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I received a cold email from Jaime asking some very good questions about what should go into a pre-revenue startup pitch deck?

Do you include financials? How long should it be? What about exit opportunities?

My general philosophy is that you should have at least 2 pitch decks – an email deck and a presentation deck. An email deck should be short (~5 slides) and the goal of this deck is to just use it to get meetings. It should have a nice overview of your business and present enough information to a would-be investor. A presentation deck is for an actual meeting and should be much longer.

I address all of these questions in this video – watch for all the details:

As always, if you have questions about pitching, feel free to subscribe to my blog! 🙂

Wow, it has been a rough last few months. I hope you are staying safe and hanging in there.

Today, I want to pick up where I left off and dig back into marketing funnels. There is no better way to discuss funnels than to go through specific examples. So here I am on a smoky Friday afternoon – wearing a Snoopy Xmas shirt – creating this Zoom recording of 3 concrete business examples.

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Today I’m going to talk about something that’s a little bit off the beaten path of what I normally write about.

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I want to talk about stress. I tweeted this last night: 

https://twitter.com/dunkhippo33/status/1282144912851390464?s=20

This is what stress can do — I cannot lift laundry detergent “normally” with my right arm. 

In fact, it turns out that your trapezius muscle allows you to do many things such as

• Reach for things in a cabinet
• Adjust the rear-view mirror or radio knob in a car
• Wash dishes
• To a certain extent, use a fork to eat food. 

Without this muscle, many things are challenging.

One of my founders even texted me right after I posted this video if I was stressed out about his latest investor report! Hah! 

This video isn’t about stress from fundraising (we’re not raising right now anyway) or from having portfolio companies who are doing well or not well. In fact, the reason I decided to write about this so publicly is not to garner sympathy (but thank you for all the well wishes!) but to show to everyone what can happen because of stress — and that this can happen to anyone.

In fact, all of this started when I was 23 — not just recently. At 23, I ended up in a hospital in Tokyo after having terrible neck pain, where I was living and working at the time. I was fortunate to have excellent care, but the bad news was that I had a pinched nerve and I would likely live with this pain and weird issues forever — though it could be managed with proper diet, exercise, and low stress. 

The likely combined cause? Years of

• Poor posture (sitting and standing)
• Poor ergonomics using computers
• Using computers too much (by age 23!)
• Slinging too many backpacks filled with heavy books during high school
• Combined with stress

In other words, there wasn’t any particular trauma or incident. But guess what? 80% of people I know have some permutation of the above. 

Over the years, I’ve been able to manage this chronic issue pretty well. I started taking up swimming, even though I was never a swimmer in school (YouTube can teach you so many things!). And, I have bought so many ergonomic keyboards over the years, that I’m sure single-handedly propping the Amazon share price up. 

But every once in a while, stress creeps up and sends me back into health issues. In 2009, when I was starting my company, my arms and hands were tingling and it hurt to type. In 2011, when I was fundraising, I felt like someone was constantly poking me with pins all over. Some of the best physicians who were specialists in this area could not find anything additional wrong — miraculously when I stopped fundraising, the prickly feeling left! And fast forward to today, the combination of shelter-in-place/little kids/handling of the COVID-19 situation/police brutality/racism/and even the murder hornets are all fairly stressful! (I’m sure I’m not the only one here who thinks this)

As it would turn out over half of my friends who are tech entrepreneurs or recovering tech entrepreneurs have stress-induced issues. Repetitive strain issues, tingling feelings, shingles, IBS or other chronic stress-related problems, etc. It’s seemingly quite common, and while mental health is starting to be discussed, the physical ramifications of stress are rarely discussed publicly. 

And once you have one of these issues, with proper care, you’ll be able to manage through it, but you’ll get flare ups from time to time as stress comes and goes. You’ll never be quite the same. 

If I had to rewind the clock, what would I tell myself?

Never use a computer or iPad in an un-ergonomic way

• No laptop usage on the couch
• Buy an ergonomic mouse & keyboard that fits your hands (the built-in ones on the Macbook Air are way too hard)
• Buy an external monitor and set it to eye-level
• Set up proper typing and mousing heights
• Use a tablet pen with an iPad

Do a stress-relieving exercise everyday – even for 5 min. Once we leave school and become adults — there’s no PE or fun sports forced upon you to keep you accountable. And, for some (such as myself), forcing exercise becomes challenging. But even just a few jumping jacks a day can do wonders. In fact, jumping jacks are near impossible for me to do now. 

