Category Archives: Venture Capital

Writing A Presentation to Raise Venture Capital : The Overview

The Overview

This is the second in a series of posts on writing a presentation for raising venture capital. In this post I will cover the Overview section of a venture pitch (click here for a complete list of the various sections). The Overview should come right after the introduction to the team and in many ways is the most important part as it introduces the following topics –

  • A large and growing market
  • Background on the market
  • A specific pain customers have in the market
  • A channel that would allow a venture funded company to gain a foothold in the market

As promised I’ll walk through the Overview section of the Data Robotics seed funding deck to illustrate how this might be achieved. Click on any slide to see a larger version of that slide.

Venture Pitch Overview Slide 1

Here is the first Overview slide from the original Data Robotics deck, entitled Opportunity. The top level bullet[2] mentions that the small business channel had little in the way of storage solutions despite strong demand, thus identifying our overall target market as Small Business Storage. Underneath are more details starting with the fact that the SMB storage market was growing very rapidly and that the overall market size was measured in billions of dollars (this is the right level of scale to get venture folks interested). Growth from $2B to $7B certainly qualifies this market as large and growing. Next the slide explains that the existing products were created with a technology unsuited for small business employees being designed instead for the enterprise market. Also it’s mentioned that the price point for these products is too high. So now we’ve identified a pain point both for the customer and channel. Finally it mentions that the channel is looking for new products for this market.

So we’ve already, in one slide, met all of the points that I outlined above as the goals for our Overview. Is our work here is done? Not so fast…

At this point we’ve expressed a lot of opinions about our target market but assuming the venture folks being pitched aren’t already subject area experts we’ve done little to add any credibility to our claims. Now we need to provide proof points and more detailed analysis.

Venture Pitch Overview Slide 2

The next slide introduces IDC’s analysis of the market. IDC was the first large scale analyst firm to look at the growth of small business storage. Seeing their landmark presentation in 2004 on how most of the storage revenue was moving from high end and mid-range business systems to the SMB and home storage markets was certainly instrumental in my decision to found Data Robotics. This slide is a copy from their presentation[3]. Having a large firm like IDC backing your market predictions provides a solid foundation for your claims.

We were in luck as, at the time, enterprise storage was already well understood to be a hot opportunity for investment so a new emerging storage market which was going to be even larger but was underexploited was very attractive.

Venture Pitch Overview Slide 3

This next slide is from an IDC storage report and was included to establish that the market size figures provided in the first slide in the Overview were correct ($2B growing to $7B) also providing the timeframe for the change.

Venture Pitch Overview Slide 4

This next slide was designed to preempt the almost obligatory VC Question – “Why wont one of the large companies in your market prevent you from being successful?”. The slide shows the major storage companies of the time and how Data Robotics market would be segmented from them. Also the slide shows that the number of units shipped in Data Robotics sweet spot would be the largest of all of the market segments (units, not revenue but still attractive).

Venture Pitch Overview Slide 5

Okay. So now we’d established that the main storage players weren’t in our market but clearly somebody already was. The next slide showed the players in the market at the time and placed them on a graph of Fit For Environment vs. Price Suitability[1]. By Fit For Environment we meant RAID which we felt was easier for customers to use vs. NAS which we felt was more difficult. By Price Suitability we meant affordability. My memory is a little hazy but I think these terms were coined by Ken Rosen (@ken_rosen on twitter) one of the Data Robotics co-founders. The important thing was that our solution was top-right on the chart, the best place on any Gartner chart! We were the most affordable and very simple to use. It’s worth noting that we were establishing this positioning well ahead of any discussion about what we were actually going to build. This is different from most initial pitches I see but always works well in my experience. Establish the $$ available and then explain the technology that will deliver them.

Venture Pitch Overview Slide 6

So we’re top right but given we have to assume that our audience isn’t a subject area expert we now need to provide the details on why. This slide segments the low end of the storage market into two parts – NAS and Storage Arrays – the two main product categories for SMB storage. The points listed are all designed to reenforce the earlier chart: NAS is complex to use and storage arrays based on RAID are expensive. Note that everything listed is jargon free and should be able to be understood by somebody outside of the industry.

Venture Pitch Overview Slide 7



At this point we’re almost ready to get into how our technology operates but first we need to explain how the current technology works to set some context for the comparison (the most common comment we got from do a demo of our first product Drobo to somebody who didn’t know how actually storage worked was “Doesn’t all storage work this way?” A good sign in retrospect). This slide show a simple example of how RAID (the cornerstone of all storage products) worked and why it cost a lot and didn’t scale well. You could start with two disks but then needed to add disks in pairs or start with three disks and then add single disks but had a much higher entry cost. There were lots of other things wrong with it which we would talk about too but cost was the easiest factor for everybody to understand.

