Category Archives: Entrepreneurship

How to showcase the “problem you are trying to solve” in your overview deck #startups

This is a series of posts with a focus on your overview deck to investors, presenting your market opportunity, the team and traction your startup has had so far.

Customers, investors and partners want different levels of depth from your problem statement.

Investors want to understand the fundamental underlying trends of the market in the context of the problem you are trying to solve.

Customers want to understand the “day in the life” pain points that you help address.

Partners want to understand the contours of the problem in terms of the challenges that customers face.

You have to articulate the problem extremely well to get a buy in from all of the above audiences. Doing that solves more than 1/2 the challenges you have with getting buy in. The reason is because all of them believe that the person who articulates the problem best is the one who has likely the best solution.

Since you know the problem so well, you have thought about the solution as much is the assumption they make.

The best way to showcase the problem slide is to outline the trend that you are seeing in the industry first.

For e.g. Cloud computing is rapidly taking over enterprise deployments of new applications. Or, there is a dramatic rise in number of developers also performing the role of operations and this trend will continue until 2020. Or, there is a new role in companies which are progressively seeking to differentiate with great customer insight and the person in charge of it is called the Customer Experience Officer.

Now, it is important that you dont show that in the slide, but also provide your view of the impact that the trend has on your problem.

The reason this is important is that most every investor, and many early adopter customers will have access to these trends and will likely know about these trends already. For many of your late adopters, this might be news, but investors tend to be on top of trends for most parts, with some exceptions, especially if the are not deep in a specific category or industry.

So rather than say the generic statement, cloud is changing everything I’d offer a view on the way it is changing that affects the portion of the problem you are solving.

For e.g. Cloud deployments are increasing by 150% every year and that rise has caused a 220% increase in number of new Developer Operations roles, and these roles dont have the tools to be successful since the developer tools are available only to debug code issues, and the operations tools are focused on monitoring production instead of trouble shooting.

There are 3 tips I have learned to use when you share the overall trend part of your problem.

a) The trend needs to be something most people can relate to easily

b) the trend is best explained by using percentage numbers to showcase the growth (trend is your friend) and

c) the trend needs to have a disruptive nature to it, if you are playing in market with large incumbents.

The pain point part (2nd slide likely) is best explained when you have a day in the life of the person who is the user. What do they go through on a daily basis which causes them angst. What do they have to go though, which prevents them from being successful or causes them to waste time, or causes them to be inefficient in their job, or costs them more money than doing it with your proposed solution.

Any or all of these day in the life scenarios is usually explained best when you showcase what your user has to endure and how with your solution these go away. So in some ways, your user pain point should directly correlate to the solution you are trying offer that will solve these problems.

For example, the PR associate at a mid to small agency spends 3-5 hours going over google news and putting news articles into word, curating the influencers into an Excel spreadsheet and finally putting a report together that will share the key media coverage in a PowerPoint slide. This associate spends 3-4 hours every week doing this and we can do these things for them in less than 15 min.

There are 3 important tips I have see that work best to showcase your user pain:

1. The persona of your user and the “day in their life” has to focus on the top 3 pain points they have, daily. If your pain points are not the things that are high on their priority list, they will likely dismiss your solution as “nice to have”.

2. The best pain points expressed are in 3 specific things, not more. If you have one, then you will find your presentations to customers to be hit or miss, so you are better off, having 3 so the total surface area of the customer’s pain points are well covered.

3. The more “real” your pain point and the more they go through it daily, the better are your chances of getting customers to buy into the fact that you can empathize with them. The best way to test this is to ask questions of them to seek engagement. For e.g. “Raise your hand if you find yourself struggling to quickly understand which emails are important and which ones are not, after a quick 15 second glance on your email client”.

Let me know if these tips work.

How to showcase your team slide on your overview deck #startup

The most important question you are trying to address on your “Team” slide is

“Why is this the best team in the world to execute this opportunity?”

Most investors get pitched multiple times by different teams with the same / similar idea or different approaches to the same problem in the same market. It is not unusual as well for investors to start to look at other companies in the space if they get a chance to see your company.

In the absence of having lots of traction or a large market (which is a non starter if you do), this is one of the most crucial slides of your overview deck.

This helps them understand the space better, and also lets them determine the merits and differences between the approaches.

While it is no unusual to hear the term “Rock star team“, most investors only tend to believe what the founders tell them about themselves and the investors are able to double check via references.