Always lift things in an ergonomic way – not just weights but everything. In school, I used to sling a lot of books over my shoulder. (Maybe I should have studied less? My HS schoolmates who had those wheelie backpacks got it right.) 

Sprint when you need to but jog when you don’t – in building a startup, sometimes you need to sprint — it’s inevitable. But understanding when you need to sprint and when you can jog is the key. As Mac Conwell discusses here, most people try to sprint all the time, and that’s just not sustainable. 

Jog mode doesn’t mean do nothing, but jog mode means reducing really extraneous things. Standing or sitting in front of a computer for hours on end isn’t what humans were meant to do. Reducing extraneous Zoom mtgs & calls, extraneous emails, etc and really focusing on health (exercise + mindfulness + stress reduction + good diet) during these times is what jog mode means. Prioritizing and only focusing on just 1 work thing for a “normal” working day is what jog mode means.

A lot of people wonder why not that many builders go back and build again. My hunch is that it’s this: they have some sort of chronic ailment that prevents them from being in “go-go-go mode” all the time and don’t think they can build a fast-growth company if they are not in “go-go-go mode” all the time. I think if we didn’t have “go-go-go mode” all the time as the norm expectation, we would see more multi-repeat builders. There’s this sense that if you’re not in “go-go-go mode” all the time, you’re not ambitious, but I think the right analogy is akin to marathon runners. Most people can’t run marathons everyday. You need to slow on some days and rest too. But when it counts, you need to be all out there running your race. Understanding what day is your race and what days are your training are critical, but often we don’t understand that. And if you get injured, you’ll never be the same. We have so many former athletes who are now injured who don’t want to run races again because they think they won’t win.

For me, with my ailments, I literally cannot type as much as I used to — I need days of typing rest. That used to frustrate me to no end. But over time, I’ve come to learn what is important to type, what emails to hold off on, and more recently, I’ve started building homegrown tools to allow me to do more with less typing. 

As a parent, I actually care way less about screen time and more about ergonomics. When my 3 year old said his back hurt from looking down at the screen, I was/am really hoping he was exaggerating (hard to tell), and it would not surprise me if this upcoming generation who will grow up on more portable devices that easily allow for poor posture and ergonomics will have even more chronic problems. I think ergonomics and posture should be taught in schools as part of PE or health. 

In conclusion – take care of your stress and health — you only have one shot, and once your health is gone, it’s hard to be the same again.

I was born and raised in the San Francisco Bay Area and grew up during the dot com boom in the late 1990s. One of the most interesting things in looking back are the stark differences in what it took to be successful back then with a software company and what it takes to be successful in building a software startup today in the US.

When I was a teenager, if you wanted to get into internet startups, you needed to find information on how to build websites. Although there were some no-code website builders, they were largely terrible. Building websites from scratch was the way to go. Moreover, developer knowledge was not really available online, because content on the internet was still being written. You had to hop over to your local Barnes & Noble bookstore to buy books on HTML, Javascript, Perl and whatnot. Lastly and most importantly, you needed access to servers. It was not uncommon for internet companies to spend boatloads of money setting up their infrastructure in a closet at their office. Back then, technical knowledge was a really valuable and a limited skill. If you could assemble the best technical teams and keep them happy, that was a really strong moat for you because you could prevent other would-be competitors from being able to build a competing offer.

And as a result, for many years, there were not that many websites in the US market (or anywhere). If you had a website, it was relatively easy to capture attention and web traffic. One such website, Craigslist, a simple peer-to-peer marketplace site that we are all familiar with, was started in 1995 and continues to reign to this day despite so many upstarts trying to compete with it on better design and usability. Why? Craigslist gets the job done and more importantly, people know about its existence. Distribution is king.

Although it often took months to build out a website in the 90s, today you can often get a fairly straightforward site out the door even with no-code tools in less than a day. And if you do need to write code, you can search for code examples on just about every possible topic in a variety of discussion forums and on YouTube. Even more advanced computer science topics such as in machine learning now have so many open source resources and infrastructure. You can often use a variety of specialty libraries without having specialized knowledge. For the most part, in software, technical information has largely become commoditized. This isn’t to say that you can’t make good money being a software engineer — and in fact, if you are a top engineer, you can now make a boatload of money! But it’s to say that most “run-of-the-mill” software development is not a unique skillset and most software businesses developed today don’t require specialized software development skills.

