New Venture Readings

October 30, 2013
Dan Katcher

We do a lot of work with startups and new ventures.  So it felt like something worth sharing when several terrific articles came out in the past few weeks that considered funding, business models, and startups. 
This post covers two articles centered around the early funding stages of Linked In.  First, there was a brilliant and insightful piece from Reid Hoffman, Linked In’s founder.    This article publishes LinkedIn’s Series B funding deck with extensive commentary on what the deck was trying to accomplish and the arguments that LinkedIn was making to investors in going after their B round.  Reid covers every single slide in their deck, with extensive commentary on the pitch and significant reflection on where they were as a business at that point of time.
This post should be mandatory reading!  I’ll try to highlight a few things.
One of the highlights is discussion of the type of pitch Linked In was making.  Reid talks about two types: the concept pitch vs the data pitch.  A concept pitch is what you do when you have ideas but not much data.  This pitch however was very much a data-driven pitch.  LinkedIn was well on their way to 1 million users by then (2004) and needed to highlight their momentum and metrics, as well as their path along the original plan.  Of course, there is much in the deck to reinforce the disruptive magnitude of the concept too, but its a reminder of just how important it is to be cognizant of where you are in your growth as you present.

A second point that jumps out is the importance of presenting your investment thesis up front, and then backing it up with arguments in the rest of the deck.  Too often it feels like startup pitches read like an ordered list of questions that need to be answered, rather then putting together a compelling theory of business with supporting arguments.  The emphasis on investment thesis also forces you to really think from the potential investor’s point of view.  Have you made your case sufficiently so that the investor agrees?
One final point I’ll highlight is the argument to argue by analogy.  In slide after slide, the LinkedIn founders pointed to other examples in different sectors that made their case.  What PayPal did for mobile payments utilizing the network affect is what we can do for business interactions.  Great stuff and I could go on, but the rest is left as an exercise to the reader. (Don’t you hate that phrase?  Sorry.)  By the way, if you don’t want to read it there’s a great summary of the article on LinkedIn by Reid here.
But if you did your homework, then it’s time to read the next, equally important response from Greylock partner David Sze.

Greylock did end up investing in LinkedIn’s Series B.   David’s equally insightful commentary is provided as a response to Reid’s posting.  You want insight from an investor’s perspective?  Read this.  In it, David shares his summary memorandum that he provided to the partners at Greylock, making the case for why they should invest – his own perspective on the all important investment thesis.  So without commentary, read this and before adding another slide to your pitch deck put yourself in the shoes of an investor as they consider all the aspects that go into a successful business.  And then try preparing an investor summary for your own pitch, as if you were the one investing.   I bet you learn something.

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