If I were to simplify the definition of a rock star team, I’d say –

A team that’s worked together and solved the same type of problem a startup would face at their current stage before in their career.

In many cases the problem has never been solved before, or the team is new and young, while approaching it differently from others in the past. In that case, a rock star team

Complements each other, works very well together and is able to trust each other to execute independently well and collectively be better than the sum of parts.

Now, to present your combined knowledge and experience on how your team is uniquely positioned to execute this opportunity, you will have to present the team slide by focusing on the top 3 things you will need to get right before your next stage of growth.

In your team slide it is not uncommon to present the founders alone. In many cases I have also seen folks include their advisory board members and sometimes legal partners in their presentation.

The ideal team slide has a key takeaway – here are the 3 most important things we need to get right and here are the 2-3 best people in world who can help us do this uniquely.

Lets say for example you are looking for a seed stage investment and have 2 co founders and 2 other employees in the company. You have an MVP and possibly a couple of early customers and users.

The next most important things you have to prove is that you can get distribution at scale and technology at scale.

Then you should focus on why the two members in the founding team are the best to figure out how to scale distribution and technology. It is really that simple.

For the specific type of users you have, the proprietary business model you have chosen and the unique technology stack you possess, there would be very few people in the world who understand what you know about the market that others dont.

You are trying to show in your team slide that this team can successfully ensure that the risk involved for an investor is minimal, since you are one of a few set of people in the world who can do this.

I would put the key 3 items that make your team different on the slide title. For example: Team has SEO domain expertise and has been named AWS scalability experts by Amazon. This assumes you need SEO expertise uniquely to gain customers at scale and your technology critical success factor is scaling using AWS.

Many folks use logos of key previous companies to show pedigree (some also put the logos of their school affiliations), while that’s good for the overview deck, for your operating plan I’d be more detailed about how long you have worked together and in what circumstances.

How to present your traction slide in your overview deck, with 7 samples

“If you got it, flaunt it”, would be the best way to talk about the traction slide on your overview. In fact, show it early, often since in the absence of other stronger parts of your business, traction trumps theory.

Progressively, % growth is the easiest to show if you have small numbers or have numbers other than revenue. The next best is to show the revenue curve (up and to the right hopefully) followed by revenue with some key snapshot metrics.

The thing you are trying to do with the traction slide is to prove that you have validation in the market. Hence, showing traction in the short term with users, or longer term in terms of growth is a good start, but traction with revenue and key metrics is the best place to be. See the slide example below.

Monthly Ad Spend On Network

If your model shows # of advertising revenue spend on your site (for e.g. media property, blog, etc.) then, ad spend on your site with key metrics about user engagement, etc. make sense.Monthly Recurring with Growth Rate

For most SaaS businesses, though, showing revenue over a decent period of time (1 year preferably) or at least since the time you started getting revenue along with growth rates helps.
Monthly Recurring with other key financial metrics

I am not a fan of using snapshot based traction, since it tends to obfuscate the growth and also does not help the investor figure out the lines from the dots. You want them to get a sense that your business has been growing for a good period of time. In the absence of having strong growth metrics, I’d still use some numbers.
Revenue to date

Absolute revenue graphs are good as well, but I’d advice most folks to show % growth and keep the numbers private to be shared during your operating plan discussion. You dont want to give any of your competitors or investors in your competitors, any knowledge of the strength of your business.
SaaS Monthly Recurring

The graph above has the revenue and mentions growth rate, but I prefer to show them next to each other as MatterMark has done before.

Short timeframe signups

Sometimes when your business is fairly recent, and your product depends on user growth initially, not revenue, you could use either the monthly signup graph or bar chart.SignupsAbove all I’d say the #1 tip for your traction slide is to focus on the headline, once your decide which metric to show. The title of your slide show tell the user about exciting development in your business from a traction standpoint.

So, instead of using words like traction, revenue, signups, etc. I’d say

1. 40% growth in user MoM, for 8 months

2. 212% growth in revenue YoY, at $500K

3. $150K revenue, 97% Margins, 40% growth in users MoM

That way, even if the audience is glancing back to their smart phone, they got the key takeaway that you were trying to convey.

 

How to present the market slide on your Overview presentation at demo day?

Most investors and others who attend the demo day dismiss the “our market is very large Gazillion dollars” hype that startups state in their size of market slide. Since the size of market is part of the 3 step process to raise capital from institutional investors, spending enough time on documenting the assumptions you have made are important, as well as having a believable set of numbers to back up your claims.

