Ajo Angels Weekly Pulse

Why Market Size Matters More Than You Think When You're Investing

When you're looking at a startup to invest in, most people focus on the product. Is it good? Does it work? Will people use it?

But what separates investors who make money from investors who lose it is that they look at the market first.

I learned this the hard way. Early in my investing career, I backed a company with a solid product and a great team. The product was genuinely useful. Customers loved it. But the market was small and getting smaller. Within two years, the company hit a ceiling. They couldn't grow past a certain point because there just wasn't enough demand. The team was talented, but talent can't create demand that doesn't exist.

That's when I realized something fundamental: a great product in a shrinking market is a slow death. A mediocre product in a growing market could be a lottery ticket.

The Market Size Question

When you're evaluating an investment opportunity, you need to ask two things:

First, how big is the market right now? Meaning what's the total addressable market(TAM); the entire pie of customers.

Second, is that market growing or shrinking?

These two questions matter more than almost anything else. Here's why.

If the market is small and shrinking, you're investing in a declining industry. No matter how good the team is, they're fighting gravity. They might survive, but they won't thrive. The best result will probably be a slow fade or a fire sale acquisition and you don't want either.

If the market is small but growing, that signals good potential. A small market that's expanding means there's room to build something that could grow to be pretty big. The company might not become a unicorn, but it could become a solid, profitable business.

If the market is large and shrinking, that's not good either cause it means they're competing in a space where the total opportunity is getting smaller every year. Think about what happened to taxi companies when ride-sharing came in. The market didn't disappear, but it did contract hard and investors who didn't see that shift coming got hurt.

If the market is large and growing, you've hit the sweet spot. This is where the big money gets made. A large, expanding market means there's room for multiple winners. Even a mediocre company can make money in a market like this.

Why This Matters for Your Money

The reason market size and trajectory matter so much is because they determine the ceiling on returns.

Let's say you invest in a company in a market that's worth $100 million total. Even if that company captures 50 percent of the market, they're only worth $50 million. If you own .5 or even 1% of that is a decent return if you got in early, but it's not life-changing money.

Now let's say you invest in a company in a market that's worth $10 billion and growing. If that company captures just 5 percent of the market, they're worth $500 million. Same company quality, same team, same product, the major difference is the market.

This is why venture capitalists obsess over market size. They know that the best team in the world can't create demand that doesn't exist. But a decent team in a growing market can ride that wave to success.

How to Spot a Growing Market

So how do you know if a market is actually growing?

Look at the data. Are more people entering this space? Are companies in this space raising more money? Are customers spending more on solutions in this category?

Talk to people in the industry. Not the founder you're considering investing in. Talk to their competitors, their customers, their suppliers. Try to identify the trend.

Look at adjacent markets. If a market is growing, you'll usually see that growth spreading to related areas. If it's shrinking, you'll see contraction spreading too.

And be honest about what you're seeing. It's easy to fall in love with a product or a founder and convince yourself the market is bigger than it is. Don't do that. The market doesn't care about your feelings.

The Real Lesson

Here's what I've learned after years of investing: the market is the foundation. Everything else is built on top of it.

You can have the best product in the world. You can have a brilliant team and a business model that makes perfect sense. But if the market isn't there, or if it's shrinking, none of that matters.

So before you get excited about the pitch, before you fall in love with the vision and definitely before you write a check, ask yourself: Is this market big enough and is it growing?

If the answer is yes to both, you've got something worth looking at. If the answer is no, keep your money in your pocket.

The market will tell you everything you need to know. You just have to look and listen. 

Summary: MbeleMed provides cardiac screening designed for Medicare Advantage patients. Its system uses continuous monitoring and physician review to find heart rhythm problems early and prevent strokes and hospital visits.

The Backstory: The company started after the founder’s father was diagnosed with atrial fibrillation but left the hospital with no clear plan or follow-up. That experience showed how often serious heart risk goes unnoticed, especially in high-risk and underserved groups. MbeleMed was built to catch these problems earlier and make sure action follows detection.

Key Innovation: MbeleMed uses a pay-on-detection model with zero upfront cost for health plans. Its system combines AI risk targeting, 14-day continuous 4G cardiac monitoring, and physician-confirmed reporting to find silent arrhythmias sooner. The platform also aligns with CMS documentation rules and shows strong financial value for plans, with modeled ROI around 25:1 per confirmed case.

Funding: Raising $1.5M in a pre-seed SAFE to scale deployments, improve AI workflows, and support Medicare Advantage integrations. The company targets 10,000 screens per month and expects a path to EBITDA breakeven within 18 months.

Companies like NVIDIA, Microsoft, and Equinix often provide bigger returns than the AI apps everyone talks about? This is because they power the chips, cloud, and data centers every AI company depends on.

Cheers,

Abdul

Hey Hey… I’m Abdul I’m the chairman of Ajo Angels and Shujaa Capital and I’m on a mission to introduce angel investing to 25,000 black folks over the next five years. I’m doing this with the goal of narrowing the racial wealth gap as well as trying to close the billion dollar funding gap for black founders.

This information is for educational purposes only and should not be construed as financial advice. Angel investing involves substantial risk, including the risk of total loss. Consult with a qualified financial advisor and attorney before making investment decisions.