Seed Round Founders' Required Course: It's You Who Tells the Story, Not the PPT
A compilation of notes shared with a founder of a startup seeking funding.Original Title: “People, Not Decks”
Author: JOEL JOHN
Translation: Shen Chao TechFlow
This article was inspired by a conversation I had with Joe Eagan from Anagram about their EIR program, which is a compilation of notes I shared with a founder of a startup seeking funding.
The Importance of Signals
Before writing this article, I asked the same question to two groups of investors: "How much of your investment decision at the seed stage is determined by the PPT?" The answers varied. Dovey Wan from Primitive Ventures pointed out in our venture capital community that seed-stage investments are like first dates, primarily based on feelings. Kyle Samani from Multicoin believes that most fundraising is about communication, and the PPT is the main tool for conveying that.
At the seed stage, information about the product is often very limited. If it's a new market with no existing competitors, information about market size is also very scarce.
When investing in Amazon in the late 1990s, would investors consider the market for buying books online? Or was it Jeff Bezos leaving his VP position at D E Shaw? The former may seem to have market potential, but the signal is very weak.
However, a hedge fund manager leaving a comfortable job to analyze the internet frontier to reduce regret is a very strong signal.
Founders can establish signals in various ways. Y Combinator's Jessica Livingston recently pointed out that what interested her about the founders of Airbnb was their grit. They made $40 boxes of cereal to extend their fundraising time, even while burdened with credit card debt. These politically themed cereal boxes helped them earn $30,000 during an election year. At that time, they were trying to give up 6% of the company for a $20,000 check.
Airbnb is currently valued at $96 billion.
I’m not saying founders should start selling cereal boxes. The impressive part of the Airbnb story is that they didn't shut down their bed rental business to sell politically themed cereal. The 2024 equivalent in cryptocurrency might be founders launching a politically inclined meme coin as a startup platform.
What I mean is, at the early stage, venture capitalists are looking for signals. And these signals can be generated in various forms. At the seed stage, when you have nothing else to show, the PPT is just one way to create this signal.
But what do you do when you don’t have a PPT? You can spend a hundred hours perfecting your pitch, or you can establish this signal in several ways.
Tell Your Story Well
Many companies are built on excellent communication skills. One of my favorite examples is Anand Sanwal, the founder of CB Insights (a company providing market intelligence and data analytics). You may not have heard of him, but most venture capital analysts rely on CB Insights for market maps and early insights into emerging companies, such as AI-driven agriculture or robotic food delivery.
A great example showcasing his storytelling ability is how he dealt with challenges in life, comparing his father's business to CB Insights. Or the insights he accumulated while running a SaaS company, or even the amusing story of how his startup was originally called "Chubby Brains" here!
For founders at the seed stage, one of the most rewarding things is to spend 8-12 hours writing everything they know into a GitBook. This book should detail the interesting aspects of the emerging industry (like intent or Passkeys), market opportunities, and how their product fits in. You can delve deeper here, but you may not need to do so in your PPT.
In emerging industries, well-crafted documentation can become the preferred resource for analysts' research. This way, venture capitalists will actively pay attention to you, rather than you cold contacting them. More importantly, potential employees, partners, and media will also rely on this documentation. Well-written documentation is a bridge that invites the public to dream with you, forming the foundation for community building and leveraging network effects.
Of course, not all founders are willing to spend time writing documentation. So what can you rely on? Another approach is to tell an engaging story. For example, read this summary of notes from Peter Thiel's course:
"The founding team of Paypal had six people, four of whom made bombs in high school."
This sentence immediately grabs the reader's attention, showing how these individuals came together to realize their dream of digital currency. Stories are a way in, and the narrative style can vary. Too often, I see founders playing a role, hoping venture capitalists won’t regret missing out on them.
Strong founders understand this. Steve Jobs once deliberately hid his Porsche when venture capitalists visited because he didn’t want them to think he was already wealthy.
Founders' stories often stem from their childhood experiences, consumer pain points, or observations in the workplace. Jeff Bezos famously left his comfortable hedge fund job because he saw the immense potential of the internet. Vitalik's experience of losing assets in World of Warcraft is also often cited as a reason for his interest in decentralized asset ownership.
