Sizing the Web3 B2B Software Market in 2023

Just how big is the current web3 B2B SaaS total addressable market (TAM)?

In the last six months, 103 web3 companies generated revenue on-chain, the smallest of which recorded a few hundred dollars of sales & the largest, Ethereum, tallied $401m.

44% of these companies produced less than $0.5m. But a nascent mid-market does exist : 41 companies produced between $5-25m.

The average software company operates at about 70% gross margin, so let’s assume a web3 company is similar. To simplify, we’ll assume the typical web3 company spends all of that cost of goods sold (COGS) on software - about 30% of revenue [1].

That implies the web3 B2B software TAM is roughly $231m in 2022 & $75m excluding Ethereum, which comprises roughly 60% of the revenue.

Web3 software sales must also navigate novel procurement processes with decentralized decision-making, payment for services in kind with tokens, & different permissions models for users.

At a 10x revenue multiple, web3 software should support about $0.75b to $2.3b in startup market cap. Depending on your view on web3 revenue growth, a 10x multiple might be high or low.

The limited number of potential customers challenges web3 vendors. With fewer than 100 accounts willing to spend $20-50k on a software contract, every interaction is precious, especially those larger accounts which dominate revenue.

To contrast with web2, Salesforce counts?150k customers in a market of about 650k who spend $57b annually. ?This is just the web2 CRM market.

While possible to build a business selling exclusively to web3 companies, the bigger market today is selling web3 technologies to web2 companies. Solutions in gaming, marketing, & financial services where decentralized databases or virtual wallets solve a core business need.

1. This is a rough estimate. Most software companies also include customer success in COGS. Fully allocating all COGS to software is aggressive. On the other hand, the software purchased by Sales & Marketing and Research & Development teams isn’t included in that line item. So, this should be a reasonable guess.