Tip 59: Market estimates. You need to show a BIG number for the market size, otherwise investors aren’t getting excited, right?
Wrong. Or, at least, for pitching to us that's possibly wrong.
For some investors in some places (VCs, outside of the south east) a huge market potential is likely a screening criterion. However, our local investors are realists and we aren’t looking for unicorns. Our ideal businesses are built from the ground up, through attrition and hard work, to reach a good set of initial customers – and are then purchased by a big competitor for less than $50 million. We are not looking for the next Google; we're looking for the next $50 million acquisition.
That has implications for your market estimate. Bigger numbers are not always better; in fact, big numbers lose credibility quickly for us.
First, the numbers need to be relevant conceptually. Say you sell a software to mid-sized real estate brokers. Telling us that the market value of transactions is $4 trillion has no relevance because brokers aren’t getting all of that value.
Second, the numbers need to be relevant to your product specifically. Telling us that there are 90,000 brokers has limited relevance (because your product only works for mid-sized brokers) and less "feasibility" (because you don't have a plan to access them).
What we need to know is how much is your relevant market - e.g. the 21,000 brokers in the southeast that house 5-10 realtors.
Stick to market estimates that are sensible, relevant, and make sense relative to your resources, go-to-market strategy, and team capabilities. Anything else is either irrelevant or not credible - more harm than good.