Every company going out to try to raise capital from angel investors or VCs seems to have some derivative of the same question – “What should we include in our pitch deck?”
While the outsize clout people give a simple slide deck may seem silly, it speaks the importance of being able to weave a compelling narrative about your business.
Roelof Botha of Sequoia Capital is one of the most successful venture capitalists of all time. He sits on the board of companies like Square and Jawbone and led investments in Youtube and Meebo before they were acquired by Google. Recently, he checked in at #18 on CB Insights list of the top 100 venture capitalists.
Basically, he knows what it takes to build great companies and how those companies should think about raising capital.
Thanks to court records from the 2010 Viacom-YouTube lawsuit, we can take a first hand look at how the Youtube founders pitched Botha (exhibit 1) and how Botha pitched Youtube internally to his Sequoia partners (exhibit 2). From there, we can better understand how companies should think about structuring their own pitches to investors as well as the major hurdles companies need to get over to turn a potential investor into an advocate who makes sure to push their deal forward.
Exhibit 1 – Youtube’s Pitch
Here is the rundown of the order in which the Youtube founders presented their business opportunity and our interpretation of the reasoning. As you will see, the way this is presented does a great job of continually answering questions and pushback that would be brought up in the preceding section.
Purpose – Why should I care?
Problem – What point of friction are you attacking? Money is made at points of friction.
Solution – How are you removing (extracting value from) that friction point?
Market Size – How much value can you conceivably capture from this new offering?
Competition – If the market is so big there must be others after it, right? While some argue that competition is not a good thing, a Blue Ocean approach to entering the market shows you have thoughtfully evaluated where others have failed and understand how to attack those areas.
Product Development – What is the actual product that will serve as the conduit for this better customer experience?
Sales & Distribution – How will you make the market care about this cool product?
Metrics – Have any of your previous predictions been tested and evaluated by your target market? How has it gone?
Team – Are you the people that are going to connect all of these dots?
Exhibit 2 – Botha’s Pitch to His Sequoia Partners
Raising a seed round is like making a sale to a SMB customer — smaller amount of money in play, usually one decision-maker, and a relatively short sales cycle.
Raising institutional money is more like conducting an Enterprise sale. The check size is bigger, the timeline is longer, and you need to find an advocate on the inside that is going to continually work to push the deal forward and get buy-in from other decisionmakers.
This latter process is the one we see at play here in Exhibit 2, where Botha takes us the Youtube cause internally at Sequoia and present the case for investment to his partners. Here, we get a rare glimpse into how an investment decision is made at a VC firm.
As a founder, reading through this section is instructive in that it can help you anticipate some of the questions an investor will face from partners so you can be sure to address those in your own presentation.
Intro – What is the thesis and (like in the previous section) why should we care?
Deal – How do the terms and structure of the deal (valuation, our ownership, etc.) fit in overall with the portfolio we are building?
Competition – How does this company fit into the marketplace of both large and small competitors? An outline of the competition quickly helps investors build a framework for what your go-to-market strategy may look like.
Hiring Plan – Does this company have a plan and the ability to attract talented executives and key employees to bring the business from where it sits today to where the founders have said it will be in the future?
Key Risks – What factors will cause the statements that have been made around market, product, distribution, and team to not come true? What is the likelihood and scale of those risks?
Recommendation – As Thrive’s Miles Grimshaw put it in his blog post on the document, how does management, market, and monetization all tie together?
