With the upcoming long weekend, I always find it’s great to refresh your mind and perspective with some critical reading. I’ve always appreciated how reading deeply into a topic (versus blogs/medium/tweets) can change your perspective on a business model or strategy. With that in mind, I’ve compiled a list of the best books I read in 2018 and my biggest takeaway in one line.

1. Ken Kocienda – Creative Selection

Why: If you want an incredible look at Apple’s design philosophy that has resulted in the creation of truly design-centric products (from someone that was actually there) . If you are a consumer / B2C product led company who wants to get some thoughts about how to really deliver value to your users and to iterate that. The product demo to Steve Jobs scene is fantastic.

Biggest takeaway: Design is how something works not how it looks. Get feedback, iterate and repeat. UX is a product feature. Think about how your process encourages creative design methodology and the selection of that design

2. Elad Gil – High Growth Handbook

Why: Elad Gil spent months interviewing successful entrepreneurs (Dropbox, Stripe, YC and others) and has put together a selection of curated interviews and essays on hiring, product, financing and the startup lifecycle. A book I have recommended to portfolio companies this year.

Biggest Takeaway: Only work on things you believe in and be very careful of the people you bring into your team (employes, peers and investors). “Valuation is temporary, control is forever”

3. Nicholas Nassim Taleb – Antifragile

Why: While a very challenging (and long) book, Antifragile and its predecessor “The Black Swan” cover a large amount of ground on the identification and adaptation to systemic risk

Biggest takeaway: Invest at the ends of the barbell. Holding a blended portfolio of gold and high risk investments is much better than holding a medium risk, medium reward portfolio (look at people that had defensive portfolios in the GFC as an example). The opposite of fragile is not strong, but Antifragile (gets better when pressure exerted)

4. Reid Hoffman and Chris Yeh – Blitzscaling

Why: The newest book in this list and from Reid Hoffman the “most connected man in Silicon Valley” and founder of LinkedIn, investor at Greylock. Actionable insights for startups who want to go big.

Biggest takeaway: Not all companies should “go hard or go home”.Too much scale too fast kills. If you don’t commit 100%, you shouldn’t look to blitz scale. Post blitz scaling the biggest challenge becomes how do you move to becoming the navy, from being a pirate eg Facebook and the challenges it faces now.

5. Ed Catmull – Creativity Inc

Why: Another company under the undoubtable influence of Steve Jobs, Pixar has brought us Toy Story, Monsters Inc and many more. A look under the hood of the intense rigour of creative production. The “Notes Day” idea hackathon is a very interesting look at the culture of the Pixar “Brainstrust” and has interesting parallels to the same “shut down the company and listen” sessions held by Howard Schultz when he came back to the helm of Starbucks

Biggest Takeaway: Good ideas can come from any place, regardless of hierarchy. Dysfunctional cultures can be brought together through good principles.

6. Ray Dalio – Principles

Why: Having lost it all, Ray Dalio, founder of Bridgewater Associates resolves to never bet on gut again, and to bet on data / full information. Almost the reverse of Apple’s “build it and they will come philosophy” and has resulted in Bridgewater being the largest hedge fund in the world. A comprehensive list of 20 work and life principles (with hundreds of sub principles)

Biggest takeaway: In order to be good at anything we have to let our egos go and objectively evaluate it (and let others evaluate us as well). You can’t be great at everything and you need to a design a system that leverages the skills of your team. Identifying but leaving sub-par elements in your team or strategy is as bad as focusing on a bad strategy. Have zero tolerance for things that don’t grow you or your vision.

7. Kevin Roberts – Lovemarks

Why: An older book, but one that the CEO of Saatchi and Satchi discussed why do we love certain companies and brands. Why are brands felt deeply in the human psyche? How do you create a brand that has integrity, deserves trust and delivers a great design. At the end of the day brands and customers are emotional creatures.

Biggest takeaway: Who are your customers who are loyal behind reasons. How do you form emotional relationships with them. Get out of your office and start talking to your users.

8. Tien Tzuo – Subscribed

Why: Founder of subscription billing service, Zuora, sets out an insightful blueprint into the history of the subscription model which has changed the way we deliver products. A roadmap of the PADRE (Position, Acquire, Deploy, Run, Expand) framework that Zuora uses for any SaaS business and the factors impacting success.

Biggest takeaway: Is this the end of “ownership”? What can be delivered as a service? How do we deliver new innovative products – subscriptions + legacy IT = chaos

9. Jack van der Kooij and Fernando Pizarro – Blueprints for a SaaS sales organisation

Why: I actually recommended this book to a number of our portfolio companies for a no-nonsense, though provoking look at making systems that sell, sell, sell. Good sales systems and people are significantly and substantially better than mediocre (the power law – better sales people close more deals, higher contract values, less churn etc)

Biggest takeaway: SaaS sales teams are not built superstars who just “get” sales. At the core of every great SaaS sales team is a documented system which needs to speak to the average sales team member.

10. John Doerr – Measure what Matters

Why: Legendary venture capital investor John Doerr worked for Intel and Andy Grove then went on to fund early stage Google. These are the actual methodologies used by these companies and Bono, Bill Gates, etc to set goals which lead to results – OKR methodology (objectives and key results).

Biggest takeaway: Periodic and public accountability is required to motivate great teams and to dissect post-morgen both successful and unsuccessful deals. Even when companies are in seed stage thought should be given to how you set and assess goals.  Stretch for amazing.

 

So it’s nearly September now, which means Winter is ending and conference season is picking up. This means there are lots of opportunities for startups to go out and network, meet new investors, advisors and potential customers. As part of this a lot of people are often told to refine their elevator pitch ahead of these events. The concept of elevator pitch is an odd one, literally it is supposed to be what you would do if you were stuck in an elevator with the person you wanted to work with and you had to sell in 30 seconds why they should. The aim of an elevator pitch is supposed to end in a big ask of “so, would you consider doing X”. If that sounds strange that’s because it is! It’s like asking someone to buy a house in the first minute of the house inspection. So I have started giving the rogue advice of not elevator pitching but being a un-pitcher. A un-pitcher is someone that builds genuine relationships and contacts by not pitching. Anyway here are some tips which might be helpful.

1. Pitching starts before you meet someone

The average number of touch points to a sale is 5-7 before someone makes a decision. If you are a startup you are probably trying to sell your product to an end user. Would you ask someone who you don’t know to try and make a decision on the spot in 2 minutes (even if that decision is to try out the demo). No, so don’t ask investors or customers to do that on the spot, in the first time you meet them. For both, a good chance to pre-pitch someone is to follow them on Twitter, Linkedin, blogs or wherever they may hang out and start interacting. Leave some genuine comments, thank them for their thoughts, start building rapport. In the same vein, LinkedIn cold mails which ask someone to look at your deck are the elevator pitches of the social media world. If you are going to DM someone, start with a genuine thank you for sharing your thoughts and a considered response like “I experienced this exact same issue with my company and I was able to use the technique described to do X”. That is much more likely to get a conversation going. When you do meet someone in person, that should be at least the second or third time that you have interacted with them.

2. Don’t stalk, be cool

You are going to really want to track down the person that you know just needs to hear your pitch at the conference. I’ve heard advice go so far as to say wait around after they get off the stage, or if you see them in the bathroom or a line for coffee walk over and make sure you get their attention. That’s also kind of weird, if someone pitched you in the bathroom most people would probably want to leave. I think there’s a key difference between if the investor or customer says “i’ll be hanging around these drinks afterwards come up if you want to chat” to going and trying to interrupt someone walking through the conference. Building a relationship is all about frame of mind, if people feel like they are being sold to the mental walls go up.

I’d recommend trying to chat to key people in a more social environment (networking drinks) or in a regulated one (the investor says please come up and talk to me). If you do and other people are talking to the person, be polite, wait your turn and when your turn comes be genuine and have a normal interaction.

3. Your objective is to get them to a meeting, not to sell

So now you are talking to the person, I often ask startups to start with something about the person, not your company or yourself. Introduce yourself, tell them you enjoyed their speech/blog/thoughts etc. At this point, people generally try to launch into a prepared pitch about why your company is changing the future of electronic socks. A good un-pitcher can indirectly spark interest in the company without sounding desperate. Examples of the best people are those who can make the investor ask the questions rather than vice versa. As in you may say “wow your point on X was really insightful. When we surveyed our two large enterprise customers they all agreed wholeheartedly. They were really pleased when we changed our pricing model”. The natural question from the investor, is “ok that’s interesting what’s your business”.

Instead of saying your prepared 1 minute presentation the true power of an elevator pitch is to say here in one line what is your business and what isn’t your business. It has to be simple enough they get it, and not too out there so that there is some frame of reference.

“We are a startup building an AI based personal assistant for education. It’s like Siri or Cortana except we do X, because we have our own data training set which we gained from Y. We’ve been doing it for 18 months now”.

That sentence tells an investor a number of things in under fifteen seconds.

1. What it is, it’s a startup for education. The investor will have some idea that the TAM is big
2. it relies on AI, so the investor will have a view that it is a technical product which will have strengths or weaknesses
3. It’s like Siri or Cortana, so the investor can quickly think if they have anything in the portfolio that looks like this already, or if they have any reasons why they hate or love the idea
4. It has a value proposition of X, and you have a proprietary data training set which you got from Y
5. You have been doing it for 18 months now, which means it is likely to be early stage, have little revenue and probably will need some money now or in the near future

That is the essence of a good un-pitch. Simple, meaningful and you haven’t asked for anything.

