People, Not Decks

Set that pitch on fire. 🔥

This article was inspired by a conversation I had with Joe Eagan from Anagram while discussing their EIR program. It is a compilation of notes I’d shared with a pre-seed founder looking to do their raise.

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If you are busy working on a deck, consider taking a break and reading this for some insights on how to accelerate your raise. In fact, send us your worst decks. We like the half-baked, early-stage decks riddled with typos. Perhaps, read the issue today and THEN get in touch. Both work.

TL:DR: Pitch decks are about signal. There are multiple ways founders can build that signal. I explore how founders have executed it in the past. I also discuss why VCs don’t back hard problems.

Signal Game

Prior to working on this article, I asked two sets of investors the same question: "What portion of your investment decision at the seed stages is driven by the deck?." The responses varied. Dovey Wan(from Primitive Ventures) pointed out in our venture community that a seed-stage cheque is similar to a first date. And that you invest on the basis of the vibes. Kyle Samani (from Multicoin) pointed out quickly that most of fundraising is about communication, and a deck is the primary element that signals it.

At the seed stages, there is usually very little information about the product. If it is a new market with no incumbents, there is also very little information about the size of the addressable market.

When investing into Amazon in the late 1990s, would an investor be considering the market for people wanting to buy books online? Or that that Jeff Bezos was an AVP leaving D E Shaw? The former, while qualitative and very real, would have had very little signal in it.

The fact that here was a hedge fund manager leaving his comfortable job analysing a frontier of the web to “minimise” regret would have been extremely strong signal.

Founders can build signal in multiple ways. Y Combinator’s Jessica Livingston recently pointed out that what made her interested in Airbnb's founders was their hustle. They had created $40 boxes of cereal to extend their runway while knee-deep in credit card debt. The politically themed boxes helped them make $30k during election year. This was around the time they were trying to give up 6% of the company for a $20k cheque.

Airbnb currently has a valuation of $96 billion.

I don’t mean to imply founders should start selling cereal loops. What makes the Airbnb story impressive is that they did not shut down their bed leasing business to sell politically flared cereal. The 2024 crypto equivalent of that may be founders launching a launchpad for politically leaning meme coins.

What I do mean to imply is that in the early stages, what a VC is looking for is signal. And that signal can be generated in more than one form. The deck at pre-seed stages is simply a method of creating that signal at a time when you have nothing else to show.

What do you do when you don’t have a deck? You can spend a hundred hours perfecting your pitch. Or you can build that signal in a few ways.

Pre-seed pitches are a lot similar to first dates. - Dovey Wan

Tell Your Story

Companies have been built on good communication skills. My favorite among them is CB Insight’s founder, Anand Sanwal. You may not have heard of him, but most analysts in venture capital rely heavily on CB Insights for market-maps and early access to new companies in niche fields like AI-enabled farming. Or food delivery being done by robots.

A good example of his ability to build an anecdote is captured in this story of how he dealt with a challenge in life and the contrasts between his dad’s business and that of CB Insights. Or this compilation of his learnings from running a SaaS company. Or this thread explaining how his startup was initially called "Chubby Brains"!

For founders building in the pre-seed stages, the highest RoI activity would be to spend 8-12 hours compiling everything they know in a GitBook. It should ideally capture the bits of what makes an emergent sector (like intents or Passkeys) interesting, what the opportunity set is like, and how their own product fits within it. You can go exceptionally deep here. But perhaps don't do that with your deck.

In emergent sectors, well-written documentation can become the go-to resource for analysts looking to study it. You invert the power dynamic to VCs tracking you instead of having to cold DM them. The more important reason is that potential employees, partners and the press will also bank on the same documentation. Well-written documentation is an invitation to the public to dream along with you. It becomes the basis for forming community and tapping into the network effects that come with it.

Surely, not all founders may want to spend that time building documentation. What do you bank on then? An alternative is to sell a story. For instance, read this note summary of a Peter Thiel class.

It starts with;

“Paypal’s founding team was six people. .. four of them built bombs when they were in high school”.

It grabs the attention of the reader. It tells you of the nature of the individuals who came together to make digital money a reality. The story is the wedge. How it is narrated can vary. Too often, I think founders are playing a persona. Of somebody that a VC may regret not being involved with.

Strong founders understand this. Steve Jobs famously hid his Porsche when a VC came to visit them as he specifically did not want them to think they had too much money.

