answering founder fundraising FAQs | Ep 78

One of the challenging parts of fundraising is that if you don't have a network or the amount of capital that you want to raise is like more than your existing network, like you will end up talking to someone who has no context for who you are. I think one of the most important things is testimonials where you have like a core customer of yours that like the way I love to see it framed is like this customer represents like X amount potentially of revenue or like it is like this is why there are like a core customer for us. Hello everyone and welcome back to see DeHarvest. I'm your host Paige Fendordi. I'm the founder of Behind Genius Ventures and early stage firm focused on investing in the future of work and the future of play. Today's episode is going to be a little bit different. I was having a conversation with a good friend of mine who's thinking through raising and just the perspective of raising venture capital as an early stage founder went through and did a pitch deck tear down and it was just so interesting to see what came up and to have the ability to talk candidly about some of the misconceptions that folks can have about raising venture financing specifically. So I'm excited to bring her on to ask some anonymous questions about the process but I before you hop into questions I just want to give some context. So I over the past three years have evaluated thousands of pitch decks who made 39 investments across precede and seed stage and we'll focus specifically on narrative and pitch deck in today's conversation and I think one of the things I wanted to provide context for is a pitch check review from an investor perspective is usually to make like one or two decisions so one is they receive a deck in an email and they decide whether or not to move forward to a meeting with a partner and analyst and then two is they review the deck prior to a meeting should they decide to meet to ask better questions and so one of the things that my friend and I were talking about was it's not often that you're actually presenting a deck in a meeting to an investor and so one of the things that can be really important is like having your narrative top of mind which can be challenging if you're like put on the spot especially as like the narrative is evolving. Do you want to start us off with actually do can you share like a bit from your perspective about like how it was to pitch deck tear down or what yeah for sure for what it's worth I actually found it incredibly valuable I think to be super honest going into the experience I was super nervous and really just like apprehensive to have a close friend be able to assess me on such a vulnerable way but I think the way that you were able to provide feedback both in terms of one in an investor is looking at a pitch deck and also what they're looking for in that deck was really helpful the reason why I see those two things is because I think a lot of the decks that we see online are like kind of templatized they're very much like okay here's the types of data you should be mentioning here's like the order it should always be like x number of slides things like that and so I think what you had mentioned around you know maybe the things that you care about in terms of narrative and what you think BC's really care about it helped me identify like expanding for it or beyond that template and so maybe you could start off by like expanding on you know if you're getting you know you're in a meeting with a founder and you kind of already have a little bit of context on what they're working on like one of the things that you care about most in that narrative and like how can they bring to the table like what that should look like yeah so in terms of the the question is like how to shape the narrative of your company as you're looking to pitch a venture capital investor I think this will vary there's two distinct styles of investors so one is going to lean more emotional and one is going to lean more logical and that can vary across angels who are making smaller commitments across funds that are investing professionally and across like many different types of investors but one of the things that I recommend is like incorporating both emotional and logical aspects of your story and then one of the things that I talked about early on in our conversation was and he would start out and and we're based like here's what I did before and here's what we're working on now and one of my recommendations was to frame what you're working on with the problem solution set prior to diving into where the business is today and I liked we have this for the conversation where you just like very strongly said like I have insight like I built products like this before and I was like yes that like start with that and like tell me like why do you have this insight what's important about it like how many people does it affect what does that look like in terms of market sizing and it's like okay you built products like this before like why where who like why do you have a personal connection with it and I think oftentimes there's like this narrative online of like how you should pitch a company but I think it looks different for everyone and to start with those very basic problem solution set and have a lot of clarity one of the things that we were talking about it's like if I'm on a call and the problem solution set is not clear within like the first five minutes it's really challenging to get across the line for an investment and I think this is tough because I think that the narrative online is like more about pitching the business than the problem solution set but that clarity is really important than having concrete details that support that and just asking like why why why again and again yeah I think one of the misconception that I had was like I focused a lot on some of the features of my product and I focused a lot on like maybe some of the elements that mattered a little bit less and I think one of the pieces of feedback that you gave that residue a lot for me was like you cared more about me being able to tell a story and really being able to like help you almost like you know even put your LPs are be able to like get that data and so maybe you could expand a little bit more as like what are the types of things that are going to help you make the case for like buy this founders yeah it was I was kind of joking kind of not joking when I was saying like venture capitalist at the end of the day are looking for great returns so depending on your fun size that defines your strategy like in our case it's like 30x plus like