Course lectures "Startup". Peter Thiel. Stanford 2012. Session 8

This spring, Peter Thiel, one of the founders of PayPal and the first Facebook investor, held a course in Stanford - “Startup”. Before starting, Thiel stated: "If I do my job correctly, this will be the last subject you will have to study."

One of the students of the lecture recorded and laid out a transcript . In this case, Astropilot translates the eighth lesson. Formatting 9e9names .

Session 1: Future Challenge
Activity 2: Again, like in 1999?
Session 3: Value Systems
Lesson 4: The Last Turn Advantage
Session 5: Mafia Mechanics
Activity 6: Thiel's Law
Lesson 7: Follow the Money
Session 8: Idea Presentation (Pitch)
Lesson 9: Everything is ready, but will they come?
Lesson 10: After Web 2.0
Session 11: Secrets
Session 12: War and Peace
Lesson 13: You are not a lottery ticket
Session 14: Ecology as a Worldview
Session 15: Back to the Future
Session 16: Understanding
Session 17: Deep Thoughts
Session 18: Founder — Sacrifice or God
Session 19: Stagnation or Singularity?

Lesson 8. Idea presentation (pitch)

I. Context and objectives of the presentation

When you think about your presentation, one of the most important things to keep in mind is the sheer number of presentations that already exist. Venture investors listen only to some of them. In addition, this process frustrates them, because it is a very inefficient exercise - only a small part of the initial presentations comes to the subsequent consideration of documents, and even less - to the conclusion of the transaction. Therefore, if you want investors to listen to you, then you need to force yourself to listen - to get through to them through information noise. To do this, you must “hack” the investor’s brain.
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If we approach conceptually, then preparing and conducting a presentation is easy. Here you are, so smart. You have a great idea, and you tell it to people who have money. These people think rationally, they give you their money.

In fact, everything is much more complicated. What you need to do is convince a rationally minded, intelligent person to exchange your capital for your scrap of paper (called a share certificate), which is really nothing more than a promise that something can become something valuable later, but based on statistical data, it may not be. It turns out it's not easy.

The fact is that most human beings tend to think in the short term. Venture investors are no exception. This is curious, because you might think that they overcame it in themselves, because the ability to think for the long term is the natural basis of venture capital. But people are people. Venture investors are simply bags of meat, with exactly the same mental inclinations as all other people. They, too, are rational systems, infected with viruses of emotions (besides, they suffer from an itchy need for well-being and privileges and all the side effects associated with them). You need to turn to both hemispheres of their brain. You have to convince investors that your proposal is economically justified, and then, using their base thinking, convince their emotional part to make a deal with you, overcoming such a prejudice of thinking as concentrating your thoughts on the short term, which resists the deal. You should also present this in an entertaining manner. On the day, they listen to several such presentations (mostly useless), and this process is boring. Cheer them and help yourself. In a technological get-together for this one joke is enough.

Before you make a presentation, you should form a clear goal in your head. What do you want to achieve? At first it seems obvious. The most banal answer: you want money. A lot of money at maximum rates, and they should start coming to you as soon as possible. But this is not entirely correct. It would be better for you if you considered a lot of nuances of the process of attracting investments.

First, you need to attract the right amount of investment. A small company is better not to raise capital in the amount of $ 100 million, even if a large late-stage venture fund suddenly wants to write you a check. Raising too much capital will be your personal nightmare. Plan your production costs for a period of 1 year, multiply this figure by 1.5 and ask for this amount as a first approximation.

Secondly, higher rates are not always in your interest. Inflated prices will keep venture capital companies from investing in your project. And they will list to you all kinds of problems regarding compensation and financial returns in the future expected by your employees and investors. Be prepared to receive an objectively good offer, even if you don’t like it on an emotional level. On the other hand, in reality, low prices are also obviously bad, as they mean that either your price was shot down or something was wrong with your idea.

Your secondary goal should be to keep control of your company. It is very important. There are things that you cannot easily change as soon as the rules are established. You cannot take and change your key values. You cannot get rid of the co-founders, unless you are ready to pay for it with interest. But the hardest thing is to replace your investors; as soon as they started working with you, you will not get rid of them. Therefore, we must choose wisely. Think carefully about this, making a list of those investors to whom you want to show your presentation. If you want to keep control over the project, then you should avoid some of the firms that are known as “serial killers” who replace the leadership of the companies in which they invest. Also pay attention to the voting procedure, it is also difficult to change later.

