raising startup capital pitch hacks class at general assembly sf september 20 2012 v ss

Nathan Beckord @startupventuresGeneral Assembly San FranciscoSeptember 20, 2012

Raising Startup CapitalSession 1- The Pitch

GENERAL ASSEMBLYSept. 20, 2012

Raising Startup Capital -- The PitchNathan Beckord @startupventures2

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Hi. My name is...Nathan Beckord, CFA. Principal, www.VentureArchetypes.com

• My Job: Startup CFO, Advisor, and BD Guy

• 100+ Startup clients over the past eight years• E.g. Kickstarter, Clicker, Autonet, Zerply, GetHired, etc.

• Clients have raised over $98 million in seed capital and achieved 5 exits• Example: I ran financial modeling for Clicker.com, which raised 2 rounds of VC

and sold for $100m in 3 years.

• Previously: Technology ValuaXon | Investment Banking | Venture Capital

• Chartered Financial Analyst (CFA) and MBA



Why this matters

From VentureHack’s “Pitching Hacks” PDF / Book: h<p://venturehacks.com/pitching

What are we doing here? Ultimately, we are telling stories so we can successfully raise money at favorable terms and valuation.

What form does our story take? In the form of our pitch.



The Full Pitch Package Written

• A one sentence (or sentence fragment) tag line

• A one or two paragraph email introduction to the business

• A 'one-pager' overview or teaser

• A 2-3 page executive summary

• a slide deck specifically designed to be handed out

• A thoughtful, comprehensive business plan: either (a) a traditional 10-20 page written plan, or (b) a carefully prepared and annotated 'business model canvas'

• A finished (or prototype) marketing brochure

Live• A one sentence description

• A 30 second elevator pitch

• A 5 minute 'quick pitch'

• A 15-20 minute angel/VC PowerPoint/Keynote pitch deck

• A sub-15 minute foolproof product/site demonstration

Online• A functional public web site

• A short video pitch

• A dedicated, controlled access, investor-relations web site

From David Rose’s answer on Quora: h<p://www.quora.com/Venture-‐and-‐Investor-‐Pitches/What-‐materials-‐or-‐soIware-‐should-‐I-‐use-‐to-‐pitch-‐a-‐VC

If you have nothing but time on your hands, here is the full list of pitch materials for you to work on...your Tag Line, your Email Intro, your Teaser, your Exec Sum, Elevator Pitch, Business Plan, Pitch deck, Video, etc. This will pretty much cover every possible situation.

But... youʼre busy startup founders-- so weʼre going to focus on the easiest to create, most commonly used, and most versatile option, the pitch deck.



What is this...‘pitch deck’ you speak of?

Pitch Deck ≠ Business Plan

Pitch Deck = Business Plan

So what is a pitch deck? In the “olden days,” i.e., like 4-5 years ago, we would draft an entire, thorough 20-30 page business plan, which is a deep dive into the business, and is what weʼd send along in advance of a meeting, or use as leave behind. Then, weʼd distill that down to a super high level, crisp and simple, slide deck to use during the live meeting.

Now, no one reads or writes business plans anymore. Yet you still need something to send ahead, and that will be sent around the office of the VC, among the partnership. And it has to stand on its own and be complete, and tell the entire story without your voice-over narration, so they can read it by themselves. So the pitch deck, in this context, is now the business plan.

So essentially, you should have two different pitch deck—the deck for sending and circulating, and then what you show them in the office. The main difference is level of detail.

Just a few tips for the deck you'll be sending: i) make it small file size, ii) have a screen shot in lieu of demo; iii) avoid builds, iv) use white background; v) Use PDF if desired; vi) pack it full of pithy soundbites that the junior analyst can plagiarize when she does her write up for the senior partners.



What is your “one thing?”

“those guys were killing it-‐-‐ rocket ship trajectory growth”

“they had a really clever solu9on to a vexing problem”

“I don’t remember what they did, but the team was bankable-‐-‐ A-‐players all the way!”

Q: what makes you excepXonal?

So letʼs talk about how to build a pitch deck. We start by figuring out what is the single most unique, compelling piece of your story.

Or, in other words, If you strip everything away...what will investors remember about you a week or two later?

In short, what makes you exceptional?



Are you exceptional?

“investors are trying to find the excep%onal outcomes, so they are looking for something excep9onal about the company. Instead of trying to do everything well (trac9on, team, product, social proof, pitch, etc), do one thing excep%onal. As a startup you have to be excep9onal in at least one regard.”

-‐-‐Naval Ravikant, Angel List

Hereʼs a quote by Naval Ravikant of Angel list, on the importance of being exceptional in at least one area.



