Justin Izzo of Dropbox DocSend joins Nick to discuss Founder’s Guide to Raising Capital: Pitch Deck Insights, Macro Trends, and the Importance of Investor Metrics. In this episode we cover:
- Key Metrics in Pitch Deck Activity
- Macro Economic Metrics and Their Impact on Pitch Deck Activity
- Trends in Investor Deck Interactions and Time Spent
- Advice for Founders on Pitch Deck Creation
- Investor Engagement with AI-Focused Pitches
- Founder Links Created and Their Implications
- Impact of VC Funding Trends on Startups
- Characteristics of Successful Founders and Regions
- Seasonality and Strategic Timing for Fundraising
- Advice for VCs Raising LP Capital
Guest Links:
The host of The Full Ratchet is Nick Moran of New Stack Ventures, a venture capital firm committed to investing in founders outside of the Bay Area.
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0:18
Justin Izzo joins us today from Boston. He’s the Senior Data and Trends Analyst at Dropbox DocSend, the platform that helps startups securely share and track their pitch decks and data rooms. Justin, welcome to the show!
0:32
Great to be here. Nick,
0:33
awesome. Can you tell us a bit about your background and sort of your experience so far at Dropbox? Dachshund,
0:39
sure, my background has nothing to do with tech or the private sector at all. Actually, I started my career as an academic. I was a professor at Brown for a number of years, teaching literary theory, political theory, and made the move to dachshund when it was but a series a startup. They were looking for someone to run a research program about startups and venture capital, and needed someone who could tell stories from numbers. I wasn’t sure at the time if that sounded like me, but turns out they were in treatment by background. And so I took it and ran with it and turned an idea for some research into a full fledged research and founder Advisory Program since the acquisition by Dropbox several years ago,
1:21
perfect. And I know that you track these PDS, these pitch deck, interest metrics, very closely, and they measure the the activity founders, the activity of investors, you know, as they’re going through a fundraise process, what are the three primary metrics that that you’re tracking most closely? Yeah,
1:40
we track metrics globally to see what deal making looks like and can look like in the future. And so we track, on the one hand, investor interactions with pitch decks. So how many times on average an investor is clicking into pitch decks they receive during a given week. The flip side of that, of course, is tracking how many decks on average founders are sending out every week. It kind of gives a sense of the supply of pitch decks in the market. And by studying investor behavior, we get a sense of what the demand for pitch decks looks like on any given day or an even week. Rather that we can then sort of bubble out into months, years and quarters. And our third metric is time spent. So we can measure how long investors are spending on pitch decks, to give founders kind of an understanding of what they should expect when they’re sending decks to investors, they don’t always know what’s in store for them. The TLDR is that it’s often a much shorter read than founders anticipate, about just over two minutes, two minutes, 15 seconds these days, which isn’t a whole lot of time, given how much information founders tend to cram into those
2:46
decks, right? And I think we’ll talk about that a bit here and maybe give some advice to the founders out there. But so is it safe to say that kind of the founder activity is a proxy for supply and investor activity is a proxy for demand. I think
3:02
so. Generally, I found on the one hand, that our pitch deck interest metrics are forward looking indicators of what deal making tends to look like in six to eight months to a year down the road. So we’re tracking the very early stage of the fundraising or deal making process, and that tends to be a pretty good indicator of the number of deals that are going to that are going to actually take place months down the line. It’s also the case that our metrics track how macro trends impact the private market fundraising process. The example I’d love to give, and it’s become a classic now, is that when covid hit, we saw investor deck interactions and founder links sent out to Dex plummet, and then over the weeks following, as investors and founders figured out how to do this stuff remotely and figured out how to work from home, activity on both sides of the deal making table ramped up considerably, and it’s just one indication of where real world events, macro events can can impinge upon startup fundraising and deal making. What
4:07
are the macro economic metrics that you track most closely and correlate with the activity on the on the deck side? Lately,
4:15
it’s been interest rates. And talk about interest rates, and what I mean by that is as news solidified, let’s say that interest rates were going to stay higher for longer. We saw investor deck interactions really tail off and as over the past, let’s say three to four months, as momentum began to pick up, jobs data, inflation data, suggesting that the economy was more or less okay, and that there were conditions in place for rate cuts to happen maybe next week, something like that, investor activity and founder activity began to ramp up considerably. So it doesn’t necessarily happen on a week to week basis, unless there’s some extraordinary event like covid where that can certainly be the case. Behavior tends to ebb and flow, and you can often map it to sort of macro events that that might predict the health of the overall economy and founders, but more more so investors tend to respond accordingly and will moderate or or really ramp up their activity in response.
