Traders are on the lookout for market alternative, not simply measurement • TechCrunch

Each pitch deck must have a “Market” slide. Sadly, most entrepreneurs get the market slide flawed.

That’s not essentially their fault. The fault lies within the pitch teaching business that insists that each deck embrace a slide with TAM, SAM and SOM. (complete addressable market, serviceable addressable market, serviceable obtainable market or variations on these phrases.)

Yow will discover templates for this slide all around the web. Nearly at all times, the template has three bubbles. Typically they seem facet by facet, just like the porridge bowls of the three bears, and generally they’re elegantly nested inside each other, like a matryoshka doll.

The legendary market measurement declare

It’s superb how this three-bubble market measurement slide has unfold. It appears that evidently in every single place I am going on the planet, from Stockholm to Shenzhen, entrepreneurs are utilizing an identical slide.

Usually, entrepreneurs declare, “Our world TAM is $X billion, however we’re going to begin out in a sure a part of the world, the place our SAM is $Y billion. And we conservatively undertaking that our SOM is $Z billion.”

At instances, in addition they present a really exact compound annual progress charge (“with a CAGR of 17.65%”) to display their analytical rigor.

It’s clear why entrepreneurs attempt to pump up their market measurement. They’ve been advised that enterprise capital traders are solely taken with unicorns, and they also assume that one of the best ways to turn out to be a unicorn is to go after the biggest 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 information that enable them to assert that their TAM is maybe $56 billion, or $256 billion, and even higher, $2.5 trillion.

When this slide seems, most traders chuckle (or weep). Not solely are the numbers at all times exaggerated, they’re additionally irrelevant.

Market measurement vs. market alternative