Pitch Archetypes

Let’s talk about...

From Jason Shen’s blog h<p://www.jasonshen.com/2012/eleven-‐compelling-‐startup-‐pitch-‐archetypes-‐with-‐examples-‐from-‐yc-‐companies/

Ok letʼs now look at a couple ways to frame your “one thing” and tell your story by way of several “pitch archetypes”

these archetypes are important, because how you frame your business and how you guide the discussion has a big impact on how people react, what they retain and what message they will share with other investors.

Excertped from the excellent blog at: http://www.jasonshen.com/2012/eleven-compelling-startup-pitch-archetypes-with-examples-from-yc-companies/



Archetype #1

Problem / Solution

This is the classic Sequoia outline, and probably accounts for 85% of the decks out there. Youʼve found a valuable, rich pain point to solve. Painkiller vs. vitamin.

Itʼs Classic, itʼs familiar, but itʼs not always as relevant to web 2.0...is there really a pain point solved by social checkins?

Weʼll look at the outline in a few moments.



Archetype #2

Traction Story

Traction-- “Pitching the numbers”...Iʼm a numbers guy, so this gets me excited.

Here, we are focused on growth and rate of growth (slope of line) as way to validate your vision; what youʼre actually doing becomes secondary. e.g. Fab.com

Bonus points if you can demonstrate the LTV > CAC. Online retail, gaming, etc. Then pouring money in becomes a no-brainer and it makes sense to dump as much in as you can profitably spend.

As Paul Singh of 500S says, “Traction is the new intellectual property.” Thereʼs a direct correlation between the strength of your traction story and the speed at which you raise funding.

Further reading: http://betashop.com/post/14249821547/behind-the-scenes-how-fab-raised-40-million-with-a and http://www.slideshare.net/brendanbaker/how-to-communicate-traction-to-investors-with-brendan-baker-and-hiten-shah



Archetype #3

“X for Y”

“X for Y”-- applying a proven model to a new market or application. You see this a lot now, and it can be combined with Problem / Solution.

Here, X is the established model (e.g. Airbnb) and Y is the new market that the model is being applied to (dog boarding). DogVacay.

Thus, X must be successful, Y must be large. The metaphors you use should also be well-known.

Risk of overuse. A variation on this is what I call the Hollywood Pitch, which is a mashup of two different scripts. “Jurrassic Park meets Dirty Dancing”



Archetype #4

“Scratched Your Itch”

“Scratched your itch” (aka Personal Story)-- youʼve solved something that was vexing you. A lot of technical companies get started this way, like Heroku or Dropbox or Github. Or, for example, Iʼm starting a company called FounderSuite.com ...

Good if you know problem intimately + itʼs universal + VC has experienced it

Bad-- if too niche or specific.



Archetype #5

Crystal Ball

Crystal Ball (aka Evolution next / skate to where the puck will be / connect the dots / converging trends)--

Here, you walk investor through how a market has evolved, and where it will be. e.g. semantic web, cloud biz, mobile biz.

Itʼs pretty compelling, as youʼre showing investors a peek into the future, and they love this stuff. So itʼs easier to get a meeting vs. some of the other formats. The harder part is convincing them you have the solution, <AND> you are flexible enough to execute around 1000 minefileds that are completely hidden...tech shifts, user behaviour, legislation, etc.



Archetype #6

Wouldn’t it be cool...

Wouldnʼt it be cool if: describe something fun and interesting. Get investor to imagine with you...get a couple cool use cases / anecdotes.

e.g. Zaarly, TaskRabbit: “Wouldnʼt it be cool if you could easily hire someone to wait in line at Apple store for new iPhone?”

Uber: Wouldnʼt it be cool is you could hail a taxi from your phone and watch it drive toward you?



More Pitch Archetypes

The Pivot

Breakthrough Tech

New Biz Model

Dream Team

Service at Scale

Consumerification of Enterprise

Further Reading: hJp://www.jasonshen.com/2012/eleven-‐compelling-‐startup-‐pitch-‐archetypes-‐with-‐examples-‐from-‐yc-‐companies/

New biz model: Taking leveraging existing tech, and innovating in how youʼre monetizing. E.g. Sunrun, GMAC, Square

Consumerifciation of Enterprise (Yammer, Asana, etc)...win by cheap software that continually gets better.

Dream team: assembled scientists with rare knowledge. Or, team with mega homeruns....banking on history repeating itself.

Service at scale-- Wave doing SMB accounting or 99Designs doing cheap design.

Breakthrough Tech (w/bmodel): literally invented something that can be patented. A new solar film, or touch screen interface.