4. Give value before you get value

If there starts to be some positive interaction on your business at some point one of you will need to leave the conversation. The ask to help you should not be the last thing that the person hears from you. In fact the call to action is just to catch up one on one at a better time in order to see how you can help them. Just as investors spend a lot of their time helping startups pro-bono or mentoring, any good entrepreneur knows you have to give value before you get value. An easy and positive call to action is saying “can we exchange cards, I would love to see if I can help one of your companies / assist you with refining your thesis on this sector / see if I can connect you with another person in my network who I think would be interesting to you”. Any good investor who catches up with you and likes your company is going to ask you, “how are you funding it, and let me know if there’s an opportunity to speak at the relevant time”. You therefore don’t need to tell them that you are fundraising now and that’s why you want to speak, in fact that is the weakest argument for wanting to speak. Probably a related point to this is that the best startup founders are networking and building relationships way in advance of funding needs. The best time to close a funding deal is when you don’t actually need funding. If you actually need the funding, then the entrepreneur has little leverage in getting a good deal. So start networking at least 6 months in advance of when you actually need funding if you can.

5. FollowING up should be easy, not hard

Once you have someone’s card, wait till an opportune time (i.e not immediately after meeting them) to follow up. I’d wait until the conference is over at least because people will be stuck with a backlog of a heap of emails, and maybe even 24-36 hours after so that the investor is a more relaxed state of mind. Remember if you created a good impression and you are adding value, you are likely to not be forgotten and have a positive path to connecting. Your email to the investor should be no more than one paragraph. It should summarise your conversation that you had and what you are following up on.

“Hi Jason, it’s Matt from X, we met at StartCon in the networking session on Thursday, and we had a great chat about your portfolio company Y. I’m dropping you a note to see if I can assist Y with anything as my Company X has great contacts in the Z sector and could be an opportunity to work together.”

The next part of the email should specify a call to action but not be a hard sell “If that’s still of interest, then very happy to come to you at a convenient time to have a coffee and chat further. Let me know if there’s any slots which make sense for you over the next couple of weeks or if a call would be easier”. Note that the objective is to make it as easy as possible for the investor to see you. Don’t go for a face to face or nothing. A call in the week after is better than a meeting in 3 weeks when the momentum has died.

The only part of the email which should reference your materials is the end of your email an again should not be a sell. “Just thought you may be interested to see a short presentation about what we do (attached) which may give you a better idea of potential opportunities. I don’t plan to go through this deck page by page if we catch up, but it might be a good context for you or Company Y”.

The deck should be no more than ten pages and not be under an NDA or not be a link to something (i.e attach as PDF). That is somewhat of a controversial view in startup circles but i generally err to the side of “if telling me what you are doing renders it useless, it’s not a great idea”. Re attaching via DocSend, I’ve seen this a lot especially in the US and it is really annoying for the investor if viewing on a mobile device. Again, you need to do what seems right but I’d almost say that there seems no reason why you can’t have a generic corporate brochure that you don’t mind people having without an NDA and that you don’t care if that stays there if the person doesn’t invest (it’s free advertising and you never know what will happen!)

Anyway, so there are some simple tips. A good un-pitch is more like a degustation rather than a la carte, it’s supposed to be a progression through stages, rather than just making a choice and hoping for the best. You just often need a lot more time (months) than you think! Happy hunting 🙂

A lot of people have been telling me they really want to get a job in VC. But like most jobs, unless you actually do it, it’s hard to actually get a handle of what do you do all day and therefore really whether you should. By popular demand from a number of people wanting this, I thought I would try and provide a flavour of a typical day. Note this is an actual day last week versus an amalgamation of 5 hypothetical days, however I did pick a more newsworthy day in the spirit of writing something interesting.

your job overall

As a whole, this day probably reflects an “average” workday Monday-Thursday at a VC firm. Some people work more, some people work less based on what they have on (I was recently in Silicon Valley where some firms have a no more, no less than 60 hour work week i.e less than 60 hours means you aren’t getting enough done and more is a law of diminishing returns). In the end, a lot of tech industry people are very outcome driven, so people work alot, but 12 hours seems fairly common if you have no prior commitments.

I’ve not actually seen someone in my team miss something really important (birthday /anniversary /performance etc) as generally the industry applies both flexible working hours and locations so if you want to start at 2pm and work till 3am, you normally can – as long as you can manage expectations from people that want things from you. I note that while it sounds long, at least some of that time is things you might be doing anyway for fun like attending talks, or catching up with people in industry for a drink etc.

So of a potential 12 hour day a breakdown could be:

• 2 hours of research / industry knowledge / networking
• 3 hours on helping grow existing investments
• 3 hours on diligence for new investments
• 2 hours interacting with the team / sharing views or formal feedback both ways on matters which you are not the lead on
• 1 hour of admin / other
• 1 hour of lunch/coffee/break/gym etc.

Things you may not expect about breaking into VC as a junior

• You work alone most of the time within your team. If you look at the average day below around 60% of the time you are in a one on one meeting / call or you are doing research by yourself
• Conversely, you are always meeting inspiring people every day from all parts of the tech spectrum and you spend at least half your day not at your desk
• Unless you are very junior you generally aren’t told what to do every day. Every day is different and while you might get asked to lead or support particular projects or investments you get a lot of time and leeway to network, pursue your own deals and bottom out your own research even in the first 12 months
• You won’t be on Excel most of the day (especially since your current job you may be on excel most of the day). Models are part of IC papers, but you won’t spent 6 weeks on the model. In fact you may be on excel <25% of your day unless you are a very junior analyst with no tech background. You’ll probably have to forget all the finance metrics you learned if you come from a banking or consulting background and relearn SaaS metrics like CAC or LTV
• Because the investments you make in venture can be quite small e.g hundreds of thousands you will very early on in your career be meeting founders directly. In fact you may be person that takes the first 3 meetings solo and advocates on their behalf to the rest of the team
• You spend a disproportionate amount of time researching and reading material. If you hate reading or listening to things this may not be the industry for you
• You get to have a disproportionate amount of fun. If you don’t genuinely get a kick out of trying out new tech, building things or listening to tech stuff in your spare time, you probably won’t have a lot of fun though
• There aren’t any slides or drone deliveries. There are free t-shirts and ping-pong
• There’s only free beer on Fridays and pizza is sporadic

An Actual Day Last week – what you might be doing

830am: Mornings are generally about news and checking latest developments. This involves checking the major Australian newspapers (or at least the AFR), TechCrunch, TechMeme, Hackernoon, various email newsletters and Twitter. I don’t really Tweet a lot but a lot of my best material / links to medium / blogs come from Twitter and I encourage everyone to get an account and start following people they like – there is some great free content out there. During this I also generally listen to a few podcasts – again a great way to jam information into a short amount of time. My life hack is to listen to all podcasts on 1.5x or 2x speed – it makes you have to really concentrate on the podcast. If we find anything relevant we will shoot them over to portfolio companies for them to reflect on / and or ask if they have a view as to how it might affect a particular industry.

930am: We have nearly 30 companies in the portfolio and a lot of the interactions are cross-border. The first one to two hours of the day are generally based reflecting on, providing feedback and strategy to portfolio companies or colleagues based offshore. This is typically providing feedback on a specific issues (tech plan, hiring, business plan, financial model etc) or reviewing any emails from offshore e.g setting up calls / liaising with the appropriate person in the organisation. Morning is a good time to talk to anyone based in LA, NY or SF which you may do at least once a week.

11am: Morning meeting with a company pitching a Seed round. This is a new investment that just came in and I’m attend this meeting one on one with the CEO. I’ve not had to prepare industry research because we already have companies in this space and I’ve heard of this particular one. I note that generally we will have prior to the meeting, read every news article about the company, their company website, their blog website and looked at all the Linkedin employees who list the company so a part to note for potential startups is what is the online presence of you / your company. Equally if you google your own name what comes up (does any VC or tech related content come up if you want to break in to investing?) Initial meetings one on one are just about getting to know the founder and their product, so it is largely a casual meeting where the outcome is that the founder will send a full deck and we will arrange a meeting with the broader team.

12pm: Lunchtime. Sushi train. A catch up with a friend works in the industry and he shoots through a couple of companies I may want to look at and vice versa (which is somewhat where at least 50% of deals originate, someone that you know has a connection to a company who is in growth mode). I come up with an app to change the speed and direction of the sushi train on demand by paying a onetime cost. I feel like that would have strong demand, at least from me.

1pm: There’s a lot of “in between” time in VC. So instead of having 3 hours to do one long task you may have 3 x 1 hour slots in between meetings where you have to try and do 3 tasks. I know I have a meeting at 2pm so I spend the next hour trying to review the subscription documents for a potential investment and get it out so that the team can keep working. I send out my issues list to the company and pass some more notes to the team looking at the investment.

2pm: meeting with portfolio company about to start a capital raise. We go through the investor deck page by page and the investor list and we suggest and debate the relative merits of potential parties. I’ve recommended to the company that their timeline needs to increase by at least a month. We also go through their metrics table and give them views as to what other metrics need to be reporting and any concerns we would have as an investor.

