The Importance of Differentiation
The Art of a Pitch Deck
The Art of a Cold E-mail (Part I)
Startup Spaces That Make Sense

The Importance of Differentiation

As someone who reviews a minimum of ten pitch decks and intro/cover letters per week, I have learned to appreciate the impact of differentiation.  I firmly believe that everyone has a unique, engaging, compelling personality.  The problem is that people filter themselves into a mold: “I’m an investment banker,” or “I work at a non profit.”  I’m not the very person to suggest that question “what do you do?” should be replaced by “what do you like to do?” but I may be among the first to advocate for the latter question’s presence in your cover letters.

Here’s the problem: everyone is smart.  As a graduate of NYU and a current MBA’er at Chicago Booth, it was horrifying to realize that no fewer than 95% of my classmates were smarter than me.  I’m not great at math.  I’m not an A+ writer.  I have trouble taking tests.  But where I do excel is hard work, diligence/research, and CREATIVITY.

Here’s a great example of the potential differentiation in a cover letter from an article in Business Insider

Looking at the reactions, you begin to realize how dull the types of requests/correspondence these bankers receive truly must be.  This is not an earth shattering e-mail.  But it is different.  And differentiation = memorability.

But don’t take this advice and begin sending old socks in a package to stand out.  Here’s what this student did properly:

  1. “I met you before…” – The e-mailer generates credibility by noting they’d met each other in person before.  Although unlikely that the banker remembers the details of the conversation, he likely remembers the student being polite/considerate/etc.
  2. “I’ve interned for Merrill Lynch…” – In an e-mail which is overwhelming risky (and which might suggest an eccentric person, aka a liability to a firm), the student is sure to note that he has worked in a corporate environment (probably not dissimilar from the firm he’s applying to) and can maintain a level of professionalism.
  3. “I have no qualms about fetching coffee…” – This is where the student defines himself as different from the pack.  I’ve held college internships (I did one at Time Inc. where I effectively couriered packages/got coffee all summer) but I was unhappy because I thought I was too important for such tasks.  The epidemic in the banking world (not exclusive to banking, however) is the level of pride among even junior workers.  I personally remember the first time I was told to stuff envelopes for a summer job and remarking “I must be the most overqualified envelope stuffer ever.”  It’s that kind of personality that firms want to avoid.  This student credibly convinces the reader that he is so passionate about the industry that he will do anything to just get a taste.
Although this e-mail was written geared towards bankers, it is a paradigm cover letter for the startup/VC world.  These are worlds defined by hustle, passion, and communication.  More in future posts…


The Art of a Pitch Deck

In the six months since joining the I2A Fund as an MBA Associate, I’ve reviewed over 100 early/seed stage pitch decks from startups in the Chicagoland area.  A company’s deck is more than an overview: it needs to tell a story.  All great stories – whether told on film, in books, or as a spoken tale – require a connection or concern for the characters, building momentum, some conflict, and of course, a climax.  The best decks I have seen fit this mold – they are stories so coherent, and so logical, that I literally become excited reading them.

I would posit that few, if any startups are approaching their decks from this perspective.  But consider the context: you are an expert in your company.  I am not.  The vast majority of the time, someone similar to me – meaning a 20-something associate with 2-4 years’ work experience who is writing up 15 deal reviews a week – will be reviewing your company’s deck.  This is true whether you are pitching VCs, accelerators, incubators, or trying to sell a larger corporation.  The first line of defense will likely be someone who is not an expert in your domain.  Hence the importance of telling a compelling story.

I don’t need to be a military expert to appreciate Saving Private Ryan, or a quant geek to love Good Will Hunting – that’s the power of great story-telling.  As a former professional poker player, the turning point in my success came when I started approaching each unique hand as a contained story.  Do the pieces of the puzzle fit together?  Is this a logical progression?