Ii. Need to know your audience

It is always important to understand your audience. To be clear, very successful and over-perceptive venture investors, who can see an excellent business idea even in spite of a terrible and poorly organized presentation, are very few in nature. If you are so lucky that you attacked such an investor, then you will not need any tricks or optimization of the presentation. But such investors are a very rare and small species, and even they have bad days, so playing to the public is always a sound strategy. You need to conduct a psychoanalysis of your potential investors. Try to adequately understand how they relate to the present and the future.

Understand one important thing: like all people, venture capital investors behave differently at different times of the day. It is useful to give a presentation as early as possible in the morning. This is a useful remark. You can neglect it at your own risk. A study was conducted concerning the decisions that were made by Israeli judges on the parole of prisoners. The study showed that prisoners who were made decisions in the first half of the day were 2/3 more likely to be released. During the day, these chances decreased. After lunch, there was a short spike, probably because the judges had a good rest. At the end of the day, prisoners had practically no chance of a positive decision on release. Like ordinary people, investors make all the worst decisions when they get tired. In the afternoon, their only desire is to go home. Of course, it is unpleasant to get up early to give a presentation to investors, but you must do it. Be persistent in your request to give a presentation as early as possible during the day.

Another caveat: it is important not to give too many choices. In contrast to praising the virtues of choice in microeconomics literature, empirical studies show that people are generally not very happy when there are too many choices. The presence of too many alternatives leads to the development of "shopaholic syndrome" and to difficulties in making decisions. By the end of the day, the investor accumulates a lot of choices. Therefore, in addition to the fact that you need to break through to the investor early (before you have a lot of options), you should make sure that your offer is simple. When you state your request, do not give them the whole set of different options or packages of your financing or ways of your optimization. This will load them and cause cognitive dissonance that makes them feel miserable. So put it simply.

Finally, do not let entrepreneurial optimism dazzle yourself. Your thoughts are seductive by default, but overly simplistic: you think you have created something beautiful, and since investors love to invest in beautiful things, they will be extremely happy to finance your beautiful idea. You're wrong. It is very easy to be deceived. After all, such is the work of investors, waking up in the morning and placing their capital. All right, but there is one interesting dynamic - none of the significant investors need to invest in your project. You must not forget this. Any large investor with whom you speak has already earned his wealth and can provide an impressive list of well-known deals as evidence. Probably, your company is not significant for it, but it represents a weighty chance to get additional workload and risk to fail. Therefore, you will see a rather inert attitude towards the transaction, since on average most transactions do not lead to the desired result, but only take time. Therefore, a constructive approach may not be enough. But, as we see, venture investors have their own preferences and motives. The question is how you can use them with an eye on mutual benefits.

III Mechanics

Who?

Tactically, the first thing to do is find someone who really needs to invest in something. This may mean that in order to listen to your first presentation, you should find a senior lawyer or a head of a division of an investment company, not its senior partner. This approach contradicts the conventional wisdom that you should not give a presentation to younger employees - “Do not give a speech to someone who does not write a check”. This opinion is wrong. Younger employees will demonstrate fair treatment towards you, because they themselves need to make a good deal in order to earn a name for themselves. If they cannot find promising deals, they will not become senior employees, and this is what they are striving for. So look for such people, they are much more motivated than experienced investors.

Subsequently, you will have to talk with senior partners. But you should not think that constructive argumentation will be enough. The logical benefits of your business can convince younger employees to take you seriously, they themselves are interested in this. But taking into account the motivation of an experienced investor (or lack thereof), constructive arguments in favor of the value of your business will be perceived distorted and look like weak arguments. Fortunately, venture investors terribly dislike losing and are subject to competition. You can read about this in numerous books on psychology. But what you really need to know is that investors will definitely not want to lose to their competitors. So convince them that your company will make a profit and make them afraid to miss it. If at all possible, make it appear that your transaction exceeds the target share subscription amount. It helps to overcome the inert attitude, destroying the faith in any transaction.