The story a founder lives is usually the culmination of their childhood experiences, pains as a consumer, or observations they have made within their line of work. Jeff Bezos famously left his comfortable hedge fund job as he saw the internet being a massive paradigm. Vitaliks’s loss of assets in World of Warcraft is often said to have contributed to his interest in decentralised asset ownership.

Your story can be presented in whatever medium you deem fit. A podcast. Tweet. Reels. Essays. Nobody cares how you express it. But it needs to be shared before people can buy into it. In the pre-seed stages, stories that deliver the best tend to be personal, as the bets are usually on the founder. And the reason why you should share it is because consumers may buy your story before VCs do. When that occurs, you have traction. Which leads me to my next point.

Things That Don’t Scale

An even better alternative is to ship a broken product and finding early adopters. If you ship a broken product, you might just hear back painful anecdotes from customers that can help iterate towards a better product. These customers become references when VCs consider backing you.

The image below is from 2020. It was a DM I sent to Alex (from Nansen) after spending $7 on their product. He was doing customer support 1 on 1. During the early days, it was a simple SQL dashboard. They are currently valued at $750 million. I am a proud investor. But prior to that, I was a happy customer. Of a product that was more or less broken. I was sticking around because Alex would do customer support 1 on 1 when things went bad—something he still does.

Telling your story and paying attention to your customers costs nothing. But it very well may be the difference between survival and dominance.

Yes, there’s a typo up there. That’s how an overly excited customer talks. This was a few weeks after the crash of March 12, 2020. I was Nansen’s first paid subscriber. So, safe to say, this was the start of a $750 million journey.

In December of that year, I even wrote about Nansen. If you are a user, contrast the screenshots in the story with the state of the product today to understand how far they have come. Being a good human and building interesting things is the most cost-effective way of getting free press.

A lot of founders tend to raise millions and build things nobody wants because their core customer base is a VC looking to invest into them. They are selling equity more than they sell their own products. And since capital allocators are often incentivised to be “nice” for the sake of deal flow, they don’t give good feedback. The markets are usually the ultimate judge of whether your goal is to create products that are loved.

Early enthusiasts are not looking for full-fledged products. Early adopters are willing to use a broken product if it means you take care of them or provide meaningful value.

Too often, consumers make their bets on the basis of which founder is paying attention to them. If you don’t have the best product, simply spending time with potential users can be a wedge to compensate for a worse-off experience in the early days. People want to be heard before they are served by a product. Paul Graham dubs this as “doing things that don’t scale.”

Consensus Formation

A lot about venture capital works on the basis of consensus. As a VC, you are not really looking at the TAM, revenue, and, oftentimes, founder. Because if the TAM is large you are either betting on a mature market with limited upside or likely lacking in focus.

Instead, what early-stage VCs focus on is what the buyer (other VC funds) in a follow on round would bet on. The focus is quite often on the narrative or theme.

This is a feature and a bug. It is a feature because VCs with taste are often able to guide founders towards market opportunities that may not be obvious to them. It is a bug because the focus areas that follow on investors have are usually the only ones that get capital.

A 12-month view of mindshare on Kaito is generally a good determinant of where the markets are focused right now. The chart above shows DeFi having an uptick as markets may be pricing in DeFi tokens being beta to ETH’s ETF.

Founders working on hard problems struggle to find backers as the exit strategy may not be clear for VCs. M&A in crypto is relatively rare. So much of the crypto-VC model (for most funds) depends on the token model. When you know the market relies on pre-set narratives, you optimise towards it.

The time taken for an “exit” in traditional venture-land is a decade. And the odds of it, if you survive that long, is anywhere between 10 to 15%. Contrast this to the 24-month cycle crypto-tokens have.

This leaves the bar much higher for founders working on what I consider “hard problems”. These are usually consumer-facing applications that require a founder to understand a market’s intricacies and use technology to fix them.

How do you battle this as a seed stage founder? The truth is, you can’t. Some founders are great at selling a story. But most aren’t. You could even have traction, and the market may simply not price you accordingly. Google once almost sold itself for $750k. This is not a new phenomenon.

A firm’s valuation is the collective delusion its founders and backers share for what it could be. Sometimes, only founders share the delusion. Sometimes, every fund shares in the delusion (like we did with FTX). The count of how many people (with capital) share a delusion determines seed stage valuation.

When consensus is not formed in a sector, it boils down to grit and perseverance. The world of startups is littered with stories of founders who kept at it until a fund decided to back a founder. Canva’s founder was rejected 100 times. It is only in the hyper-capitalist world of Web3, where exits are a given through tokens, that we default to rounds being filled overnight.