5:18
And it’s pretty immediate, right? Because a lot of these rate cuts are going to affect the VCs ability to raise capital, which will affect their deployment, maybe in three to five, you know, and over the course of three to five years. But from an activity standpoint, you’re seeing a fairly immediate effect with news on on interest rates, and part of the reason I ask is, you know, it looks like the Fed is going to cut rates on September 18, so kind of curious, if that will be a catalyzer, you know, for the for the venture market here,
5:51
it’s often immediate, ish, it might not happen the same week, but we’ll see often a response over Two to three weeks. Let’s say, interestingly, the rate cut, if it happens, is going to happen at about the same time that investor and founder fundraising season kind of kicks off, which always happens in late ish, September, a couple weeks after Labor Day. So it looks for all the world like this is going to coincide pretty perfectly, but what I call the fall rush of startup fundraising. There are often two rushes, one in the fall, one in January, after the holidays, so I’m expecting to see a pretty significant uptick in founder and investor activity that would have happened anyway, but will likely be enhanced by news of the rate cap.
6:38
Interesting. Let’s go back to your metrics, and let’s start with the first one. So investor deck interactions. I’m curious to learn more about what the trend shows in 2024 and how that compares with like peak height periods like 21 and also maybe more stable periods like 18 and 19.
6:59
Sure. You know, we saw investors begin to pick up their activity after 18 months of what you might call a holding pattern. It wasn’t a significant it was wasn’t a significant drop off, but we weren’t seeing the kinds of spikes we had seen previously as investors kind of sat on the sidelines, might have looked for deals, but not as eagerly as they would once have. And in about q4 of last year, investor behavior started to change, and we saw interactions really pick up, and they’ve remained high for much of this year, often at times higher than 2021 now what’s been interesting is that this hasn’t necessarily turned into deal making. Quite yet I am reading, and I hear anecdotally, but what I read into this is that investors are gearing up for deals. They are sort of sitting on capital, or anxious to engage with founders and to deploy that capital, but they want to make sure that conditions are propitious enough. And what that really translates to is, are rate cuts coming? Do we know that for sure? Well, not quite yet. And I think that that the encouraging signs we’ve seen all year of behavior, of investor activity, far surpassing 18 and 19 and even surpassing 2021, at times, indicates that there’s significant demand out there for pitch decks and for for for startup deals, but investors are still waiting for the final push to kind of pull the trigger and turn all that interest into deals, which is something I think we’re going to see in the next sort of six to eight months. Okay,
8:37
yeah, we have seen a bit of a re rebound in VC dollars deployed, I think last quarter, and your trend line does show, looks like persistently high interactions, right for 24 relative to other years. I mean, you’ve got what seven years reflected here, or eight actually. And so I would, I would think that that would be promising. You know, there’s, there’s a lot of folks leaning in at the moment. How about if we move on to time spent? Right? What are we seeing in 24 and what are the implications sure
9:10
we’re seeing in 24 kind of the same thing we saw in 2023 namely, that investors are spending less and less time on pitch decks. And what this also means is that founder decks are getting a bit shorter. They’re getting shorter than they were three to four years ago, and they’re kind of staying short. Founders are meeting investors where they’re at. This kind of happened after covid, where more of this happened virtually than ever before. And what that means is investors have the ability, because of influx of potential decks, the need to cycle through decks faster than they ever had. And what that means is that investor or founders have to present their their the case for themselves more succinctly, but with the same paradoxically kind of robustness they might once have in in in in a longer, more. More thorough format, and that’s the delicate balance founders always have to strike. What they have to really communicate briefly but show the deep thinking that they’ve been doing about their business at the same time. And that’s kind of what this is, what this is indicating as metrics. So as we’re seeing time spent get down to, you know, two minutes, two minutes, 20 seconds ish per deck, founders are still trying to communicate the same types of information about their business in the pitch decks that I see week in week out, and that means founders have to do a little bit more work in the sense that they need to be ruthless editors. They need to get good feedback from external folks who aren’t too close to their business, people who can say, well, this doesn’t necessarily make sense to me. Someone who’s very close to the business might might let something slide that they understand, but they don’t necessarily know that other folks don’t understand, for example, and it’s about establishing enough critical distance within your narrative to communicate a really snappy pitch deck, but also can present compelling metrics about the business. And doing all of that in the span of two minutes is no easy task for founders, and I tell them that I empathize with them, but that is the balancing act that founders need to strike, and that’s what this time spent data is really pointing toward. It’s funny.
