2 Fast 2 Fyre-ious

Source: https://www.vanityfair.com/news/2017/05/fyre-festival-pitch-deck

Date: 2016/2017

Outcome: Ha! You already know this part.

It would be very easy to skim through the Fyre Festival deck, point and laugh at some of the most outrageous claims, and say in hindsight that this was an obvious scam. But that’s a disservice to this deck and to what I’m trying to do with Startup Deck Review. The fact is this deck is fairly well-designed and intuitively structured. You really can learn some good lessons from this deck.

Unfortunately for the folks who had to read it (but fortunately for us), it’s also a solid gold toilet of a pitch. And reading about what other people have done wrong is the only way to learn what NOT to do in your pitch. I haven’t been able to publish as many failed pitch decks as I would have liked because it takes a lot of work to write fairly about pitches that didn’t succeed.

But with one William Z. McFarland now in prison for this dumpster fire — and, hilariously, with the label “(Fraudster)” appended to his Wikipedia page — let’s go ahead with a clear conscience.

Once we get past some legal mumbo jumbo (which I’ll touch on again very briefly at the end), there’s this purpose slide.

This is a good start! A purpose doesn’t have to be overly specific, but it has to be concise and expressive — it serves as a guiding light for the company you’re going to build. If you showed me this and then immediately told me there was going to be a world-class music festival at the center of this, that would have made sense as a marketing event — a demonstration of Fyre’s ideal world.

But then we are introduced to the “Fyre Bookings” part of the business, and this is the first major red flag.

There is a mismatch between problem and solution. Sure, live bookings and music management is a human-centric business with tons of friction and they could probably use some better tools, but Fyre jumps immediately to a marketplace solution that doesn’t solve some of the actual problems caused by this “solution.” If I’m a touring musical act, how much confidence do I have that your venue can handle my setup? How do I know you’ll promote me? How do I know you’ve read my rider and will abide by it? The human element exists in this process to support reliable vetting and representation on both the talent side and the booking side. Why should either side give up control to Fyre? If discovering talent or bookers in this market was a problem, it might be worthwhile. But the best talent and the best bookers don’t currently have problems finding each other, and so they would likely self-select off of the platform.

Fyre did show off a potentially profitable use case later in the deck: Coordinated influencer marketing. Had they built a product that made mass influencer marketing campaigns easy, that might have been extremely interesting. Probably not worthy of its own music festival, but arguably a real business!

I want to be clear: An entrepreneur making a pitch does need to go out of their way to get investors excited about writing a big check. Ideally, you can point to traction and growth and say “Aren’t you excited about investing in THAT?!” But if you’re very early on, you talk about the potential for the market to grow and change in big, exciting ways. You talk about how your company fits in now and how it will play a key role in catalyzing those changes.

You do not get investors excited with beautiful photographs, unattributed quotes, and utterly basic vision boarding.

I can say this as someone who thinks and speaks with entrepreneurs about mission, vision, and values on a regular basis and believes in them as key sources of competitive advantage: They don’t look like this.

They also don’t lie about who they’re working with. “PENDING” absolves Fyre of all responsibility for having to come through on these.

Lastly, this slide might be the most offensive waste of space in the entire deck:

How is this 360? This doesn’t look like a circle. What does this have to do with sponsorship? Is this seriously your sales pitch to brands? Can you show me any case studies or examples? No? Oh, that’s right. This is a distraction.

Am I being harsh? Investors are supposed to be economic buyers, but early stage investors frequently buy in on simple theses and founder-market fit.

But to the extent that all of these things should be authentic to yourself and your values, this pitch is clear about what kind of people they were: Party animals who wanted to lean in all the way on the worst elements of influencer culture.

And also this guy. The real hero of the story.

Other notes:

  • Amazing that the deck starts with TWO slides about confidentiality! If you don’t know already, sophisticated investors do not sign NDAs as a matter of course.
  • “Where is Ja?”
  • Team of rockstars arrested for arson.

Carta’s headlines were better than this one

(Originally eShares)

Source: Carta itself.

Date: Early 2015

Outcome: Raised $7M. Raised $17M later in 2015 and another $42M in 2017.

Here’s a common error that founders make on their decks: They write lazy, boring headlines. Yes, investors have a real list of things you need to hit in your deck, but they’re not learning to read. Literally title a slide “Problem” and you’ve just wasted 30% of your visual space. And because you won’t be there to walk them through the deck the first time, you’re forcing them to understand whatever complicated or abstract visual you use with incomplete context.

