Market Size Proves VCs Wrong

A story about how Sridhar Vembu's modest market size prediction was initially criticized by VCs but turned out to be exactly right.

"In '97 we were exhibiting our software at a trade show in Las Vegas. I actually drove there because I couldn't afford a plane ticket, and we stayed in this $15 a night hotel where they subsidize you for gambling.

At the show, we found some really valuable customers - two critical customers who each paid us about quarter of a million dollars. But during the event, a VC asked us what we do. When he asked about market size, we were at zero revenue, and I took a wild guess and said maybe $10 million. The VC responded, 'Why are you so unambitious?'

I had no answer except that I thought to myself if I'm too ambitious then I wouldn't have a business because I wouldn't be able to raise money. But here's the interesting part - seven years later, we actually reached exactly that $10 million number I had predicted, and then we completely flatlined. There was no growth left. We had saturated exactly at the market size I had randomly predicted.

That's when we had to become our own VC and invest in bigger markets to grow beyond that ceiling."