In their quest to ensure that they are excited about how large it is, most entrepreneurs only do a top-down market analysis and usually mistake total market size with addressable market. For example, if your app helps teenagers communicate with each other using only animal pictures, then technically all teenagers are your target market. Realistically, if you factor in the # of teenagers who have cell phones with good camera, who have reliable Internet connection and then those that like animals it is likely to be much smaller.

If you market is small, it is small. No amount of you trying to make it big is going to make you look credible.

There are 2 types of audiences you are trying to convey to and 3 most important things you need to articulate about your market.

The audience that knows the market and instinctively knows it is big. These are the “insiders” who have been following many other startups in the same market and understand either unmet needs or displacement opportunities.

The second audience (the larger set) that does not know the market at all and needs to see a clear breakdown of total market size, immediate opportunity and complete potential.

The market slides you put together in your overview deck, is aimed more at the 2nd audience than the first one. The insiders only need to know that you have thought through the size of market.

For the uninitiated, you need to keep in mind.

1. You have credibly broken down the “large” market into addressable chunks and have a credible process by which you came up with the market size.

2. Walk your audience through your thinking process on how you came up with the size of your market to gain their appreciation for your understanding of the space.

3. Cite as many good dependable sources in your market slide to show that you have done a good landscape map of your market.

I would highly recommend you do both a top down, as well as a bottoms-up analysis to come to your market size.

Here are 3 market slides from companies I have seen. The first one from Tealet is pretty poor, the one from Mattermark is better, but the one from Square is the best.

Square Market SlideMattermark Market Slide

Tealet Market Slide

If you were presenting in front of a large audience, I would use the Mattermark slide – large size fonts. If you are making a market size slide for the operating plan deck, I’d use the Square format. If you were looking to put a slide on Angel.co for your profile, I’d use the Tealet approach.

Why you need 3 presentations (with increasing depth) to land investment post your seed round

The 3 step process to raising money post your seed has

a) an overview step – usually at a demo day (3-5 min presentation) or via a warm introduction followed by

b) a first meeting (30 – 60 min) where your pitch deck showcases your company and business and finally

c) a follow on second meeting (60-90 min) with partners at the firm where you outline your operating plan

Your overview presentations’ goal is to pique interest in 5-7 slides and generate enough excitement to warrant a follow on meeting

The pitch deck’s purpose in 12-15 slides is to give enough visibility into your business to help potential investors understand it.

The operating plan’s purpose in 15-25 slides is to share the details of how you plan to invest the raised capital to get to the milestones that will make your company succeed.

Over the next few days I will take each slide deck and share some of my experiences with examples.

Let us first take the overview deck. This is typically given at your demo day or when you have 3-5 minutes alone to pitch, instead of 30 minutes (when you will need your pitch deck)

Your should cover 5-7 key areas and here is what I recommend:

1. Your single line positioning, company name, founder’s email and angel.co profile address.

E.g.

1. Get Magic Now – Text this number to get what you want with no hassles

2. Seed.co – Modern business banking without branches

3. Get Meadow – Buy medical marijuana for delivery today.

The positioning is different from your tag line, which focuses more on being memorable and different about how you do something as opposed to what you do.

Here is how I think about positioning: Try to address in one word who your customer is, another word for what you do for them and third word for how you do it differently

2. The problem you solve (and focus on the customer specifically) – be as specific as possible, and show how customers are currently solving that problem. Here are some tips on presenting your problem slide.

3. Your solution & how is it different – use screen shots to show your product if you wish

4. Size of your market – total and addressable market size is preferred. Here are some tips on presenting your market slide.

5. Traction – be as specific as possible either in terms of users, revenue, or other metric you are tracking. # of meetings with customers or discussions with prospects is not traction. Here are some tips on presenting the traction slide.

6. Team – answer why you are uniquely positioned to execute this opportunity

7. Call to action – Dont say we invite you to talk to us. Ask for folks to download, or ask them to tweet for early access, etc.

Over the next few days I will outline each of these slides with examples.

How to be a more innovative startup by changing just 2 words in your meetings daily

Most every startup wants to be innovative. That’s the essence of being in a startup. To be innovative, most entrepreneurs realize they have to get their culture right. An innovative culture fosters and innovative workplace which builds an innovative company.

So, now the question is how do you build an innovative culture?

