Trapped Value and the 10% Capture Rule
Find the pool of value your technology unlocks — you keep roughly 10% of what you release.
- Difficulty
- Easy
- Time to result
- ~days to results
- Steps
- 3
- Confidence
- 85%
Moore's sizing heuristic for early-market vision and for beachhead selection. Innovation is worth what it releases: locate the trapped value your technology would unlock, and expect the world to hand you roughly 10% of the gain. Inverted, it becomes a hard target — a billion-dollar company requires roughly ten billion dollars of trapped value to unlock.
Origin
Geoffrey Moore's concept from his venture work ('the concept we use in venture, I call trapped value'), presented here as the third pillar of the early-market playbook alongside the technology wizard and the demo.
Core principles
- 01Value is created by release, not by invention: what is currently locked up that your technology sets free?
- 02You capture roughly 10% of the value you release — Moore's admittedly round number ('I'm an English major, it's an easy number to do math with').
- 03Therefore company scale is a derived quantity: pick your target, divide by 10%, and go find that much trapped value.
- 04In the bowling alley the same lens narrows: where is a SMALL pool of trapped value that we can become the owner of?
- 05The cost of NOT releasing the value is often the sharper framing: risk exposure, growth gating, or churn.
How to run it
- 1
Locate the trapped value
Ask what asset, capacity, or capability is currently idle, unusable, or wasted, and which your innovation would unlock. Quantify the pool.
Pro tip Look for underused physical or human capacity first — it is the easiest trapped value to see and to price.
- 2
Apply the 10% rule to derive your ceiling
Multiply the trapped value pool by ~10% to get the realistic revenue ceiling your innovation supports. Run it backwards to set your ambition: a billion-dollar company implies you need to find roughly ten billion in trapped value.
Pro tip This is a sanity check on VC narratives — if the pool cannot support the outcome, the pitch is fiction regardless of the technology.
Watch out The 10% is a heuristic, not an entitlement. Competition, incumbents, and ecosystem taxes all eat into it.
- 3
Shrink the lens for the beachhead
For the chasm crossing, do not look for the biggest pool — look for a small pool of trapped value that you can OWN entirely. Then identify who controls access to that pool: whoever must sponsor the deal to release the value is your target customer.
Pro tip That access-controller is almost always the economic buyer, not the end user who feels the pain.
Watch out Confusing the person who feels the pain with the person who can release the value is Moore's 'target customer mixup' — one of the seven deadly sins.
In the wild
Airbnb's innovation released trapped value sitting in people's spare rooms and empty homes — idle assets that produced nothing.
→ A vast pool of previously unusable inventory became rentable supply, and Airbnb captured a slice of the value it released.
Moore's framing: Uber unlocked the trapped value of the empty back seat of a car, and did it with a labour force it did not have to employ.
→ A commoditised, century-old product (taxis) was converted into an extraordinarily valuable service by releasing idle capacity.
Common mistakes
Sizing by TAM instead of by trapped value
A large existing market says nothing about what your innovation releases. If the value you unlock is small, the market's size does not help you — and in a beachhead, a huge pool actively hurts you because you cannot own it.
Target customer mixup
Having found the pool, founders often target the person suffering from the problem rather than the person who controls access to the value. Only the sponsor who can release trapped value can sponsor your deal.
Is it for you?
Best for
Early-market founders sizing a disruptive innovation, and investors sanity-checking whether the outcome is arithmetically possible
Not ideal for
Main Street businesses competing on service or price in a commoditised category, where no value is trapped to release
From the transcript
“where's the Trap value that this Innovation would release because when you release trap value the world will will give you a portion of of…”
“where is a small pool of trap value that we can we can become our pool”
“who controls access to that who's got to sponsor my”
From the episode
Geoffrey Moore on finding your beachhead, crossing the chasm, and dominating a market