Following are my five criteria for selecting the best target market:
1. Size of opportunity.
This includes the total available market (TAM), your serviceable share of it (SAM), and estimated share of it (SOM). For example, are we talking a billion potential customers/units, 100’s of millions, or just a few millions? Is it a mass market, or a niche?
2. Value proposition.
In which of your potential markets is your value proposition strongest? Where are you a nice-to-have and where are you a must-have?
How long would it take you to generate first revenue in each of your potential markets? This also implies how much money you would need to raise to survive until you can generate revenue.
Which market presents the lowest risk? This includes technology development risk (which product is more complex), competitive risks (which market presents tougher competition), and market risks (uncertainty, regulatory risks, disruption, consolidation, slow growth, etc.).
Which market (and business model) would be more attractive to investors, thus making it easier for you to raise money?
This is not the only, nor the best, set of criteria. Indeed, I would be happy to receive your feedback and suggestions for other criteria.