There aren’t enough hours in the day. They’ll either pass without a second thought or you’re going to have a single unproductive meeting with them and that will be that.

Carta (again, formerly eShares) shows us how it’s done. This thing is a masterpiece of headlines. Watch this.

What is eShares?

eShares is capturing the next generation of IPOs. We are an SEC registered Transfer Agent. We issue electronic shares, options, debt, and derivatives. We automate their approval and compliance and track the shareholder registry.

How do you make money?

We charge $20 per transaction and everything else is free. Then we add bundle-on services such as 409A.

How are you doing?

We are growing revenue 40% month-over-month. Cohorts continue to contribute over time. Our customers love us. I mean, they *really* love us. And they are getting larger and larger and getting traction with the law firms. Our product is beating Solium head-to-head. Perkins Coie chose eShares after an in-depth evaluation.

We are lean and mean. We are a small product focused team raising $6-$8M Series A to converge private market.

That is all in the headlines. I changed nothing and omitted nothing. With this deck, an investor can understand this company in less than 60 seconds. It directly hits everything on the list except the specific customer problem, and that ends up addressed later on. In any case, their demonstrated growth and traction implies the existence of a real problem that the team understands very well.

Because the full story is told in the headlines, the rest of the content carries much more weight — when an investor has a question, it’s usually addressed somewhere in the details. The deck essentially pitches itself.

So how does that square with CEO Henry Ward’s takeaways from this fundraising process? If the vision was so clear, why did so many VCs pass? (Read the whole post. It’s wonderful.)

It is hard to get investors excited about a problem that doesn’t personally hurt them. Even one degree of removal from the problem is too far for many VCs. If they haven’t personally managed a cap table for years because their lawyers are doing it or their founders are handling it, they were never going to fall in love with the problem. And if — as Henry suggests — their addressable market wasn’t large enough for dollar signs to trump all other concerns, then they needed to deeply understand and care about the problem and believe that the team could go all the way.

It’s a grind to make that happen until you find the perfect investor. And it can take a lot of no’s to get there. A good fundraising process can feel very slow… until it closes at lightning speed.

Other notes:

  • I’m not a fan of the visuals that are basically examples of what the product looks like. Especially in the first part of the deck where they’re showing off electronic stock certificates and SEC documents that don’t really mean anything to the investor. But I’m not sure what else I would put there. If I thought it was a real problem or I was looking to shorten the deck, I’d probably compress those slides 4-7 into a single, all-text slide.
  • Great use of the market landscape right at the beginning to illustrate where the other players in the market are and how Carta will land and expand.
  • Solid discipline on the revenue growth slide. They may have been able to display a very impressive paying-customer conversion rate — if it’s growing over time, that’s a great sign — but the slide was already cluttered and the revenue speaks louder.
  • Carta may be telegraphing a vision of a marketplace for private equity by practicing it on its own employees.
  • Okay, they’re practically trumpeting it.

Alto Pharmacy: A spoonful of sugar helps the math go down

(Originally ScriptDash)

Source: Downloadable at https://www.atrium.co/blog/seed-stage-funding-startups/

Date: Early 2015

Outcome: Successful seed round. They have since raised $23 million — if you believe Crunchbase, it came as $6 million in a June 2016 Series A and $17 million in a June 2017 Series B.

At a recent Seattle Startup Drinks, I had a conversation with a founder who, like me, has raised money in both Seattle and the Bay Area. The thrust of the conversation was this: Investors in Seattle (and everywhere outside of Northern California) tend to be slow. They want to see you’ve thought through the actual business you want to build. It’s great if you have incredible user traction, but if you don’t have a plan to make money and meet plausible financial projections, most of them will be wary. In short, they want to see everything I listed here.

In contrast, investors in the Bay Area will take big swings at the smallest germ of an idea as long as it has a chance at a big exit (i.e. Your vision is grand and your addressable market size is, at minimum, in the tens of billions of dollars) and you can build the slightest bit of buzz. And yes, you are probably at least two of the following:

  • Ex-Facebook or ex-Google
  • An early employee at a startup that had a good outcome
  • A charismatic man
  • Holding a PhD related to machine learning

This founder relayed to me that one of his Bay Area investors writes dozens of checks per year at $100,000 a pop and he can decide within 20 minutes whether he’s going to invest. The downside is limited, the upside is not, and time is a non-renewable resource. This has been the venture capital business model for decades. So, to this founder, Seattle (and everyone else) is basically doing venture capital wrong. And he might be correct about that.