Your story can be presented through any medium you find suitable. It doesn’t matter whether it’s a podcast, tweet, short video, or article. The key is to share it so people understand. At the seed stage, the most compelling stories are often the personal experiences of the founders, as investors are typically betting on the founders themselves. You should share your story because consumers may accept it before venture capitalists do. When consumers resonate with your story, you gain market traction. This leads to my next point.
Things That Are Hard to Scale
A better option is to launch an imperfect product and seek early users. If you release a flawed product, you may receive painful feedback from customers that can help you continuously improve the product. These early users can become strong references when venture capitalists consider supporting you.
The following image is a private message I sent to Alex at Nansen in 2020 when I spent $7 to purchase their product. He personally provided one-on-one customer support. In the early days, their product was just a simple SQL dashboard. Now, their valuation has reached $750 million. I’m proud to be one of their investors. But before that, I was a satisfied customer, even though the product had many issues. I stuck with it because when the product had problems, Alex provided one-on-one support personally, and he still does.
Telling your story and focusing on your customers doesn’t cost anything, but it may be the key to your success.
In December of that year, I even wrote an article about Nansen. If you are a user, you can compare the screenshots in the article with the current state of the product to see how much progress they have made. Being a good person and building interesting things is the most cost-effective way to gain free publicity.
Many founders often raise millions in funding but build things that no one needs because their core customer base is the venture capitalists who want to invest in them. They are selling equity, not their own product. And because capital allocators are often incentivized to be "friendly" for deal flow, they won’t provide good feedback. The market is usually the ultimate judge of whether your goal is to create a popular product.
Early enthusiasts are not looking for fully mature products. If you can take care of them or provide meaningful value, early adopters are willing to use a flawed product.
Too often, consumers make choices based on which founder pays attention to them. If you don’t have the best product, simply spending time engaging with potential users can compensate for early experience shortcomings. People want to be heard before being served by a product. Paul Graham calls it "doing the unscalable things".
The Formation of Consensus
Much of venture capital operates on consensus. As a venture capitalist, you often don’t pay much attention to Total Addressable Market (TAM), revenue, or even the founder. Because if the TAM is large, you are either betting on a mature market with limited upside or lacking focus.
Instead, early-stage venture capitalists are more concerned with what buyers (other venture capital funds) will bet on in subsequent rounds. The focus is often on narratives or themes.
This is both a strength and a weakness. The strength is that visionary venture capitalists can guide founders to discover market opportunities they may not have noticed. The weakness is that only projects that align with the areas of interest of subsequent investors can receive funding.
Founders solving difficult problems often struggle to find supporters because their exit strategies may not be clear to venture capitalists. In the cryptocurrency space, mergers and acquisitions are relatively rare. Therefore, most cryptocurrency venture capital funds rely on token models. When you know the market relies on preset narratives, you will optimize in that direction.
In traditional venture capital, achieving an "exit" typically takes ten years. If you can hold out that long, the chances of success are about 10% to 15%. In contrast, the cycle for cryptocurrency tokens is 24 months.
This creates a higher barrier for founders solving "difficult problems." Typically, these problems involve consumer-facing applications, requiring founders to deeply understand market complexities and leverage technology to solve issues.
As a founder at the seed stage, how do you cope with this situation? The truth is, it’s hard to cope. Some founders are good at storytelling, but most are not. Even if you have some market appeal, the market may not give you the corresponding valuation. Google almost sold itself for $750,000; this phenomenon is not new.
A company's valuation is a collective fantasy of the founder and supporters about its future potential. Sometimes, only the founder has this fantasy; sometimes, every fund shares this fantasy (as in the case of FTX). The number of capital holders sharing this fantasy determines the valuation at the seed stage.
When consensus has not formed within an industry, success often comes down to perseverance and persistence. The startup world is full of stories of founders who persist until a fund decides to support them. The founders of Canva were rejected 100 times. Only in the hyper-capitalist world of Web3, where token exits are taken for granted, do we see rounds filled overnight.