330pm: Phone call to follow up on a potential investment. We’ve had a few meetings with them, so this is ticking off items on our diligence list. We look at the product demo with a representative of one of our portfolio companies who works in the space and get them to offer some thoughts. Startups should assume that if the VC has an investment in the space and they like your company they will ask (subject to confidentiality and how closely overlapping it is) for a trusted person in that company to take a look whether just the materials or actually turning up to the meeting or call. We have a debrief and send notes around to the deal team.

5pm: Emails, emails, emails. It’s not uncommon for you to be out of the office most of the day, so people are emailing through the entire day trying to get you. I try to look at decks quickly and first and get feedback to founders as soon as possible if it’s totally not in our sweetspot, or suggest anyone that I know that they should contact. There are a number of ASX announcements that concern our later stage investments today and we circulate them noting the impact on the company and potential valuation.

6pm: Friend’s birthday, so a great chance to eat tacos and catch up with old friends I haven’t seen in a while. A lot of tech investing is networking and meeting new people so if typically one person from our team is at one event every night. There is no hard and fast rule, and you definitely don’t have to go to any every week, but most people I know go to 1-2 per week even if it’s purely out of interest (this is probably part of your 12 hours but i don’t classify this as work because generally everyone in VC loves going to hear about new things or meeting other like minded people)

9pm: Back at home, finish emails, finalise and send out final paper for approval for investment committee for one of the deals we have in train. Read a pretty long analyst report on AI and Automation, and forward some specific queries to a portfolio company about what are they doing on specific issues raised in the report. Write out list of things to do for tomorrow and check that I’m prepared for my morning call and finalise my list of questions

12am: Done for the day. I’ve been watching the Discovery Channel in the background and the Alaskan Bush People have completed their windmill so that’s a good time to head off to bed. A fairly long day but i have managed to squeeze in quite alot of things i wanted to do, so that’s a plus.

 

 

 

 

I’ve been getting asked for a lot of career / personal advice lately. Running a startup or being part of a startup team (whether as a technology company, traditional company or investor) is a huge challenge and leads to a lot of self reflection like “why am I doing this”, “why is this so hard” or “why is everyone else I speak to doing better than I am”. Often well meaning people will give you the advice you want to hear, rather than the advice that you need to hear because they see you working really hard and don’t want to burst your bubble. Often, that advice doesn’t actually fix your problem it just keeps you doing the same thing for a little while longer. It doesn’t make you any happier or more successful it just keeps you going which means well meaning advice compounds your problem and lead to even bigger issues in the future. After working with and learning from so many incredible investors, entrepreneurs and friends in the startup space and seeing people who have become wildly successful I observed some trends which generally run counter to a lot of common wisdom. I decided to write seven of them down here and bust some common myths which often cause people to be really dissatisfied with not being able to “live up to expectations”. In summary, living with purpose, and pursuing whatever you are doing with passion (whatever it may be, work, family, art or other) is largely the only thing you need to worry about. Once you work out what drives you and what you want to do – everything else seems pretty logical. That’s the only question you really need to ask!

MYTH 1: EVERYONE SHOULD HAVE WORK LIFE BALANCE IN ORDER TO BE HAPPY AND SUCCESSFUL

ACTUAL OBSERVATION: NO ONE SUCCESSFUL TALKS ABOUT WORK LIFE BALANCE, THEY TALK ABOUT DOING WHAT YOU LOVE, WHETHER THAT IS WORK, LIFE, FAMILY OR OTHER. THERE IS NO BALANCE, THERE IS CHOICE AND CONSEQUENCES.

This is actually the biggest one people have asked me what is the optimum balance between work, family, friends etc. I think the concept of work / life balance is inherently stupid because it is supposed to be this magical proportion that maximises your career while allowing you to have a life outside of that. I think chasing it is also stupid because you are always going to be dissatisfied with why is X not going better. Like Sheryl Sandberg and many other very successful business people say the first step in dealing with balance is identifying you can’t be the best at everything. Want to play bass guitar 2 hours a day, great, go do it, but that’s 2 hours you are sacrificing with your family or your business. At the end of the day solving work / life balance is about personal choice and then committing 100% passionately. Only spend 3 hours with your best friend every two weeks? Then makes those 3 hours count. Equally choosing to have a $10m business rather than a $100m business but spending less time on the road in sales meetings is a very valid and admirable choice if you want to be home for dinner with your family. At the end of the day successful people realise that the only person who can make the choice is yourself – and those choices (read sacrifices) have consequences as to your level of “success”. Most people use other people’s idea of success to benchmark against what they personally want to do and end up inherently dissatisfied. If you want to sit at home on a Saturday night and read a book, do so and be happy you learnt something. You don’t want to hang around people that call you a loser and make you feel bad that you aren’t out partying. If you would rather be out partying, go party (within moderation) and don’t feel bad about leaving your business behind for a few hours. Everyone should try and do one thing that betters themselves or learn one new thing a day.

MYTH 2: THE BIGGEST CHALLENGES IN YOUR CAREER / BUSINESS ARE THOSE FROM THE CAREER OR BUSINESS ITSELF

ACTUAL OBSERVATION: THE BIGGEST CHALLENGES ARE PERSONAL CHALLENGES, BEING YOUR OWN MENTAL RESILIENCE, AND YOUR FRIENDS, FAMILY, EMPLOYEES AND DEPENDING ON YOUR LEVEL OF SUCCESS (THE PUBLIC / MEDIA)

If you actually ask most successful entrepreneurs about what the hardest part of the business is generally no one says the things you might think like “sales”. Most successful people are confident in their ability to deliver the business once they have some sort of momentum or if they have delivered some sort of success in another field. The things which keep them up at night are actually more like “what happens if I close down division X and Bob who works for me just got his mortgage” or “We are getting much more traction in Product 2 which was supposed to be an add-on product, should we give up on our core product and start again” or “my parents were very disappointed I cancelled on dinner today and seems really angry but I don’t think I achieved very much in that hour so I probably should have gone”. Contrary to most people, successful founders believe they can control their destiny in business – they probably were coming first in school, or selling newspapers at 14 or coding apps at 16. They know they can work at things and deliver results. The part which stresses them most are “random” variables – and that’s usually people. That’s also one of the least things which founders are prepared for i.e when you miss your mum’s birthday or when you come home after a 16 hour day and have to help your friend deal with their personal issues. Those are actually the things which founders feel they can’t control and therefore cause them to have the most stress. I don’t think there is a real solution than acknowledging this and having low expectations about the level of certainty you can have about personal issues. Again one of the big common themes you’ll hear founders talk about is how they wished they’d started working on themselves much earlier in their journey – most of the challenges are in our heads.

MYTH 3: EVERYONE DESERVES TO BE LIKED, APPRECIATED AND SUCCESSFUL

ACTUAL OBSERVATION: THOSE WHO DO THINGS WHICH APPRECIATIVE OTHERS AND INSPIRE SUCCESS GET LIKED, APPRECIATION AND SUCCESS. IF YOU DON’T DO ANY OF THOSE THINGS, YOU SHOULDN’T EXPECT ANY

This is more of a life lesson but I’ve found that if you know someone that doesn’t get one with one or two people that’s normal. But if you know someone that is constantly in fights with their boss, their family, their friends etc it’s not that everyone is always wrong – it’s them. One of the things that I’ve observed of the really successful people i.e people that have changed their community, the world or their industry is that self made people are not jerks, they give back to others and they have a strong sense of integrity. Just as you don’t want to hang out with someone that always tells you how stupid your business is, you can’t expect to be appreciated if you don’t try to add value to others. If three of your founding team have walked out and you don’t know why it’s time to reflect on yourself and your mindset. If you can’t act with common courtesy or respect towards others the problem is you, not the world, no matter how much you pay someone. Loyalty is a two way street.

As a personal note here I’ve found that every time I’ve met someone who I looked up to in real life, yes they all seem amazing but they also seem really human. They have the same problems as us, their dog is sick and they are short on sleep and they wonder if they could have bought their last flight at a cheaper price if they waited a week.

MYTH 4: EVERYONE THAT YOU START YOUR JOURNEY WITH CAN COME ALONG FOR THE RIDE AND WILL COME ON BOARD ONCE YOU ARE SUCCESSFUL

ACTUAL OBSERVATION: THERE WILL BE A SIGNIFICANT NUMBER OF PEOPLE WHO CANNOT COME ALONG FOR THE RIDE NO MATTER HOW SUCCESSFUL YOU ARE. THAT’S JUST HOW THEY ARE, AND GREAT PEOPLE HAVE LEARNT TO ACCEPT THEM FOR THAT, OR MOVE ON AND FIND NEW PEOPLE TO INTERACT WITH

Doing anything worthwhile is hard. You don’t need more negativity in your life. In Australia it still seems to be a bit of a black word to tell people at a barbecue you started a business – a bit like “oh when are you going to stop that and come back to your job”. Most people think that as soon as they become successful this is going to change and everyone will love them. Ironically, its probably the reverse. Their friends start asking them for money, people ask them for favours because they think they can afford it, your family still asks you why you don’t spend enough time with them now you are successful. Just as it’s widely accepted that the team who scales your business from 5 to 50 people is highly unlikely to be the same team from 50 to 500 people – you are unlikely to be able to bring everyone who you know today on the journey with you tomorrow. It’s like the reason we aren’t all friends with our primary school friends, people grow, they move on, they go in different directions. Successful people have realised that’s life and have given up trying to “convert” people that aren’t moving in the same direction. There are obviously people you can’t abandon, like if your parents hate your business you can’t cut them out but the biggest pain point i’ve seen is the “failed help” mantra. Stop trying to help people who don’t want help and choose to be around people that inspire you and your life will get a lot less complicated. One of the most common frustrations of successful people I have heard is the inability to get people they care about to expand their horizons and want more for their life. Just because you can do it, doesn’t mean other people are open to doing it – and that’s fine. Appreciate them for who they are or move on.

