After meeting over 1,000 early-stage teams in the past six years, one thing stands out immediately in a conversation: how well a founder understands their market. Not just how big it is, but how it behaves, who else is playing, and what’s likely to happen next.
At FIRSTPICK, we back pre-seed and seed-stage teams in the Baltics, often as the first institutional investors, so we’re used to hearing ideas that are still taking shape. But certain red flags repeat again and again. Here’s how to avoid them.
1️⃣ The “$100B Market” Fallacy
We’ve all seen it: “Our TAM is $100B.” Sure, maybe. But in most cases, it’s either unrealistic or completely irrelevant. Founders throw around huge numbers to prove the opportunity is big, but it often raises more questions than it answers.
We want to understand how you plan to win a specific slice of the market, and how that wedge can expand. At FIRSTPICK, we always look at both top-down (industry-wide) and bottom-up (your customers × average contract value) logic to sanity-check these estimates.
👉 Example #1: You’re building an AI tool to optimise routes for logistics firms in the DACH region. Don’t claim your market is the global $9T logistics industry. Instead, count the regional logistics firms you can serve and estimate their likely annual spend.
👉 Example 2: You’re launching a vertical AI tool for sales teams in SaaS startups. Start by estimating how many teams have 5–20 reps, use CRMs daily, and are willing to pay for outbound automation. That’s your real market.
2️⃣ “We’re First Movers”
Being early to a market doesn’t guarantee success. In fact, it can be a real challenge. You may face low awareness, high acquisition costs, and slow customer onboarding.
Positioning “first-mover” status as a competitive edge only makes sense if you can also explain how you’ll stay ahead once others enter the market.
👉 Example #1: A fintech startup building a new expense card for freelancers in Latvia says it’s the “first.” That’s not enough. What matters is how fast you can build trust, get licensed, and integrate with local accounting tools.
👉 Example #2: If you’re launching an AI legal assistant for Central Europe, the key isn’t being first. The key is learning faster, integrating deeply, and growing a user base before bigger players catch up.
3️⃣ Ignoring Market Timing
Market timing is crucial. Many great products fail because they’re too early or too late.
Every experienced investor will ask: “Why now?” Good timing means you are launching as a shift is happening in user behavior, regulation, or technology, not long before or long after.
👉 Example #1: A Lithuanian regtech startup launching in 2025 could align perfectly with the wave of new EU financial compliance standards. Too early, and no one cares. Too late, and the space may already be crowded.
👉 Example #2**:** Zoom existed before the pandemic, but hit product-market fit because the world changed. Perfect timing.
4️⃣ No Strategic Landscape Thinking
Talking about where the market is today is not enough. You also need to show how it might evolve over the next few years, and how your startup is positioned for that change.
We like teams who can zoom out and see regulatory shifts, buyer behaviour changes, and where technology is going.
👉 Example #1: You’re building an AI-powered learning assistant. Have you looked at how national education systems are adopting AI? Are governments funding digital literacy? Show you’ve thought about these trends.
👉 Example #2: A SaaS tool for HR teams is being built as if nothing is changing in employment law. But remote work, EU labor regulations, and AI use in hiring are all shifting rapidly. Show that you’ve considered how these changes affect your GTM.
5️⃣ Saying “We Have No Competitors” or Underestimating Them
If a founder says there are no competitors, that’s usually a red flag.
This one is simple: Every real problem already has some solution. Maybe it’s a manual workflow, a legacy product, or a team of interns. But something is being used instead of your tool.
Founders also love to use the 2×2 matrix, where every competitor is in a weak position and the startup is conveniently in the top right corner. Without substance, this means nothing.
Also, don’t dismiss big players as “old” or “slow” without understanding their strengths. It’s better to acknowledge their role and explain how you’re different.
👉 Example #1: An AI content-generation startup claims no one offers its exact feature set. Maybe not, but thousands of companies still use ChatGPT + Notion + human editors to do the same job. That’s indirect competition, and you need to show awareness of it.
👉 Example #2: You’re creating an AI email sorting assistant. Claiming Google has no proper solution might be true, but Gmail’s default filters and plugins have a massive installed base. Show why users will switch.
6️⃣ No Real Moat (Long-Term Competitive Advantage)
A great idea is not enough. Investors want to know how you will stay ahead once the product starts working and others begin to copy you.
Your “moat” is what makes your business defensible over time. It should get stronger as you grow. Moats can include:
- Proprietary data: your models improve as more users interact with your product
- Switching costs: users become dependent on your integrations and workflows
- Network effects: more users make your product better
- Regulation: licensing or compliance features that take time and money to replicate
- Speed and stickiness: when a user starts using your product and is satisfied, it becomes hard to lure them away — especially if you onboard early, move fast, and outperform in execution
👉 Example #1: Your AI health diagnostics startup collects large volumes of patient data from local clinics. That data advantage becomes your moat. The more data, the better your models, and the harder it is for others to catch up.
👉 Example #2: You’re building a vertical AI platform that becomes the core of sales ops in fast-growing B2B SaaS teams. It’s already embedded in lead routing, call analysis, and CRM updates. The deeper you go, the harder it is to switch.
7️⃣ Vague Ideal Customer Profile (ICP)
“We’re for SMBs and enterprises.” No, you’re not.
ICP is not just company size or industry. It’s a pain point + behaviour + how they make decisions. If you can’t describe your customer like a real person with a specific job and daily struggles, you don’t know them yet.
👉 Example #1: “We serve ecommerce brands doing €1–5M/year in GMV, with a 3–5 person ops team, using Shopify, and spending on Meta ads.” That’s an ICP.
👉 Example #2: “We target product-led SaaS startups with 10–50 employees that have no full-time data analyst and struggle to extract insights from Mixpanel or Amplitude.” This tells us who they are, what they feel, and why they’ll buy.
Quick VC Pitch Checklist
Before your next investor meeting, ask yourself:
- What’s your market size, and how did you calculate it?
- Why now? What shift is happening in tech, regulation, or behaviour?
- How will the market evolve in the next 12–24 months, and what trends or big players are shaping it?
- Who are your competitors, both direct and indirect, and how are you better?
- What’s your moat, and how will it grow stronger as you scale?
- Who is your exact customer, and what triggers them to buy?
FIRSTPICK invests in pre-seed and seed-stage startups across Lithuania, Latvia, and Estonia. If you’re currently fundraising or about to start, check out our website or apply here.