As long as VC is a game of consensus, and crypto is a game of token-based liquidity, founders will continue to struggle to raise for hard problems. It is the nature of the game. If you are a founder working on hard problems, do not take rejections as a measure of the “value” of what you are building. Too often, you are really translating a vision only you can see. If it were a consensus bet, you’d be in a crowded market. But there’s nuance here, too.

Just because you continued to build in a market, does not mean you are guaranteed to succeed. Smart founders are usually defined by their ability to gauge when to double down and when to shut down. A lot of founders we have worked with have shut their firms, taken a break, and gotten back into the arena after learning from their past experiences. Such founders usually get a premium for the learnings they hold from the past bet and the integrity they showed in closing down something that was not working.

Shutting down is as desirable as continuing with grit is. Too often, what is valuable in the process is the ability to have honest conversations.

Shuffle the Deck

Consider that one of the largest names in our industry presents with decks like these if you ever find yourself lacking conviction. Source Link. FWIW, it is likely because he’s been doing this for over two decades.

I wish I had it in me to tell you that decks don’t matter. But I’m not Masayoshi Son running SoftBank. I help with things at Decentralised.co.

Ultimately, decks serve a simple function. And that is to communicate the signals a founder needs to share in the process of doing their fundraise. Most founders struggle with stories, communities or reaching ramen profitability. So, the deck becomes the lowest entry barrier.

So, presuming you are still hell-bent on making it, I’d ask you to ignore most junk advice that comes from investment bankers. The average time spent by a VC on a deck in 2015 was 3 minutes and 44 seconds. In 2024, you are down to two minutes and 30 seconds. In crypto, what you really have is maybe a minute because the analyst or partner is likely staring at a meme tokens price chart while looking at your deck.

Here is what you should ideally capture in the deck:

1. The nature of the opportunity and the unique approach you have to taking it.

2. The reason why your team is the best to take a crack at it. Experiences and stories. The human element.

3. The things you have (customers, sign ups, pre-orders) backing your reasoning for market demand. Some signs of traction.

4. The wedge you have to scale the product with better unit economics — that is, what viral element can give a product a competitive advantage

5. How this thing can make money. You don’t need a clear answer. But a directional foresight into what makes money at what scale shows clarity of thought.

6. If you have customers, consider adding proof points of their adoration for you. Tweets, e-mail responses, chats. Flex what the users say.

Here’s what I would like a founder-friend to know. The perfect pitch deck is like the perfect coffee for me as a writer. You can wait on it and presume things will fall in place. But much like coffee, decks don’t solve everything.

Decks can be a great place to procrastinate. Part of the reason why accelerators (like Y Combinator) work is because they set a deadline for applications. Founders are forced to send in their half-baked ideas. And yet, when we take a decade-long view, Y Combinator’s founders have the highest impact on the Web as a whole.

Instead of waiting for the perfect deck, talk to customers. Cold DM VCs. Ship product. Most of these things will fall on empty ears. Rejection is the default state for early-stage founders. But you cannot rally the troops on a vision you hold in your head. It needs tangibles. The pathway to better tangibles is conversation. You are likely far better off talking to people, documenting, and shipping than spending weeks on a pitch deck.

Much like coffee and writing, the point of the deck is to aid you. Not to keep you waiting. Postpone perfecting the pitch deck if you have better ways to signal credibility.

Here are some resources for founders looking to build their decks.
Rebellious little brats ignoring everything I just said.. SMH.

1. This collection of 1400+ decks for some “inspiration”

2. Y Combinator’s slides for those who like standardised formats.

3. Some additional examples of deck curations.

4. This post by NFX (a personal favorite) on storytelling.

5. OpenDeck batches decks by business model and stages.

6. A course by NYU professor Ashwath Damodaran on numbers and story telling.

7. And my article from last year on playing the narrative game.
   (I obviously have to shill myself…)

8. If you want to get your head out of startup land and simply be inspired - grab this book on creativity.

Seed stage investing is ultimately about the people. A VC is buying at a discounted valuation the network and experiences a founder has. When founders lack the networks or experiences, documentation helps signal their expertise. Ultimately, all early-stage bets are about founders and their ability to navigate scaling a company.

This is, however, with the caveat that founders build in themes that see capital. It may be drastically harder to build and raise for an NFT marketplace today than it may have been 36 months ago. That is because both attention and capital are elsewhere.

In an attention-deficit world, grabbing attention is half the job. How one chooses to go about doing it is up to the founder.

Reading about the dying web,
Joel