Thread by @josephflaherty

One of the biggest missed opportunities I see in pitches is the "Market Size" slide.

Typically, the entrepreneur throws out a multi-billion dollar number designed to convince the VC there's a $100M+ revenue opportunity for their startup. 1/9

The market size is treated like a box to be checked, and the bigger the number, the better. Which makes some sense — a $20B market should have more opportunity than one worth $2B. 2/9

It is important to show that you're addressing a big market, but the market discussion is also an opportunity to showcase your expertise. For instance, imagine you're building an IoT device to treat diabetes.

You'd be correct in saying diabetes is a $230B market, but...

3/9

Only 15% of that number is spent on devices and supplies.

80% of that is spent on insulin, and your device isn't a substitute.

50% of the remainder is paid for by Medicare which won't reimburse for your device.

And your device isn't a good fit for 60% of the rest. 4/9

Even with all those caveats you'd still be addressing a billion-dollar market! And you can tell a story about how with scale you could drop price to get the Medicare audience, and with the Medicare audience, insulin companies would pay you for data. 5/9

And the whole time you're telling this story it's a demonstration of your encyclopedic knowledge of the industry dynamics, user tastes, payment mechanisms, and so on.

The takeaway is the opportunity is big and *YOU* are one of the few people best suited to go after it. 6/9

There's an art to this, you don't want to go too far and make your market seem like a niche. Also, You don't want to confuse your audience — it's critical to have good answers prepared for why you're not going after what look like more lucrative segments. 7/9

But on the other hand, if the number market size is too big and vague, it can make the presenter seem dishonest, or naive.

If the number is big enough, the investor may give the benefit of the doubt that you'll find a lucrative seam. Still, that's a missed opportunity. 8/9

The best founders make you feel like they have the ability to see "The Matrix" and can run their businesses accordingly. Often, this is just the side effect of being diligent students of their markets. It's a superpower open to any entrepreneur. Use it! 9/9