Tld;dr: Dave McClure shares a seminal pitch deck outline on how to raise from venture capital investors.
When I quit banking I knew nothing about startup. Less than John Snow.
There wasn’t the same content that there is today. Not by a long shot. The only real VC around I found sharing informative content was a total weirdo who made me laugh. His name was Dave McClure. No doubt you have heard of him (And if you have ever been near him, you have certainly heard him… possibly shouting). I loved this guy.
This video and deck are one of the first real sources of information that I learnt from. Almost a decade later, I want you to enjoy it too. The learnings are as applicable today as they were then.
If you don’t know, Dave is a serial entrepreneur. He started out as a database consultant & programmer
He joined PayPal as Director of Marketing, where he started the PayPal Developer Network program. So many amazing founders and startups have come out of PayPal that the term ‘Paypal Mafia‘ was coined. I’m talking: Tesla Motors, LinkedIn, Palantir Technologies, SpaceX, YouTube, Yelp, and Yammer.
After Paypal from 2005 thru 2006 Dave ran marketing for job search engine Simply Hired. From 2008 thru 2010, Dave started investing, managing the FF Angel seed investment program for Founders Fund, and ran the 2009 fbFund incubator program on behalf of Facebook, Accel Partners, & Founders Fund.
In September 2010 McClure founded 500 Startups which is one of the most known accelerator programs globally. The initial class included twelve startups. That number would later increase to 31 companies in October 2011 to the hundreds they do now. As of today, 500 Startups portfolio of companies is comprised of over 1,200 companies with successful stories like Makerbot, Wildfire, Viki, or Simple. His firm has a presence in Mountain View, San Francisco, London, Seoul, and Kuala Lumpur.
Pitch deck outline
We could skip over this slide, but I have some learnings to share with you. The opening slide is obviously the first slide investors are going to see, so do it right!
What can you learn:
- BIG TEXT. The title is very clear and prominent. It’s the first thing you eyes are drawn to. You also know what the hell the pitch presentation is about. Are you sure you deck is so obvious?
- Images. They make the slides less boring… zzzzz
- Contact info. If you are doing a pitch presentation on stage, this is definitely worth adding. A lot of founders forget to do this. If there are investors in the audience, it’s useful to see your name and contact details so they don’t just think ‘that dude with the food delivery startup.’ If you are sending the deck, I put it on the last slide
- Social media. If you have a large following on social media. Chuck these up too. They can offer a bit of social proof, and investors can stalk you to find out a little more about how you think and interact with people. This isn’t’ critical to me at all though. Including your Linkedin can be useful (saving the investor two minutes to find you). Why? Investors absolutely want to know who you know in common. They’ll absolutely hit up everyone for a reference
- Tag line. ‘aka startup viagra’- change that for your tag line. Explain very simply what you do in a few words. When the investor opens your pitch deck they will get a quick ‘oh, ok, so they are food delivery startup, I like this…‘
Now, I recommend you do not:
- Date. Don’t add a date. It doesn’t add anything. You will forget to change it and then if you have been raising for a long time, investors will know you have been raising for a long time (That’s bad)
- Location. This is only relevant if you are doing a presentation for someone. You do not ever need to put this on a pitch deck
- Crude. You aren’t a big deal (yet). There ARE a lot of prudes around who might take things the wrong way, or think you are unprofessional. It’s just safer to not use offensive anything in your deck (Other than the amount of money you are going to make. BOOM).
Important stuff page
This page just sets out things that are important.
- Make sure investors know what the hell you do
- Show why it is awesome
- That the market is big enough to make a lot of cash
- You have figured out the matrix (product market fit)
- That the team is worth backing
- (And get their attention)
Overview of the key slides in a pitch deck
Dave just sets out the key 10 slides.
Now, I’ve never really seen a deck in the real world which was actually just 10 slides. They’re normally about 20+.
All these slides matter. The weird one that is missing is traction. I have no idea why that’s not on here but he alludes to it at the bottom.
When he says ‘Demo goes here’, Dave means you don’t need to have an actual slide. You can pull out the computer and show it live.
The elevator pitch should be short (KISS = Keep It Simple Stupid), simple and memorable, ‘what’, ‘how’ and ‘why’ should be answered.
And remember to keep it free of jargon too. So don’t be using technical context, or industry-specific context unless you know that investor has that background
Like Dave, I love the first slide to explain what the hell it is you do! Some people disagree, but I think they are idiots. It is much easier to talk to an investor if they understand what your company does.
I have seen many decks where at the end I think ‘What the fuck do these guys even do!?’ That is the biggest fail ever. How the hell do you expect to get $$$ when the investor… does not know what you do!? The overview or elevator pitch slide is a safety valve for the stupid.
