Making market analysis work credible
When there is not much information about a market available, startups sometimes commission new research to dig up the facts and make projections. The end result is often a slide with one number: “Our extensive research shows that the market will be $1,0234,654 in 2020, the full report is too detailed and we won’t bore you with it”.
Investors are not going to buy this.
Here are some things you can do:
- If the research was conducted by a reputable consulting firm, put the source prominently on the slide. But not many startups can afford rubber stamping buy expensive consulting firms.
- Round up your numbers. $1.0b is better than $1,0234,654
- Break up your $1.0b in individual market segments (if you can)
- Relate your $1.0b to something that exists today. Your precise market does not exist yet, but people spend money on activities that are related, similar.
- Show a deep dive on one segment, one part of the analysis to explain the thorough methodology you have applied, leave out the other 325 segments.
- Break down the $1.0b in things people can touch: # of customers, price per product/month/subscriber, # of countries, etc.
- If you are getting only 5% of the $1.0b market, think about who will have the other 95%. If you cannot identify them, go back to your market estimate.
The above is useful when making the presentation, but can also be handy when you brief consultants for a project.