To build an innovative culture, I believe you have to encourage experimentation. Lots of it. Most people learn only by experimenting, not by sitting in classrooms and being taught. While it is important to sit and learn the first principles, most everything else needs to be learned by doing. You will have to let people try lots of things and learn what works for your company, your industry, your market and your customers.

The trouble with experimentation is that it breeds failure. Lots of failure. If everyone of your experiments were successful, then you are not taking enough risk, which means the company wont be as innovative. In fact, the leading indicator for innovation in most companies is the number of failures they have. Which means they are taking more, but managed risk. A good metric to measure, is the # of experiments your startup conducts in a unit of time and what the failure rate is.

The best way to do this is to practice the art of disciplined experimentation. Which is why I am a fan of the phrase “My discipline will beat your intellect“.

So, if you do conduct a lot of experiments, you will fail. How do you understand, organize and learn from your failure?

Most companies conduct an audit of their experiments, the hypothesis, the initial learning and the final results. That’s where the the biggest problem is to be found.

Most managers and executives are trained to ask the question –

“Who to blame”?

That’s the question that most meetings post experiments start with? What happened? Why did it happen? Who is to blame?

I propose a small change instead, which will get your people less defensive, more open to taking risks and experimenting.

The right question to ask is –

“What to blame”?

Focusing on the process, steps, methodology and systems brings out the best answers to the question “how do we get better”?

Surprisingly you learn more about people, their strengths, limitations, weaknesses and biases if you focus on the process that was broken instead of assuming that the people messed it up.

For most founding entrepreneur CEO’s this is one approach that works best to foster a culture of innovation and risk taking.

Do you have a manager who has followed this principle? I’d love to understand what you have learned from them. Drop me a note on Twitter. (I do respond to all @ replies BTW).

Hiring your “best” friend as a first employee, at your startup – pros and cons

Many startups have co founders who are best friends. I have heard of many cases when that has worked out well and a few cases when it did not. I would say in more cases than not, it has worked out (anecdotal). Hiring your best friend as the first employee has different connotations for your startup. You want to hire so that the person is individually proficient and collectively efficient.

The word “best” indicates to me that you know each other very well. There are secrets you’d keep from your family and other friends, but not from your friend.

The word “friend” indicates someone you know for a long time. This person is not someone you worked with for 1-2 years, but typically someone you either grew up with, studied with or worked with for an extended period.

Sometimes this can apply to your spouse or significant other as well.

Your best friend comes by and you start to think, why dont I ask her to join my company?

Even if they are not a “perfect” fit for the role you are trying to hire, you think you need a utility infielder anyway, so why not get them on board.

First the pros:

1. She knows you very well, so it is likely you will have a good relationship and be able to talk about anything about the business. Even if you have a co founder, running a startup is a lonely business, so having a sounding board, who wont judge you is a great advantage.

2. She can help you see things you dont see. Most entrepreneurs (not just Steve Jobs) create a reality distortion field around themselves, so having someone who can objectively point out the flaws in your argument, without you getting defensive will help you go a long way in your ability to grow as an entrepreneur.

3. You trust the person instinctively so it is likely you will be able to have them take on any role and be supportive when they make mistakes. This helps a lot when you have to explore new markets, attempt a new technique to sell your product or investigate a new architecture framework to use.

The other advantage is that the journey is a lot more fun when you like and enjoy working with the people you interact with daily.

Now the cons:

1. If you are both alike, (regardless of what people say, I think most people are best friends with people who are *very* similar to themselves), then it is likely you will see things the same way. This makes your company fairly uni-dimensional. Opportunities are best created when there is a good mix of different skills, talents and perspectives. Diversity creates dissonance, which leads to new ways to think about the same problem.

2. They may not be the perfect fit for the job – either because you need a front-end UI person and they are a back end developer, or they are a marketing person and you need a quota carrying sales person or if they dont have connections in the industry you are trying to tackle.

3. They are more likely to take liberties in the company (rare, but happens). This creates an environment where other professionals you hired will feel a sense of resentment towards the employee, since they believe your best friend will snitch on them.

In the last 3 years, I have seen about 120 companies go through our accelerator programs and looking back I notice about 10 cases where a best friend was hired as an employee (as opposed to a similar number of cases where the best friend was a co founder).

I cant think of a single case where it ruined a relationship even though the company did not do too well.

In my own personal opinion, bringing on your best friend to work with you at your startup is one of the best things you can do.