Where do we belong in our industry’s value chain, and is the total addressable market (TAM) big enough for substantial growth?
Once you've shown traction and revenue, you must establish the market size and your startup's place within the value chain. To attract investors, demonstrate a market capable of generating significant ROI in the 10X-100X realm!
For a VC hunting for future unicorns, your reasonably obtainable market needs at least $1bn as a rule of thumb for them to care about talking to you. In other words, you need to explain that the market is big enough to generate an outsized Return on Investment (ROI) you are asking for.
Clarify your competitive edge against incumbents or future challengers (expanded on in the "Competition" slide).
Use this slide to discuss market opportunities and growth potential with secured investment. Address these questions:
How do you define your target market?
- Industry verticals (B2B, B2G)
- Segments (SoHo, SMB, Enterprise, Government, etc.)
- Demography (B2C, B2B2C, D2C)
- Geography/Region
Broken down by potential customers:
- Total Addressable Market (TAM)
- Total Serviceable Market (SAM)
- Total Obtainable Market (SOM)
Future market growth potential of your SOM:
- E.g., based on independent research from Gartner, Forrester, et al.
- Make the case for entering a growing market now! Investors are more interested in a bottom-up accurate list of potential customers /user base than a generic top-down market size assessment.
- Tip: Present an actionable list of potential named customers to close within the next 12 months.
If you combine a top-down market sizing with a bottom-up customer list, you will get the best response from investors.
Understanding the size of your target market is crucial for business success. Knowing how much you can potentially sell within that market is key. Two fundamental approaches to comprehending a market are top-down and bottom-up analyses. These methodologies will guide your business strategy and help you tap into the full potential of your target market. Here's an article discussing the pros and cons of top-down and bottom-up market sizing.
In the context of our therapy health app example, the market slide might include the following:
▸ The number of young individuals living within the target market (specific countries or cities).
▸ Current data concerning mental health issues within this demographic is backed by public statistics.
▸ Expected mental health trends in the coming years, supported by statements from reliable sources such as health officials and medical professionals.
▸ Potential expansion into overseas markets.
▸ A location-based list of targeted therapists for recruitment.
▸ Information on insurance companies and municipalities funding the mental health sector.
▸ Present this as a sales funnel (including contact names) on your prospective customer list.
Remember that the best market size slide is the one you believe in yourself!
Questions the market slide should address:
- What is the total addressable market (TAM), including Serviceable Available and Serviceable Obtainable Market (SAM/SOM)?
- Which customer segments significantly contribute to driving market demand?
- What is the willingness of these segments to pay for a solution, indicated by metrics such as average revenue per customer or annual spend?
- Why is the present the opportune time to establish a company in this market?
- Can you share recent or comparable success stories in the market, including any noteworthy exits?