11:14
It reminds me of the Mark Twain quote, If I had more time, I would have written less exactly perfect. I’m curious Justin, if I’ve ever tracked, like the number of words per slide and correlated that with drop off rates or investor time spent.
11:29
We haven’t anecdotally, I can tell you that the number of words per slide has tended to go down as pitch decks have gotten shorter. Anecdotally, also, I see VCs and I’m on pitch deck tear downs or advising sessions for founders, I always hear investors telling founders to cut words out of slides and to present, I don’t want to say the bare minimum of information, but to present whatever the thesis of a given slide is, plus accompanying data points in as few words as possible, but also not in such a way that investors have to do all the work to understand what’s being communicated. So again, it kind of comes back to a balance, but you really want to communicate that balance in as few words as possible. It used to be the case that I would advise founders to stick to about 50 or 60 words a slide. Now I tend to say as few as possible, so long as you’ve been vetted by folks who have given good feedback on your deck, that your ideas are coming across clearly enough,
12:28
I see. And do you have any specific advice for founders at like, the slide level? You know, whether it be like a problem slide, a solution slide, a competition, a team slide. You know, do you have any specific insights on those those slides?
12:45
I have insights. The insights you are the the advice I tend to give varies about this slide, but it in general, I would say it’s never a bad idea to have a nice thesis statement header at the top of a slide accompanied by a little section header saying, this is a problem. This is a solution slide, just so that investors don’t get lost, and so that you are creating an architecture within your narrative, that you are showing that you’re organized, but also staying organized at the same time when you’re building this out. But to take a more specific example, let’s take the team slide. This is a slide where founders often either over or under communicate. On the one hand, I see a lot of team slides that are packed with advisors, ancillary hires, people outside the founding team, and that can be messy, and it doesn’t necessarily communicate in any succinct way why these team members and their specific backgrounds are the perfect fit for their business problem. By the same token, I will often see very bare bones team slides that do kind of adhere to the principle of doing more with less, or try to at least, but don’t necessarily show enough about their backgrounds to indicate that they have a reason to work together. So on the one hand, founders tend to want to either cram way too much into the slide and making their purpose a bit jumbled, or they don’t tell enough in this slide and make it hard to discern why an investor should choose them over another team that might communicate their synergy. To use the buzzword a little more snappily, and this is one slide where I where I really do tend to focus on getting that balance right. Are
14:28
there certain slides that investors tend to spend the most time on? It
14:31
can depend on the year. It can depend on on on the stage. But I think there are some slides that are evergreen in terms of where investors want to spend time. They’re spending a little bit less time overall these days on the business model slide. But by the same token, that’s never not an important slide to use double negative, and what I mean by that is the time spent may be going down overall year over year, but it’s still pretty high relative to other sections, and investors may be spending less time here than they. Would have three to four years ago. But by the same token, they’re still leaning into that monetization business model slide to make sure that founders have really thought clearly about how they’re going to monetize their product. Interestingly, I always tell founders that investors don’t necessarily care if you reinvent the wheel here. They don’t always want to see something like that, but they do want to see that there are clear assumptions communicated, and that they can understand that you aren’t working with eight different revenue streams for a pre seed company, and that you’re trying to sort of justify all of this in one slide that investors might take 45 seconds to read or give up on if the whole isn’t