Also, in some ways, narrative is overrated. Yes, I harp on about the importance of story telling all the time, but never at the expense of clarity. If you have a warm intro to a VC, and you are a bit legit, then you could skip this slide and start with an intrigue question. But if you are 99.9% of founders don’t skip it 😉
Start with a simple elevator pitch. There’s no need to set up the problem and build intrigue, you can just get to the point. Always get to the point.
What does an example look like?
- Slack. Slack brings together all of your team‘s communications in one place, is instantly searchable, and is available wherever you go.
- Socialcam. Socialcam is a mobile app that makes it easy to take videos and share them with friends and family
Let me fill you in from the investor perspective. They don’t care about you. They don’t care till they care. A hundred decks a week you have to filter and you don’t have the will to live. When you get emailed a deck you want to triage as fast as possible. The elevator slide can help them figure out fast if they ‘might’ care or not. Yes, you want a quick no, not a false meet only to get a no. You need the time to be executing. Fundraising is such a waste of time.
Use baby language, not jargon filled bullshit. You want to explain what you do in the simplest language possible. Don’t try be smart. Smart people don’t have to try. What is easier to understand:
- We’re Google. We build a website with a box in it. You can type any question into that box and we’ll show you websites that answer that question
- We’re Google. We organize the world’s information by indexing the web
The first one, right? Don’t make the investor think. Thinking is always bad.
I also like adding an ‘X for Y’ (Don’t use Uber…). As Dave says, just makesure the comparison is similar. So for Slideshare, it might be:
We’re the YouTube for PowerPoint presentations. Both of these are well known, so that’s a reasonable claim. But if the points of reference are too obscure, they might not get it.
Dave likes to have fun. It’s probably his personal ‘special sauce’ in differentiating himself from other investors. No one likes boring. Most peoples’ lives are boring. Be the fun, be big energy and they will want to be around you.
Fun is infectious. So try and enjoy yourself.
99 problems but my pitch deck ain’t one
As Dave says
A lot of the time people begin by saying what their solution is. But I recommend that you talk more about what the problem is. This helps you establish emotional context with the person listening.
According to Kevin Sytrom “Let’s focus on problems, not solutions” was the focus as Instagram emerged from the failure that was Burbn, as “With Burbn we started at a solution and worked back. That’s the wrong way to do it. You have to start with the problem and work forward from that.”
I think this is one of the best explainer slides ever for the problem. A big fricking broken thumb. Do you want a vitamin when your thumb breaks? Hell no! You want a painkiller and you will pay for it!
You need to very specifically explain:
- What the exact pain point is
- That it is really painful
- Who specifically has this
- That your solution to this is a painkiller, not some pansy ass vitamin
If investors can’t empathise with the problem and feel it is worth solving, then why should they fund you?
About 20 years ago, a friend of mine broke his wrist when were out rollerblading… bla bla bla… I’ve shared with you a problem, I’ve taken you through an emotional experience, perhaps even one you know personally. So you have all these ideas running around your head, and I haven’t even told you about the solution yet. But I probably have your attention, and we now have a shared emotional context.
Now that investors understand the problem is a horribly broken wrist, Dave’s point is that it’s time to talk about your pain killer, wrist-guards or whatever your solution is.
You may want to contextualise the problem to your audience if you know anything about them. If you don’t ask. “Do they have kids, are they straight, gay, old, young? Is there a context that you can tap into and share with them?”
Whatever you do, start the presentation explaining there is a big ass problem.
This is worth learning off by hear… Great products and companies do 1 of 3 things:
- Get you laid (Sex)
- Get you paid (Money)
- Get you made (Power)
How does your solution tap into the emotional, powerful, evolutionary needs that we as humans have?
You are unlikely going to be all things for all people. So niche down. Pick a tribe you know, that will love this. Explain how it makes current and potential customers happy. Then explain how it’s better and different to existing products/services out there. If it isn’t different, then flip the script and change the context so that it is different to everything else.
Maybe you’re not the best snorkel solution to ALL customers. But maybe you are the best for left-handed grandmothers. If you’re product/service isn’t the best in your field, you need to change the frame of reference enough so that you become the best in your niche
The core goal here is to explain how you solve the problem. The next slide gets into the details.
The product demo
So what the hell have you actually made? What does it do and how does it work? I mean at a high-level and for key functions.
You need something that illustrates your solution
You can illustrate this a few ways:
- Live product demos
- Pre-recorded demo
- Glove puppets
I personally recommend a pre-recorded video demo with NO voice and sound. You talk to it. The reality is that shit happens. The internet won’t work etc. A recorded video is unlikely to go wrong (but plan in case it does by having screenshots in the worse case in a PowerPoint).