Pivot-- Weʼve tried several things, and now somethingʼs working. Twitter, PayPal. PayPal famously had 5 pivots...cryptography for handheld devices, then a way to beam $$ among Palm Pilots, then emailing money, then they merged with an online bank, etc. The archetype is explaining what you did to run into a dead end, what you learned from that, and what new direction that set you off on.



Minimal Viable Pitch

What you’re doing (and why)

Who you are

What’s going on (tracXon / growth)

What you want $ (and why)

So now that Iʼve given you several different ways to frame it, here is the minimum set of information to cover in the first meeting. I really want to drill into you the importance and value of keeping it short and simple. Minimal = elegance.

Think of your first VC meeting as a first date... Keep in mind, this first meeting is really just a mutual-screening process, to see if thereʼs mutual interest. in going on a second date.

Plus, you only have an hour...so this “uber-minimal” approach-- just focusing on most important things-- helps you avoid “rat holes” that are very easy to fall into if you present too much info. Common ratholes are: i) too deep into tech or product; ii) too much on competitive landscape.

And then finally, when you tell investors upfront that there are only 5 slides as opposed to 30, youʼll instantly notice increased engagement on the part of the potential investors; this is important.



MVP (minimal viable pitch) What you’re doing & why

Who are you

What’s going on

What you want

✓ Problem✓ Market size & Trends✓ SoluYon / Product✓ Clear & big Vision

More people than ever (78M!) have dogs. They spend $2bln/yr pugng dogs in kennels but it’s expensive & dogs hate it. We are “airbnb for dogs.”

Samir-‐ VP Engr, prev. @Adobe; Samantha-‐ Designer, prev. @Apple, NYU; Stewart-‐ Stanford MBA; Advisors: Steve Blank, Andrew Chen.

✓ Solid Team-‐-‐Hacker, Hustler, Designer✓ Pedigree, Experience✓Peer reference / “social proof”

POC in SF, NY, Atlanta (now); Adding 3k members & 120 boarders / week via events, AKC partnership, select GOOG ads. Avg. booking $55 x 7% = $3.85

✓ Thesis Validated✓ TracYon / Growth✓ MarkeYng Plan ✓ Bus. Model✓ Momentum

$4m Series A @$16m pre to hit 6 more geo. mktsBurning $75k/mo. Cash Flow B/E @ 2k bookings / week (2013). LTV > CAC ($145 vs. $33).

✓ Sensible UOF✓ Strong Future Vision✓ Economics Scale✓ Path to Profitability✓ RealisYc ValuaYon

Message:

Here is a simple framework. Note that each of these could easily be a standalone slide, in 40 point font...add a title, add a clever image or a supporting chart or diagram, and youʼre done. Killer MVP.

To note, I intentionally did not include a competition slide, as that can be a rathole. Make them ask about it, make them bring it up. But def have a thoughtful analysis and appendix slide to answer.



Sequoia’s Outline 1. Company Purpose Define the company/business in a single declarative sentence.

2. Problem Describe the pain of the customer (or the customer’s customer). Outline how the customer addresses the issue today.

3. Solution Your company’s value prop. to make the customer’s life better. Show where your product physically sits. Provide use cases.

4. Why Now Set-up the historical evolution of your category. Define recent trends that make your solution possible.

5. Market Size Identify/profile the customer you cater to. Calculate the TAM (top down), SAM (bottoms up) and SOM.

6. Competition List competitors & competitive advantages

7. Product Product line-up (form factor, functionality, features, architecture, intellectual property). Development roadmap.

8. Business Model Pricing, Revenue model Average account size and/or lifetime value Sales & distribution model Customer/pipeline list

9. Team Founders & Management Board of Directors/Board of Advisors

10. Financials P&L, B/S, Cash flow Cap table, The deal

Now letʼs match up the MVP we just did with Sequoiaʼs classic outline...our MVP nails almost everything on Sequoiaʼs ten-slide deck outline.


Raising Startup Capital -- The PitchNathan Beckord @startupventures

500 Startups’ Criteria

And not only does it hit the highlights with Sequoia, but also with small funds like 500 Startups. Product / Solution, Biz model, distribution, traction and team.



And It Works!

And it really works! Also, airBnBʼs simple deck http://tiffanyk.com/post/10611384492/the-original-airbnb-pitch-deck-honored



Show and Tell Time!

Let’s take a look at a few decks...

