Pitching Angels 5: Market Sizing — Ditch the TAM/SAM/SOM
After starting your pitch with a simple description of the problem and solution, you have to convince investors there’s a big market for it. This is particularly true for specialized or technical products where investors have no sense of the scale of the problem or even who the intended customers are.
Of all the slides on your deck, market size usually gets the least scrutiny. It’s background information to give investors a sense of the scale of the opportunity. The key is to keep it reasonable; don’t exaggerate or you’ll lose credibility. And keep it focused on the market for your specific product, not some humongous market of which your product is part of only one tiny segment.
In theory, market sizing is simple. If you’re building a better mousetrap, add up the sales of all the mousetraps on the market now, or find data from a reputable source. But, of course, it’s rarely that easy. If you’re building something completely new, there’s no market for it now so you’ll need to find another way to estimate the potential demand.
The common approach to presenting market sizing is TAM, SAM, and SOM. Personally, I’m not enamored of the T/S/S paradigm, but it is the standard way of discussing market sizing so whether you use it in your pitch or not, make sure you understand it and are prepared to answer…
