Do you want more funding?
Are you at the point where you are wondering how to capture the market size in a pitch deck?
Market size is one of the most important data points in your pitch deck. This metric alone and how it is presented can be incredibly pivotal when it comes down to getting funded or not.
Yet, this remains one number and pitch deck slide that even the most talented and intelligent entrepreneurs and startup founders struggle with. So, how do you find it out and capture the market size in a pitch deck in the best possible way?
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Here is the content that we will cover in this post. Let’s get started.
Presenting Market Size In Your Pitch Deck
One of the top three decision factors angel investors and VCs look at when considering putting capital into a startup is market size. It will make or break you.
You cannot afford to underestimate the importance of this number. The other two main factors are most likely, the founding team and your business idea. There’s only so much you can change about these to elements. However, there is a lot you can do to present market size well, and ensure it gives you the best chance of getting funded.
Done well, you shouldn’t have to spend much time talking around market size during your pitch presentations. Present the metrics as facts, and move on.
When thinking about how to capture the market size in a pitch deck, keep in mind there are three ways to present market size in your pitch deck when fundraising.
They are:
- Value theory: Predicting buyers willingness to pay
- Bottom-up: Showing existing in-house data
- Top-down: Based on industry research
Use a graphic, clearly and simply laying out the three main metrics in market size:
- Total market size
- Total addressable market (TAM)
- Serviceable and available market (SAM)
Where Market Size Fits In Your Pitch Deck
Remember that storytelling plays a key role in fundraising and you will need capital to scale things up. This is being able to capture the essence of the business in 15 to 20 slides. For a winning deck, take a look at the template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.
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In this breakdown of the most important slides in your pitch deck, I put the market size slide very close to the beginning, right between The Solution and Competition.
- Cover
- Problem
- Solution
- Market Size
- Competition
- Competitive Advantage
- Product
- Traction
- Customers and Engagement
- Business Model
- Financials
- Amount Being Raised and Other Investors
- Use of Funds
- Team
- Advisors
- Back Cover
Below is a video where I explain how to create your pitch deck and where I cover in detail how to put together your slides around market size.
Capturing Market Size In A Pitch Deck: The Musts
When it comes to determining how to capture the market size in a pitch deck there are two musts when it comes to those and getting funded by serious investors.
1) It’s got to be big enough
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Your market size should be at least $1B. Probably more. It’s what’s expected. Your company may never sell for that much, but it shows the potential. More importantly, it demonstrates the potential returns to investors.
2) It has to be realistic
Don’t be overly conservative. You’ve got to sell the dream and potential. For you that may be the mission and product. Hopefully, your investors have an affinity for that too. Though they are coming into this presentation for the money. Still, if you aren’t realistic with your numbers it is an instant red flag that you either have no idea what you are doing, or you are just fluffing the numbers. You can bet that professional investors who have the kind of money you want have a good sense of when you are undercutting yourself or making things up.
Keep your slide clean. Back up your figures with sources in the appendix.
Total Market Size
How big is this space? This should be a critical question when finding answers to how to capture the market size in a pitch deck.
What is the total annual transaction volume and dollar value? Is your business local, regional, national, international or even inter-planetary?
What is the direction and future size of this market? What is the projected annual growth rate?
Total Addressable Market
Your TAM is a portion of the total market. There are few real monopolies. Your product or service probably isn’t the perfect fit for everyone in this market. That even applies to Apple and Google.
For example, if your startup focuses on vacation homes, that only relates to a small portion of total annual real estate sales or rentals.
Serviceable & Addressable Market
Also sometimes used interchangeably with SOM (Serviceable and Obtainable Market). This is the percentage of market share you can realistically expect to capture.
Most VCs believe 1-5% is a good range. Remember, you don’t need the whole market or even a majority market share to have a billion dollar company in a really big industry. In contrast, if this is a smaller industry, you may need a much larger market share to deliver the returns investors are seeking.
Greenfields: When There Is No Existing Market
Some startups are creating completely new industries and markets. Here investors will care most that you can actually sell your product and there are buyers.
Show the results from customer surveys. What are they saying they want? Show sales. Even if it is only a handful of enterprise level customers, who has actually proven your theory by paying money for what you are offering?
Get A Second Opinion
When it comes down to figuring out how to capture the market size in a pitch deck, It always pays to get a second opinion and another pair of experienced eyes on your deck, and especially this slide and its relevant data. This is even more important if you are new to this industry. You could be missing out on a big chunk of potential market share of size of the market. You may not be thinking like those who know the industry and are most likely to invest.
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