MYTH 5: IF I JUST HAD THAT EXTRA CONTRACT/OPPORTUNITY/FUNDING ROUND/ MORE SUPPORT FROM FRIENDS, FAMILY OR PARTNERS/ LUCKY BREAK, THEN MY LIFE AND MY BUSINESS WOULD BE SERIOUSLY BETTER

ACTUAL OBSERVATION: IT WOULDN’T. IF YOU GO TO TWENTY MEETINGS AND GET A NO, THEN THERE’S PROBABLY A REASON FOR THAT. SUCCESSFUL PEOPLE RECOGNISE WHERE THEY NEED TO IMPROVE AND THAT IMPROVEMENT DRIVES SUCCESS

I think the keyword here is personal responsibility. In today’s world where you can start a website in 2 minutes or an online store in ten minutes – we can only blame ourselves if we don’t achieve what we want to – technology is the great enabler of the 20^th century. This is actually the worst advice that well meaning people give you when you are struggling in your life “just keep going and it will all get better”. Successful people realise it won’t. If you want different results you have to have to do different things to other people. They realise that hope is not a strategy and no one is magically going to walk in and tell them here I’ve solved your capital problem or here’s a million dollar. Relying on lucky breaks or for things to fall your way actually makes you unhappy not happy and unsuccessful not successful. If you want something, go get it. You often see new founders make is relying on their friends or family for advice on how to make their life better. This is fine for simple things like “do you like this “logo”, but I’d strongly encourage you to branch out to people who are successful entrepreneurs in your field for big things like “should I do an MBA”.  If you have been coughing for 7 days, you go to the doctor, you don’t just keep googling coughs on reddit and asking your mother.

Another related point is that I think many people assume you magically reach a point one day where you know the answers to a lot of things so it’s worth “giving X a go” in the hope of getting some new insight about what you might like to do or something better that improves your life. I find 100% of change starts internally not externally, I think most problems can be readily solved by finding what you are passionate about and then discarding everything that is not in line with that passion.

MYTH 6: WORKING HARDER IS DIRECTLY PROPORTIONAL TO SUCCESS

ACTUAL OBSERVATION: SUCCESSFUL PEOPLE DON’T WORK 10% HARDER THAN OTHERS AND GET 10% MORE SUCCESS. THEY WORK 400% MORE THAN OTHERS AND GET 100X MORE SUCCESS. SUCCESS IS EXPONENTIAL NOT LINEAR.

I think one thing I’ve seen is that there is no jam in the fast lane. If you told everyone that if you had to work 80+ hours a week for 8 years to definitely (which is not true) make a startup a success and get an exit you could walk around to any school and 95% of people would say no thank you. In his book Outliers, Malcolm Gladwell talks about the non-linear scale of success. It’s why working say 9-6pm doesn’t make you significantly more successful than working 9-5pm. Top athletes, business people, actors or top anything work multiples harder than the average person. It’s why Elon keeps a bed in his office or Kobe shot thousands of jump shots a week. To most really successful people it’s a passion not a job or profession. They get paid to do what they would be doing anyway. Conversely if you think you are working too hard and missing out on things that are important to you eg family or friends then working 20% less is likely to lead to a reduction of >20% in output. Like Myth 1, this is all about choice, there is no right answer and everyone should do what feels right to them. I’ve personally seen two of my best friends who are founders work a full day on the day of their wedding by getting up super early in the morning. It’s pretty hard for their competitors to beat that sort of passion and that’s why they are successful. The also related point here is that really successful people seem to have a great sense of what they are good at and what they are not good at and then focus 110% on being exceptional at what they are good at rather than quite good at everything. Yes we can all start learning to play the ukulele today, but if you’ve never played an instrument before you are unlikely to be a good professional ukulele player.

MYTH 7: BEING SUCCESSFUL IS SUPER GLAMOROUS AND REWARDS PEOPLE WITH WHATEVER THEY WANT AND THE FREEDOM TO DO SO. DELAYED GRATIFICATION IS THE ROAD TO SUCCESS

ACTUAL OBSERVATION: MOST PEOPLE THINK OF SUCCESS AS MONEY / TRAVELLING / HOUSES AROUND THE WORLD ETC BUT FOR PEOPLE THAT BECOME REALLY SUCCESSFUL THAT IS A BYPRODUCT NOT A PASSION. SOMEONE THAT GETS INTO STARTUPS BECAUSE THEIR PASSION IS TRAVELLING AND THEY WANT TO SEE THE WORLD GENERALLY DOESN’T HAVE THE MINDSET TO TAKE THEIR STARTUP BIG. CONVERSELY SOMEONE THAT HAS A PASSION FOR CODING THAT MAKES A BIG EXIT FROM SELLING THEIR COMPANY CAN TRAVEL ANYWHERE THEY WANT BUT GENERALLY HAS NO DESIRE TO DO SO. IF YOU HAVE A BURNING PASSION TO DO SOMETHING NOW, YOU SHOULD DO IT NOW, DON’T WORRY ABOUT WHAT ANYONE ELSE TELLS YOU TO DO.

This is also one of the biggest and most satisfaction destroying myths. My parents used to tell me that “you can work hard now and enjoy things later” and promote delayed gratification. I think the reality is that you just have different priorities and different challenges if you are successful and you get no more time or opportunities to do the things you want to do. The more successful you are the less rather than more likely you will get to take that 1 year backpacking trip to Italy that you dreamed of – things just get in the way and there is too much opportunity cost to not capitalise on all the hard work and sacrifices you have made. I consistently have heard very successful 100m+ founders say take that trip after uni, move to Japan for work or go do that MBA abroad because you will never get to do it again. When you’ve just sold your business most founders plan to take a year off but often get caught back in within months or weeks because they’ve just seen an opportunity that no one else is tackling. That’s just how successful people are, they are always looking for the next challenge – something always comes up over the horizon when you aren’t looking. I think the actual “truth” part of this statement is that if you aren’t a person that isn’t following your passion and/or trying to build success, spending a lot of your time and money on instant gratification (and a cycle of always taking holidays instead of saving for a house for example) is going to be really negative for you. So I don’t mean that, I mean like bucket list desires. Like if you’ve known since you were 10 that you wanted to live in Paris, go live in Paris. Don’t wait for the right time, start your business in Paris, move your business to Paris – you’ll find a way. Funnily enough, most of the really incredible people I know have no strong desire to do any of these things, they just get a kick our of working out big issues and adding value – so maybe it’s a self solving problem. People that value things like private jets, luxury cars etc generally aren’t that successful and never get to own them and for the people that are very successful – it’s just another thing that gets you from A to B and so they don’t really care either way. Life’s ironic like that.

Last week I wrote about getting your pitch deck ready, if you haven’t read that and would like to, see here. This week, as part two of three, I’m going to share some tips as to how I think a pitch should be structured. Now there are no absolute rules and each founder will do these differently, this is just a guide on how I think a good framework can be made which looks investor ready. So here we go!

Firstly, work out how much time you have. Most meetings with investors are one hour. Often, investors will have “new company day” and you may be back to back with other potential companies seeking the same investor. Some people, myself included like to schedule all pitches on a recurring day or day(s) in a week where possible so you should always assume that you are actually going to be compared with multiple other companies which are in the investor’s head, if not literally right after you in the same room.

So let’s walk through a timeline for the one hour. You should always assume that the VC will have to leave when they say they do, so if you have anything that is core to your proposition or that can refute objections it needs to be within that time – so don’t leave questions till minute 58. I like to tell founders to break this into eight sections – remember time is always ticking so make sure when you practice or are in the room you keep the ball rolling by looking surreptitiously at the clock and make sure you get through all eight. The only caveat here is if you think the investor is really loving what you are saying and you then may want to keep on that section for a bit longer, but don’t assume you can add an extra five minutes on to the back so you’ll need to cut something else down on the fly. The eight sections roughly look like this.

1. Small Talk and Setting the Scene – 10 mins
2. The Problem – 5 minutes
3. The Solution – 10 minutes
4. Why You? 10 mins
5. Unit Economics – 5 minutes
6. Your Vision – 10 minutes
7. The Ask – 2 minutes
8. Question Time – 5-10 mins

Bear in mind the first investor meeting is largely for the investor to get to know you and find any huge red flags. They will have looked at your deck, looked at your website, but probably not really gotten in depth into unit economics or the like. They may have a preexisting investment in the sector and if so they have probably asked them if they have heard of you and have any thoughts. The first investor meeting is not the place to be doing deep dives into due diligence questions – it will largely be high level and making sure that nothing sounds really out of place, that the team seems good and that they believe in your product and vision. You should not be, and are not expected to go through your financial model line by line in your presentation and I encourage you to stick with very simple math which I will detail below.