clear, that’s once. That’s one slide that investors tend to spend a lot of time on Team slide as well, as well, is always a slide that that garners investor attention, and even more so, our upcoming pre seed report is going to show that that investors spent even more time on the team slide over the past year than than in previous years, and that’s because at the earliest stages, and most of our companies In our data sets are at those earliest stages. Investors are sure, investing in ideas, they want to see some path to profitability, at least hypothetically. But these are also collections of individuals solving a business problem, and and investors are going to want to think critically about this collection of individuals, why they’re put together, where they are, and they’re willing to spend a bit of time, comparatively, doing that kind of work. Business model, Team traction is another slide where investor tend to spend a lot of time. This is also a place where, where founders can can really help themselves by choosing a few key metrics and communicating clearly why there’s a momentum upwards, let’s say doing so in a way that doesn’t raise red flags can be tricky for investors or for founders. I see many founders will show dips in their data in unexplained ways and not account for that in the deck. And investors, when I’m on calls with them or on a panel and we’re taking apart a deck constructively, will often point out, well, why is this here? The founder will have to come on and explain. And some of this work could have been done up front, or the data could have been shown in a different way, for example, to remove any doubt, or as much doubt as possible from the minds of investors. Because a lot of what it comes down to in building a well balanced, creative and succinct deck is removing red flags and de risking your startup as much as possible for investors who are looking to invest in risky, sort of early stage startups that are the least risky of a risky bunch, let’s say. And the extent to which founders can do that will help determine how much funding they raise, or even if they raise funding at
17:40
all. Yeah, I have this conversation with our portfolio founders. I feel like pretty frequently, you want the deck to be a tool to get a meeting. And so I say the goal of the deck is to create intrigue. You should want to remove information that leads the investor to say, Well, how is this possible? Why is this going to happen? Like, the exciting stuff, but you also want to address the potential objections, the reason why they would immediately pass right, and abate those. So if you have a big dip, like, there needs to be, you know, some reasoning. But the goal should be not to cram all the information in there, because the engagement is like playing catch. You want to go back and forth, you know, in a discussion, and the investor wants to feel like they’re having that exchange. And, you know, meanwhile, I’ll see some founders that, you know, they’re sending out the data room, you know, on the first date. And it’s like, it’s too much. It’s too much like, get into that rhythm, get into that exchange, and make the investor work to get the insights a little bit, and it will be like a delightful experience for both sides.
18:53
I often tell founders the exact same thing. On the one hand, you cannot and should not try to answer every possible question or objection about your business in your deck, if only because that cuts short opportunities for collaboration or advising going forward, and that’s part of what this relationship should be. By the same token, I will always tell founders that that getting the meeting is the most important part, and you want to sort of present your business in a way that that is accessible and allows investors to do the kind of analytical work they really want to do, but what they really don’t want are hurdles in the way of that analytical work, right? And that’s where the lack of clarity, too many words, confusing numbers, unclear assumptions kind of come into play. Make it easy for investors to do the analytical work they want to do, and assume they will go do it. What they don’t want to do is be hindered on the way, on the road to completing that analytical work, because then they’re going to lean out and pass because there will be another. Deck that does that.
20:00
Justin, are you seeing strong correlation between AI heavy pitches and investor engagement?
