The 1% fallacy(successfulsoftware.net)
successfulsoftware.net
The 1% fallacy
http://successfulsoftware.net/2013/03/11/the-1-percent-fallacy/
19 comments
I think you're wrong.
The reason people put it on pitch decks to investors is that investors care. Now, this can be explained by investors being stupid. But there is at least one other explanation:
VCs are trying to hit the 1 in 1000 startup that makes it big. These startups are, necessarily, aiming at a large market. The VC realizes that, if the size of the market is huge, your chances of getting a good chunk of that market is small. But so what? They'd rather fund 100s of startups that will fail, but are all trying to make it big, than fund 100s of successes that are mediocre successes (to them).
Of course, as a founder, this isn't the math you should be doing; not by a long shot. But it is what matters to investors.
The reason people put it on pitch decks to investors is that investors care. Now, this can be explained by investors being stupid. But there is at least one other explanation:
VCs are trying to hit the 1 in 1000 startup that makes it big. These startups are, necessarily, aiming at a large market. The VC realizes that, if the size of the market is huge, your chances of getting a good chunk of that market is small. But so what? They'd rather fund 100s of startups that will fail, but are all trying to make it big, than fund 100s of successes that are mediocre successes (to them).
Of course, as a founder, this isn't the math you should be doing; not by a long shot. But it is what matters to investors.
But unless it's a very, very small niche; why does it matter what the upper bound is. If you hit that, you've got a good problem on your hands.
Totally agree. I have a niche product that can be expanded further once it's gained critical mass. But, given the recent investor pitches I've done, there is some backlash from investors on that concept. They want to know is it possible to turn this into a billion dollar corporation at some point, and the reality is that in my niche market, it's not.
Totally agree. I have a niche product that can be expanded further once it's gained critical mass. But, given the recent investor pitches I've done, there is some backlash from investors on that concept. They want to know is it possible to turn this into a billion dollar corporation at some point, and the reality is that in my niche market, it's not.
Saying "We're going for 1% of the market" is a top-down estimative.
And they usually are very off the mark
Rather, try to estimate from the bottom up. Your first realistic estimate should be 0.
Then start adding up, how many lemonades can you sell at a lemonade stand? (apply to your case)
And they usually are very off the mark
Rather, try to estimate from the bottom up. Your first realistic estimate should be 0.
Then start adding up, how many lemonades can you sell at a lemonade stand? (apply to your case)
These are inductive and deductive ways of estimating the same unknown. Both ways are valid and more helpful when used combined. They're far from the reality but their purpose is to provide a general idea.
Your example ignores the market (i.e. assumes that you are creating a new market, of which you will have 100%).
That is not the typical case, as most products enter existing markets and estimating market share is key.
That is not the typical case, as most products enter existing markets and estimating market share is key.
Yes, but I wouldn't even go so far as to cite the 100% new market creation - where's the usual timing / major shift argument? If that actually applies for real, forget the fallacy. In all other cases, feel free to keep it in mind.
> You don’t look at a pie and just say, “I’ll take 1% of that”.
Exactly. Pretty much sums up everything that is there to say about the article.
Exactly. Pretty much sums up everything that is there to say about the article.
100% wrong. Most products are launched into existing markets and estimating a likely market share is essential.
Essential for what? You can get an idea of what the ceiling of your market looks like, but that's it. Unless you can strongly and credibly argument how, saying you'll get 1% of the market is equivalent of saying nothing.
> The only thing market size can tell you is what the upper bounds are for a product niche. But unless it's a very, very small niche; why does it matter what the upper bound is.
Presumably that is, in fact, exactly what it's for--to tell you the absolute upper-bound to growth, so investors don't accidentally invest in your "growing" company only to see growth taper off completely when you run out of market to tap.
I would guess that this is actually common for brick-and-mortar businesses, because of locality. Pretty rare when your market is "anyone who can type a credit card number into a web page," though.
Presumably that is, in fact, exactly what it's for--to tell you the absolute upper-bound to growth, so investors don't accidentally invest in your "growing" company only to see growth taper off completely when you run out of market to tap.
I would guess that this is actually common for brick-and-mortar businesses, because of locality. Pretty rare when your market is "anyone who can type a credit card number into a web page," though.
but who cares?
==It's the level of abstraction that has signalling value.
==It's the level of abstraction that has signalling value.
“He forgot there was a number lower than one percent.”
http://sivers.org/1pct
http://sivers.org/1pct
I wouldn't mind getting 0.01% of the CRM market.