 Note in the below article I go through a bunch of slides which are an not exhaustive list of what you need, so I am just talking about the ones that often get spent time on in the meeting – there will likely be more slides you need in your deck which are not mentioned in here to illustrate your value proposition.

Small Talk and Setting the Scene – 10 minutes

So the clock is ticking. Remember most meetings don’t start on time, and make sure you are there early and with your presentation up and your demo ready if you have one so you can start as soon as the investors arrive. If you have people dialing in via phone your side, make sure they are on the line at least ten minutes before they are supposed to be so you can work out if the investor’s conference number works etc. At this point it is a very simple “great to meet you –  thanks for making the time, hope you’ve got the deck and had a chance to read it.” Always ask the investor that question as sometimes the response will be no. Bring extra copies of your presentation in hard copy to give to people if they don’t have one. Most investors will offer to talk about themselves, what they are looking for and their interest in the sector which you should accept but by the end of small talk, introducing everyone and this investor background we can be up to 15 minutes in length (i.e up to a quarter of the time). Make sure if you have more than two people attending that you either introduce by name and title instead of a full bio or literally a ten second bio like “Hi, I’m Peter, I’m the CTO and co-founder, and I’m ex-Google, and before that I started a machine learning startup”. The aim here is to get into your presentation as quickly as possible. Life lesson: in most meetings I have been to the first ten to fifteen minutes is always small talk and getting the presentation and/or phones working and everyone in the room if there are multiple people. So you probably only have 50 mins to shine.

The Problem – 5 minutes

This should be at most two or three slides (not including total addressable market). If your app is a consumer app or something which is more general than niche then this is typically a time to have a story. Emotional responses elicit more interest than logical responses. Typically this is a story about you and the problem you had which led you to found the business. If it’s not you then it should be your target customer persona “Lucy is a 25 year old professional who earns over $75,000 a year but does not have any savings”. The first 2 slides are generally questions, by question I mean “did you know that X% of 20-30 year old professionals do not have access to X”. If you are going to put any full colour pictures in your presentation this is often a light-hearted and fun way to start the pitch.

Your next slides will be more serious and have graphs, data and market sizing assumptions. They generally reflect a series of initial and then follow on markets with concentric circles with the first circle being your current market and expanding outwards. I typically recommend people to not have “Global” or “Worldwide” as the last circle and try to have the circle size being large but not ridiculous. Remember, the investor is testing both a) is this a big enough problem and b) could you be the market leader i.e greater than 50% of your market. Also remember that your model and business plan needs to correspond to this, and you need to have sufficient market share of your market in your plan to lead it. One of the first things the investment analyst at the firm will be asked to do is test the market assumptions (i.e do the market stats seem correct) and work out who else has what share in their market. So if the market leader currently has 10% and you are projecting 30% in two years it will look very odd unless you can prove a data driven thesis.

Generally, unless your stats are very off, or someone has an investment in this field, you will not get strong push back in the meeting because people will want to get into the unit economics and the like.

The Solution – 10 minutes

Depending on how complicated your solution is, this is either a very quick or potentially more lengthy scenario. At a minimum the first slide of this section is “So we created X, an [app] that does Y”. You should have a one or two-line vision statement and or value proposition on this slide.

Slide 2 is a value chain diagram showing exactly what you do and what you don’t do. People often forget to include this slide but basically the investor really wants to know at what point does your product start and other products end. Draw a big box or otherwise colour code what you do in the diagram. Unless you really come from a fintech background or have a special reason to do so, investors want you to focus on the stuff that is differentiable. Unless you have a specific reason to do so, there is no reason to build say a payments engine for example and you will see Stripe or Pin (a shameless plug for one of our investments) or other payments providers in this slide.

If you have a demo or MVP this is the time to bring out screenshots, your app or the demo. You generally spend 5 minutes explaining what you are trying to achieve and then 5 minutes demoing the MVP, app or the above. While you demo you should point out how it solves specific pain points identified in the problem section. I always encourage people to have a video as backup if for whatever reason the internet, your page, wifi etc goes down and your product demo doesn’t work etc (happened twice last week at pitch day).

You will end this section with a slide or recap highlighting the key benefits to reinforce this. This should largely mirror how you sell the product to customers. If you have net promoter scores or testimonials from customers e.g screenshots of emails etc or logos then you can add this in here as well.

I note you will probably have a pricing and “tier” (e.g free, standard, premium) slide in here, but I like entrepreneurs to talk about this later on in the presentation in depth. You should mention who your target market is and contract size etc but note you will talk about unit economics when you get to the slide.

 

Why You? 10 mins

There is no right answer to this section and a lot of founders rely upon traction to answer this question. Examples include a slide full of your logos that you have to the extent you have big customers. Normally the pitch is something like “we believe we are going to be the pre-eminent solution in market X because” and then a list of your key product / business highlights. You then may have a few supporting slides such as

• Slide 1) user graph or user and revenue graph over time plus other relevant operating metrics which may include churn / typical contract length and stickiness etc
• Slide 2) our clients
• Slide 3) Competitors and their product versus your product on a tick and cross system. I note that almost every deck we see that has this has the company presenting with all ticks and everyone else at significant crosses, so just assume that people will discount this if it isn’t actually the case.

Further slides contain anything specifically special, patents, technical diagram, commercial test results or industry benchmarking, partners etc.

If you operate in an industry where regulation is key, you should have a regulation slide (e.g medical, deposits, insurance etc) and how you are addressing key regulatory issues which are often a good “moat” or why you have a competitive advantage.

Note at this point we are over halfway through the hour and we want to make room for questions and we haven’t even explained how the business model works. So try to not get drawn into too much debate in the first sections, and take questions offline where it is hard to answer and commit to answer them via email later.

Unit Economics – 5 minutes

I encourage all founders to have a unit economics slide or slides. This should set out your proposed cost and revenue structure, and/or your actual cost or revenue structure if you have customers. This should at a minimum have

• How much is your product?
• How much does it cost directly to serve your product (i.e hosting, other direct costs). Note this does not include say marketing or your salary this should be the direct cost of providing each additional contract as a MARGINAL basis. Revenue minus direct costs of goods sold equals the gross margin. For software (excluding amortisation of software development costs) this can be 70-90%. If your gross margin is 30% and none of your competitors are, do not assume you can convince anyone this will change over time
• Fixed costs base / opex per marginal transaction.
• Customer acquisition cost (CAC)
• Life time value of your customer
• Projected churn rate of your customers

For the last three we don’t have enough time to go through this in this post but see this link here. Assume any VC will ask you to step through in detail your assumptions around this if not in this meeting then in the next. So proactively address that question by saying something like “so my contract is X dollars per month, it costs Y dollars per month to serve and then my operating / acquisition costs are Z which means that for every new customer I aim to make Q dollars per customer or a gross margin of R% and an operating margin of S%. That translates to targeting a 3x LTV:CAC ratio on the CAC of P dollars I mention and a payback period of 9 months”. If you can’t accurately articulate these numbers you need to get these sorted before you talk to institutional capital.

You may have some slides here showing key contracts and how much they make and/or potential contracts to show effect on cash to the bottom line which you can talk to. “This shows that if I get these two next contracts I am close to winning I can expect an additional $x per month in cashflow and we have seen that once people go through the freemium product over 30% of people upgrade and then stay for at least 12 months”

You should have a marketing slide in here which shows your channels and assumptions on channels to the extent they are relevant e.g Social, direct sales, reseller sales etc. Showing maturity of thought by segmenting CAC per channel and marketing spend per channel is key here for a more mature product if you are raising at a valuation over $5-10m pre money, you may get away with it as broad assumptions under that valuation.

Your Vision – 10 minutes

At this point often we are running out of time but a well thought out pitch will go through two slides here, business plan and technical roadmap.Technical roadmap is typically first. Here is what I have built and here is what I am building. You should include somewhere a simplified diagram of your technical architecture which includes the main things that people may want to know so that you can get through the section a bit quicker e.g hosting, platforms / languages used, geographies etc. You should also make clear in the diagram what you own or are developing and what you are licensing or using.

Business plan discusses the next 12-36 months and where you see the business heading. You should generally talk about this while the financial forecast is on the screen (they are two separate slides but you can do the talking on the second slide with the financials). The financial forecast should have some operational metrics below so that you can correspond them to the business plan e.g “you can see in Y2 we aim to have 10% of market X which corresponds to Y users. So therefore you can see that at an average contract value of Z per year that equals my revenue of U dollars you can see in 2019”. Try and do the math for the investors so it is easy to follow as that is one of the most things that impresses me about founders – those who can show the math simply and can show you insights at a simple level and that they understand it “you can see in Year 3 we stop spending so much on development because our CRM module done and we start turning that into additional money on sales and our cashflow statement reflects that”. If you can demonstrate that sort of insight as a founder you almost always get the investor to take a further look at the information because it demonstrates you understand how the levers for growth in the business and how you can make money for them.

