There is one problem that I am seeing more and more frequently. Desperate to show how big their market is, a startup founder claims his TAM/SAM/SOM figures that are unobtainable and ridiculous, well above the market .
understand. We want to make it look like we’re building a very valuable company. But in the pitch process, honesty must be maintained.
Be very careful that you’re telling the right story when you’re trying to delve into the whole addressable market, the whole serviceable market, the whole available market.
The problem became especially clear Decomposition of recent Vori proposal material, but it seems unfair to call them separately. This is a common problem with many pitch decks I see.
The following slide appears in Vori’s presentation material.
On this slide, Vori talks about “the largest non-digitized retail segment,” which is probably correct, but $785 billion in total spending in the US isn’t the size of the market. This is the scale of all consumer spending at grocery stores. .Statista has some interesting numbers there. )
Investors are smarter than that
The problem is that Vori didn’t start a grocery store, it started a tool store. for grocery store. In other words, even if Vori’s business did as well as it could and he had 100% market share in every independent supermarket in the world, that would mean the company’s sales would be his $250 billion. not. Industry we serve return that amount.
Nowhere on the company’s slide deck does it mention what the company considers to be the industry’s top sales cap. This can be either bottom-up (how much is an indie supermarket spending on inventory management and analytics software, how much will that market grow, what percentage of those stores can have customers) or top-down (how much or ). There are many supermarkets there, multiplied by the price of services per supermarket. This is the total market size).
I can understand why Voli chose to use these numbers, but they are inherently nonsensical at best, ignorant at moderately good, and deceptive at worst. It’s true that you want to ensure a rosy and aggressive growth picture, but resist the temptation to use the largest numbers you can find. Example: For a car dealer, the total serviceable market is not the value of the cars they sell (it’s the car manufacturer’s SOM). Your SOM is the total value of sales commissions, service plans, aftermarket goods and services, and everything else you can do. actually to make money. Don’t confuse the two!
This is an excerpt from the full pitch deck teardown of Voli’s deck. You can learn this and much more from TechCrunch+’s weekly Pitch Deck Teardown column!