will this investment return the fund 30x and does the market that you're solving a problem for reflect that and then second bcs want to tell a cool story at a conference about a portfolio company that they've invested in whether they're speaking to perspective LPs or speaking to existing LPs you know one of the most common questions that I get from our existing investors is like tell me about a company that's going well and I love personally when I can like frame a company that's going well with the context of the narrative of what problem that that entrepreneur start solving why it's so personal for them the execution velocity that they've had to date and the impact that company will have and I think that there's also a lot of information on like what bcs are looking for but I truly think what bcs are looking for boils down to like great returns and a great story and so your ability is a founder to understand that and internalize it in the narrative that you're telling in your you know it can be as early as like in your affordable in your pitch check or in the conversation that you're having for the first time that really helps get me over the line from an opportunity perspective and those things are like it sounds very basic to ask those questions like what problem are you solving and for who but I think it takes like a tremendous amount of research and testing and trying things to get to a clear answer on it and it's very easy to tell when people have put a lot of passion and time into figuring out the answers to those questions yeah that really resonates I think like as a founder hearing that one of our jobs should be making your job easier in a way and being able like equip you with the data that you need to figure out like okay is this person doing a lot of research how much research are they doing like I think in that way it almost helped me understand the parts of the deck that I might want to index on is less about oh what are the functionalities of my demo and maybe a little bit more about like why do I care so much about this problem how much time have I spent researching on it it seems like you kind of indexed a little bit more on like talking to users and that kind of yeah and it will I think like I'm not part of the target market and most of the venture capitalists that you pitch regardless of whatever business your building aren't they may have been in the past and also like building businesses with venture capitalists as your customers pretty brutal we're kind of like the worst customers because our job is to like say no to things all they long there's teaching adventure capital class at San Diego State and we had an entrepreneur come in and pitch and have our students give us like basically the five most important like deal point questions and then give feedback and one of the points of feedback is their deck focused very heavily on the functionality of the product but no one in the room had experienced the problem that they were pitching although it was big one they focus very heavily on the functionality and you could start to see like the students eyes glaze over and it was just like you could tell they weren't engaging with the material versus the questions that they asked were around like market sizing go to market traction like lessons learned from testimonials so that for me is what I like to see in a deck is how have you thought about exploring this hypothesis that you have about solving the problem that you've identified and have unique insight about cool yeah that's super helpful I heard a I'm going to can't I'm pretty sorry okay I was a founder like I think for me one of the things that rest just like speaking kindly one of the things that resonated the most was even just like this doesn't seem like it'll be a big deal but it actually is a really big deal just like the sequence of information that you put stuff in the reason that I was like a little bit maybe not so surprised but I I realized that the sequence of the order of where I put information can really like redirect or change the entire conversation if you don't see like information like testimonials for example in our call earlier enough then you don't really feel as confident in terms of like what I've been actually done to like validate you know the work that I've been doing and so maybe I'm curious if there's like specific you know patterns or comments are almost like like yeah comment mistakes you might see in terms of like slides that you see earlier in the deck that you are as you later or slide that you see or maybe often too late in the deck lead rather see like in your person yeah it was funny because we were going through and I was like move this like this one up for it like like don't bury the lead I think that's the the major thing that I keep going back to is like don't bury the lead like give context for the most important parts of the company like problem solution experience in asking those questions as early as possible I think it's funny because sometimes I'll go through a deck and I'll be like oh move this earlier move that earlier and it's like half the deck I'm like move earlier but I do think that like each there shouldn't be a lot of slides without data points to back things up like if you're trying to make a statement present it with data or with an emotional connection to it so for example instead of saying hey we're solving this problem it's like okay here's what that workflow looks like today and here all the problems that my customer is struggling with and then on the other side it's like here's how we make that experience a lot simpler with specific data on cost savings time savings that is a much more compelling slide than just like here's the problem that we're solving and here's a solution that we're thinking about you can have a very dense informative slide without having a lot of words on it as well so that would be an example of you know finding out that your products saves your customers thousands of hours might take a lot of research and development and it's a very important stat that I like to see like on the solution slide so yeah I was gonna say like as you know as founders were like very preceded or maybe even at the angel level I know you are also investing in precedes so like let's say I'm like in the process of validating my idea and I'm trying to figure out like how do I get that data would you kind of like maybe encourage folks to spend a little bit more time on getting that data like okay exactly how much time we're spending or how much you know revenue are you helping your customers be yeah maybe the question is like how does folks go about that