The Ask – 2 mins

As I said in the last post – you need to end strong. So this is typically saying you need $X at $y pre-money EV and the round has Z dollars remaining with U dollars taken. You can also describe here the specific synergies and reasons you think they should invest including focusing on your slide I mention in that post which shows a potential opportunity for the investor’s portfolio company. Be as personal and tailored as you can about why they (specifically) or their investee companies could benefit (specifically) from your company.

 

Question Time – 5-10 minutes

Question time should be two way, no matter if you think this is the investor you really really want and no other investor makes sense. I usually encourage people to start with “do you have any initial feedback at this point or are you happy to take questions”. 90% of investors will start with questions, so remember to go back to initial feedback if you don’t get any.

At the end of this a good founder will ask, so what would be the typical next steps from here and the typical diligence requirements. In almost all cases where the investor is interested the next step is to send across an NDA if not already signed and give them access to more data. You should agree who is doing that and when you will send it, and when you expect to grant them access and for how long. You should also be clear as to what your timing is and ask the investor how long their total DD period is. We typically like to get an informal two way check every say five to seven days during a DD process where both parties confirm they are interesting in continuing and if anything has changed. In my personal experience DD usually falls apart at the beginning rather than the end so you usually should have some inkling early on if it will not make sense for either parties.

Other Things Which May Come Up

There will obviously be other things that come up in the deck which may or may not get airtime. Capital structure will get some airtime if you have other institutional investors or a weird capital structure and you should have one of those slides. I note that typically companies don’t put their round history in there but I ask for it in every meeting i.e when did you raise last and at what round so it should either be in your slide or you should have those numbers in your head.

Team and team bios may also offer discussion if you didn’t go through them in the Introduction s section. As may specific contracts, names or logos in your deck. If you have something in your deck and it is a metric, you show know as a founder where that metric comes from and how it was calculated (i.e if someone asks you how installs are calculated one of the worst things you can do is say my CTO does that). You should assume that whatever you show in your deck will be specific metrics the investor will diligence later including the robustness of the calculation and/or data set and the ongoing tracking. Again a red flag is metrics that are made ad-hoc for the deck and have no other tracking. So if you are not tracking metric X, then either start tracking metric X or remove it.

Good luck!

I mentor a number of startups here at Tank Stream Labs and a number of other worthwhile programs. Check out Tech Ready Women if you are a female entrepreneur who wants to get into startups (also blatant plug). One of the most common questions I get is how should I pitch my startup to investors.

Answer – pitch like Chamillionaire. Rapper, grammy winner, entrepreneur in residence, investor, singer of Ridin’ and subject of multiple panda memes. You may have seen this video on TechCrunch a couple of months ago where he fronted his new app Convoz. I think the general impression of most people that saw his pitch it was that it was good. Not just good. Excellent even. You should watch the whole thing if you want to see a good piece.

Therefore I thought I’d do a three part series where I go through what I like to recommend early stage companies do before the presentation, at the presentation and then post presentation. Without further ado, here is part one – my ten tips for getting you and your deck ready pre-presentation.

Pitch deck- you need one!

If you are going to pitch to institutional capital or venture capital you need a deck.  That deck should answer at a minimum 4 questions

• What’s the problem I am trying to solve
• Why is that problem big enough
• What’s the solution to that the problem
• Why am I the person(s) who will solve that problem and providing a continuing solution to that problem for the future

Your deck should look good

Your deck will benefit from looking good. As in it should be correctly formatted, have nice pictures, screenshots and / or video.  It doesn’t have to be a masterpiece or professionally designed (coincidentally all 3 pitches I saw at a recent event were all professionally desktop published) but it shouldn’t detract away from your product if your deck doesn’t look great. So if you are producing a new AI model that is 10x faster and can talk about that in depth you can have the worst deck in the world and you can get funded. If you are building a two -way marketplace for goods and you are using Comic Sans then it is going to be tough to get your point across and you will have to start from a handicap. So don’t start from a handicap. All decks should typically be in PDF for this reason, never send in PPT or in some sort of weblink, it just annoys VCs and often the formatting is off.

Identify and resolve potential objections before pitching

Think about all the things you think someone could say as to why your idea doesn’t work and try and proactively include this in your pitch. If you think there is a risk the market is too small you can include on the slide that you aim to start in market x, dominate it then move to y and z where the total addressable market is more. If you don’t have a CTO and you aren’t technical you should include the fact that you are in the middle of recruiting that person. If your platform is based on access to a technology you should include that you are negotiating contractual terms on that access for the next x years. Obviously there is a fine line between future looking and exaggeration but there is no prize for exaggeration because often these become conditions to investment you have to fulfil. So if you aren’t a week from hiring your next R developer, don’t promise that you are – transparency works both ways! If someone tells you an objection in the pitch the only way in which you shouldn’t have an answer is if it is a really obtuse one. Assume there will always be questions about

• Size of your market
• Your unit economics
• Your competitors
• Your value proposition
• Your ability to scale
• Company X that the person already invested in

You don’t have zero competitors

I am always very concerned when someone in the pitch says they have zero competitors or pulls out a slide which shows them as the only product in the top right quadrant and everything else is in bottom left.  The biggest thing that derails a pitch I have seen is where the startup is in a diverse industry (consumer, social, e-commerce) and the slide goes up with 3 competitors and the investor asks “how are you different from X, I already invested in that” or “I passed on that”. If you don’t know don’t guess or try and make it up on the spot. Obviously ideally, you have researched broadly into the space so you would know- but if you have no idea, just table that for discussion afterwards by saying “happy to take that on board at the end of the presentation if you send me some materials I will provide a detailed comparison post this meeting”. Note that in your preparation for an investor pitch, no excuses for not knowing something in their current portfolio or that was recently exited (and ideally you’d look at their past investments section which is on most websites). When you have zero competitors you have no spend associated with your product. Investors immediately think this means very high customer acquisition dollars and marketing spend and this will be uncharted territory.

Understand your unit economics – are they reasonable?

The main thing an investor is looking for is some understanding of the actual or proposed marginal product unit economics. So what is the fixed cost base you need to survive and then post that how much do you make for each marginal product. If you are in an industry which has unicorns as your competitors (versus traditional business) you will find it very hard to pitch VCs a negative unit economic market share model for a winner takes all market e.g like Uber. You should make sure that your product pricing slide has a positive unit economics for each marginal product. The flipside of that is that if your marginal profit is $1 before fixed cost operating expenses and you have a fixed cost base of $2m then investors will naturally ask you how long and what is the plan to sell 2m products (and also is there are market for say 20m products). If you think that you can’t sell 2m products you need to rethink your pricing and / or market.

Also as another tip, the long term customer acquisition cost (CAC) in your B2C startup is very unlikely to be $5, no matter if that’s what your first 1000 customers are! Again a subject for another topic but great founders will understand that costs are likely to trend to the industry average unless you can demonstrate a particular value proposition. So therefore if you are comparing yourself against an incumbent and they have a CAC of $100, you are unlikely to have a long term CAC of less than $50-75 unless you can specifically show data or you have a systemic advantage. Unless you have genuine virality and user metric growth in a dashboard, plugging that gap with “social media” or “user referrals” is immediately discounted by investors.

Practice, practice, practice

You should have presented the pitch at least 10-20 times before you go to the investor. In the valley I’ve heard 50 times before the investor you want. Practice to yourself, with timing. Record yourself, play it back. Practice to your friends, family all you want but hopefully you will get to practice to friendly investors, your peers, advisors or other startups. Ask for feedback and iterate that feedback into your deck. If people lose interest ask them specifically where they lose interest. Often the areas which founders spend a lot of time on have no interest to the investors. It’s great to hear 1 mins about how you came up with the idea as you were biking around Costa Rica, but less fun to hear ten mins.’

Also legitimately at least 50-75% of product demos I see do not work in some way on the day. So I’d have practiced your product demo on the day at least once. Ask to come in 15 mins early so you can setup. Bring your own internet and be prepared to connect to it. Bring an HDMI cord for your laptop.

Cut unnecessary slides – less is more

Team should be one slide, I’ve seen up to 5 slides with full colour pages of the founders headshots as the entire slide. Unless your team has a specific advantage (first person to crack SSL encryption etc) you should assume that the default assumption is that you are all competent unless something goes very wrong in the pitch. If you think there is a specific disadvantage that you need to overcome in the deck e.g you have no technical co-founder or you will be seen as “too X” then you can create wording around that. I would try to keep to one slide though. Other slides which often go on for too long are below

• Mission – one slide max
• Market – two slides max
• Timeline – one slide max
• Logos for partners – one slide max
• Press clippings – one slide max
• Almost anything else is unlikely to need more than 2 slides! One slide is better!

Financials and tech roadmap – the sad forgotten cousin of full colour product shots

You always see these tucked away at the end of the deck. A sad little 3 statement revenue to EBITDA forecast with no assumptions that gets zero time in the presentation. Or a picture of a computer stock graphic with “AI-centric design roadmap”. The more you can take investors on the journey with you by showing them what underlies the financials (who doesn’t like to make money) or the roadmap (how we can get better together) the better it will be. As I’ve said in a previous post, you need to ensure that the first 12 months of your forecast are pretty well locked in, you have pretty good confidence (i.e good rather than ok) about doing 75% of the next 2 years and better than not confidence for half of the total forecast revenue you show.

