What is a TAM Slide?
First things first, what is a TAM slide? It stands for the Total Addressable Market. And in pitch decks to VCs, it gets a lot of attention. If you’ve ever watched Shark Tank, you’ll have heard them say just how big the market is for their product. The problem is, founders and presenters give the TAM slide a LOT of attention and what they don’t realize is… VCs don’t.
Many founders think that showing a huge market size is the key to winning over investors. But unless it’s done correctly, it actually hurts founders case more than it helps. Let me explain.
The Illusion of Big Numbers
The TAM slide is supposed to show investors how big your market is and how much money you could potentially make. Sure, a big number looks impressive, but investors know that these figures are often exaggerated. They understand that capturing a significant chunk of the market is no walk in the park. You’ve got to remember that while you see the vision behind your company, they are pitched big vision by founders every day. They’re not impressed by big numbers without a proper foundation.
Quality Beats Quantity
Investors care more about how well you understand your specific market segment and your strategy to dominate it. A large TAM number doesn’t tell them anything about your competitive edge or business plan. What they really want to see is a clear plan for attracting and retaining customers.
At the end of the day, if you’re not showing them that you understand your market, that you’ve got a plan to solve a real life pain, then they don’t care how big of a market there is for it- they’ll find a founder who has a plan.
Execution Matters
A massive market size means nothing if you can’t execute your plan. Investors are looking for a strong execution strategy: your go-to-market plan, customer acquisition tactics, and how you plan to keep those customers. They want to know how you’ll navigate market challenges and outshine competitors. Showing you have a solid plan for execution speaks volumes more than just a big number.
Focus on SAM and SOM
While TAM gives a broad market view, the Serviceable Available Market (SAM) and the Serviceable Obtainable Market (SOM) are much more meaningful. SAM narrows down the TAM to what you can realistically serve, and SOM pinpoints what you can capture soon. These figures provide a clearer and more credible market potential, showing investors you have a focused approach.
Realistic Projections Are Key
Investors appreciate realistic, data-driven projections more than inflated market sizes. Presenting well-researched SAM and SOM figures shows you have a grounded understanding of your market and a practical plan. This builds their confidence in your business.
At Ethos3, we build decks for some of the largest VCs in the world, we know what captures their attention. Big vision is nice, but data backed strategic planning is far better.
The Story Behind the Numbers
In all of the data though, it’s important not to forget the story behind it all. As much as we like to think that we only make decisions based on data, the reality is that we’re not reasonable creatures. We’re still driven by emotion, we’re driven by passion and stories. So make sure that once you’ve done the hard work of researching the numbers and diving into the data, make that come to life by telling a story with it. Show that these numbers you’re referring to, aren’t just numbers, but that behind each one is a human with a pain that you can solve.
So, to wrap up, when you’re building your fundraising deck just remember that while the TAM slide can provide a snapshot of market potential, it shouldn’t be the star of your pitch deck. Investors are more interested in your execution plan, market understanding, and growth strategy. Focus on realistic SAM and SOM figures and craft a compelling story about your unique value and execution plan. That’s how you’ll win over investors and get the funding you need.
If you need help with the nuts and bolts of building out your pitch deck that will capture your investors attention, reach out to us at Ethos3. We’re here to help!