data like maybe they're still very early on yeah it's a good question so I think the question around how do you show that you're solving a problem or that the problem is large even if you're early on in your customer interview journey right so I think one of the most important things is testimonials where you have like a core customer of yours that like the way I love to see it framed is like this customer represents like X amount potentially of revenue or like it is like this is why they're like a core customer for us in the like you know like Shelley X does X at Y like tell me why that person is a part of your customer market and then you can use that as a nice segue to talk about like how many Shelley's are there and then the quote itself highlighting the aspects where it's saving them time and money I think that one of the lenses that I look through things that is like is this mission critical to the business like is this their biggest hair on fire problem for that customer segment and I think this can be different if you're building a horizontal product that's geared towards doing the same action across a bunch of different industries or if you're working on a verticalized product that's specific to one industry those answers can change a bit but I like to see like costs and time savings because those are like very crucial and will lead to customer spending money on them versus there are some like other pain points that when push comes to shove people might not pay for and usually that's like adding additional functionality so it's like can you solve the problem on that's like causing them pain right now versus like adding additional functionality is like bonus so I like to see data points around that even even so far as like even pre LY or like letter of intent you can have an example of someone saying this product would save me X amount of time in my business and you can be very I would like recommend being very specific in your customer interviews of being like how much time with this save you and like how much money do you think this would save you and ask those questions in your discovery process to have more clarity on what people might be willing to pay for and then it can also help you build context around pricing strategy because I think that's really challenging at an early stage and venture capital so also pass on companies because they don't have clarity in their pricing and so I think demonstrating if there is a pricing strategy early on in the business like how it's tied to the value it's providing to the business there's a handful of companies in our portfolio where the pricing strategy is actually like the meaningful thing outside of like the founder and the problem in solution that got me across the line when I was like they've really figured out how to monetize the value that they're providing to these businesses because I can be really challenging. Yeah I think like as a founder I almost segment my jobs almost into like two parts one is like talking to users and like talking to my customers and then the other part is like oh talking to my investors or talking to people we're looking at my deck and I think like one thing that you did really well that was really helpful was figuring out how I can marry the two and like the types of questions I should be asking in those user interviews to like better inform what should be in my deck like I think the questions you mentioned around like how much time with this save you are like how much increase revenue can you get from this type of product or like things like that like now I know exactly what to chase after and so it's really cool to be able to kind of marry those two together that I think people might not otherwise. Yeah it's interesting one of the things I was talking about with you was that the product that you pitched to a venture capitalist is ultimately different than the product that you pitched to customers similar to like in our first fund when we were raising we you pitch a different product to LPs that you pitch to founders like for founders one of the most important things that you can give them is like deep belief in the conviction that they are a capable individual of building out this company but that's not really something that you can put in a pitch check and so instead these testimonials from those same founders where that might be like the highlight of it and similarly in startups the proposition that you're pitching to investors is like hey I can make you a 30x return and give you a really cool story through the lens up here's a massive problem that I'm solving here's my personal connection to it and here's how we're thinking about this solution I think some of my favorite like concrete details are often like weird things that founders did as kids like spinning up like Minecraft servers or like I don't know winning their like elementary school like book contests or like things that shown that they've kind of been this scrappy hustler for their whole lives or like have a black belt and martial arts like a lot of them have very interesting side interests that they're talented at and I like to include those oftentimes in the story that I tell and then talking about like maybe how out of their way they went to land their first customer like for example there's a company that are portfolio called Lotus and to land an elder care facility pilot the founder actually agreed to move to an elder care facility for a month with his fiancee which is pretty crazy so I think like those are some of my favorite stories to tell where there's like a lot of hustle involved in like landing a customer and it's clear that there's like a deep passion for what the founder is building yeah I think that's super helpful especially like I think as a founder you are doing you're wearing so many hats and you're doing some different things but you often don't know like which of those things do I accentuate and like really stress on and like index on for a VC to be like oh this is how they get signal that I can hustle this is how they get signal that I'm like talking to my users and like that's what's important to me and so like hearing that those are types of questions you ask to get hustle or get signal for hustle is really helpful because then I know like what to index on in my in my narrative and in my yeah and I think it can be really challenging because you're living your life and so I think it can be really helpful to have outside people who know you well be like wait a second you're not saying this cool thing that you do and so I think getting feedback from other founders who have raised venture financing can be really