Q. How?

There is a common misconception that investors are so smart that they can understand any business idea on the fly. However, at least at the beginning of your meeting, they will not be able to do this for sure. Sure, they can be amazing people with an impressive technological background, but they are also very busy people. The attention that they give to any presentation has a rather limited scope, and this is a reasonable approach. First presentations should be simple. Engineers who start with presentations of complex products and business models quickly lose their audience. Where possible, think like investors. There are predictable questions, the answers to which investors will want to get. [At the end of the lecture, a list of such questions is presented.] Do the calculations yourself beforehand so that they do not have to do this. Imagine that you give a speech in front of moderately mentally developed ninth-graders, whose attention can be kept for a very short time, and who have neither deep knowledge nor intuition to understand your business idea. In subsequent iterations, you can slightly increase the complexity of the story. (If everything goes well, then you will need to make a presentation several times anyway). If you need to analyze the data, analyze. Do not rely on investors in formulating key findings. Of course, they can make them themselves, but why risk it?

As soon as you manage to captivate investors, you can count on close intellectual attention on their part. Again, investors are very, very smart people when they are interested, and you should be prepared to answer very detailed questions about your business. You never thought about many of them. Answer these questions honestly, but if you don’t know the answer, you can also honestly admit it.

C. When?

Try to make presentations when you do not need money. These are the moments when you are in the strongest position. Short-term financial difficulties are often perceived as a sign of the weakness of the entire system. If everyone knows that you are in a desperate situation, then the best thing that can happen is that you are forced to accept less favorable conditions. In the worst case, there will be no deal at all. Investors will not think that they will get away with your murder if you have money in the bank for another six months. Otherwise they will be ruthless. On average, the period of allocation of funding takes from 1 to 3 months. If you only have money for this time, then you are entirely at the mercy of investors. The team that makes a presentation of its startup with 15 million dollars in the bank, 8 months after receiving them, operates from a position of strength. So do not hesitate to attract new investors after you recently received funding from others. At the very least, your marketing materials will not be outdated.

If you are a CEO of a startup, then making presentations is your work. There is, of course, a romantic illusion that the only significant thing is the product itself, and that you can devote yourself entirely to it. It's a lie. In fact, half of your job is to “sell” the company, because the CEO is the only person who really can effectively deliver presentations (no investor wants to listen to the sales director). If you are a CEO, then you are a seller. Each quarter, from now until the end of time, Larry Ellison ( Larry Ellison ) will make presentations on Wall Street and explain why people should buy Oracle stocks or at least should not get rid of them. Warren Buffett’s condition ( Warren Buffett ) is close to 46 billion dollars ( according to 2012 data - about 44 billion dollars - approx. Transl. ), And he still has to make speeches that he has been doing for about half a century (in least, judging by his annual letters). If people with a fortune of tens of billions of dollars are forced to do this, then you can conclude that this also applies to you.

D. Brief Presentation of an Elevator Start-Up (“Pitch”) - Classic First Presentation

And now the time has come for a brief presentation of the startup for the elevator ( presentation for the elevator ), which sounds a bit ironic, considering that all the houses on the Sand Hill Road are two-story at most. The meaning of this name, of course, is that the story of your child must be shrunk to speech, which takes no more time than a trip to the elevator. The standard format is to build an analogy on several well-known products or services that your idea resembles: “We are like Instagram with the elements TaskRabbit and Craigslist.” You must give up on it. This approach works well in Hollywood, where people like repetitive hybrid ideas and where everyone loves recognizability. In Silicon Valley, it works worse. Your market is completely different. If your startup is simply built using the x + y formula, then it is likely that you can just be copied. At least it looks like this. From this, most investors immediately run away. Just make a compelling speech about what you do and why it matters. The SpaceX project had an excellent presentation: “The launch cost has not declined for decades. We reduced it by 90%. The market is XX billion dollars. ”(Compare with this:“ We are a hybrid of NASA and Toyota! ”)

For some companies, the presentation for the elevator may be just as straightforward. “We cured monkey pancreatic cancer. We need money for the second phase of the experiments. If everything goes well, then this is a market of 10 billion dollars a year. ” Even if your speech is not as easy to read as this, make it easier. Here is the formula for a good short presentation: problem + solution = money. Remember it well, because investors are omnipresent, and you never know when or where you have to give a speech. Do not push or throw at them. Do not interrupt their lunch. But if the situation for communication is favorable, then do not miss this opportunity.