Interesting... my reaction to the OP was "Duh, everyone knows that!" But my reaction to your sivers.org link was "Great story!" Not sure if that says something about me or about the relative writing skills of the two posts.
On a semi-related note, I always found print advertising to convert extremely poorly no matter what. If your goal is to acquire customers, never invest in offline media, because you may aswell throw the money directly into a trash can (if your goal is branding and image though, print may be fine)
It depends on your target audience. For instance, print campaigns work extremely well in the aviation market. It turns out the various pilot magazines are still the most penetrated medium to that market. Print campaigns work better than anything else. I agree print campaigns for a social networking site is dumb.
I've discovered that as well. The only way it really works is if you do brute-force advertising. If you can afford to buy 10% of the available ad-space every month, you can probably do fine. Otherwise, forget about it.
I agree that you should never go into a market thinking, "If I can ply capture X%, we'll be hugely successful." It's putting the cart before the horse.
You go into a market by finding a pain that you solve. You can go into the CRM market if you have a method that, for even just a few companies, solves some significant pain they have. Then, over time, you analgesic grows to soothe more companies' pains. Then you find you captured some percentage of the market. The capture is the result, not the plan.
You go into a market by finding a pain that you solve. You can go into the CRM market if you have a method that, for even just a few companies, solves some significant pain they have. Then, over time, you analgesic grows to soothe more companies' pains. Then you find you captured some percentage of the market. The capture is the result, not the plan.
I've been taught that your pitch deck should have a slide on TAM, SAM, SOM [1]. The idea here is that we show that the general market for this product domain is huge and then we drill down to the niche in that market who's pains our initial product addresses. It makes the opportunity much more attractive when there's a huge market that you could potentially become the Salesforce of, even if you're just addressing pains of flower shops right now.
[1]: http://upandrunning.bplans.com/2012/06/22/tam-sam-and-som-hu...
[1]: http://upandrunning.bplans.com/2012/06/22/tam-sam-and-som-hu...
I don't disagree with the OP's basic point about not making "get 1% of huge market" your strategy. As SoftwareMaven points out above, getting 1% of a market is not a strategy at all, it's a result, and it's not going to happen just because the number sounds small. But I do want to oppose the more general notion that you shouldn't enter crowded markets.
A market like CRM is not one big homogenous thing; it's got tons of nooks and crannies in it. Maybe you want to be CRM for bakeries, who, let's just say, are largely not using CRMs yet. You'll end up with a different product, but more importantly, you'll have different sales channels and marketing strategies. You go after an untapped niche with special requirements, maybe even one that's too small for giant CRM firms to target. You compete with all of those giant CRM companies by not competing with them.
Will that add up to 1% of the market? Seems doubtful, but ask yourself what percent of $18 billion you can run a company on. It's a lot less than 1%.
A market like CRM is not one big homogenous thing; it's got tons of nooks and crannies in it. Maybe you want to be CRM for bakeries, who, let's just say, are largely not using CRMs yet. You'll end up with a different product, but more importantly, you'll have different sales channels and marketing strategies. You go after an untapped niche with special requirements, maybe even one that's too small for giant CRM firms to target. You compete with all of those giant CRM companies by not competing with them.
Will that add up to 1% of the market? Seems doubtful, but ask yourself what percent of $18 billion you can run a company on. It's a lot less than 1%.
It would probably be best to target niches with relatively large companies who have very specific requirements.
Over the years I have built about 6 mini CRM systems for small companies. Usually these start off as contact form on a webpage and evolve into something that outputs excel spreadsheets.
Over time though, these things tend to get replaced by mass market packaged or SaaS CRM systems simply because even though they are not bespoke to that business they do the job well enough for the price.
The answer is probably not to make "A CRM for bakeries" but to make a "system to help with the unique problems of large bakeries that might happen to have CRM-like components"
If you want to build a product for a market as opposed to selling consulting by building a system for one specific bakery then the sweet spot is likely to be a very small target area.
Over the years I have built about 6 mini CRM systems for small companies. Usually these start off as contact form on a webpage and evolve into something that outputs excel spreadsheets.
Over time though, these things tend to get replaced by mass market packaged or SaaS CRM systems simply because even though they are not bespoke to that business they do the job well enough for the price.
