Total Addressable Market (TAM)

• According to its LinkedIn profile, "Compoundly empowers everyday investors to control their financial future by delivering a suite of sophisticated, objective, and customized financial tools." Compoundly and its competitors are financial technology or fintech companies that serve customers in the personal finance segment of the fintech industry.
• More specifically, the automated investment services (also referred to as Robo-Advisors) segment of the US personal finance market is identified as the closest subset of the fintech industry that Compoundly and its competitors serve.
• This means that the TAM of Compoundly will be the size of the automated investment services segment i.e., Robo-Advisors segment of the US personal finance market.
• According to Statista, in 2020, the robo-advisors segment of the US personal finance market is worth $682.73 billion in terms of projected transaction value. In 2019, this segment was worth $607.43 billion in terms of projected transaction value.
• Hence, the total addressable market (TAM) for Compoundly is estimated at $682.73 billion in 2020.

 

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Serviceable Available Market (SAM)

• Serviceable Available Market (SAM) is the segment of the TAM that is targeted by a company's products and/or services within its geographical reach.
• Compoundly's products and/or services mainly target:
• Individual retail investors in the US who use the services of financial advisors and/or money managers
• Americans who have retirement accounts (e.g., 401(k), 403(b), etc.)
• The closest market segment that serves these customers is the US financial planning and advice segment.

• According to IBISWorld, the main activities in the US financial planning and advice segment are fee-based financial investment advice services and financial planning services. In addition, the key services in this market are personal financial planning and advice services and personal investment management services. One of the main drivers of this industry is the aging US population. An increase in the share of the US population that has reached or is approaching retirement age is directly linked with an increase in the demand for retirement planning services, thus adding to the industry's revenue growth.
• Hence, the Serviceable Addressable Market (SAM) for Compoundly would be equal to the size of the US financial planning and advice market.
• Data from IBISWorld indicates that the size of the financial planning and advice market in the US is $57.2 billion in 2020.
• This market size declined 7.8% from 2019 due to "economic uncertainty stemming from COVID-19."
• Using a CAGR calculator, a growth rate of -7.8%, time period of 1 year, and a final value of $57.2 billion, the size of this market in 2019 was estimated at approximately $62 billion.
• Hence, Compoundly's SAM for 2019 was $62 billion while its SAM for 2020 is $57.2 billion, indicating a decrease due to the pandemic.

Revenues of Compoundly’s Competitors

 SmartAsset 

• SmartAsset is an award-winning fintech company that helps customers make personal finance decisions around homebuying, retirement, and taxes, among others. The company serves 45 million to 65 million users every month.

• SmartAsset's average annual revenue was $19.5 million in 2019.

 Personal Capital 

• Personal Capital is a fintech company that helps people "plan for retirement and invest their capital." It offers free financial tools as well as paid "wealth management option for accounts of at least $100,000." In June 2020, the company was sold to Empower Retirement, a retirement services provider, for $825 million and an additional $175 million in "planned growth" incentives.
• It serves over 2.7 million users and has more than $16 billion assets under management.

• The company's estimated annual revenue in 2019 was in the range of $75 and $100 million, averaging $87.5 million (i.e., ($75 million+$100 million) /2). It's latest revenue per ZoomInfo is $86 million, which is close to the average from last year.

 Betterment 

•  Similar to Personal Capital in its offerings, Betterment is another competitor in the fintech space that acts as an "independent online financial advisor" and provides a smart automated investing service for "optimized investment returns for individual, IRA, ROTH IRA, and rollover 401(k) accounts." The company serves more than 500,000 customers.
• Betterment's estimated annual revenue is $37.7 million.

Compoundly’s SOM

• SOM refers to Share of Market/Serviceable Obtainable Market, and is an "estimate of the portion of revenue within a specific product segment that a company is able to capture."
• Compoundly's SOM can be calculated by dividing the average revenue its competitors generated last year by the industry's SAM from last year. The percentage obtained represents the average market share of its competitors from last year, which is then multiplied by the industry's SAM for the current year.

• Hence, Compoundly’s SOM is estimated at $44.47 million in 2020.