Each deck It should have a “market” slide. Unfortunately, most entrepreneurs get the market slide wrong.
This is not necessarily their fault. The mistake is in the pitch training industry where every deck should include a slide with TAM, SAM and SOM. (Total addressable market, serviceable market, serviceable market or variations on these terms.)
You can find templates for this slide all over the internet. Almost always, the template has three bubbles. Sometimes they appear side by side like the three bears porridge bowls, and sometimes they stick together beautifully like matryoshka dolls.
The legendary market size question
It’s amazing how widespread this triple bubble market size slide is. Everywhere I go on the planet, from Stockholm to Shenzhen, entrepreneurs seem to be using the same slide.
Typically, entrepreneurs say, “Our global TAM is $X billion, but we’re starting in a certain part of the world, our SAM is $Y billion. And we carefully project that our SOM is $Z billion.
Sometimes, they also show very accurate compound annual growth (“with 17.65% CAGR”) to demonstrate their analytical strength.
A typical market size slide is outdated.
It is clear why entrepreneurs try to increase their market size. Venture capital investors are told that only unicorns are interested, and so they think the best way to become a unicorn is to go after the big market.
Perhaps, the thinking is that it is easier to get 2% of a very large market than to get 20% of a small market. So they desperately want market data that allows them to say that their TAM is maybe $56 billion, or $256 billion, or even better, $2.5 trillion.
When this slide is shown, most investors will laugh (or cry). The numbers are not only exaggerated but also irrelevant.