Calculating Total Addressable Market for Small Business Investment Crowdfunding Service

Disclaimer. We are 'testing the waters' to gauge investor interest in an offering under Regulation Crowdfunding. No money or other consideration is being solicited. If sent, it will not be accepted. No offer to buy securities will be accepted. No part of the purchase price will be received until a Form C is filed and only through a FINRA registered funding portal. Any indication of interest involves no obligation or commitment of any kind.

We are trying to reduce the chronic undercapitalization of small businesses in places where investment crowdfunding is legal. Starbucks never struggles to raise enough money for a new coffee shop. Know what I mean? If this seems interesting to you, please submit your info on kupchiy.com landing page - we'll keep you posted on developments.

Now, to the point:

There are 32.9 million small businesses in the United States. Small businesses represent 99.7% of all businesses in the US, employ 46.4% of the US labor pool, and provide 39.4% of the overall non-government payroll. 

However, many of these are individual businesses. As much as the team at @Kupchiy would like to assist independent entrepreneurs and professionals, we think that investment crowdfunding is better suited for small business owners who have already achieved scale in their operations. 

Thus, having at least one employee is a significant sign that a company is ready to raise capital from their community under the Regulation Crowdfunding SEC Exemption.

So how many small businesses employ at least one person?

• According to U.S. Census Bureau for 2020, 7,977,623 small businesses employed at least one person besides the owner.
• According to US Small Business Office of Advocacy report for 2022, there were 6,081,544 employer small businesses, based on the 2019 Census.

Federal Reserve System report I mentioned above polled about 10,000 employer small businesses across the US.

"...the share of applicant firms that received all the financing they sought declined from 51% in 2019 to 37% in 2020" (Executive summary, page 3)

That’s enough to calculate the Total Addressable Market - all the businesses we think Kupchiy could serve with a completed product. 

To do that, we will multiply the percentage of Small Businesses that sought capital access (37%) by the total number of employer small businesses (6 081 544). 

The result is 2 250 171 small businesses that could become our clients once we brought a turnkey product with which small businesses can:

1. Plan and manage crowdfunding campaigns to take loans from their communities instead of banks, online lenders, etc
2. Communicate with the community investors after the raise. 

To maintain a conservative estimate, we round up this number to 2 000 000 small businesses looking for financing.

The Kupchiy revenue model is based on customers paying us monthly for access to a web-based application, a subscription service model. If Kupchiy succeeds in getting the platform features, marketing, and customer service right, we think our users will be willing to pay $35 per month. Annual Recurring Revenue (ARR) would then be $420 per year. 

Total Addressable Market thus becomes 2 000 000 x $420 = $840 000 000

In the following posts we will dive deeper into calculations of our Serviceable Addressable Market & Serviceable Obtainable Market.

Please help me find mistakes in this logic & calculations!

Peter Rostovsky - CEO & Founder - peter@kupchiy.com