E. Other ways

Another investment path you can take is a cold presentation. This is a very simple way: you simply send a description of your project to the email address of the investor or call him on the main work phone number. The only drawback of this path is almost zero chance of success. I will ignore your presentation immediately after receipt.

You are at Stanford. You should be able to find an investor. Many investors tried to go to Stanford, but could only manage the beginning of the road. The entrance for you will be simple, and if you cannot do this, then people will think that something did not work there. Profit from your connections from Stanford; small world. Find someone who knows who you need to talk to and get his recommendation. At least you will bypass the spam filter.

Another alternative approach that works well is a preliminary presentation. If you approach it wisely, then you will get a positive effect. This is, in general, PR. TechCrunch publishes 20 stories per day. Let one of them be about you. If you do it right, investors can come to you themselves. And you do not have to invent an aggressive offensive strategy to launch a product. Finding the right email address is easy. You will find that the authors in the TS are quite friendly and love to write about small companies. Such a “presentation on the contrary” is a good kung fu. Well, or good matanza. For those of you who are not familiar with the Sicilian art of fishing, I will explain: this method involves luring a small shoal of tuna into separate mesh pockets and then putting fish on harpoons. It is much easier than fishing one by one using fishing rods and fishing lines.

Iv. Basic presentation

A. Setting parameters

If you are lucky, all your efforts will lead to a classic presentation at the investor’s office. The action usually takes place with all the formalities of the Kabuki Theater. Most likely, you will have a presentation of 10-20 slides. You will be listened to from 1 to 5 partners. After 40 minutes, when the presentation in PowerPoint is read just word for word from the screen in the dark, and as people slowly generate alpha waves ( alpha is an indicator of the effectiveness of the investment portfolio, word-play - comment perev. ), Then there will be a section of questions and answers in which the partners pretend to be interested, but, of course, they were hypnotized by the meaningless quotation of the presentation. They will simply ask you if you want to mark a parking ticket. And then you will not hear about them again, because there was no real interest.

To avoid such a scenario, tell them the story - and do it from the very beginning, without relying on the presentation. People love stories. Our brain is tuned to respond to them. It is easier for us to remember the facts when they are presented in the form of a plot. The proof of the value of such an approach is Hollywood. People pay a lot of money for stories. The entertainment industry is a much larger industry than venture capital, because people love history. Even a junk game like Mass Effect 3 is sold in millions of copies, because people love stories. Therefore, you also need to try to tell your story. Why did you start your company? What do you want to achieve? Then just build up the “meat” of the facts on this skeleton.

Fortunately, the structure of a good story has long been known. Aristotle discovered the elements of a perfect presentation several thousand years ago. He described the principles of the logo (the semantic component of the presentation), the ethos (character, spirit) and pathos (inspiration, emotional response). Logos are arguments based on facts and their rational explanation. Ethos is an argument based on a spirit or character — your character. This is what adds credibility to your story. And finally, pathos is an argument based on the emotions of the audience. That is what you need to use. Therefore, perceive your presentation through the prism of logos, ethos and pathos. There is sufficiently convincing evidence of a duration of three thousand years that people react to presentations in which these factors are used correctly.

B. Presentation as such - Mechanics and Practice

Supposedly, you have a strong reason why your project will make a lot of money - this is a rational part of your presentation that will find a response from engineers.

First, the most important thing: you need your presentation to explain your idea. Don't even try to make a speech without such an explanation. Without a presentation, investors will show no interest at all, so do it. Presentation is written propaganda. You will have to send it by e-mail to many people, so it must stand out with something. In fact, this is NOT a TA presentation that can be shown at a meeting using a projector. This presentation helps to present the data in the form of a story that people will read for themselves. All newfangled graphical interfaces of Notepad or PowerPoint do not matter. They can only interfere during a live presentation. To make matters worse, they will only distract the audience from what you wanted to show in your presentation: information provided in writing and set out in a thoughtful and easily perceived form.

Again, your presentation is your argument for your company. This is not a tool for creating animated presentations: most listeners are horrified that they will have to wade through the bulleted list on each slide. Your presentation is an informative public manifesto. Here is one clever way to use your victim's natural shortcomings: at some point, the junior analyst will be given the task to analyze your company, so you need to write a text that can become the basis of plagiarism for this junior analyst. Good, informative presentations reduce the burden on analysts. Make it easier for them to work, and they will make it better. Help them to present your project in a favorable light.