The answer is probably not to make "A CRM for bakeries" but to make a "system to help with the unique problems of large bakeries that might happen to have CRM-like components"
If you want to build a product for a market as opposed to selling consulting by building a system for one specific bakery then the sweet spot is likely to be a very small target area.
I love his closing comment, "Whatever you do, don’t stand in front of investors and pitch them the 1% fallacy. It makes you look an idiot. I should know, because I’ve done it."
The flip side of that argument is that two of the five biggest CRM vendors had single digit market share (2008; Gartner via Wikipedia) and ~40% of the market uses vendors outside the big five. It has high margins, few economies of scale and sales that are more relationship than reputation-based - in other words one of the markets you genuinely could get very rich off being a smaller player with a good sales strategy and a generic solution, power laws be damned.
You won't get anywhere near that mythical 1% without a well-costed and planned strategy, but the same applies to trying to capture a huge chunk of a tiny niche market like bingo card creation. Once you've stopped worrying about phoney percentages, you can afford a lot more false starts in the huge addressable market than with a misjudged niche product.
You won't get anywhere near that mythical 1% without a well-costed and planned strategy, but the same applies to trying to capture a huge chunk of a tiny niche market like bingo card creation. Once you've stopped worrying about phoney percentages, you can afford a lot more false starts in the huge addressable market than with a misjudged niche product.
The biggest issue I have with this 1% fallacy (which is a huge pet peeve of mine) is that it shows completely the wrong mindset needed for success in my opinion. To me it is saying we don't have confidence in our ability so we're going to target such a large market that if we even have a small amount of success we'll still make a lot of money.
Your aim should always be 100% market share. If you don't think that is is possible to create a product that would be appealing enough that everyone in that market should want to use it then narrow that market into a smaller subset and aim to get 100% of that. You should never be ok with only 1% of target users using your product.
Your aim should always be 100% market share. If you don't think that is is possible to create a product that would be appealing enough that everyone in that market should want to use it then narrow that market into a smaller subset and aim to get 100% of that. You should never be ok with only 1% of target users using your product.
I agree with this, if only to create the correct mindset from the beginning. Never settle or be prepared to show weakness.
The most interesting part of this..
"Whatever you do, don’t stand in front of investors and pitch them the 1% fallacy. It makes you look an idiot. I should know, because I’ve done it."
was the end, and not elaborated on... I for one would love to hear the story of how that turned out, with specifics!
"Whatever you do, don’t stand in front of investors and pitch them the 1% fallacy. It makes you look an idiot. I should know, because I’ve done it."
was the end, and not elaborated on... I for one would love to hear the story of how that turned out, with specifics!
I am the author. As I remember it the pitch (for a .com company I worked for) was going ok until I said "...and if only we can get 1% of this market...". They flinched. I didn't really appreciate what I had said wrong at the time. It was only when I had more experience in marketing and running my own small company that I realized how naive this argument was.
When the next person tells you she will get 1% of any market then ask her to identify her top x customer prospects by name, describe how she will reach those customers and why those customers will buy her software instead of her competitors.
That's pretty sexist! There's no reason to think that women are worse than men at evaluating market opportunities.
I think it is just someone using female for the generic pronoun. Of course maybe you realize and are poking fun, whatever.
If you decide to abstain from the normal generic pronoun "because women feel that you aren't referring to them when you use he," then that very logic means that you aren't referring to men when you use "she" to talk about stupid individuals as above.
Hopefully, our friend above did mean the message in a sexist manner. I find the modes of failure present in the other alternative too sad to contemplate.
Hopefully, our friend above did mean the message in a sexist manner. I find the modes of failure present in the other alternative too sad to contemplate.
not sure if that was tongue in cheek but only intent of post was example to show market %s are meaningless if you are going top down.
if he or she can go bottom up - show which customers he or she will win (how and why) - and then show what segment of market that represents then that is more valid.
if he or she can go bottom up - show which customers he or she will win (how and why) - and then show what segment of market that represents then that is more valid.
Interesting, I may be wrong but I don't think its a 'fallacy' (after all if you got 1% you would be successful) so much as a 'unsupported argument' which is where you don't say "how" you get that 1%. The Derek Sivers link is also good in this regard.
The mistake is believing that people will randomly try your product. That is true if the threshold for their trying it is below their "don't care" point, but if it's going to cost them more than their "don't Care" point cost they won't try it unless sold on it.
Its perfectly reasonable (in my opinion) to go in with "The market leader here has an $X billion market, with Y customers. All of those customers have pain foo which our product version solves. We're going to reach those customers through the following channels with the goal of converting 1% of them to our product which is functionally identical and less painful."