20:06
Anecdotally? Yes, we don’t track sort of on a weekly basis by industry, but we are seeing, obviously, a giant uptick in AI focused businesses at our earliest stages, in our in the data pool for for for our research reports. I’m of course seeing like, like, like, like, like, any analyst or investor up there that that AI is now being taken, some kind of AI component has been taken as a given, rather than as a nice to have. But by the same token, I’m also seeing a more and more ready critiques of AI rappers, AI chatbot rappers, than then, then I get the beginning of this AI craze. And I was speaking to a colleague of mine on Dropbox ventures just the other day about about these trends, and we sort of came to the agreement that the the the market is maturing very rapidly and pretty soon, if not already, folks are gonna be demanding a lot more from from from Ai decks and companies are gonna have to show that they’re solving real business problems in real ways, with real automated functions, in ways that, let’s say you might eight months ago, one might have tried To get a chat bot to show but that wouldn’t pass muster these days. So we’re still seeing a significant uptick in or significant sustained interest in AI related startups, but the criteria being applied to those startups is growing more stringent by by the month, I’d say it’d
21:38
be interesting to see like the buzz index words, you know, over time, we’ve had a few buzzy phases, and like the prevalence of those words index, and then also correlate that with investor interests. That would be kind of interesting. I would like to move on to your PDI metric three, which is founder links created. So this is, you know, a founder creates a new doc, send link to be sent out to investors. Some out there will track the number of startups being founded, but the data tends to be noisy, mixing non tech with tech, mixing lifestyle businesses with venture businesses, whereas your metric directly relates to those tech companies that are seeking funding, which, in my estimation, seems to be a strong proxy for the health of new tech companies and potentially venture fundable tech companies. So over the course of 18 to 24 what year has kind of been the high watermark for founder links created, and what year has been the low? Yeah,
22:38
I think that the past two years have been busy for founders, so as investors have leaned out, I might say that capital has dried up for founders who were running on fumes or already had fledgling businesses and who needed the injection of funding to stay afloat. And this may be one reason why we’re seeing persistent high activity among founders over the past two years, let’s say, even though it’s been not even an open secret, it’s been a known thing that investors grew much warrior after 2021 and even more So in the late 2022 early 2023 founders persisted in in their search for capital grew even more demanding. And that stands to reason. I think by the same token, we’re seeing a lot more founders on average, sending out decks than we were four to five years ago, certainly more than post covid, where the amount of the average amount of decks was was what was much smaller. And I think it speaks to the fact that said that that pitching virtually is here to stay has been the name of the game now for several years, it’s so much easier now to raise funds for more investors from more countries than than it ever was, and that’s another explanation for why the founder links created have stayed pretty high over the past several years, but it certainly doesn’t explain all the way why over the past two years, founders have been especially glamorous in searching for capital. I think that certainly relates to the number of new businesses created during boomier times, let’s say. And they may not have used capital wise. They may not have found a product market fit. There may have been many zombie companies hanging out in the ecosystem who once pushed came to shove, actually needed to show something to investors and needed to raise capital, and haven’t been able to now, there are a number of reasons why I think invest or founders have been especially busy over the past couple of years, but it certainly does speak to a lack of capital. I think in the broader ecosystem, I’m guessing this might modulate over the next six to eight months, a little bit as founders, who have been looking for capital for a long time and are still afloat, managed to secure something and get back to running their business. I. Flip side. But I can, I can also see more founders coming out of the war book to raise if, if conditions do radically change and investors really jump back in feet first, I can kind of see it going both ways, hitting even hitting new highs for founders, or leveling off a little bit as as founders become less desperate. I’d say, yeah,
25:19
you mentioned venture dollars in the ecosystem. We do know that venture dollars raised by VC funds over 23 and 24 are down substantially. 23 had the lowest count of VC funds Since 2013 and dollars were the lowest since 15 and now in 24 you know, dollars are trending up, which is promising. But 44% of VC capital this year went to just two firms. Should startups be concerned about the reduction in dollars and the number of venture firms that can fund pre seed, seed and a a rounds? Yes.
