Too many entrepreneurs confuse their addressable market with their market size. It's rare that these two numbers are the same. And, mixing them up can be a problem.

The market size is the total revenue generated in a particular segment of the economy. For example, the internet advertising industry may be X billion dollars this year - the total amount of money spent on advertising on the web.

The addressable market is the total amount of revenue that your company could generate if it acquired every potential customer. The entire group of potential customers is often referred to as the addressable population.

The addressable market is unique to your narrow industry focus and therefore is often different from the high-level market size numbers that analysts quote about that sector of the economy. If you are an ecard company - your addressable market is not the same as the online advertising market size. Your addressable market is a sliver of that market. Getting this wrong is bad.

Since the addressable market is often much smaller than the market size, using the market size as your addressable market typically means that you are over-stating the opportunity. When VCs see this they draw one of two conclusions:

1. You don't know the difference between an addressable market and a market size, implying that you're not competent management, or
2. You're trying to dupe them into thinking the opportunity is bigger than it is and your not going to be an honest partner.

Either way you look bad.

Get the addressable market size right and impress your investors.