That is a 'go to market' strategy that, if you are right about the pain, can turn your product into a going concern. But again, it solves a problem you know exists.
However having an identical product, especially one where you don't differentiate, means you have to get out ahead of the market leader in acquiring new customers and that is expensive and difficult. Not a good strategy over all.
The mistake is believing that people will randomly try your product. That is true if the threshold for their trying it is below their "don't care" point, but if it's going to cost them more than their "don't Care" point cost they won't try it unless sold on it.
Its perfectly reasonable (in my opinion) to go in with "The market leader here has an $X billion market, with Y customers. All of those customers have pain foo which our product version solves. We're going to reach those customers through the following channels with the goal of converting 1% of them to our product which is functionally identical and less painful."
That is a 'go to market' strategy that, if you are right about the pain, can turn your product into a going concern. But again, it solves a problem you know exists.
However having an identical product, especially one where you don't differentiate, means you have to get out ahead of the market leader in acquiring new customers and that is expensive and difficult. Not a good strategy over all.
It is a fallacy because it is based on the incorrect premise that getting a 1% penetration in a large market is relatively easy. It is quite widespread - over the years I have heard plenty of people come out with it.
Your probably right, it would be clearer if they said "We can easily get 1% of that market." That would certainly sound fallacious.
I have seen folks actually use 1% as a goal in a reasonable pitch, one where the challenges were laid out and the tactics for mitigating those challenges identified. I guess it just struck a nerve, like people who say "I hate generalizations." :-)
I have seen folks actually use 1% as a goal in a reasonable pitch, one where the challenges were laid out and the tactics for mitigating those challenges identified. I guess it just struck a nerve, like people who say "I hate generalizations." :-)
Awesome article. Puts some classic and well established theories to good application. The age-old advice comes through again: focus on a niche.
Nice explanation and good numbers. Also bonus I'm in a wedding soon and will probably need your software, but this is the first I've heard about it :)
This is also known as failure to segment the market on the old-school list of entrepreneur mistakes.
Maybe there is a $100 B of revenue out there. But 40% of it is locked up in internal markets, and 40% of what's left is locked up in long-term contracts, and 40% of what's left is held in government contracts you can't get, etc etc etc and pretty soon you need to grab something like 25% of the market just to break in.
Maybe there is a $100 B of revenue out there. But 40% of it is locked up in internal markets, and 40% of what's left is locked up in long-term contracts, and 40% of what's left is held in government contracts you can't get, etc etc etc and pretty soon you need to grab something like 25% of the market just to break in.
I've heard this described as a top-down versus bottom-up approach. The problem with the top-down approach (i.e. I will capture 1% of the market) is that is doesn't tell us much about how you'll capture this 1%. By going from the bottom-up we can clearly see how you are going to iterate and build your userbase.
Great reality check for you and your business...but it may or may not translate to better luck with VCs. Plenty of them buy into this innanity, and plenty more don't care about market size at all and will decided to invest in whatever other VCs are investing in.
Reminds me of PG's "Deep Well" concept.
Imagine if Steve Jobs would have thought like that, world was not going to experience iPhone.
This seems to be 37 Signal's model case and point. It's been doing pretty well for them.
Bollocks. 1% is not a fallacy. It's just a way of mentioning a low-risk target without specifying the strategy.
You don't know the specifics of the strategy because you're a startup - to quote Clayton Christiansen, the needed market research costs much more than making the product, so you can't afford to do it - and to quote Steve Blank, you may need to pivot if you get your hypothesis wrong.
It's called a "fallacy" because idiot VCs don't bother to note these facts, and just want a sure fire winner business plan handed to them so they can fire the founders from their own company.
Similarly, idiot VCs don't get why you'd want a hockey-stick graph or to say "these figures are conservative", for much the same reasons. So these become infamous "fallacies" too.
If you play by the rules of these idiot VCs, you will find that it's impossible to make a business plan that meets their expectations and isn't fraudulent. It's better to walk away than to play their game.
If by any chance you meet a sane VC, they're likely to tell you something useful. Instead of banging on about 1% being a fallacy, they'll say something like "at your stage you need to have a working prototype before seeking investment" or "at your stage you need a more aggressive advertizing plan".
You know, something with content.