For a live presentation: by default you should come 10 minutes early. Investors are likely to arrive 10 minutes later, so do not worry. Connect the projector. The room will become dark, and people will have to contend with the natural desire to sleep. The first slide appeared. An investor is entering. The exchange of business cards begins. So begins the investment equivalent of the Bataan death march ( Bataan death march ). Too many people intend to finish this: you have prepared all these slides and, damn it, you will show them all. And investors wage their own war to stay awake. This situation is of no use to anyone and is unnecessary if investors have already read your presentation.

Your only chance is a simple and informative presentation that you need to complete as quickly as possible. Investors have already reviewed it before the meeting, because they don’t want to waste time, and if the presentation is bad, they will inform you that they have urgent family circumstances and will send a junior employee to the meeting.

At the same time, you should be ready to talk about your project and your presentation should be open if some masochist investor wishes to decipher the items on your list on the slide. Try to start a real conversation as soon as possible. It is much more effective for organizing interaction for both parties. Also, two presentations are simultaneously carried out: one you hold for the investor, but if your company is generally suitable for something, then the investor holds the second presentation for you. Be prepared for such two-way dynamics.

Sometimes you should have two different presentations: one is the one that you sent to investors in advance, and the second is the one that you show them in the office. Perhaps your multimedia presentation contains something that cannot be demonstrated in any other way; then show it to them, and do not tell about it. A better impression will be made by prototypes, which investors can use or otherwise interact with them. People love to play with different things. So half the battle is done, if you can captivate them with playing with what you offer.

Remember that investors view so many presentations and are so overloaded intellectually that their way of analyzing the data is very negative at the very beginning. Therefore, their goal is to find a way to say no. In this case, you must be perfect. If you give them a reason to say no, they will.

Another trick that smart law students know about is the underlining of key phrases. Professors never really read the entire examination paper. In any exam question there are only 10-15 important concepts. Most likely, the professor will not even look at whether you correctly used these concepts in the text of your answer. You have simplified the exam process and got the top five. Venture capitalism is not too different from the law school exam. If you emphasize important points, you will facilitate the work of the investor, and this will reduce friction in the decision-making process, which is the main goal of this whole undertaking.

Another note: do not ask about the non-disclosure agreement. Never do this. You will be looked upon as an amateur. If you are not sure that you want to share detailed information about your company, then do not share. Go and find someone else.

C. Presentation

Gibney looked at two completely different presentations for the same company, one of them is good and the other is traditional (bad), and explained the difference between them. Both of these presentations were shown at the lecture.

A bad presentation may look like this:











But a good presentation:





(You can see a good presentation completely in PDF format here . Notice that Gibney stressed that this presentation is not perfect. It is rather just good enough to allow the reader. , to make a general idea of ​​the business described in it).

D. Essence

Again, a natural conversation is much better than a slide-based story. So try to get away from them as soon as possible. Start with a shared vision - what you really want to achieve. Explain why you are a company, not just a product or an idea. Then tell us more about the business idea. What is it? How is it better than other ideas? Why after a while it will not replace another business idea? Be clear and concise. Your speech will then be summarized for further discussion within the investment fund. Therefore, equip those on your side with enough ammunition to fight for your company against your colleagues. Investors love to make a dent in their partners' intended investment targets. You need to anticipate these gaps and close them in advance.

The team is very important. This is the part of the presentation that reflects your character: why is your team the right people to solve the problem? Why should investors trust you? Who is your team and what skills do these people have? Maybe you are missing someone? How are you going to attract and captivate the 20th employee? Also be prepared to talk about your remuneration scheme. You have probably heard that some investors are very demanding on this issue.

Then the discussion should relate to your market, and especially the volume of your “target” market and the ways in which you are going to get it. What market share do you plan to capture? How?How do you rate the level of competition? Answer honestly. If you insist on the absence of competition, it is almost always a mistake. Investors will understand that you think you are superior to competitors (or are going to do it) - yet they know that this is a presentation. But if you critically underestimate the competition in your area, then lie detectors built into investors will work.

