Sizing Up Your Market

Market Research

October / November 07 By: Betsy Gillette Volume 5 Number 5

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Accurate market sizing is critical to an entrepreneur's business plan and it is one of the most difficult items to research and quantify for newer technologies. As this issue of Innovation focuses on nanotechnology, we decided it was an excellent opportunity to try a fictitious example of market sizing using nanotech.

A number of startup business plans revolving around nanotechnology have wildly large market sizes. Indeed, if you do a general Google search, you will find market sizes estimated in the range of $700 billion to $1 trillion over the next several years. Even a person not used to reading business plans would be able to tell that those numbers are a bit huge, and must cover every type of material, processing, fabrication, manufacturing and packaging cost known to man. A venture capitalist, who is experienced in reading business plans, would know while that the $1 trillion figure may indeed cover the entire market, it isn't the market size relevant to the product being evaluated.

Let's assume that you, as the entrepreneur, have developed a mold with a special diamond-like coating for thermal nanoimprint lithography. Nanoimprint lithography is a growing area mostly for semiconductor manufacturing, and your mold with the special coating will help make the manufacturing processes more efficient by not having to replace molds as frequently as is currently done. Now, that $1 trillion market figure seems fairly excessive for something this specific. As an entrepreneur, you probably do not have the resources to buy or commission research, so you will be looking at free resources that might be available to you.

Let's go back to your favorite search engine. You will need a search term more specific than "nanotechnology market size," so perhaps you can try "nanoimprint lithography market." That search yields some articles by some trade associations, and many of them reference market numbers found in recent market research reports. (An entrepreneur needs to look at the credibility of data, and in this case if national or international semiconductor trade organizations are quoting established research firm figures, that's a good indication of credibility.) In particular, there are some interesting references to a BCC (Business Communications Company) report, "RGB-338 Nanopatterning." We're getting closer!

The article indicates that the BCC estimates of the total nanopatterning market should reach $292.74 million in 2010. That's much more specific and credible as far as your business plan is concerned. However, you have only a particular component of that market. Now what? In this case, you may not be able to find the full report in a library or purchase the report. Indeed, even if you were able to purchase the report, the likelihood that it covers molds with special coatings is slim. You will need to develop your own numbers at this point.

Since your target is semiconductor manufacturing plants (fabs), you should determine the number of fabs, both domestic and international, to calculate your total possible customer base. If you don't know the number, you can do a search on semiconductor trade associations; many of them have data points on their web sites or reports that can be purchased at a reasonable cost. If you are considering purchasing one, be sure to review the table of contents to determine if it covers the numbers you need. You may even be able to call a trade association's research department and ask for the number. Alternatively, most business libraries have general industry reports, such as the S&P Industry Reports, that cover the semiconductor equipment industry report.

Once you have the number of fabs, your work isn't done. You should, if possible, figure out the sizes of the fabs to determine how many of your specially coated molds might be used in each one. (You may need to contact potential customers or talk to industry experts to figure this out). Once you have that number, you have to add up the total number of units you could sell if you sold the appropriate number of molds to each fab. You won't sell all of these, of course, but that's the maximum you would be able to sell.

Now you have to take the maximum number of molds and multiply it by the estimated price of your molds. That is your total addressable market. Let's assume for the purpose of this discussion that you determine your total addressable market is $100 million in 2010, when you expect to enter the market. (This probably isn't a realistic number, but assume it is for this example.)

When you put this in your business plan, it might read something like this:
The nanotechnology market on the whole is huge, coming to $1 trillion dollars in a few short years. Our specially coated DLC molds fall into the nanoimprint lithography niche of the overall market. It is expected to produce revenues of close to $300 million by 2010. We expect our molds to have a total addressable market of $100 million in this niche of nanoimprint lithography, based on a projected need for 10,000 molds in the 300 fabs worldwide. (These are fictitious numbers.)

You've just demonstrated a knowledge of the overall market, but most importantly, of your niche market and of your customers. That's sure to make an imprint—larger than nano-sized, we hope—on anyone who reads your business plan.

Betsy Gillette is director of market research and planning for Technology Ventures Corporation.