25:52
Right off the bat, usually I’ll hesitate more before giving an answer, but, but, but, but I say yes, and what that means is founders should be concerned about finding traction, product market fit, and sketching out some path to profitability before worrying too much about fundraising or venture fundraising, I should say which would which is a whole different ballgame, and one many founders might think at first glance that venture funding is a ticket to unlimited growth. More founders than you might think don’t realize this or assume this, I should say, and it should encourage founders to slow down a bit and build something more sustainable without assuming that venture dollars will, will will simply find them. It should also suggest to many founders, or prompt founders to wonder whether they need venture funding and whether their business is necessarily a good fit for for for the kind of growth and kind of scale that that that venture returns presuppose. And I’ve seen many founders sort of express this publicly over the past, sort of, let’s say, 18 months, two years. They aren’t necessarily this is an implicit critique of the venture of the venture ecosystem, but it is the sense that I’m realizing now that my business isn’t set up for the kind of growth VCs need. So it’s almost a good thing that I haven’t been able to raise any money, or that haven’t really gotten any traction during a fundraise prompted me to be strategic in other ways, and to think about how to grow my business in a way that doesn’t have to meet the demands of VCs, but in a good way, right? That that that grows at a different pace, and that finds its fit in, in in other ways. And that’s encouraging, I think, in the sense that I, my hope is that this will lead to fewer failed startups down the line, but startups with a more considered sense of sense of purpose that don’t necessarily aim for hyper growth without there, there and Justin.
27:54
You know from your metrics and your tracking, is it, is it possible to determine or or maybe Intuit which startups successfully raised raise capital, you know, closed around and and which didn’t.
28:05
Our research reports, which take data from founders who succeeded in raising a round and from those who didn’t paint a solid picture of the types of founders who managed to raise at a given round in a given year. And so we tend to find that, for example, startups with shorter decks over the past year, pre seed founders from a younger demographic, let’s say, were a bit more successful than other demographics. So our research reports and a plug our pre seed report, just because coming out in the next couple of weeks, goes our research research reports go some way toward towards sketching out what successful rounds look like and how founders can organize their decks in ways that make sense for their business, using data that we provide to get themselves the best chance of getting funded.
28:51
Any other characteristics or findings you can tease from the report this, this interview will come out after
28:56
the report. We’ve seen that. We’ve seen that founders from the west coast have been a bit more successful and are making up more of our survey than they have in previous years. We saw the West Coast of the US fall off a bit a bit, bit during covid, a bit after covid, and now that region has seen an uptick, a fairly significant one, in terms of our data, which may be due to tech companies shrinking and folks spinning off starting their own businesses, I suspect strongly that it is we’re seeing companies that put a team slide sooner in the deck be more successful raising funds. And I think it’s because, on the one hand, investors are looking to invest, or they’re looking to scrutinize team slides more closely, and companies correspondingly with good teams at the heart of their business, are looking to foreground that as one of their key sections early on. And so that’s giving that kind of move in a deck narrative is giving investors a strong sense of who’s behind this company and why they’re a good fit. So it’s kind of a meeting of where meeting investors. Is where they’re at with companies whose teams tend to be their strong selling point at these early stages, that are seeing a good amount of success in a still fairly challenging market.
30:11
And what about New York City? You mentioned West Coast has kind of been on the rise lately. What are we seeing out east, where you’re at in Boston and then New York City, which has become quite hot. Sure,
30:21
places like Boston and New York City are remaining hot. They’re remaining key, significant sort of pluralities of our data set. There’s no one that has a majority, but I would say the Western United States, New York and Boston are three of the top areas. For sure, these are still hot venture markets, and even though the West, the sort of classic Silicon Valley path to funding has has re established itself, let’s say over the past year. We shouldn’t neglect that. New York, Boston, even down south, we’re seeing, we’re seeing a particular activity there in Atlanta, for example, I’m seeing more and more successful companies raised from Atlanta, these markets are not getting overlooked, even as traditional hubs remain. Traditional hubs very good.
