TAM SAM SOM
PRESENTING TAM SAM SOM DATA TO INVESTORS
TAM, SAM, and SOM are commonly used metrics in market research to help businesses (and investors!) understand the potential size of a market.
These metrics are particularly important for businesses that are developing a new product or entering a new market, as they help to provide insight into the market’s potential and the opportunities and challenges that the business may face. So it’s clear why VCs want to know about these values. Most importantly, Venture Capitalists want to see a very high TAM, as securing a small market share of a huge market, means that the company will still create very high sales, and therefore high returns on their investment.
TAM - TOTAL AVAILABLE MARKET
TAM stands for Total Addressable Market, or Total Available Market. This is the total market demand for a particular product or service, including all potential customers and all potential revenue streams. TAM represents the maximum revenue opportunity for a business in a given market if they would be a monopoly… and we all know that’s close to impossible. VCs normally want to see a TAM higher than $100 Billion, as this gives the companies that end up being successful a higher chance to become unicorns.
SAM - SERVICEABLE AVAILABLE MARKET
SAM stands for Serviceable Available Market. This is the portion of the total addressable market that a business can realistically target and serve with its product or service, given its resources and competitive environment. SAM represents the portion of the market that a business can realistically address and capture. This can be limited to a very specific geographical area, or to a subset of companies in a specific sector. As a general rule of thumb, if you can “service” a specific audience, this is part of your Serviceable Available Market. In other words this is a market that you can “address” or that is “available” to you.
SOM - SERVICEABLE OBTAINABLE MARKET
SOM stands for Serviceable Obtainable Market. This is the portion of the serviceable available market that a business can realistically capture, given its marketing strategy, product positioning, and competitive environment. SOM represents the portion of the market that a business can realistically expect to capture and represents its expected market share.
Midjourney: a colorful pie chart seen from the window of a space ship
CONCLUSION
By analysing these metrics, businesses can gain a better understanding of the size and potential of the market they are entering, and the competition they will face. This can help businesses to make more informed decisions about their marketing strategies, product development, and overall business plans.
Additionally, these figures are crucial in convincing investors to believe in your company and the TAM SAM SOM slide is a crucial component of your pitch deck: this slide provides a clear and concise overview of the potential size of the market for the product or service being offered, and the business’s expected share of that market.
Investors are typically well-versed in the market they are investing in, and are likely to scrutinise any claims made about market size and potential. As such, it is important to ensure that the data presented on the TAM SAM SOM slide is well-researched and supported by credible sources.
Including sources for your data is not only important for demonstrating the validity of your claims, but also shows that you have conducted thorough research and are knowledgeable about the market you are operating in. It also allows investors to validate your assumptions and assess the accuracy of your projections.
When creating your TAM SAM SOM slide, you don’t have to include a detailed explanation of how you arrived at your estimates, or any assumptions or limitations that underpin them. But be ready to explain yourself, and how you reached your conclusions. This will be crucial to build credibility with investors, and demonstrate that you have a deep understanding of your target market. Overall, a well-researched and well-supported TAM SAM SOM slide can greatly enhance the overall effectiveness of your pitch deck and increase your chances of securing investment.
Do you need help in researching your market? Reach out to us and we’ll explain to you how we can complement your team and help you get the most out of your pitch deck!
SUBSCRIBE TO OUR NEWSLETTER
TO RECEIVE UPDATES ON NEW ARTICLES
The Scorecard Valuation Method
The Funding Dictionary
Valuation
The UniCamel
Investment Process
SUBSCRIBE TO OUR NEWSLETTER
TO RECEIVE UPDATES ON NEW ARTICLES
New SEIS Rules 2023
Business Valuation For Beginners
Income-based Valuations