On the roadmap, pet personal peeve – don’t include AI or blockchain unless you really know how AI or Blockchain helps your product. There are too many people including it as a buzzword so investors are generally sceptical if there is a sense it is an “add-on” rather than core to the final product. So if you don’t know anything about it, it will reflect very badly on the presentation if you get asked something about Tensorflow and you don’t know what that is. Buyer beware!

Bring Snoop Dogg!

Chamillionaire brings out Snoop Dogg at the end of his pitch. I encourage you to bring Snoop Dogg if you know Snoop Dogg. But for most of us, that means end strong, end on a high note and leave them with something they didn’t expect to see. Most pitches start really strong then peter out by the end. The last 2 mins of the pitch are very important. It should be a call to action “who’s ready to come join this journey with us” or humour or try to have something other than “so that’s the end of my presentation” – which I actually hear about 40% of the time. End strong and leap into a positive discussion!

What’s in it for me?

Everyone talks about the “internet of one” i.e the webpage you see should be different to what I see. In the same way you should adopt the “investor of one” concept. If you really want someone to invest ask “what’s in it for them”. Do they have a company that would have a great synergy? Do they have a track record of investing in this type of companies? Is someone they know already on your board that they can connect with? Are you just about to launch something that will require further investment? Can you give them good publicity in your article on TechCrunch etc? The best pitches are tailored to the investor, but often you may not have time to change every slide. So therefore try and include one slide which is an “investor” slide e.g it outlines a potential commercial partnership with one of their investee companies and how much that opportunity might be worth split 50/50.

 

 

 “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.” – Bill Gates

I’ve been talking to a number of founders this week and they have all ask me questions like where should I sell this, should I hire more sales people or should I raise more money now or remain bootstrapped. The first question I actually want to know the answer to is why. Why are you doing this business? Why is this a passion? Why do you have a burning desire to deliver an idea or outcome to the world.

A lot of companies at the start feel like they are jumping off a cliff and building an aeroplane on the way down. But the ones who go on to become great have a very strong “why”. The average time from seed to exit in the US was roughly 8.3 years in 2017. That’s a long time to do something because you think it makes a lot of money, or because you think it’s a big problem and therefore would be a good business idea. A big problem is only a relevant problem if it’s YOUR problem – one that you are passionate about. If you don’t own a dog or have never owned a dog, don’t start a dog startup.

In engineering, asking a series of 5 “why” questions is often used to diagnose problems and present solutions. It works sort of like an inherent devil’s advocate, where asking a “why” question and receiving an answer is then distilled a further four times to get the root cause of a problem.

The same logic can be applied to your businesses whenever you think about something fundamental. Let’s take a real example where I got asked about moving to a partner only sales channel and not building an in house direct sales team.

Q: Why do you think you need a partner sales channel?

A: Because sales are very slow and I think I need to get people who understand sales better than our team

Q: Why do you think it’s your team that is making your sales slow?

A: Because when I go into a meeting, I can sell this. I understand what the problem is. I tell this to my team and they can’t replicate the results. We don’t have the money to hire a dedicated sales team so I’ve been using our COO to do sales

Q: Why do you think you can sell it but your COO and co-founder can’t. You’ve both been at the business at the start and you both have experience in the industry where you sell

A: I don’t know. Maybe I’m more passionate in my delivery

Q: Why have you decided that getting a sales partner is the solution to this. Do you know anything about sales partnerships and the economics of distribution?

A: Well I thought it would all be incremental so it didn’t really matter. If we got more sales via a partner, they would be sales that we wouldn’t have gotten anyway so any margin is better than zero

Q: Why didn’t you do this from the start or why haven’t you done it sooner?

A: Because it went against my fundamental principle that we wanted to deliver best in class customer service for a problem I really understood and I felt that the initial problem I had as a user was that the people who were selling me things didn’t understand my needs – in fact they didn’t even understand the product they were selling well and I had to take multiple meetings to work out it wasn’t right for me.

At this point the penny dropped. At an early stage company (i.e before you have metrics or can A/B test anything) almost every business decision is as much a philosophical decision about how and why you want to deliver value to your target audience. Every part of your value chain should therefore be focused that sector or customer. Want to know whether or not to advertise in a particular publication – go ask the customer, go look where they hang out, see what they read, what they watch. And it’s not just asking a matter of one person – I encourage you to actually go out and talk to 10, 20, 50 – as many as you can. That’s the easiest way to understand if you should or should not be doing something, and it works all the way through your life cycle.

This is illustrated no better than in Jeff Bezos’ annual Amazon shareholder letter. Nowhere in the letter is the word “profit” or “net income” or “returns” any of the other buzzwords we normally see. However, what it does contain is 20+ mentions of the word “customer” and “product” and Amazon’s customer focus. There was a story recently which illustrated this where Jeff personally rang the Amazon customer help line and timed how long it took someone to answer as a measure of his commitment to customer satisfaction (it was four minutes, and that wasn’t a great result for the persons involved!). Going through the Amazon values is an exercise in itself – but to summarise you can read a very good article here from Parsa Saljoughian after he read every Amazon shareholder letter. You should also read the 2018 Amazon letter here released a few days ago which talks about the Amazon focus on high standards – a topic for another post.

So as an investor, I take a strong approach to understanding your “why” before I invest in a founder. After I invest in them I take the same approach in reflecting that “why” back to them as they grow their company strategically. Regardless of how attractive the economics of a decision are, if that decision is fundamentally counterintuitive to the “why” or reduces the ability to deliver that vision, then it isn’t going to work long term.

In many ways that’s a simple statement, but the simplest ideas are usually the best. At the beginning, you enjoy a relatively high degree of freedom. It’s much easier for a seed stage startup than Microsoft to suddenly change their pricing model or not deliver a product they thought they told everyone they would release. And that freedom is sometimes good and sometimes paralysing. But the reality is that everyone can and should build a great sustainable business based on a laser focused “why”.

Look at Dropbox (NASDAQ:DBX) and Box (NYSE:BOX) for example. Dropbox is consumer based, with only 2% of its 500m users actually paying for it on an average of c $9 a month. Box is enterprise based with c 50m+ user accounts at an ACV of $300 a month. It essentially delivers the same fundamental service – secure cloud storage – sounds the same right? When Dropbox announced its IPO, Aaron Levie at Box famously congratulated Dropbox because he didn’t see Dropbox as a competitor and thought they were naturally complementary products. And the reason why Dropbox has focused at the consumer level and not enterprise is somewhat of the same reason why most corporate PCs run Windows and not MacOS. The answer – customer centricity. Because all good businesses have strong customer and buyer profiles. They don’t try and be everything to all people or sell to anyone who wants to buy. They differentiate themselves in their target market by saying if you want X, you should buy from us. But if you want Y, then Company Z makes much more sense.

So the moral of the story, is that at an early stage – your passion and hunger to do something positive is not only your motivation but your North Star metric when you don’t have enough data to do proper metrics. Consider what the books say, consider your mentors and conventionally established wisdom – but at the end of the day the world is filled with tech companies that work because their customers love them, and not because of how they would perform on a case study basis. It’s true that investors do a lot of pattern matching i.e what is your growth rate versus other companies they have seen (if it’s higher or the same therefore it should be similarly successful) but at the end of the day they want something they resonate with. If you have off the chart NPS and customer feedback you can work with experts to fix other bottlenecks and optimize your processes – it’s significantly harder to do the reverse!

So in closing – if you were unsure if your vision or focus was right because it was not reaping near term financial goals, I will remind you of the quote at the start of this post. When you play the long game and create value for your users because you really care about the mission – great businesses are built!

Better late than never, but I thought I’d share 20 takeaways from the points which interested me from the recent Money 2020 Asia Conference held earlier this month in Singapore. Highly recommend to anyone thinking about going next year.

Enjoy!