31:10
And I think most VCs know anecdotally, like the seasonality of this business. What times during the year do you find are the best times for founders to be out raising capital, sure
31:23
that is mid September through, let’s say mid October and early January, after the holidays, year over year, that’s when we’re seeing investors pick up their activity. They get back from vacation, or they come back refreshed after the holidays, ready to make some deals. Things might pick up in the early spring as well. But these are really two moments of the year that founders can say, count on, but founders should look to if they’re planning a raise ahead of time. And all founders should plan a raise ahead of time insofar as they can for the maximum potential investor eyeballs on their deck and interest in potential deals.
32:01
And from personal experience, we’ve tended to do the most number of deals during the periods of least VC activity. So we get a lot of deals done in August. We get a lot done in late December. I’d love your take on you know, what do you think would be the best time for VCs to really lean in and potentially increase their investment activity. You know when others are kind of leaning out, like
32:25
you said, during those summer months? I think it’s it’s an interesting time. Investors always looking for an edge over their peers. They’re always looking for the best deal flow. And if we take into account the fact that over the past several years, the tide of founder decks in the ecosystem has remained pretty high. You can expect that even during a comparatively slow summer season, there will still be a very healthy number of founders looking for funding out there actively raising. So I think that these lower moments during the summer vacation, let’s say, might yield comparatively good opportunities when other investors are leaning out. Let’s say I think the August strategies is actually a pretty good one if you’re really looking to differentiate, or maybe find deals you wouldn’t necessarily find, or that your peers might not know about because they’re behaving sort of with, with, with, in accordance with the seasonal flow of how fundraising works, I’d encourage founders to look, to look at that the perceived lower activity moments of warmer months. If they want to get out of the comfort zone.
33:28
VCs do like their vacation. So feed and then. You know, you’ve dropped a lot of gems of wisdom so far. But any other advice that you would give to founders that are launching a fundraise and sort of building their pitch deck. Sure,
33:42
build relationships with investors that aren’t necessarily predicated on extracting capital from them. This is easier said than done, but I have learned many things about startups and fundraising since I’ve been working at Dropbox, stocks and and the fact that this is a relationship building exercise about relationships that go on for a long time is one thing that I’ve taken to heart. And founders should look to investor interactions. Let’s say even that seems to sound very impersonal, as as first and foremost relationships, rather than as potential trends. The source of potential transactions, I think, is a healthy way to approach fundraising. Secondly, really make sure that when you are building a deck and learning how to talk about your company, your business, your problems, your solution, that you aren’t too close to your material. I see so many smart, technical founders dive right into the densest possible material in their decks or in the way they interact with founders in ways that are unhelpful. Not every investor is an expert in your specific field. Most, dare I say, won’t be. And if you can gain enough critical distance when you talk about your company, you’ll one sound more like an actual. Human that someone will want to relate to and do business with, but also you’ll be able to speak to a broader cross section of investors, which can only stand you in good stead, because this is, to some extent, to a large extent, maybe a numbers game, and that’s what founders one thing that trips founders up often, it’s just getting way too close to the material because they haven’t workshopped it with enough folks that are at some kind of remove from their business. I will support
35:25
that that point wholeheartedly, and I would even state, you know, a strong recommendation to founders, do not page through your deck during the meeting. You know, use your deck as a tool to get the meetings and then get the meetings, and you got to tell your stories, right? You got to tell your narrative, and you got to bring investors on a journey and and get into a dialog. So I think that’s really good advice. And how about, you know, on the VC side, I know that dachshund supports a number of VCs that are going out and fundraising as well. You also have, you know, the data room and the ability to kind of host all that. So I’m sure you see a variety of activity. Any advice for the VCs out there that are trying to raise LP capital? Sure, my
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advice is to make sure your thesis is buttoned up. I have seen many emerging fund managers struggle to get traction with LPS because their thesis isn’t differentiated enough, or isn’t sort of clear enough. On the one hand, it has to be rigorous. On the other hand, it has to be so obviously simple yet original at the same time that that’s where the compelling aspect of the thesis comes from. It’s a different kind of balance than what founders have to strike, but it is one that needs relentless tinkering and tooling and at the same time, rigorous data thinking backing it up. And that’s one commonality that emerging fund managers especially, and emerging founders sort of need to, need to need to really take to heart that it is about creating balance and communicating the complexity and richness of what you’re working with in intuitively simple yet original terms. Again, I’m phrasing this more or less elegantly, sure, but I’m not neglecting for a second the amount of sweat equity that goes into the creation of such perceived simplicity.