Adopting this approach to presenting your company will greatly enhance your firm’s reception.  Here’s why:

The majority of decks I see follow a standard approach.  They present the problem, then I’m told the market size, their solution, some traction, the team, and the fundraising goals.  Fair enough, all useful information.  But you’ve effectively just mailed in a series of bullet points, dressed in pretty graphics.  A good deck, like a good story, connects the dots with ease, building my interest.  A good deck will integrate the consumer’s point of view while hinting to investors of the potential.

For example, rather than merely telling the problem, a better approach is to consider and express why people care.   How many hours from the day are lost through a poor legacy product?  What are the ramifications?  When I see that someone is losing 15 unnecessary hours per week due to an inefficiency, I know that person is likely to pay well to get them back.   You get the idea.

But the single most important piece of the story is your traction.  If I’m engaged in your story and increasingly understanding how the pieces come together, but then see that no one’s signed up or you haven’t started selling, it’s as if someone unplugged the TV in the middle of the climax moment.  The deck is supposed to be building momentum – once your platform or product makes sense to me, I want to see adoption.  That doesn’t mean a million users; but it does mean continued growth.  Show me what happened to your metrics when you improved a product, or changed it.  Show me how much you know about your consumers, and how you’ve seen progress through experimentation or A/B testing.  An early stage startup is, in many ways, an organic process – the best way to help me understand your full story is to make me a part of that process.

Two very helpful links:

From Ryan Spoon @ Polaris Ventures on creating an early stage deck:

From Naval Ravikant of Angellist, who actually doesn’t think the deck is vital, but offers great advice on how to make your startup’s story compelling and engaging.  His thesis of communicating something “exceptional” I’ve found to be spot on.

He’s probably right that the deck matters less…if you’re friends with him.  But for purposes of networking and opening doors, it will matter, especially in Chicago. utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+venturehacks+%28Venture+Hacks%29

Best of luck refining your decks!


Article originally posted on Built in Chicago

The Art of a Cold E-mail (Part I)

I have been blown away by the kindness total strangers have shown me, responding to my notes, even interviewing me, all after a cold e-mail.  For sure, there is no substitute to a warm introduction, but in my case, I simply didn’t have the network.

I entered business school straight out of the world of professional poker and living abroad.  I had a strong network in the gaming industry, but little connections elsewhere.  Of course, one of my reasons for going to business school was to expand my network, but when I turned my sights towards VC, I knew I’d have to get creative and fully leverage what little I had.

Here’s an example of one of my early cold e-mails:

Although this e-mail didn’t elicit a response, I do believe I did a number of things well.  My goals were:

  1. I expressed a level of credibility (albeit small) by mentioning angel investing and close contact with a number of online gaming firms.
  2. I aligned the e-mail closely to his interests (rather than spewing e-mails to people at random).
  3. I made the e-mail about him, not me, by offering to chat about my knowledge in online gaming.

As regards #3, the truth is this: I’m not fooling anyone offering to chat “opportunities that may be available for [the] fund.”  Anyone who reads this e-mail gets that I’m trying to build a network in VC.  Which is okay – AS LONG as you’re communicating a value add for the person on the other end of the phone.  VC is an industry where high level people are generally altruistic, but simply constricted by highly limited time – and the best way to bring out their altruism is to generate creative ways to engage them, offering a value-add for them, and let their nature come out once connected.  IT IS A MISTAKE to request altruism from the start without offering anything in return – not because VCs are evil, but simply because they don’t have the time in their day.  You need to first make a credible case that you add value.

Ultimately, this e-mail didn’t connect, but I learned a lot from my early misses.  In my next post, I’ll discuss why you should drop the resume and find an alternate creative marketing tool to express yourself.

Startup Spaces That Make Sense

One of the amazing perks of working in venture capital is the sheer number of intriguing ideas that pass across your desk.  Some smaller VCs may vet as few as a hundred deals a year while larger VCs can look through upwards of 5,000.   Speaking of which – ever wonder why your cold e-mail didn’t get a warm and lengthy reply? Don’t take it personally.