You don't know the specifics of the strategy because you're a startup - to quote Clayton Christiansen, the needed market research costs much more than making the product, so you can't afford to do it - and to quote Steve Blank, you may need to pivot if you get your hypothesis wrong.
It's called a "fallacy" because idiot VCs don't bother to note these facts, and just want a sure fire winner business plan handed to them so they can fire the founders from their own company.
Similarly, idiot VCs don't get why you'd want a hockey-stick graph or to say "these figures are conservative", for much the same reasons. So these become infamous "fallacies" too.
If you play by the rules of these idiot VCs, you will find that it's impossible to make a business plan that meets their expectations and isn't fraudulent. It's better to walk away than to play their game.
If by any chance you meet a sane VC, they're likely to tell you something useful. Instead of banging on about 1% being a fallacy, they'll say something like "at your stage you need to have a working prototype before seeking investment" or "at your stage you need a more aggressive advertizing plan".
You know, something with content.
But if the whole point is saying there is a lot of money in this space so it's less of a risk then why mention 1%? Mentioning the market size and opportunity is important but I think the issue people (such as myself) have with this specific framing is:
1) It makes it seem like you believe there is no way you could get less then 1% market share. Because 1% is so small that it must be easy to get. 2) It often de-emphasizes why people would choose your product over any others because you only need such a small percentage to be successful 3) It makes it seem like you aiming low. Aiming to get only 1% of a market to me means you ether don't have huge faith in your product.
1) It makes it seem like you believe there is no way you could get less then 1% market share. Because 1% is so small that it must be easy to get. 2) It often de-emphasizes why people would choose your product over any others because you only need such a small percentage to be successful 3) It makes it seem like you aiming low. Aiming to get only 1% of a market to me means you ether don't have huge faith in your product.
Aiming to get only 1% of a market to me means you ether don't have huge faith in your product.
You forget the question of time. Maybe the product is good enough to get 100% eventually. But maybe you'll go bust in the meantime if you have a ridiculous burn rate. "Aiming" for 1% means making your burn rate sustainable on 1% so can live to fight for the 100%. Microsoft wasn't built in a day.
It often de-emphasizes why people would choose your product
No because that's covered in another part of your pitch, which deals with your product characteristics. The 1% part of your pitch deals with your strategy.
By the way, you are not supposed to have faith in your product, you are supposed to have a willingness to deliver whatever product the customer wants. That's what pivots are for. Business is supposed to be a rational process, not based on faith.
You forget the question of time. Maybe the product is good enough to get 100% eventually. But maybe you'll go bust in the meantime if you have a ridiculous burn rate. "Aiming" for 1% means making your burn rate sustainable on 1% so can live to fight for the 100%. Microsoft wasn't built in a day.
It often de-emphasizes why people would choose your product
No because that's covered in another part of your pitch, which deals with your product characteristics. The 1% part of your pitch deals with your strategy.
By the way, you are not supposed to have faith in your product, you are supposed to have a willingness to deliver whatever product the customer wants. That's what pivots are for. Business is supposed to be a rational process, not based on faith.
When you are talking about large markets 1% is not a short term goal. It is important to specify how you plan to keep your company running as you grow, but I don't see how saying if we reach 1% market share we will make a lot of money does that.
Also I'm not saying that using 1% and explaining what makes your product good are mutually exclusive. Just that more often then not people who use a 1% pitch tend to focus less heavily on the why it is a competitive product. This is just the trend I see, although I may be wrong and if there is any hard data on this I would be interested in seeing it.
Maybe "faith" was a bad word to use. What I ment was that by using 1% it seems like you don't have confidence in your team to produce a competitive product.
When it comes down to it 1% is often used as a place holder for arbitrary small number, and in this case it is a complete fallacy. 1% of a large market is hard to get, and if you can get it then why can't you get more? Basing your math for a pitch based on this arbitrary number kind of renders the rest of the pitch worthless.
Finally 1% is never a good metric to aim for. If you wouldn't accept it for retention rate, conversion rate, profit margin etc why is it ok for market share? My point is you should always be aiming higher then 1% so why use it in a pitch?
Also I'm not saying that using 1% and explaining what makes your product good are mutually exclusive. Just that more often then not people who use a 1% pitch tend to focus less heavily on the why it is a competitive product. This is just the trend I see, although I may be wrong and if there is any hard data on this I would be interested in seeing it.
Maybe "faith" was a bad word to use. What I ment was that by using 1% it seems like you don't have confidence in your team to produce a competitive product.