At some point, talk about your business model. Just say something clever about this. For a young company, this is almost certainly something invented, as it is likely to change over time. But if you have a reasonable answer, it proves that you are thinking about how the product will turn into a business. The approach “If we build it, they themselves will come” is simply not true. That you are able to discuss revenue, the sales process, customer acquisition, and entry / exit barriers will show investors that you are not so naive.

You should also clearly know what you want from investors. How much investment do you want to attract? Why do you need it? What are your monthly average costs? There is one more question that is always reluctantly discussed - this is the valuation of the company's value, and this really interests investors. You should discuss company valuation as early as possible, perhaps not at the first presentation, but then exactly at the second. This is a signal to open the gateway, so there is no point in numerous investment cycles, if you are several orders of magnitude wrong in assessing the value of the company. And therefore, both investors and entrepreneurs always proceed with great caution to discuss this issue.

And you must tell the story of your foundation and obtaining a syndicated loan. The history of the company's foundation is important both in terms of quantity and quality (have you attracted investors before? Do they invest in your company again? If not, why? What is your personal contribution to the company?) Syndicated loan, which the other participants stand for The round is also an important aspect as it helps to assess the quality of the transaction. Who else are you negotiating with?

Investors, of course, will ask you: “Why do you want to work with us?” The emotional aspect, which is very important, is already beginning to operate. You must have a specially prepared answer. But this should not be news to you, it is like filing documents in all elite universities. Why did you consider Yale University? For the same reason as Harvard: this is a prestigious educational institution. But for members of the selection committee you have prepared a more detailed response. You had (and you did it) to tell tales about the unmatched pizza in New Haven, or how you always dreamed of working with Professor X of Faculty Y, and also about this secret object z. Yale, you said, this is the only place where you can be happy. And then, of course, you mocked Harvard by talking about how you love Boston. In fact,it was just sarcasm. You should have at least a few reasons why you want to work with this particular investor and you should not be shy about this.

In general, there are many different tips and trivia that are worth remembering. Do not submit information too original. This is a presentation, not a lecture on contemporary art. Mark the main axis of the discussion. Do not use tables or links on Facebook, unless they are directly related to your project. Despite the fact that even the most mossy investors understand that young people use Facebook, and it is important in some sense, none of them will be deceived by irrelevant logos and images from clip art.

Once again, all these elements must be part of a convincing story. Investors will remember the stories. It may be more or less difficult to shape your story into a fairly convincing dramatic plot, but you definitely should try to do it.

Finally, try to prepare an information package for your investors. Almost no one does, and it is not clear why. If you do not prepare it, you will receive 1000 letters with requests for information that you should have submitted. Do not force investors to dig in the mail in search of some information, because if they don’t dig, it’s bad for you, and if they do, they’ll do it lazily and ineffectively. Do not place in your information package files with numbers in PDF format, it is better to use easily modifiable formats. Let investors have the opportunity to test your assumptions and play with them.

V. Life after presentation

What happens after the end of the presentation? If investors did not fall into a coma in a dark room, and you did not bore them to death, then the presentation took place.

Very rarely does a presentation end with a sentence. Good investors will take a break from several days to several months to make a decision. That's not bad. Your company is difficult to understand, like other good companies. In many cases, for several years, investors have no understanding of all the elements of portfolio companies that they have financed, and there is nothing terrible about this: it means that companies have exceeded the imagination of one person. If you have a real live business, investors need time to properly understand it. Sometimes, if you spend a lot of time analyzing a business, this is a good sign.

You need to choose yourself an evangelist among investors. You need a champion, otherwise your deal is doomed to failure.

Remember, the presentation works in both directions. Now companies are remaining private longer and longer, without attracting investment. You are contacting an investor for a very long time. For example, Facebook has been a private company for 8 years already. A marriage in the United States lasts an average of 10 years. Before choosing a life partner, you spend in thought more than 1 hour. Therefore, the choice of an investor also take seriously and spend time on it. How smart is an investor? Is he honest? Try to find out what deals this investor is interested in, if he has the necessary experience. Or maybe he is just “shot” in order to see later which of the list of projects is better to invest in? Why do you need someone's lottery ticket?

As soon as you make a deal, immediately release a press release. Quote investor words. Place your logo on his website. And immediately start thinking about who will be your next investor in a year and a half.

Vi. Questions from the audience

Q: During the presentation, do you concentrate on your initial product or on a shared vision?