I find that live demos can go poorly. You get sidetracked, want to show some erroneous feature and go off script, your backend stops working (FML, it happens).
In all cases, rehearse. Know every word you are going to say. Be polished, but not robotic.
Importantly, you are pitching a customer. Your job is not to blindly talk and get it over and done with. You need to listen and respond. The best pitches are conversations, NOT pitches.
Expect to be interrupted. If you do get interrupted, what should you do? Listen. If they interrupt you, it usually means they care enough about your product to ask you something. So don’t go right back to your presentation, answer their question properly – you’ve got their attention. The script isn’t your slides, the script is the face of the person you’re talking to
The market always wins. Here is why you won’t get past the second meeting if you haven’t convinced investors of the market slide (How big can this get? This market sizing question has killed many startup fundraises).
Generally, if your market size isn’t larger than $1bn investors will take a pass. Why? Well, VCs need big returns to make their own business model, but we’re not getting into how the VC business model works right now.
Market size matters because most investors want to know that you’ve got a big business. Bigger is generally better. There are two ways to think about market size – top down, which means someone else reported this market data – such as Forrester or Gartner. Or bottom up. This is the one I prefer. A number of users, a size of transaction, and frequency.
Top down means someone else said it. Then a lot of people say something lame like ‘if only we get 1% of the market’ Sequoia would say fuck you, I want the whole market. lol.
Top down is a fine starting point, but investors don’t really like it unless the market is so big it is obvious. If you are making a new market you don’t have top down, you need to do bottom up. That’s hard for a lot of people who didn’t work at BCG.
With bottom up you figure out your metrics like your ARPU, repurchases, how many customers you get etc and come up with a number. TAM, SAM, SOM are the typical numbers. There is an example of this in the pitch deck template. Pitch deck template: The end of ugly decks for startup founders
The business model – AKA ‘how do you make money. I’m a big fan of simple revenue models, typically direct models, either transactional or subscription. When you’re listing sources of revenue, I recommend you keep it simple and keep it to one or two. When you list a large number of sources, generally that tells me that you don’t know how you’re making money. If you do have a bigger list, at least prioritize them by biggest first
There’s a lot of learnings in that paragraph.
- You always have one main business model: transaction, subscription or ads (gross)
- If you have more than one you only talk about one (or you sound lost and confused). You can make money in more than one way, but don’t get into them unless investors ask. Your main source needs to be enough to make cheddar anyway
There are two types of startups
- Those that know how they’ll make money
- Those that haven’t figured it out yet
By series-A, 99% of startups should be in category 1 (and actually making money). Category 2 is what you raise your pre-seed/seed for.
If you’re the next Facebook or Snapchat (NOT most startups) you’re probably in category 2 and you’re going to either make money by growing big then turning on ‘uncool’ advertising unless someone has figured shizzle out and you copy them. You don’t really want to be ‘innovative’ here and propose a new business model unless you are credible and have a fricking cool insight, like freemium.
Special sauce / big unfair advantage?
Try to identify some big, unfair advantage. Another misconception is that VCs like to take risks. That really isn’t true. VCs like to not take risks and bet on sure things
Who likes fair? If I was a gangster and said ‘Hey Jim, I’ve loaded the dice, it’s a sure win’ would you prefer that or ‘let’s got get fucked up at Vegas and win big, dude!’ if you needed to make rent? Cleary unfair is better. You want to bring a gun to a knife fight or be one big chica (FML she is huge!).
The VC is only going to get rich(er) if you make out like a bandit, so why take a risk on ‘fair competition’ if you can [legally] cheat?
There are a lot of ways you can answer this and 95% of founder make up total bollox on this slide. If you don’t have an unfair advantage you might want to just skip this slide and hope…
Your special sauce can be a few things:
- Team. You actually need to be special. Your mother telling you are does not count. Most people do NOT have world-leading teams. I also don’t know how you compete with Google
- Intellectual property or patents. You need to have a legal budget to hold up patents… But if you have some real cockblockers, ok. Worse case you get acquired for them
- Big lead. If you and your dog have been churning out code for years and the market suddenly turns, then yes your tech may be a big lead. Similarly, if you have got awesome customers signed up that it will be frickin hard for someone else to enter cool (Why would JP Morgan go with the new guy when you already have 5 of the top 10 banks for your enterprise software?)
In reality, the only real competitive moats are:
- Data exponent. If you are Google you are an exponent above Bing. They just can’t beat your compounding
- Network effect. i.e. Linkedin. Everyone uses you so everyone else will too
- Brand. You are Coke. Everyone buys Coke. It’s just so expensive to build
Whatever you have, sell it. Be credible. You don’t need to list 10 things. You don’t have 10 things.
