We encourage thinking of meetings touted as a test of fire: If an entrepreneur can negotiate the deadly traps and slay the monsters of doubt that reckless tech investors, they’ll be rewarded with a golden SAFETY note at the end of his mission.
Especially for first-timers, pitching has become an existential drama, which can lead to poor decisions like the slide being too long, not preparing investors for the big deal. meeting and is seriously exaggerating the size of the total addressable market (TAM) they hope to compete in.
“With TAM, it is almost guaranteed that you will be wrong,” Aydin Senkut, founder and managing partner of Felicis Ventures, said at TechCrunch Disrupt. “It will be too big or too small.”
Kara Nortman, a managing partner at Upfront Ventures, said the TAM figure given in an offer has no control over whether she has the ability to invest. “I will tell [it is] more importantly being able to articulate how big something can become and show that you have a thought process about TAM, if it’s early. “
According to Deena Shakir, a partner at Lux Capital, TAM, along with metrics related to the serviceable addressable market (SAM) and the usable market (SOM), does not mean carved in stone. They are simple planning tools that help founders show investors the growth potential of their company, while SOM and SAM help them offset risk.
“If we went into the meeting, we all thought there was something interesting there that was interesting enough to potentially be in the banking business,” she said. “The way it is calculated and the way the founder thinks about it does not necessarily tell us about the business or its future, but about how the founder thought about starting the company. And that’s much more important at the earliest stage. “
All three panelists said that the numbers TAM, SAM and SOM provide an opportunity for founders’ thinking, but they are not decisive, as they already have a common understanding of the areas. areas the founders hope to compete in.