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I love it. It’s like you’ve you’ve got to build everything, and then you’ve got to edit ruthlessly and really get it tight. I think I’m going to be sending you my pitch deck after this. That’s cool, so I can get your advice. But just to wrap up here, Justin, if we could feature anyone on the show, who do you think we should interview and what topic would you like to hear them speak about?
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I’d love to hear Jerome Powell speak about approaching the sort of quote, unquote, we hope soft, blaming for the economy coming out of covid. Having seen how the debates about interest rates, the realization that interest rates are going to be higher for longer, has come to affect private market fundraising, I’d be super interested to hear about the assumptions he built out when thinking about how to navigate these questions. And I like to ask him about what he thinks, or how he assumes that that these decisions, or non decisions, on interest rates might affect private markets. Very good.
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Justin, what book, article or video would you recommend to listeners a book that
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really influenced me when I first began learning about markets? That’s Bob Shiller’s irrational exuberance. It’s sure about the public markets rather than the private markets, but founders especially should be interested in how the public markets work, because it helps them and us understand how macro events at the broadest level can come to in come to influence private market transactions, right? And we get there by understanding how these macro events can influence public markets. And it’s the relationship between these three layers that really has come to structure my own thinking about startup fundraising, venture capital, and it’s something that not all founders know about, necessarily, but these are questions that founders should be very interested in, because they touch on the very heart of their of their business and their business’s ability to keep functioning. It’s
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an oldie, but a goodie. You know, it’s funny to me how exuberance as a word now has finite financial connotation and negative connotation when people say exuberance and it’s, it’s just kind of funny to me that it’s, it’s, it’s caught that connotation over time. Justin, do you have any habits, tactics or behaviors that are a force
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multiplier going super deep quickly and with an eye toward picking out part unexce and unexplained assumptions is a skill that I have honed ever since my days as a professor, as a writer, when you constructing complex arguments about philosophy, about a novel, it doesn’t matter. It is a skill that serves anyone well in any aspect of life, being able to start at a high level, zoom in and define. Find that paradox, that kernel of tension that that leads people to question what they’re doing, or to question certain strategies behind certain questions, or to think about their assumptions in new lights, is a skill I try to teach people, especially founders who are out there raising capital, thinking about their business and thinking about how to narrativize their business. This kind of analytical work is really helpful to them. It’s the kind of work VCs also really like to do, which is why I find myself getting along with VCs very often. Because we have brains that work alike. And the extent to which many founders can can can adopt this mindset, which is again similar to that of VCs, will stand them in good stead, but it also helps you think more interesting thoughts about the world, and that enriches all of us. I think
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perfect. And then finally, here Justin, what’s the best way for listeners to connect and follow along with you? Come
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find me on LinkedIn, because I don’t do Twitter or other socials. I’m Justin. That’s i z, z, o on LinkedIn. Perfect. He
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is Justin. Justin itzo, the company is Dropbox, docsin. In the upcoming report, I believe it’s called the pitch deck Insights report, pre seed report, the pre seed report. Thank you so much, Justin. I really appreciate the insights today and a huge help for the founders in the audience, as well as folks like me that are on the investment side. So thank you, Nick, thanks
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for having me.
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Appreciate it. You. Brenna kyper, that’ll wrap up today’s interview. If you enjoyed the episode or a previous one, let the guest know about it. Share your thoughts on social or shoot them an email. Let them know what particularly resonated with you. I can’t tell you how much I appreciate that some of the smartest folks in venture are willing to take the time and share their insights with us. If you feel the same, a compliment goes a long way. Okay, that’s a wrap for today. Until next time, remember to over, prepare, choose carefully and invest confidently. Thanks so much for listening.