Answer: Founders Fund likes to start with a common vision. But many people are focused on narrower issues, and may well want to hear product information first.

Question: How can you judge an investor without your own experience in startups or investing?

Answer: Follow your intuition. Assess their intellectual side, if any. Do a thorough check. If you see that some investor suddenly places the Facebook logo on the home page of your site, reports about the formation of an investment portfolio of $ 25 billion and publishes standard discourses about investing in the future, then go ahead. From their side it is not fair. But if you find someone like Brad Feld ( one of the founders of the famous business accelerator Techstars - approx. Translator ) who knows exactly what he is talking about and who has concluded some very interesting deals, you can feel more at ease.

Question: What kind of investors do you like and dislike?

Answer: This is a narrow circle of people, so sometimes you have little choice. If you are trying to raise $ 300 million with a company valuation of $ 6 billion, there are not many places where you can go. The truth is that most investors are no good. If we evaluate objectively, the “lower” 80% of the industry have not earned any money at all in the last 10 years. The advantage of this situation is that those who have earned are truly competent.

Question: At what point during the presentation you begin to discuss important conditions?

Answer: You should mention key terms or some other specific points at the very beginning of your speech. If you want to control the whole enterprise, report it immediately. Sometimes this can ruin the whole discussion, and then no one will have to waste time in further discussions.

Many conditions do not matter at all. Project economics and control matter, and discuss these issues first. As for everything else, the results are usually very contradictory. If the result is zero, then the conditions do not matter. If the result is very successful, then the conditions are again irrelevant. Conditions matter for results slightly better than mediocre, and such results are quite rare in venture capitalism. Therefore, do not waste time or 80 thousand dollars, consulting about specific conditions with the law firm WSGR ( WSGR ).

Question: If you could radically change or even remove some element from the presentation process, what would it be?

Answer: The worst thing is when people who are not yet a company make a presentation for you. Investors finance companies, and do not create and do not form them for you. Do not make presentations until you are a company. No one wants to listen just about some idea or product. Even if investors would like this idea or product, they literally cannot invest, because there is nothing to invest in. You need a legal entity into whose account you can transfer funds.

Question: How important is strategic investor advice?

Answer: Approximately 80% of value added is capital, and 20% is consulting. Superangles are very popular now. They claim they can help you build your business. You look at their portfolio, and in it 150 projects. How much time or energy can they actually devote to one company on average? Ordinary investors have fewer companies in the portfolio, and the time and energy limitations are the same. They can create added value by providing strategic advice, creating syndicates for funding and explaining the processes that are known to them, but new to you.

But if you talk at the level of the mythical hybrid model, an investor and consultant from McKinsey ( international consulting company that specializes in strategic management - approx. Transl. ) That helps you build your business hand in hand with you, then no most portfolio companies. It is impossible even mathematically. Those investors who claim to do this for each of the companies they work with are cheating.

That's what investors will definitely want to know:

1. Macro level
   
   1. Are you a company or just a product / idea?
   2. Your company vision
2. Your product
   
   1. What is it
   2. What problem does he solve
   3. Why is he better than others?
   4. Why for some time it will not force out some other product
3. Team
   
   1. This is part of a presentation that reflects your character. You must explain why you are suitable for this task and why the investor should trust you.
   2. Is your team missing someone?
   3. How do you recruit or convince a twentieth employee to join you?
   4. What compensation system do you apply?
4. Business
   
   1. The size of the market, namely, the target market
   2. What market share do you plan to capture and how
   3. Competitive Analysis / Your Benefits
   4. Business model
   5. How will you generate income?
      
      1. Sales process
      2. Customer acquisition costs
      3. Profitability
   6. Barriers to entry / exit
5. Desired amount of funding
   
   1. How much do you need and what will you spend this money on?
   2. What are your monthly average costs?
   3. Company valuation
6. Foundation History / Syndication
   
   1. Who else are you negotiating with? (this is part of the emotional response of the investor)
   2. Why do you want to work with this investor?
   3. What, besides money, do you need from an investor?

From the translator:
I ask translation errors and spelling in lichku. I also remind you that this text is a translation, its content is copyright, and the author’s opinion may not coincide with mine.

I repeat once again that I translated Astropilot . Formatting 9e9names . All thanks to them.