Ultimately an early stage pitch deck is a product you're selling to a very very narrow audience in exchange for a lot of money (and including some worthless equity as a freebie). So the two step plan really is: "we will build the right pitch deck for a tiny market with lots of qualifiers, and use that success to, well, pivot to another market that we hope to begin to understand as we spend that money" ;)
Yeah, in theory, I think that's true. I think that's hard to pull of though? Or at least was for me? Even if you knew the plan was kind of a story you tell yourself and VCs, it's hard not to try to live the plan at least a little bit (and you sorta have some obligation to live it if that's what you sell to an investor). So I agree that "pitch big, build small" is probably a good strategy, but it's a *hard* strategy.
Very much agree. I wasn't endorsing that strategy so much as observing what happens most of the time. To your closing point in the post, I don't know if capital markets today support the more sensible option you laid out (get a bank loan, maybe?).
*I think* you could actually kind of try to split the difference, and raise big seed rounds from institutional funds. Those funds write those checks on options for later rounds, under the assumption that, if things go well, you're gonna want to raise again. But you could just not? I think you could basically bootstrap the company but with a head start that way.
Yes, that makes sense. I wonder how often people do this, and what investors think when it happens (I doubt they'll be happy to be deprived of their expected markups).
Another banger. Maybe it's not the pitch deck to raise from VC as they are now, but as they adapt to be. Hopefully (necessarily?) the next generation of tech startups will be more down to earth, realistic, sane.
You'd hope so, but I'm not sure that that's every really possible. Like, there's a kinda sorta prisoner's dilemma with startups, where if the market is down and everyone is being operationally efficient, you can probably win by being a big spender and trying to bully your way into success. But if the market is up and everyone’s a big spender, then it's hard to survive without doing the same. The only time when there’s a real incentive to be efficient is if you’re playing a different game than everyone else, and I'm not sure that will ever happen across the whole industry.
On one hand you need that ambitious vision to sell to the VC. On the other hand you start by building for one customer at a time that's willing to take a risk on an unproven company. I wonder how many times we (startup founders) get confused which of the worlds we're in and end up jumping back and forth not making any real progress.
My question here - how much does the pitch deck even matter? I have always thought that the VCs are really mostly investing in the founding team knowing that the plan will change. But I think you are kind of illustrating that already with the 100 million dollar plan being more about the founders thought process and less about the actual plan.
Ultimately an early stage pitch deck is a product you're selling to a very very narrow audience in exchange for a lot of money (and including some worthless equity as a freebie). So the two step plan really is: "we will build the right pitch deck for a tiny market with lots of qualifiers, and use that success to, well, pivot to another market that we hope to begin to understand as we spend that money" ;)
Yeah, in theory, I think that's true. I think that's hard to pull of though? Or at least was for me? Even if you knew the plan was kind of a story you tell yourself and VCs, it's hard not to try to live the plan at least a little bit (and you sorta have some obligation to live it if that's what you sell to an investor). So I agree that "pitch big, build small" is probably a good strategy, but it's a *hard* strategy.
Very much agree. I wasn't endorsing that strategy so much as observing what happens most of the time. To your closing point in the post, I don't know if capital markets today support the more sensible option you laid out (get a bank loan, maybe?).
*I think* you could actually kind of try to split the difference, and raise big seed rounds from institutional funds. Those funds write those checks on options for later rounds, under the assumption that, if things go well, you're gonna want to raise again. But you could just not? I think you could basically bootstrap the company but with a head start that way.
Yes, that makes sense. I wonder how often people do this, and what investors think when it happens (I doubt they'll be happy to be deprived of their expected markups).
Another banger. Maybe it's not the pitch deck to raise from VC as they are now, but as they adapt to be. Hopefully (necessarily?) the next generation of tech startups will be more down to earth, realistic, sane.
You'd hope so, but I'm not sure that that's every really possible. Like, there's a kinda sorta prisoner's dilemma with startups, where if the market is down and everyone is being operationally efficient, you can probably win by being a big spender and trying to bully your way into success. But if the market is up and everyone’s a big spender, then it's hard to survive without doing the same. The only time when there’s a real incentive to be efficient is if you’re playing a different game than everyone else, and I'm not sure that will ever happen across the whole industry.
On one hand you need that ambitious vision to sell to the VC. On the other hand you start by building for one customer at a time that's willing to take a risk on an unproven company. I wonder how many times we (startup founders) get confused which of the worlds we're in and end up jumping back and forth not making any real progress.
I think that's a big part of it (and a very similar thread: https://benn.substack.com/p/how-to-create-a-winning-pitch-deck/comment/64966530). You know that the pitch and the day-to-day job aren't the same thing, but I found it hard to really separate those two.
My question here - how much does the pitch deck even matter? I have always thought that the VCs are really mostly investing in the founding team knowing that the plan will change. But I think you are kind of illustrating that already with the 100 million dollar plan being more about the founders thought process and less about the actual plan.