helpful getting feedback from friends can be really helpful but I think you truly do get like actual market feedback when you're asking people for money and I found that when we were raising our first fund it was like people would give you like all sorts of feedback but then like ask them for a check and then the feedback that's like your actual feedback and so I think that it changed like similar to playing poker like poker changes when you put money on the table and there's that age old saying of like ask for advice get money ask for money get advice and so I think one of the best ways that founders can think through that process is like asking a bunch of people for advice on thinking through the narrative with the context of like people evaluate companies very differently I would say I lean more on the emotional side so I really like that like strong story but I want the concrete details of what and why and how and who and like everything's supporting that because I think those are the strongest stories yeah I have like two more questions and yeah cool I think like one of the things that you mentioned to me pretty early on in a phone call was like this idea you spent a lot of time looking at like a lot of different types of decks and one of the deck types that resonate with you the most is like design decks which are like optimizing more a little bit more for like maybe user personas are like you mentioned like show does this and like before my product existed this is what her user journey would look like it's interesting because I think like that narrative is pretty different than maybe what some other investors might care about I'm curious like if you could share more about like what about that excites you and like why is it designed deck or you know some of those elements exciting for you to see that's a really good question so the reason why I prefer having something similar to the like workflow is well one I'm more generalist so I invest across a bunch of different areas and one of the things that's important to me is to build empathy with your customer it's really hard to do that if I don't know what they usually do in terms of the problem that you're solving so it's like what does their day to day look like put me in their shoes like help me understand the problem and so it's not necessarily like designing the product but it's like how does the customer interact in the world and do this right now and how would it be magnitudes better if they were using your product this might be less true for more specialist VCs I think this is like funny because I've invested a lot of creator economy startups and a lot of them in terms of their pitch would be like here's the workflow for a creator and here's what their day to day looks like and I'm like I like that like that is my life so you don't have to explain it to me and so I think that some more specialized investors whether that's in like developer tools or AI or manufacturing like they'll have a better idea of that user percent anyways but for investors who are more generalist or don't haven't operated in that capacity it can be really helpful to build empathy for the massive problem that your customer base is facing so that's why I like that it like helps me engage because I actually like feel connected to like the person at the end of the product that you're building yeah that is really helpful I think like both so that I can illustrate what this looks like for you to be better connected and then like it makes me feel like you're more bought into the vision than I'm excited about and then I think also you mentioned this idea of you know your founders are doing a lot of work behind the scenes and like you can tell that there's so much that they're doing and I think there's a lot of responsibilities on founders to like show that like they know what they're talking about and so creating this like user journey or creating this like user persona really helps investors understand like oh this person knows exactly who their customer is or they know exactly like what the space looks like yeah I think that's like the big one well one of the things I screen for like in my calls is like does it feel like a duh obvious to talk to hundreds of customers like someone's just like yeah I saw this problem and then I like went and interviewed like 600 people or spent like nine months interviewing people and that was just like do why would I not do that right and I think like the misconception is that everyone's doing that or everyone has those exactly high standards and that's just not true and so like if that is you as a founder and you've done a lot of work to validate this problem tell me that like please I'm begging you please tell me that and I think it's it's especially interesting when it's people that you have known for a while or founders who are like raising their next rounds where I'm like I have context for like how hard that you've worked in this specific area like it it shouldn't be like a side piece of conversation like tell me that do not bear the lead yeah yeah that's really helpful damn now that's like it's so interesting to have this conversation because I'm like reflecting on all the things that I'm like oh am I indexing enough on this they're like oh like maybe there's something I didn't think about but like it's kind of just like in there as you mentioned yeah as a side thought almost and so it's that one really challenging things for anyone fundraising for a business is that it's there's like that David Foster Wallace quote of like this is water like you're living it there's no membrane between like you in the story that you're telling and it's constantly evolving in dynamic so for you to take yourself like out of the position and look at it as a third party observer and do that from a perspective like oftentimes is early stage owner you don't have that much context for like how venture capitalist think like that is really challenging to do especially if you haven't raised money before and I think that like giving yourself grace as you're thinking about it because I don't know I was like laughing about it what some of us like what's up and I was like you know like not much and then I was like way that's so not like I've been like do just like I know I've been like investing in running a podcast and like building a business and like doing all these initiatives but I think that's a pretty common mindset to be in as a founder is just like what's up not much you're just like in it I think like it's funny when I talk to people like earlier on in their journey of like either going full-time or building a business where they're