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Home Technology Nice try, startup, but that's not your serviceable obtainable market (SOM) •...

Nice try, startup, but that’s not your serviceable obtainable market (SOM) • TechCrunch

There’s one subject I’ve began to see an increasing number of typically: Startup founders, of their desperation to indicate how massive their markets are, overstep the mark considerably, claiming numbers for his or her TAM/SAM/SOM which can be unobtainable and absurd.

I get it: You wish to appear to be you’re constructing a really precious firm. However within the pitch course of, you continue to have to keep up a way of honesty.

Whenever you’re making an attempt to drill down on the entire addressable market, the entire serviceable market, and the entire obtainable market, be very cautious that you just’re telling the appropriate story.

The difficulty turned notably clear in a recent pitch deck teardown of Vori’s pitch deck, but it surely appears unfair to name them out for it individually; it’s a typical subject in a whole lot of pitch decks I see.

In Vori’s pitch deck, the next slide seems:

That’s not your SOM. Picture Credit score: Vori

On this slide, Vori talks about “the most important undigitized retail section,” which is probably going appropriate, however the $785 billion of complete spending within the U.S. isn’t the market measurement — that is the scale all spending, by shoppers, in grocery shops. (Statista has some interesting numbers there.)

Traders are smarter than that

The issue is, Vori isn’t launching a grocery retailer, however a software for grocery shops. In different phrases, even when Vori’s enterprise does in addition to it will possibly, and it will get 100% market share throughout each single impartial grocery store on this planet, that doesn’t imply that the corporate can have $250 billion of turnover: It signifies that the business it serves turns over that sum of money.

Nowhere in its slide deck does the corporate handle what it thinks is the higher fringe of the quantity of turnover in its business. That may very well be completed bottom-up (how a lot cash are indie supermarkets spending on stock-keeping and analytics software program, how a lot might that market develop, and what number of these shops might you’ve gotten as your clients?) or top-down (what number of supermarkets are there, multiplied by the value of your companies per grocery store. That’s your complete market measurement).

I perceive why Vori selected to make use of these numbers, however they’re primarily meaningless at greatest, clueless at medium-good, and misleading at worst. As a startup, you wish to just remember to paint a rosy, aggressive image of development, for certain, however don’t fall for the temptation to make use of the most important numbers yow will discover. For instance: In case you are a automobile dealership, your complete serviceable market isn’t the worth of the automobiles you promote (that’s the SOM for the automobile producer). Your SOM is the entire worth of the gross sales commissions, service plans, aftermarket items and companies, and the whole lot else you may really become profitable on. Don’t confuse the 2!

That is an excerpt from the total pitch deck teardown of Vori’s deck. You’ll be able to study this, and way more, from my weekly pitch deck teardown column on TechCrunch+!

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