How can you address market size concerns during a pitch deck?

Forget the fancy market reports with big numbers. Millions, billions, trillions. While it might be tempting to play with big numbers, it doesn’t help much as in reality this is NOT your market. Market size is heavily dependent on your business model! Or put differently: how much money you can make, depends on how you make money. Here's the proper way to estimate your market opportunity in terms of $: Reachable market size = [# of consumers/companies for whom your current value proposition is relevant] X [real or expected CLTV per customer]

To get a realistic market size, use the bottom-up method (users x product price). This method avoids the overestimation common with top-down approach and is great for calculating your Serviceable Obtainable Market (SOM), Serviceable Available Market (SAM), and Total Addressable Market (TAM). In your market analysis, don't just focus on the current opportunity. Highlight the growth trends, like the Compound Annual Growth Rate (CAGR) of your niche, to show that the market is dynamic and expanding. Don't forget to back up your numbers with credible sources. About 95% of investors expect to see them in your deck.

Focus on showcasing concrete evidence like customer data or market validation to prove demand. Emphasize scalability and growth projections based on clear trends. Additionally, discussing potential strategies for market expansion or targeting niche segments demonstrates a proactive, adaptable approach to addressing market concerns. DO NOT just throw large numbers out there of how big the market COULD be in 5 years without a concrete way of capitalizing on it.

Something to keep in mind: market sizing is impossible when you're redefining the market. The market size of electric cars when Tesla started was essentially non-existent. Now it might be bigger than the entire ICE market combined. The market for Ecommerce in 1994, when Amazon started, was also non-existent. Disruptive innovations (e.g., AI) are, by definition, on the edge and the markets are yet to be created. So the question to ask is: if this works, how high is up? Understanding how high was up for Amazon, who only sold books online, was quite difficult to size up. Today, market sizing just about an AI product is impossible. Some will ask for it, but they're asking the wrong question. They should ask: if this works, how high is up?

There are two primary methods to address market size during a pitch deck. Top-Down Approach: This common method starts with a broad industry value, often sourced from market research reports. The key is to break this total addressable market (TAM) down into a serviceable available market (SAM) and then further into a serviceable obtainable market (SOM). Bottom-Up Approach: This method involves a more direct estimation. It assesses how many potential customers could be convinced to purchase the product over time, coupled with an estimated price point. Multiple them together to get an obtainable market size. It's best practice to calculate market size using both approaches. They highlight any unrealistic assumptions in the estimations.

Financial models for 2+ years can tie well into the TAM/SAM/SOM story. The deck can lead into how competitors and differentiators are seen.

Example: "BridgeTempo is a great value for the money. I have learned more in the past few months than I have in years of taking traditional bridge lessons." - Peter Doe, bridge player A value proposition gives"value for money" to users/customers: BridgeTempo provides superior value to bridge players by helping them to: Improve their game: BridgeTempo's personalized instruction, adaptive learning, and measurable results help players to improve their game in all aspects, from bidding to play. Save time and money: BridgeTempo's online platform eliminates the need for expensive and inconvenient traditional bridge lessons. Gain confidence: BridgeTempo's personalized feedback and instruction help players to gain confidence in their game.

An example: BridgeTempo is revolutionizing bridge for vision-impaired players, breaking down barriers and fostering inclusion through its innovative platform and commitment to accessibility. With a substantial market opportunity and a compelling social impact, BridgeTempo presents an attractive investment prospect making the vision realistic based on the innovative services. The services empowers vision-impaired players to improve skills, gain confidence, and connect with the bridge community Aligns vision of inclusive bridge with its mission to provide tools and resources for vision-impaired players to succeed. Presents a compelling investment opportunity to transform bridge for vision-impaired players.