As long as venture capital relies on consensus and cryptocurrency relies on token liquidity, founders solving difficult problems will continue to face funding challenges. This is the nature of the game. If you are a founder dedicated to solving problems, don’t view rejection as a measure of the value of what you are building. Often, you are conveying a vision that only you can see. If this is a consensus bet, you will be in a competitive market. But there are also subtle differences here.
Just because you continue to build in a market doesn’t mean you will succeed. Smart founders can usually judge when to double down and when to shut down their companies. Many founders we work with have shut down their companies, taken a break, and re-entered the market after learning from past experiences. Such founders often receive higher evaluations due to the lessons learned from past experiences and the integrity they show when shutting down unsuccessful projects.
Shutting down a company is just as commendable as persisting. Often, the value in the process lies in having honest conversations.
Reshuffling
(Source Reference. By the way, this may be because he has been doing it for over twenty years.)
I wish I could tell you that the PPT doesn’t matter. But I’m not Masayoshi Son running SoftBank; I’m just here to help at Decentralised.co.
Ultimately, the role of the PPT is simple. It is to convey the information that founders need to share during the fundraising process. Most founders struggle with storytelling, community building, or achieving basic profitability. So, the PPT has become the lowest entry threshold.
Therefore, assuming you still want to succeed, I suggest you ignore most of the garbage advice from investment bankers. In 2015, the average time venture capitalists spent on a project was 3 minutes and 44 seconds. By 2024, your time will be reduced to 2 minutes and 30 seconds. In the cryptocurrency space, you may only have a minute, because analysts or partners, while looking at your proposal, are likely also watching a meme’s price chart.
Here’s what you should include in your PPT:
The nature of the opportunity and your unique approach to it.
Why your team is the best choice, including experiences, stories, and personal factors.
Signs of market attractiveness: the customers, registered users, and pre-orders you have that support market demand.
You need to find ways to improve unit economics to scale the product—meaning, what kind of viral factors can give the product a competitive advantage.
How this product makes money. You don’t need a clear answer, but you should have a clear vision of the direction in which it can be profitable at scale.
If you already have customers, consider showcasing their testimonials of love for you, such as tweets, email replies, and chat logs. Show user feedback.
This is what I hope a founder friend knows. A perfect PPT is like the perfect coffee I strive for as a writer. You can wait and assume things will go smoothly. But like coffee, the PPT doesn’t solve all problems.
The PPT can be a good place for procrastination. Accelerators (like Y Combinator) are effective partly because they set deadlines for applications. Founders are forced to submit their immature ideas. However, when we look at it from a ten-year perspective, the founders of Y Combinator have had the most significant impact on the entire network.
Instead of waiting for the perfect presentation, communicate with customers, casually send DMs to VCs, and launch products. Most of these things will sink without a trace ; for early-stage entrepreneurs, rejection is the norm. But you cannot rally a team based solely on a vision in your mind. You need something concrete. The best way to achieve these concrete outcomes is through dialogue. Instead of spending weeks preparing a PPT, it’s better to engage more with people, record feedback, and quickly launch products, which is more likely to lead to success.
Like coffee and writing, the purpose of the PPT is to help you, not to make you wait. If you have a better way to convey credibility, postpone perfecting the PPT.
Here are some resources prepared for founders to build their PPTs.
A collection of over 1,400 PPTs for inspiration.
Y Combinator’s slides for those who like standardized formats.
Some additional PPT strategy examples.
NFX’s article on storytelling, one of my personal favorites.
OpenDeck with PPTs categorized by business model and stage.
NYU professor Ashwath Damodaran’s course on numbers and storytelling.
And my article from last year on narrative games.
If you want to step away from the startup world and just get inspired, refer to this book on creativity.
Seed-stage investment is essentially an investment in people. Venture capitalists buy the networks and experiences of founders at lower valuations. If founders lack these resources, documentation can help showcase their expertise. Overall, all early-stage investments are betting on the founders and their ability to scale the company.
However, this comes with the caveat that founders need to start in capital-favored areas. Nowadays, building and raising funds for an NFT marketplace is much more challenging than it was 36 months ago, as attention and capital have shifted elsewhere.
In a world of attention scarcity, capturing attention is half the battle. How to do this depends on the founders themselves.