Acme 5-‐SliderAirbnb early days

Dress RushSpeakeasyEverestCSS PifflePiccsy

PopsurveyManpacks

First letʼs start with the minimalist theme. Hereʼs the 5-slide deck referenced in that TC post: http://www.slideshare.net/timyoung/magic-5663116

Hereʼs another that is nice and bare bones--- AirBnB: http://tiffanyk.com/post/10611384492/the-original-airbnb-pitch-deck-honored Good: Problem / Solution and Market Sizing for a new, unknown market. Very simple, lots of whitespace.

Some nice online design inspirations: http://investors.dressrush.com/ http://investors.getspeakeasy.com/ http://investors.evr.st/ http://pitch.csspiffle.com/#intro http://piccsy.com/investors/ http://www.slideshare.net/DeckFoundry/popsurvey-deck http://www.slideshare.net/500startups/manpacks



File type?

Length?

Tone?

Online?

Angel List?

ConfidenKality?

Data? Room

Format / Build?

But what about... (nuts & bolts)

File type: PPT, Keynote, Prezi.

Formatting: minimal. White background if it will be a printed / bplan version.

Builds: as few as possible (they are distracting).

Length: 5 slides for minimalist, 10-12 for Guy Kawasaki / Sequoia, and 15-25 with appendix for full plan (feel free to go crazy in the appendix).

Tone: Depends. Confident is good, without being cocky. Thoughtful / reflective / aware if youʼve pivoted. Serious if enterprise.

Online: Use https://speakerdeck.com/, slideshare.com, or bit.ly Dressrush has an explanatory guide to doing this: dressrush.tumblr.com/post/12506021124/dressrush-online-pitch-deck.

Angel List: Absolutely. This is pretty much a requirement these days. In your deck, link through to your AL profile.

Confidentiality: Assume everything you send over will be shared. Sanitize as needed, or give them access to data room.

Data room: Almost no one does this, but it can save you from 1000 emails asking for stuff that should have been put in a data room.



Presentation HacksFile type?

Length?

Tone?

Online?

Angel List?

ConfidenKality?

Sharing Data?Early Bird

Live Demo

Laptop Demo

ConversaKonal

Audience Tuning

Memorize

Performance

Friendly Fire

Format / Build?

Don’t Forget the

ASK!

Early bird: arrive 10 minutes early, the VC will probably arrive 10 minutes late; donʼt be rattled.

Live Demo: this usually occurs about half way through the deck, after you've established "what" and "why" and "who." Tips: be mindful of time (3 mins!) and don't get lost in product.

Laptop demo-- assume the projector bulb burns out, Internet connectivity will fail, etc. Be ready to run a demo off your laptop if you can. Plus it creates a more intimate setting if you're sitting side-by-side, looking at your screen.

And, be prepared to completely ad-lib it (w/o slides) by telling a story / conversation. This can be powerful.

Tuning: Know your VC. were they finance guys? Sales guys? Founders or product guys? Who else have they invested in?

Memorize: practice it, hours per day, until it becomes conversational.

Itʼs a Performance-- use movement, dramatic emphasis, walk around, use emotion, elongated pauses etc.

Friendly fire: practice your pitch with your attorneys, friends, advisors, startup founders, c-list VCs.

And finally, youʼre selling, youʼre asking for money. Go for the close! Ask for it!



First steps to get started (do it tonight!)Draw or storyboard it by hand

Dras an outline in Word or Pages

Build Xtles and headers of each slide

Find an exisXng deck and modify it. Or

Or

Or

Then...

Add simple images or pictures to accompany text

Create diagrams, charts that support the slide topic

Sparingly add addiXonal detail. PracXce!

Draw or storyboard it by hand. Put the computer away and sit down at a clean, empty desk with 10-12 pieces of blank paper and a pen and simply draw rough diagrams for each slide. This spurs creativity, and you can re-order the paper slides into the perfect storyline. Then, fire up the MacBook and start creating a digital version.

Draft an outline in a Word or Pages file. Begin with one of the standard pitch deck formats as suggested by Sequoia or Guy Kawasaki (e.g., Problem / Solution / Team / Market - etc.) and then add one key concept that I want to convey on each slide as a sub-bullet. This forms the basis of the "story arc" that the deck will take, and then add more color and detail to each later.

Headers and titles: If the storyline is already pretty clear, then with a blank Keynote or PowerPoint build a set of 10-12 slides starting with just the headlines. In some cases, I'll also do a set of sub-titles, too. Then the rest of the slide expands on these concepts, or better yet, represents them as images or diagrams.

Pull up an old deck: there are many, many good decks now online (see my Quora answer on the topic) and many concepts can easily be recycled. Just be sure to make the look, tone, and feel consistent to avoid "Frankenstein" decks.



KISS

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