But I submit to you that the existence of hair-trigger investors is not an excuse to be lazy. Building a proper pitch deck is as much for your benefit as it is for your investors. It forces you to answer real questions about your customers, your market, and your business. And once you’ve answered those questions, it’s not difficult to show investors how prepared you are to succeed and grow.

For as much good as Atrium is doing spreading easily-digestible startup advice, most founders should read How to Raise Seed Stage Funding: The Startup Guide (which is where I sourced the ScriptDash/Alto Pharmacy pitch deck) with a grain of salt. It’s a perfect start if you’re going through Y Combinator or you fit the profile above. This is not a coincidence: Justin Kan has a long history with those groups. But even most Bay Area investors want to know about your unit economics.

Having said all that, I was pleasantly surprised by the ScriptDash deck. After reading Justin’s advice and the six slides he emphasized, I was expecting some serious handwaving. From the guide:

I recommend limiting your seed stage pitch deck to six compelling slides that follow your narrative:

  • Problem
  • Scope of problem
  • Why now
  • Solution
  • Traction (if any)
  • Team

Focusing on these six slides alone leaves you wide open to the top-down “1% of a huge market” trap. It’s a useful framework for figuring out whether or not you’re directionally correct, but it doesn’t compel you to think about how you’re going to attack the market. So the most encouraging thing about the ScriptDash deck wasn’t their “How big is the market” slide or even their elegant solution slides; it was the three slides where they walked through their assumptions on customer lifetime value and customer acquisition cost in a clean and simple way.



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Laying down concrete numbers shows that you think about your startup as a business, not as a hobby. Even if you aren’t getting the numbers to a particularly granular level or if you aren’t sure what your CAC is going to be, just setting up some benchmarks or reasonable goals can communicate a viable path forward — not just for engineering, but for marketing, sales, and operations. At worst, you can look at your projected gross margins and then answer this question: “Given projected cash on hand and our goals for customer acquisition, can we run a legitimate marketing operation with a reasonable CAC?” If your business model allows for a high CAC, you may have just found an opportunity.

Other notes:

  • On the surface, the birth control market looked like a fantastic jumping-off point and I would have loved that focused strategy: Start with a well-defined customer segment, be their first choice when they inevitably have other pharmaceutical needs, and grow from there. But ScriptDash/Alto focused on one geography, and it turned out that geographic coverage and pharmacy benefit manager coverage was extremely important, which is one reason why Pillbox (which checked both of those boxes) was acquired by Amazon for $1 billion and Alto is pivoting to a business based on doctor/pharmacy communication.
  • Good choice to leave those last two slides in the appendix. In isolation, I kind of like them — the “Not Just Better Tech: Life Saver!” slide could have been the start of a stronger purpose than “The pharmacy. Reinvented.” — but the deck is simple and coherent and they don’t add enough value to justify shoehorning them into the story.
  • Find me an investor in Seattle who writes more than $5 million in seed checks every year and we’ll all be very happy.

Airbnb paved a desire path

Source: https://arenavc.com/wp-content/uploads/2015/07/airbnb-original-deck-2008.pdf

Date: Fall 2008

Outcome: Entered Y Combinator. Raised seed from Sequoia. Is privately valued at $30 billion as of this writing.

One of my favorite pieces on design is 99% Invisible‘s explainer on “desire paths.” These paths illustrate that, regardless of how a space or product is designed to be used, people will depart from your design in favor of the path of least resistance. Or, in visual form:

In 2008, the hospitality industry thought it had a pretty good handle on how people made travel decisions. They thought they had a monopoly on trusted and safe brands and that to go downmarket meant dirty, scary motels or — shudder — hostels.

Airbnb saw a desire path.

airbnb slide 4

Something interesting happens when you find a desire path: You expand the market. Even Uber didn’t think that far ahead. And notice how Airbnb actually revealed TWO desire paths: people who were looking to lend out their couches and spare bedrooms were listing them on Craigslist — a platform in no way designed to capture this sort of activity — while many more people were looking for “alternative” (inexpensive and/or personalized) hospitality. None of this activity was being properly captured, even on Couchsurfing.

The hotel industry was focused on serving high-margin business and comfortable recreational travelers. They believed in the value of their brands. Airbnb saw millions of people who were looking for trustworthy temporary housing but who were priced out of most brand-name lodging. And they came along when many people suddenly needed to cut their expenses and bring in more money on the side to afford mortgages they could no longer pay.