like telling me all these things I'm like oh my gosh I love this and they're like what's up and I was like this is like you know like like one of my investors Andy Wiseman at usb I was like oh how like you know how are you doing and he was like I'm in details mode like I am like doing the work that I set out to do and I think like the longer your time span increases the longer periods you'll have your in detail mode and then you'll like kind of come up for air and do a strategic framing of like what did we accomplish and how are we feeling about it and how do we want to adjust but I think the exciting part at the beginning of any business is like you get to be in like big picture figuring stuff out and like being scrappy and executing on like different projects and as the time span of the business increases then you have like longer strategic like okay ours and like it just changes a lot as a founder so I think that giving yourself grace and not having everything that you're working on top of mine is like very normal yeah yeah I think your advice to like make sure that you're as a founder you're talking to both folks who have context on you and folks who don't is really helpful such that like you know I am lost to be surrounded by a lot of friends who want to support me and want to help me but then I think like knowing exactly what type of feedback and advice I suppose one of the challenging parts of fundraising is that if you don't have a network or the amount of capital that you want to raise is like more than your existing network like you will end up talking to someone who has no context for who you are like this is going to be your first conversation they've never heard of you and you have to be like here's why this problem and solution said is massive and here's why I am the person to solve it and so I think practicing people not having context for what you're doing as much as possible before you get to that conversation makes it a lot easier because like I didn't and then I was like I could feel myself being not as engaged in the conversation because I was like whoa it's like a lot of context that like I need to bring up and like kind of overwhelming so I recommend like practicing it early as possible yeah I think one thing that like I often forget is like okay when you're in the venture industry when you're in the startup industry obviously you want to go through as many like warm-in shows as possible yeah this is advice that like why a coordinator gives it is do you're like do the pitches that aren't like your top picks in the first like they they try and do they're doing it over like two weeks do those pitches in the first week and then set up your like to your one best fit for the second week because then you will have had like some repetitions of telling the story and getting feedback on it there were definitely instances in like our fundraise where I'd like talk to people who I really wanted in a little too early and I was like oh I wish I had like more traction or like I wish I had had more practice telling that narrative and yeah so I think like pacing yourself is really helpful yeah yeah that's good to know baby one thing that we you and I talked about was like knowing as a founder when to bring up your deck versus when to do it alone versus yeah one to use a memo and you know you and I were chatting about like oh like some folks tend to communicate better in memos sometimes investors want memos over decks and so on and I know this is like yeah on the discourse online I'm curious like do you have a take on when you when do you think a founder should be sending a deck versus the memo so the question around like when do I I there's two different questions so like this this would be like pre-call and during the call so like pre-call my thoughts on deck versus memo versus blurb and then like during the call conversation versus memo versus deck I think pre-call I really enjoy when founders send me memos like I think I've always expressed myself best in the written medium and I really enjoy like seeing people's thought processes on billionaire companies I think decks are the standard for any founders listening to it please put in doc send and I this is like doc send if you could sponsor me that would be really cool but this is like not sponsored by them I think there's like a there's like a standard approach in industry which is like doc send is just expected and like yeah it's not ideal to like pay like six dollars a month for it but I would definitely recommend that and it also will give you like information who's looking at your deck and like who's spending time in it and then on a call also sometimes like a casual blurb can work from someone that I like have done a bunch of deals within the past or is my friend it's just like and they like know my investment parameters really well I think that like I don't necessarily I might like ask for a deck if it's interesting to me but and then on the call one of my friends gave me a really good piece of advice which was to ask basically be like as you're starting the call you do your small talk you talk about what city you live in you talk about why you like them or you don't like them you talk about the weather and then you're like all right like thank you so much for your time you know I'm happy to give you some more context for our company just let me know if you prefer doing this as a conversation or if you want me to walk you through a deck and that way as the founder you can ask the bench capitalist for their perspective on whether they want to run through a deck or or go through a conversation like I prefer a conversation which I think like definitely keeps founders on their toes because you like you got to know your business to like run through a full conversation no deck like just like off the top of your head but I think that that's really helpful so that's my thoughts on it and that's why I'd like consider approaching it as a founder but I think I feel like we hit like a good amount thank you for coming on and asking these questions I think this hopefully this will be helpful and if you're a founder listening or if you're an investor and severely disagree with what I am saying I would love to know people's thoughts in the comments about how they think about either screening deals or if you're a founder and you have questions about bench capitalist hopefully leave them in the comments cool thanks so much Paige I'm particularly curious to hear both founders and investors say about your take on design decks and very special thank you to Cedar Harvest podcast editor tape d'Ordie for his amazing work on this episode