Every pitch deck must have a “Market” slide. Unfortunately, most entrepreneurs get the market slide improper.
That’s not essentially their fault. The fault lies within the pitch teaching business that insists that each deck embody a slide with TAM, SAM and SOM. (complete addressable market, serviceable addressable market, serviceable obtainable market or variations on these phrases.)
You can discover templates for this slide all around the web. Almost all the time, the template has three bubbles. Sometimes they seem aspect by aspect, just like the porridge bowls of the three bears, and typically they’re elegantly nested inside each other, like a matryoshka doll.
The legendary market measurement declare
It’s wonderful how this three-bubble market measurement slide has unfold. It appears that in all places I’m going on the planet, from Stockholm to Shenzhen, entrepreneurs are utilizing an analogous slide.
Typically, entrepreneurs declare, “Our global TAM is $X billion, but we are going to start out in a certain part of the world, where our SAM is $Y billion. And we conservatively project that our SOM is $Z billion.”
At instances, in addition they present a really exact compound annual progress fee (“with a CAGR of 17.65%”) to display their analytical rigor.
The typical market-size slide is out of date.
It’s clear why entrepreneurs attempt to pump up their market measurement. They’ve been informed that enterprise capital buyers are solely interested by unicorns, and they also assume that one of the best ways to change into a unicorn is to go after the most important market doable.
Presumably, the considering is that it’s simpler to get 2% of a really giant market than it’s to get 20% of a smaller market. So, they earnestly seek for market knowledge that enable them to say that their TAM is probably $56 billion, or $256 billion, and even higher, $2.5 trillion.
When this slide seems, most buyers chuckle (or weep). Not solely are the numbers all the time exaggerated, they’re additionally irrelevant.