They paved that desire path just in time.

When you’re pitching a company with a clearly-delineated market, it’s not hard to model how big you can get. But how do you think about your financial future if the market is hidden or dark? You have to find that desire path — what people are doing when there’s no product doing it for them. There are typically two places to find these.

  1. Data. That’s what that slide above is: A desire path hiding in plain sight. The hard part is that these desire paths will typically emerge in unusual datasets. It’s hard to find a hospitality industry report in 2008 that was talking about Couchsurfing or Craigslist. Read and learn across disciplines.
  2. Customer validation. You have a theory that a valuable set of customers doesn’t show up in the data? Build an MVP and see what happens.

Pair those together and you have a compelling pitch.

Other notes:

  • Most investors might say that, in a two-sided marketplace, you’re better off shoring up supply first before trying to scale up demand, but they secretly want you to bring both along at an efficient pace.
  • The User Testimonials slide is great because the testimonials specifically address how Airbnb is competing on dimensions that the big hotels can’t match. Per the first bullet point, it’s also important that they included testimonials from both sides of the marketplace.
  • I love perceptual maps on competition slides. They clearly illustrate a market’s softest spots.
  • I also love a simple Product/Solution slide. Airbnb definitely qualifies.
  • The Craigslist dual-posting feature is pretty rich considering some of Airbnb’s growth tactics.

Dropbox was a magic show

Source: https://www.dropbox.com/s/llgn2oc0fq0nndw/Dropbox%20-%20Sequoia%209-14-07.pdf

Date: September 2007

Outcome: Raised $1.2 million from Sequoia and others. IPO’d in 2018. $12B market cap as of this writing.

You can read the deck linked above — despite the bland colors and reliance on text, it keeps each slide short and hits on almost everything you need in your deck — but the legend of Dropbox really starts with this video.

(Source is here and also links to a later, more polished version of this video that came out just prior to their Series A in 2008.)

I’m generally not a fan of video demos (except as backups to real demos). But that’s not what this video is. This video is Drew Houston performing magic.

No, seriously. Like David f-ing Blaine. Put yourself in a 2007 mindset — bury yourself in USB memory sticks — and watch this video.

  • His tone is so matter-of-fact. He’s just having a casual conversation about this little thing he spun up.
  • This little thing he spun up does things you’ve never seen before.
  • He makes it look easy. He’s even throwing in theatrics and inside jokes.
  • You (probably) have no idea how he’s doing it.

That’s a magic show! It seems so simple now, but that experience was sufficiently advanced enough to trigger the exact same responses you get from great magic: Amazement and curiosity.

Truly special demos break a lot of the rules — and you don’t have to limit them to Sand Hill Road investor pitches. Garner a big public response to your demo and you’ve just indirectly demonstrated traction and validation for your product. And then those investors will descend from their ivory towers and start pitching you on why you should take their money.

But that’s extremely rare. And the bar for magic in technology gets higher all the time, whether you’re Dropbox or… well, Magic Leap.

The phrase “It just works” is only in the deck once, but that was their most important value proposition. Consider how that value proposition is hammered on over and over again — particularly in the demo videos, but also in the “Why better?” slide.

Significantly, they note that it “doesn’t make you change the way you work.” You see again and again in the video how you just move files to new folders like you always would have done before. But now that folder is connected to online storage AND to your collaborators. Simultaneously. You didn’t do anything special. It just happened. It just worked.

One of the hallmarks of great magic is that it seems so simple on the surface. That works for messaging and communication too.

Other notes:

  • I love how Dropbox talks about competition in this deck. They spend several slides after the demo on why and how it’s better than the status quo or other players. They walk a fine line between talking about changing market conditions and shouting “YOU SUCK” at Carbonite and Foldershare.
    • Some advice on talking about your competitors: First, assume they’re smart. Then figure out why they’ve made the key decisions and ostensible mistakes that have driven you to start your company. If they’re a major incumbent, what strategy taxes or technical debts are holding them back? If they’re a smaller company or another startup, what’s the best explanation you can come up with for their decisions? And how are you better positioned to capture the same market — or a better market?
  • I’ve seen decks where every slide looks like it was designed by a different person. Dropbox doesn’t overcomplicate it: They just used their logo like a watermark and used that as the template for every single slide. Unless you have a professional designer helping you, pick one theme and stick with it.
  • This guy is why magicians don’t reveal how they do their tricks.