When it comes down to it 1% is often used as a place holder for arbitrary small number, and in this case it is a complete fallacy. 1% of a large market is hard to get, and if you can get it then why can't you get more? Basing your math for a pitch based on this arbitrary number kind of renders the rest of the pitch worthless.
Finally 1% is never a good metric to aim for. If you wouldn't accept it for retention rate, conversion rate, profit margin etc why is it ok for market share? My point is you should always be aiming higher then 1% so why use it in a pitch?
When you are talking about large markets 1% is not a short term goal
This is where you are precisely wrong. A VC wants to cash out within 3 years.
Finally 1% is never a good metric to aim for. If you wouldn't accept it for retention rate, conversion rate, profit margin etc why is it ok for market share?
Because your short term market share goal is in this context a proxy for your ambitions for your burn rate. So it is the exact opposite. You want your conversion rate to go up while you want to keep your burn rate down. 1% is an excellent number in this context.
Basing your math for a pitch based on this arbitrary number kind of renders the rest of the pitch worthless.
You will find that whatever numbers you target in your pitch are arbitrary, absent a crystal ball that can actually tell you the future. The comical term for this is Scientific Wild-Ass Guess.
This is where you are precisely wrong. A VC wants to cash out within 3 years.
Finally 1% is never a good metric to aim for. If you wouldn't accept it for retention rate, conversion rate, profit margin etc why is it ok for market share?
Because your short term market share goal is in this context a proxy for your ambitions for your burn rate. So it is the exact opposite. You want your conversion rate to go up while you want to keep your burn rate down. 1% is an excellent number in this context.
Basing your math for a pitch based on this arbitrary number kind of renders the rest of the pitch worthless.
You will find that whatever numbers you target in your pitch are arbitrary, absent a crystal ball that can actually tell you the future. The comical term for this is Scientific Wild-Ass Guess.
This is where you are precisely wrong. A VC wants to cash out within 3 years.
I think we may have different definitions of "short term". When I say short term I mean that you are in the process of proving a concept as viable and at the point that pivots are not very costly. If you've reach 1% penetration in a large market then you are past this point.
1% is an excellent number in this context.
I would definitely agree that it is a good target to hit. I'm just saying that it should not be your golden standard. There is a difference between saying "this is how we plan on securing a foothold in the market", and saying "If we can get only 1% of the market then we will be successful."
The comical term for this is Scientific Wild-Ass Guess
I completely agree. Thats why i actually disagree with stating a target marketshare in a pitch. Personally I think that stating total market size, an underserved aspect of that market/competitive advantage and how you plan to try and break into that market should be enough. I don't think making wild guesses at market share is really worth while at all.
I think we may have different definitions of "short term". When I say short term I mean that you are in the process of proving a concept as viable and at the point that pivots are not very costly. If you've reach 1% penetration in a large market then you are past this point.
1% is an excellent number in this context.
I would definitely agree that it is a good target to hit. I'm just saying that it should not be your golden standard. There is a difference between saying "this is how we plan on securing a foothold in the market", and saying "If we can get only 1% of the market then we will be successful."
The comical term for this is Scientific Wild-Ass Guess
I completely agree. Thats why i actually disagree with stating a target marketshare in a pitch. Personally I think that stating total market size, an underserved aspect of that market/competitive advantage and how you plan to try and break into that market should be enough. I don't think making wild guesses at market share is really worth while at all.
I don't think making wild guesses
The problem is that the Scenarios section in any business plan is typically full of this kind of bullshit.
In business schools they teach the MBAs to layer it on by the ton.
The 1% thing I find frankly the least offensive.
The problem is that the Scenarios section in any business plan is typically full of this kind of bullshit.
In business schools they teach the MBAs to layer it on by the ton.
The 1% thing I find frankly the least offensive.
If the 1% is the least offensive, I'd hate to see the rest of it. I guess I'm glad that I'm on the technical side of things :P
Instead you spell out through which methods you will gain and keep customers and how many you will gain via those methods. For SaaS, that could look like “We have x visitors to our website. We have shown with previous products and experiments a y percent conversion rate. From this, we estimate x * y customers at $d/month. With your funding, we should be able to increase the number of visitors to the product site by z% while maintaining or improving our conversion rate."
These numbers are not a factor of market size.
p.s. The only thing market size can tell you is what the upper bounds are for a product niche. But unless it's a very, very small niche; why does it matter what the upper bound is. If you hit that, you've got a good problem on your hands.