Quick PaaP Test: Someone walks up to you at a party and wants you to join their teleportation company.  Do you care if the market for teleportation is big?

Well, what you care about is not whether the market is big or small, but whether or not you can make a lot of money in it.  And that depends.

Some big markets are already done; the players are set, the money is flowing, there’s no room for newcomers to make a difference or make a score.

Think soft drinks today.  A huge market, but no big transformations.  It’s trench warfare: a few points of share for Pepsi, a few points for Coke.

You would want a market where a new change was happening, an old order was about to blown away, and there was a real chance for newcomers to grab a lot of new business.

So, #1 characteristic of a market: is a lot of money likely to change hands soon?

I call this a “big wind”.  Is a big wind blowing in this market?

#2 question: how much of that big wind can the teleportation company get?

Savants call this the “addressable market”, and it’s not a simple question to answer.

To answer it right, you have to have a model of how money is going to be taken away from the incumbents, how the customers are going to shift over, what will be the reasons that will pry the first, second, and third waves of customers away from the old solution.  And you need to quantify those waves.

#2 characteristic of a market: a bottom-up analysis of addressable opportunity.

Sadly, most market sizing work in presentations is the opposite of this:

You see what’s wrong here?  The usual pitch contains easy answers to non-problems; investors want hard answers to real problems that the business might face.

Please Stop Complaining About How Busy You Are – Meredith Fineman – Harvard Business Review

Great observations, but doesn’t go to the heart of the matter: people protest how busy they are so that they won’t seem idle.

It’s like the women in “Schindler’s List” who prick themselves and put blood on their cheeks and lips so they will appear robust and won’t be “selected”.

The “uber-busy” are afraid they’ll be flagged as members of what Marx called “the reserve army of the unemployed” which seem increasingly a feature of our times.

Instead of a“framing slide” as the way to begin a pitch, most entrepreneurs are coached to start a pitch with a long section – the longer the better – on the “market need” for which their product or service is a solution.

It’s not uncommon for a pitch deck of forty slides to have 15 or 20 on this topic, covering these kinds of issues:

• The absolute misery of people who suffer from the problem
• The vast numbers of people affected
• The profound inadequacy of existing “solutions” to the problem
• The size of the affected market.

Nothing wrong with this kind of discussion in and of itself, but the first words on the first pitch are probably not the place to do so at length.

Why?

Because pitchees will rapidly sort into three groups:

1. Those who understand the market-need argument and agree that the market is a big one
2. Those who understand the market-need argument and think it’s not a big one
3. Those who don’t know where they stand but are willing to stipulate that the market need is big in order to see what you have to say about: who your team is, what your solution is, and how much it’s going to cost them (in other words, the stuff that should go on the framing slide).

Emphasis here is on “rapidly”.  I would guess I go into one of these three buckets midway through the first slide on the market need.

If my experience is typical – and the investors I’ve spoken to seem to agree that it is – then the Solution Pitching approach to Market Need to have one slide on market need, not twenty.

What might be on this slide?

• The problem: “people spend collective years driving cars to work.”
• Some argument about size: “Commuters spend $40B per year on autos, public transit, air travel, and rail.”
• Some argument about market adoption: “Commuters have not adopted teleportation in the past because 10% of the transmitted people were not successfully re-constituted on the receiving end.”

So, enough detail so that your audience knows what problem you’re proposing to solve, why it’s a big potentially lucrative market, and why the market will be ready for your solution.

The rest of the “market needs” slides can go into the back of deck as an appendix in case more detailed questions come up.  There will certainly be more discussion about the market, and I will say more about it in a subsequent post.