I would probably immediately add ‘we know this moat won’t last forever but it will mean we get to S-A and then S-B way before a competitor, so they will struggle to beat our resources.‘
Competition: Why you’re better or different
Everyone has competition. Do not ever say you do not! Inertia is a competitor.
Your fat hungover ass on the couch calling Dominos is a competitor to your fridge and healthy living.
It is important for you to list your competitors. I wouldn’t recommend leaving competitors off your pitch if you don’t want investors to know about them. That isn’t a great way to start a relationship with them.
If you pitch a ‘good’ investor like all founders say they want then they are not going to be dumb. If the VC does marketplaces and you pitch marketplaces, do you think it is a good idea to conveniently not mention a big competitor? No.
You are also very likely going to get asked ‘this is the same as Google. How are you different to them? Why will you win?‘ You need to know your competitors. Being an industry insider helps in this regard.
Your job isn’t to hide your competition, it is to figure out how you can be better and different to them.
You will never beat Google head to head. You can, however, beat Google in a niche with a maniacal focus on that customer.
This is the 101 competitor slide. You need to pick your x/y axis labels correctly. You need to include the main competitors. I like to add comment callouts to explain things. You are typically in the top right (it’s so normal it would be funny if you weren’t there). Sometimes I put a startup in the bottom right with an arrow to the top right and add ‘we are moving here post series-a’ or something. I think it’s important to be realistic as it gives you credibility. You want to be optimistic and ‘visionary’ about the future… not in naive denial about where you currently are. Everyone starts somewhere.
Marketing plan: Customers and distribution
It’s all very well to have an idea and a product… you need users and customers to pay you, bitches.
This one’s tough because marketing has changed so much in the past 5 years. There are more channels than ever, channels that didn’t even exist 5 years ago with hundreds of millions of users. Think Facebook, Twitter, YouTube, Apple, Android, LinkedIn, Zynga…
You have search, social, mobile, local, TV, radio (lol)… You can’t do everything. There is always ONE MAIN channel you are going to scale with. Ideally, you have tested and have ideas about the scale and cost (CAC) of the channel and be able to illustrate it (and back it up).
Volume, cost and conversion can be a good framing exercise that at least allows you to think about what volume of customers, or leads, and what does it cost me to get them and what is the conversion rate to the target – namely revenue?
If you are really early, I would talk about everything you have tested and your key, data-driven learnings. VCs like data-driven founders. The numbers matter. The like the fact you test and are thesis-driven.
Team hires: Hustler, hacker designer
This might come as a surprise to you, but 70% of an investors’ decision is the team. Here is why. Investible Founding Startup Teams
In general you want people that can build and sell products. That’s the simplest way of looking at your team. Geeks with deep technical experience are great, these days designers with great visual or usability experience are also good. But if you can tap into entrepreneurs that have sold companies before, or at least sales and marketing folk who have successful sales backgrounds, those are also important skills to have.
Dave likes the ‘hustler/hacker designer’ skill-sets.
- Hustlers figure out how to get customers
- Hackers have engineering or technical chops to ship
- Designers make stuff usable
Notice there is more than one role here. You need a breadth of complementary skills.
What do investors want to know:
- How many founders?
- Is there a technical co-founder?
- How long have they known each other?
- Is everyone working full time?
- What is the equity split among the founders (Ideally equal or close to equal)?
Your GPA doesn’t matter as much as a relevant credential. If you are launching rockets into space, did one of you work at NASA (Yes, I have satellite pitch deck and yes people worked at NASA).
Money and milestones
If you’re trying to pitch people for money, have some frame of reference for how much money you’re asking for and how you would spend it
Dave places import on having three budgets in mind which cater for different investment opportunities – small, medium and large. You should be able to demonstrate that each amount of money will be able to get you to a certain milestone.
When you’re thinking about raising money, an optimum way of doing that is you want just enough capital to get you comfortably to a milestone that raises the value of the company. And then you can raise more money with a higher valuation of your company.
What do you achieve with how much money is a major yardstick aka capital efficiency?
Investors judge how long it took you to get to where you are. If you are at $100k MRR in 2 months with $50k investment, that is baller compared to $100k MRR in 2 years and $5m blown.
Generally, I think you should bucket money into those three categories. When you’re talking to investors, you want to be able to say ‘I need this much capital to run operations, this much to pay headcount, and I might need this much to acquire customers
You generally spend money three ways:
- Hires, to help build your products
- Hires to help with marketing campaigns and get customers
- Cost to run the company
How to pitch a VC video
What are your most interesting learnings here? What do you think of the pitch deck outline?