Over the past couple of months, I’ve started to categorize a large number of the startup trends we see into big buckets.  In this article, I’m going to outline the three major buckets, and why I’m personally a fan of all three.  I will then warn all you entrepreneurs out there that in my view these represent the low-hanging fruit of the current startup environment, which means that barriers to entry are low and VCs will be expecting you to really bring something extraordinarily differentiated to the table to make your company special.

Peer-to-Peer Marketplaces

I call it the AirbNb effect, but it basically goes like this: we all have a lot of material objects.  We also have a lot of interests.  We may even have other assets like our job experiences that we want to monetize.

This effect also has another name: “take under-monetized Craigslist verticals and turn them into blockbuster companies.”

Remember the “crafts for sale” link on Craigslist?  Think Etsy.  Autotrader stole the luster of their “cars for sale” page.  TaskRabbit has run off with their services section, HomeAway with vacation rentals, and the list goes on and on.

This is where we see a lot of companies.  And it’s great because these are large, potentially billion dollar marketplaces.  Unfortunately, the only proprietary element is critical mass.  This means that we see a lot of companies that say, “we’ve built a marketplace that allows people to monetize X,”  which is cool – but: how do you get there, who are your evangelists, and how do you compete with the two dozen other firms who can also get it built for $150k?  These are the questions you need to be able to answer. In a two sided marketplace, VCs want to see your growth plan, not a product demo.

A slight twist on this model is the hybrid sales marketplace.   In Chicago, good examples of this would be ParkWhiz or SpotHero who have put in considerable effort signing up parking lot operators.  GrubHub is a blockbuster example, and I’m personally an investor in Furnishly, which deviates from a true P2P marketplace by also offering exclusive content from local consignment shops which you can’t find elsewhere.

On-Demand Services:

I’ll keep this one easy, too. I call it the “Uber effect.”

I am finally starting to see this category pop (understandable as it’s been ~18 months since Uber started to take off).It’s basically an idea that nearly all localized services – whether hailing a taxi, getting a car towed, finding a locksmith, or having your computer repaired – should be geo-targeted and on-demand.

The concept makes a lot of sense.  As a consumer, all one truly cares about is: (a) what are my options nearby, (b) how quickly can they get here, and (c) how I can ensure they’re reliable.

Uber’s solution answers all these questions – a real-time geo-locational feedback tool which lets you know the closest driver, expected wait time, and that drivers’ crowdsourced rating.  These same tenets can and will be scaled to new verticals, and I am actively on the lookout for them.  Lyft & Sidecar, based on the West Coast, are using similar tools to build the ride-sharing market.  Mobile adoption has finally scaled to the point where critical mass is possible and where merchant adoption is both sensible and low-cost/low-risk for them.

This is a more complicated niche than peer-to-peer marketplaces, as these companies require a high level of selling and some degree of technological innovation/behavioral shifts.  I do believe that a great company will be built around on-demand, geo-located car repair, for example. I simply haven’t seen it yet.

Digitizing Legacy Communication Systems

A somewhat harder category to describe, but it’s basically the art of taking traditional scheduling/management systems and digitizing them to improve communication and efficiency.

At a high level, think of CRMs such as recently IPO’d Workday or Chicago-based Future Simple.

On a more micro level, consider the communication difficulties many industries face – for example medical professionals with their patients or non-profits with their volunteers.  Yammer was developed to solve inter-office communication.  Many industries have complex communication needs – think legal services with a variety of clients or partners on each deal.  Or financial services that need to seamlessly toggle between clients, executives at companies, analysts, etc.

Industries need great tools for planning, communicating and executing.  If you’re currently building one, or are developing a biz in either of the prior two categories, I’d love to hear from you.

But heed my warning: the question isn’t so much about what your product does, but what makes you special.  And don’t confuse being special with exclusive features.  Features can be copied easily.  What makes your biz special is your plan for growth, visionary outlook, and deep experience in an industry which convinces potential users that you deeply understand how both merchants and consumers think.

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