Markets as Currents, Not Bodies of Water
Chase the change dynamic pulling the market, not the size of the market
- Difficulty
- Moderate
- Time to result
- ~weeks to results
- Steps
- 4
- Confidence
- 88%
A reframe of market evaluation. Most people size a market like a body of water — how big is the ocean we are going after. Tavel argues the useful question is about currents: what is changing in this market right now that will pull you forward? A market with a strong current lets a plank of wood on the river make progress; a market without one requires you to build something enormous just to move. This is why Benchmark cares less about TAM and gets excited about markets that look small from the outside.
Origin
Sarah Tavel's contrarian market lens, articulated at Benchmark and consistent with the firm's known indifference to TAM. It generalises the 'why now' question most investors ask. The underestimated-market examples (Airbnb, Etsy, Hipcamp) come from Benchmark's own portfolio history.
Core principles
- 01The question is not how big the market is, but what are the dynamics of change — what is the current?
- 02A strong current makes the founder's job easier; a dead market means building something big and fancy just to make progress.
- 03Underestimated markets are attractive precisely because they have no competition early on, which is what makes them tippable.
- 04The starting market must not be a cul-de-sac — it needs adjacent markets it can grow into.
- 05Small markets often grow because your own success changes the supply side's behaviour.
- 06Be precise about the current: 'crypto' is too broad a category to be a current; stablecoins driven by local-currency inflation is one.
How to run it
- 1
Name the current, not the TAM
Identify what specifically has changed to open this opportunity now — the momentum that will pull the company forward. This is the 'why now', but expressed as a force acting on you rather than a static size.
Pro tip Pair it with the earned secret: a founder who sees a market opportunity others overlook, where once you see it you cannot understand why it still works the old way.
Watch out Be specific about the current's boundaries. Tavel corrects Lenny's 'crypto has no current' to: DeFi has no current with treasuries where they are; stablecoins, driven by inflation in local currencies, have a very strong one.
- 2
Prefer markets others think are too small
Deliberately seek opportunities that look small from the outside. They come without competition, which is exactly the condition that lets you saturate and tip.
Pro tip Tavel's standing offer: if other people are telling you the market is too small, Benchmark would love to meet you.
- 3
Check the adjacency, not the size
The starting market can be small but it cannot be a cul-de-sac. Verify there are adjacent markets, larger than the beachhead, that your success would let you expand into.
Pro tip The best case is when your own success creates the adjacency, rather than you having to reach for it.
Watch out A small market with no adjacency is not an underestimated market, it is just a small market.
- 4
Check the wave is not going the other way
Recognise when the current is against you. A crypto marketplace started in a bull market and built through crypto winter found everything pulling it away from success — the correct read was that the timing was wrong for a new entrant.
Pro tip The current can reverse mid-build. Re-check it, do not assume the why-now that got you funded still holds.
In the wild
Benchmark invested when Hipcamp was land for hardcore campers — you brought a tent, a sleeping bag and a willingness to filter river water. A small-looking market. But hosts started making money and reinvested it into their land: first a fire pit or a shower, then a treehouse or a yurt.
→ The supply side upgraded itself into serving glampers who want nature without pitching a tent, so the market expanded far beyond the beachhead — and the beachhead's lack of competition is what made it winnable in the first place.
Etsy's beachhead was handmade goods. Running up to its IPO it chased GMV growth beyond what it stood for, letting mass-produced goods on the platform — Tavel remembers a mass-produced-scarf seller spamming Pinterest with pins.
→ Handmade sellers and buyers reacted, trust eroded badly, and the episode preceded a CEO change. Expanding beyond what you stand for is not the same as riding an adjacency.
Common mistakes
Sizing the ocean instead of finding the current
A big market with no change dynamic means you have to build something enormous just to make progress. A smaller market with a strong current pulls you forward.
Being too coarse about the current
Categories are not currents. 'Crypto' has no single current; DeFi and stablecoins have opposite ones. Get specific enough that the change dynamic is actually identifiable.
Starting in a cul-de-sac
Small and uncontested is good only if adjacent markets exist. Without them the beachhead is the whole business.
Is it for you?
Best for
Founders and early-stage investors evaluating whether a market is worth entering now, especially when the TAM looks small
Not ideal for
Later-stage capital allocation where market share and unit economics, not why-now, govern the decision
From the transcript
“the most interesting markets you have to think of them like currents”
“you're going to have to build like something really big and fancy to make any progress and that's why we care less about Market size”
From the episode
The hierarchy of engagement
Sarah Tavel (Benchmark, Greylock, Pinterest)