1. The next wave of trillion dollar companies are AI and will incorporate AI building Ai – Sentient built Google’s image classification and captioning system in 3 months – 5000 GPUs versus 30 PhD working on this for 2 years – Antoine Blondeau, Alpha Intelligence Capital
2. Using AI for automated payments fraud detection, matching round trip times from where payments directions come from and against previously held databases for users on an individual basis. Humans are very bad at making random sequences eg randomizing emails in a certain way eg name plus a sequence of five numbers – usually AI can sort these emails produced by a structured process – Michael Manapat, Stripe
3. Onboarding people without a data source (e.g passport database) by using machine learning – what does the font look like, what does the spacing look like, the paper thickness etc – Francesco Cardi, Onfido
4. Cryptocurrency shouldn’t actually be called a currency right now, you can’t actually use it to buy anything. Ripple is building systems to join and interconnect institutions – it just happens to be using the blockchain. Their goal is to take 300bp to 30bp interchange – Brad Garlinghouse, Ripple
5. SWIFT’s published error rate is 6%. As a comparison to people who say blockchain is insecure, imagine if you didn’t get 6% of your emails – Brad Garlinghouse, Ripple
6. By 2025, GPUs will be more than 1000x more powerful than comparable CPUs for AI based decisioning – Dr Ettikan Karrupiah, Nvidia
7. Computer vision will become an increasing component for investment decisoning for investment firms rather than just research eg scanning container maps for trade flows – – Dr Ettikan Karrupiah, Nvidia
8. AI is still mostly used as a facilitator – the vast majority of the ideas I saw were largely middleware, rather than taking the primary supply chain position e.g a research service that helped management consultants rather than automating management consulting
9. Real roboadvisory is not yet there because robots haven’t had to live through a Black Swan event – Augment Bank
10. Real growth in SEA payments exploding. Adyen’s recently launched omni-channel solution advertising a 6 month payback and 103% ROI. Grab’s $700m Grab Financial loan book has a data driven management systems which is showing less than 0.75% bad debts in an unbanked market.
11. Biggest question for an AI based lending platform should be how you can make cost of borrowing 5 dollars same as 500,000 dollars –  Simon Loong, Welab
12. The data shows that if you know a bad borrower on social media you are 9x likely to default than if you do not. Social analysis is not about reading your posts or judging what you look at (both illegal) – it is largely about who you know and their credit score – Simon Loong, Welab
13. When you ask people to take a photo of ID for verification purposes, the most common response is to send a picture of something else (usually a mug!) – Simon Loong, Welab
14. AI driven product creation – selling insurance for mobile phones to someone who has bought skinny jeans. Automated car damage insurance and assessment via machine learning image recognition which pays out automatically by assessing cost – Cheng Li, Ant Financial
15. Only 6% of people in Asia versus 12% in Europe versus 25% in US will not use biometrics. Corporate biometrics is 5-10 years away, currently GDPR type legislation means that you cannot use biometrics for something which doesn’t involve the protection of data and that protection is necessary (as an example in France it is currently illegal to have a biometric scan to access a door) – Philippe Biot, MeReal biometrics
16. Continuous authentication e.g how you walk, type, write etc is the future. We will be moving to only asking for authentication when there is abnormal behavior. The biggest issue which is currently not being looked at is conversely machine to machine authentication – 2 billion IoT devices to come online – Craig Ramsay, HSBC
17. Average Generation Z has 5 passwords across all their accounts, older people have at least 10-12 passwords, current generations are much more lax about security having grown up in a connected world (i.e one password gets a lot further)
18. When asked about his secret to success “Every human is built to run under 9 seconds, but only some of them work on it” – Kristo Kaarmann, Transferwise
19. Insurance for delayed flights in real time (e.g if you are late by one hour it will suggest insurance that the delay will be no more than 2 hours). If the plane is delayed payment automatically occurs via WeChat – Wayne Xu, Zhong An Insurance
20. Contrast in ways to build a hugely scalable business in Asia. Zhong An online insurance, 50% employees are engineers, no sales and no face to face – data mining only, all done via chatbot. Compare Go-pay, concept of community and principle that you can’t create trust on a phone it is all word of mouth – thousands of staff used in person for onboarding. Both have reached 150m+ users in under 5 years using very different methodologies for the same people.

In Crossing the Chasm, Geoffrey Moore asks startups to pick an initial beachhead market in which they believe they can be the market leader i.e they have 50% or more of the total market. To put it an inverse way if you want to have $15m of revenue that means that the total spend in the market you pick must be at most $30m annual spend for that product.

But what about revenue growth. A recent article by Scale Partners discusses the Mendoza Line for startups. For non-baseball fans, the Mendoza Line is a baseball term for the batting average below which a hitter is not worth hiring for Major League Baseball. That article posits two principles:

The first is that most venture investors prefer to invest in companies that have at least the chance to become standalone public companies (which is not to say most achieve this objective). Looking at the realistic low bar of what it takes to be a public company, this implies being at run rate revenue (ARR) of $100 million at the time of IPO, while still growing at 25 percent or greater in the following year. 

The second is that most of the time, growth rates only decline, but do so in a way that is on average fairly predictable. For a best-in-class SaaS company, the growth rate for any given year is between 80 percent and 85 percent of the growth rate of that same company in the prior year. We refer to this as growth persistence (and this assumption holds true from about a $10 million run rate on).

If we look at the simple tables below we can see some interesting math. I have picked 7 years here as the target horizon, being a typical exit time for founders and investors.

Let’s say you have a company who is currently doing $200k ARR. This may be your typical seed company or even pre-seed. It is still trying to identify product market fit, it doesn’t have many reference customers (maybe 1 or 2) and it is still trying to decide if it should hire more people. It might have only a couple of people outside the co-founding team. Let’s also say your goal is to be doing $30m ARR in 7 years. The below table shows that you therefore need to grow your revenue around 2x per year every year for the next 7 years to get there. Note that these are compound rates, which means that in Y6 you would have had to been doing around $15m ARR, to have made your goal of $30m ARR in Y7. Also note that in Y1 for example you would have only been growing from 200k to 400k i.e 200k ARR, whereas in Y6 you would have been growing by $15m ARR – clearly a much harder task. In fact most people expect growth to decline for this reason as you increase your absolute revenue (e.g see this post, where they discuss how it is likely to be no more than 80% of last years’ growth).

		Revenue Target $m
		Y1	Y2	Y3	Y4	Y5	Y6	Y7
	CAGR	1.0	5.0	10.0	15.0	20.0	25.0	30.0
Today’s Revenue $m	0.1	900%	607%	364%	250%	189%	151%	126%
	0.2	400%	400%	268%	194%	151%	124%	105%
	0.3	233%	308%	222%	166%	132%	109%	93%
	0.4	150%	254%	192%	147%	119%	99%	85%
	0.5	100%	216%	171%	134%	109%	92%	79%
	0.6	67%	189%	155%	124%	102%	86%	75%
	0.7	43%	167%	143%	115%	96%	81%	71%

Ok so that seems really hard, and most people say, oh that’s because the base is so low so the growth numbers look abnormally large. But let’s do the exercise but assume you did really well and you had $2m ARR today instead of 200k. $2m ARR is by any standards a company that has taken the step up from “idea” to “business”. It has made, or made great steps towards product market fit, it has at least 1-3 key clients or a decent number of users, it has a medium sized team outside of just the founders. It is doing 10x the revenue of the first company we looked at.

So let’s assume the same goal – $30m ARR in Y7.  I did this with a team the other day and found that most people (myself included) cannot visualise these compounding numbers in their head post say Y3 or 4 (in fact what company forecasts more than 3 years!) and if you asked one of your team you might get some of the following answers:

• Some people will largely assume that 10x more ARR to begin with means the growth rate is 10x less, so it will be something like 10% instead of 100% per year
• Others will look back at high school math and remember that compounding interest is different to simple interest, so 10% doesn’t look right but it probably should be say 3-4x less and may guess say 25%
• Very few people (in our real world example nil) will guess anything above 40%

So what’s the actual answer. 47%. Yes, even starting with a base 10x bigger than the first company, the second company still has to grow its revenue by half every year! Did you guess that? Ask anybody in your sales team if they are happy with their sales target being increased by 50% or 100% each year.

		Revenue Target $m
		Y1	Y2	Y3	Y4	Y5	Y6	Y7
	CAGR	5.0	9.2	13.3	17.5	21.7	25.8	30.0
Today’s Revenue $m	1.0	400%	203%	137%	105%	85%	72%	63%
	1.5	233%	147%	107%	85%	71%	61%	53%
	2.0	150%	114%	88%	72%	61%	53%	47%
	2.5	100%	91%	75%	63%	54%	48%	43%
	3.0	67%	75%	64%	55%	49%	43%	39%
	3.5	43%	62%	56%	50%	44%	40%	36%
	4.0	25%	51%	49%	45%	40%	36%	33%

Of course, both companies will be hiring more, advertising more, attacking new channels and hopefully establishing a leadership position in one or more markets- the point of this exercise is to ensure that everyone on your team has aligned expectations about how much more revenue they need each year and are focusing and resourcing appropriately. In the first example, what would have happened if you grew your ARR by 75% per year instead of 100%. 75% is pretty good right? You would have actually ended up with $10m ARR instead of $30m ARR. In fact, if you had grown at 100% every year except the last 2 years in which you grew 80% you would only have $20m ARR instead of $30m ARR. That would have cost you multiples of $10m if you were acquired at Y7.

So here’s a quick exercise you and your team can do. Take your next 12 months’ sales forecast budgeted growth rate and assume that you grow that rate for the next 6 years post that. If you have a 24 month forecast, take the average of the next two years’ growth rate and project it out for 6 years. If the number you calculate isn’t the number you want, then you’ll have to work out what items can make massive change in the business. Remember, by massive change, if you only had $150k ARR instead of $200k ARR today and you doubled every year for 7 years you’d only have $13m ARR instead of $30m ARR. Remember also, that keeping the same growth rate as your business scales is also increasingly hard because the numbers get progressively larger on an absolute scale.

So assuming that it is hard to grow by more than 80%  (see the original article on growth persistency by Rory O’Driscoll of Scale Partners) of the previous years’ growth in the next year, even if you are at $2m today, to make $30m or more ARR in 7 years you’ll need to think about targeting doubling your business next year rather than just 50% growth. Did you think you’d have to grow that much and are you thinking big enough with your go to market strategy?

		Revenue Target $m
Today’s Revenue $m	Required	Y1	Y2	Y3	Y4	Y5	Y6	Y7
	Growth	195%	156%	125%	100%	80%	64%	51%
	0.2	0.6	1.5	3.4	6.8	12.1	19.9	30.0
	Growth	86%	69%	55%	44%	35%	28%	23%
	2.0	3.7	6.3	9.8	14.1	19.1	24.5	30.0