So the key takeaways on writing the Overview for a venture deck are –


  • Show the three key items:

    1. A large and growing market
    2. A simple to outline customer pain
    3. A defensible way to enter the market

  • Use overview arguments based on costs and time. Most business decisions come down to these two factors

  • Provide third party data to substantiate your claims

  • Be upfront in your discussion about the competition and how your solution is differentiated and why the customer will ultimately choose you (see the second bullet above)




  • Footnotes

    [1] Ironically I now work at Overland Storage which sells two of the products listed as unsuitable on this slide. The world is a small place, the storage market doubly so…

    [2] If I wrote the presentation again I’d remove the bullets as there is only one headline bullet so an indented bullet list seems odd. I suspect that in some variation of the pitch there were more top level bullets that were removed to make the story simpler

    [3]You can see a miniture version of the orignal included on the slide to prove authenticity

    Writing a Presentation to Raise Venture CapitalAn Illustrated Example

    Venture Pitch Title SlideMany new ventures require large amounts of capital in order to reach profitability (but not all). Over the last ten years I’ve raised approximately $230M in venture capital for my own companies and helped many other founding teams (most recently Pancetera) with pitches which have resulted in their successful raises. Over the years I’ve evolved the template I use for seed round venture capital pitches and I thought it might be interesting for me to share this with the reader.

    There have of course been many articles written on raising venture capital and how to write a plan or pitch but few of these (actually none as far as I’m aware) have an actual example of a successful presentation included as an illustrative example. There are many possible reasons for this. Maybe the pitch contains company confidential information or possibly the ultimate company product or financials deviated by quite a long margin from the original vision.

    I’d like to walk you through the original Data Robotics (originally called Storage OS[1]) seed round venture pitch and explain the thinking behind the slides. Fortunately this pitch doesn’t contain any information that isn’t in the public domain and the company is reasonably well know so it makes a good illustrative example. This pitch was also successful (I’ve been lucky enough to have had a 100% success rate so far) and valued Data Robotics at an approximate initial valuation of $12M with nothing more in assets than this pitch and our initial patent.

    The sections of my current seed template are as follows –

    • The Team
    • The Opportunity
    • The Solution
    • How Does It Work?
    • Paths To Market
    • Business Model
    • Summary

    In the coming weeks I’ll walk through the slides in the various sections dealing with one or two sections per post but in the meantime here is a very short summary what what each section should and shouldn’t contain.

    The Team
    This section establishes the credibility of the founders who will be giving the presentation and introduces team members not present to show the overall strength of the founding team. Keep the names discussed to just the core founding team members.

    The Opportunity
    This section of the presentation shows an attractive and hopefully growing market, then outlines some kind of pain the customers in that market have (or possibly some completely missed opportunity) which would allow market share to be captured.

    The Solution
    This section of the pitch outlines a solution (not technology) that resolves the pain experienced by the customer. I like a story based walkthrough of a real world situation if possible showing what the customer experiences contrasted against what they have to do currently.

    How Does It Work?
    This section shows the technology underlying the solution and shows why it’s involved, defensible and has long term value. This description should be kept short and high level for your initial pitch meeting as you’ll be quizzed later by more technical folks and you can whiteboard with them on the details. It’s extremely unlikely that the venture folks you’re pitching will be subject matter experts on the details of the technology.

    Paths To Market
    One of the most important parts of the presentation, this section shows how you expect to reach, educate the customer and ultimately fulfill the resulting demand. Alternative sales strategies might be a channel based model or direct sales force. Marketing strategies might include online, viral or traditional (or more likely in the modern world some blended strategy). The mood on the best go to market models tends to change fairly rapidly here in Silicon Valley so it’s also a reasonable fundraising strategy to outline several options, discuss your preferred model but keep the matter open for resolution in the future.

    Business Model
    This section shows a very simple layout of the company fundamentals to demonstrate how the company can provide a great return within a sustainable business model. A five year income statement example and cash flow should be enough. Sometimes I’ve just used graphs (with numbered tables held as reserve slides) as these are easy to quickly digest. Currently it’s possible to get a new media or social media company founded with little to no idea of where or when income will materialize but I’m a traditionalist and shy away from this kind of venture.

    Summary
    No more than three or four one sentence bullets outlining why the target market is great, what the current problem is, how the new venture solves it and how much can be made doing that.

     

    Here are a couple of final points to consider –

    • Focus your presentation on telling a story. This will resonate with your audience much more than any technology or business details.
    • Don’t allow yourself to get sidetracked. Several times a member of the audience has asked me to just tell the story without a structured presentation or has dived straight into detailed questions. Once the narrative flow is lost it’s very difficult to get your audience to the right conclusion so instead insist that the presentation will cover their questions later and get right back on track. You will of course need to be open to discussion and longer questions following the conclusion of the pitch.
    • I often hear talk about the number of slides being important. That’s not key but the pace and duration certainly is. Try to keep the length of the presentation to 30 minutes or so as a maximum. Venture folks see a lot of pitches and it’s tricky to hold their attention for much longer than this. Much better to use any extra time for discussion.

     


    Footnotes

    [1] Yes, I do know that this abbreviates to SOS!