I’m often asked what’s meant by “Market”. I’ve lost count of the number of times I hear “The market for our product is $3B and we only need 1% to be rich!”. Saying this demonstrates your naivety and mis-understanding of your potential customers. A useful working definition of market is:
A group of people who will buy your product.
And, what do investors want to know about your market?
There are three key things:
Market type: If you have a multi-sided market, show how you are going to start getting all groups on board. Are you targeting businesses and/or consumers? Mass market or niche?
Number of customers (or Market size). You can read up about the jargon: TAM, SAM and SOM but what we are really interested in is how many people will adopt the product, and when they will adopt the product using the Product Adoption Curve. Think about issues of geography, language, and culture that will slow adoption.
Reaching customers (or Route to Market). Demonstrate your knowledge of the chain from your suppliers through to your customers demonstrating that you understand that every part of this chain needs add value and be compensated for it as well.
One tip, rigorously keep track of all the assumptions you make since a small error here may well be magnified and every assumption will need to be validated.
Finally, why is this only the 8th most important slide in the deck? Because the investor will make up their own mind about market size – all you can do is influence it.