This has led to a flurry of many applications being built online – often with multiple teams building the same thing. It is not uncommon to run into 50 different founding teams all trying to build a marketplace for gym trainers. Or 300 founding teams trying re-invent marketing automation.

According to Statista, the number of websites has ballooned to nearly 2B!

For most software businesses in the US, the problem isn’t technical knowledge anymore. The problem is getting a wedge into distribution — also known as marketing.

Furthermore, incumbents who generally do a good job, often manage to continue reigning. According to Brad Gerstner, CEO of Altimeter Capital, who recently did a podcast on Invest Like The Best, large tech companies have managed to take even more market share than 10 years ago. Some people may argue this is because the large tech companies have improved their products over time to stay ahead due to their increased collection of data and better algorithms that feed on that data over time. That may be true for some companies but not all. This also applies to other products that have not made significant strides in their technology — Craigslist, Salesforce CRM, Turbotax, Quickbooks to name a few. Even Google Search which arguably had a better product in the 1990s compared to its peers is about on par with alternative search engines today, but 90% of people worldwide still use Google. Old habits die hard, and distribution matters more than ever if you are just starting a business. It’s hard to topple incumbents who have strong distribution and already large audiences — even if you can build a much better product.

So where are the opportunities in software? Is it even possible to build a company that takes an entire market? I took to Twitter to find out.

A big warm thanks to everyone who participated. A number of people came up with some great suggestions of winner-take-all companies within a variety of developer tools / API markets, but in large part, this was an incredibly difficult challenge. No one could think of a company that has started in the last decade and has clearly dominated above all other competitors. On the flipside, we’ve already rattled off a number of older software companies that continue to dominate market share TO THIS DAY in a variety of areas: Google Search, Amazon Books, Turbotax, etc. This isn’t to say that you cannot build a big business if you don’t own a market, but it’s to say that the old way of thinking about market domination is just not applicable anymore.

Put another way, a lot of the “low hanging fruit” in the US software market is now gone. Software in the US generally works. And new opportunities get swept up with would-be competitors immediately. If the 90s was about thinking through your build, the 2020s is about thinking through marketing & distribution.

As such, while many VCs are still fixated on finding unique technology in software and chasing companies that will ultimately be the sole winner, I’d contend that these two strategies — while successful in the 90s and early 00s — largely no longer work. There are certainly exceptions but if we are talking strictly about software, (not hardware, not drug discovery, not synthetic bio, etc) you’d be hard pressed to find a company where winning does not require a solid marketing and/or sales game. This is very different from the 1990s. Having a marketing skillset and mindset is what you need to win in 2020 in the US software market.

Although the low hanging fruit opportunities in the US are gone, it’s not to say that you can’t build a Salesforce competitor or a Craigslist competitor and be successful. The software market in the US has gotten so big — you can still build a billion dollar business if you are the 15th email service provider. We are seeing more and more unicorns ($1b valuation businesses) and many in the same market. However, we are also seeing many more startups than in the 1990s being built. This means that while there are more unicorns as an aggregate number, there are also many more companies that will not become unicorns. And with increased competition, even if there are more winners, the cost of customer acquisition becomes more expensive for all.

In fact, there are economic schools of thought around where we are in the tech-economic landscape. As economist Carlotta Perez describes, we are now in the Deployment Phase of the internet in the US — meaning, we are in-process of exhausting all use cases for internet technologies in the US. What has traditionally happened at the end of a technology phase is oversaturation of investment dollars chasing smaller returns. Valuations go up, returns go down, and investors lose their money. (Sound familiar?) On a company level, what this means is, if not careful, a lot of companies will end up wasting marketing dollars in this type of landscape. Companies in the 2020s, unlike in the 1990s, need to really be performance-marketing driven in order to compete. The end of last year certainly showed us many examples of well-funded companies that could not make the unit economics work. The software industry has become a marketing game.

Even if you aren’t running a strictly software business but use software platforms to operate a business, marketing is still key. If you run your company off Yelp, Shopify, Patreon, Stripe, Recurly, ConvertKit, Substack, or any of the others, you need to stand out, and that’s marketing. And the people who do the best at marketing make a LOT of money, and those who don’t, just can’t catch a break, even if they are good at their craft. Marketing is necessary.

There are, of course, exceptions to this — there are still emerging markets (both in the geographical sense and technology sense) where marketing doesn’t matter as much.

In developing geographical markets, it’s largely greenfield. We have a portfolio company in Indonesia that was able to get 250k signups almost immediately from brick and mortar small businesses and no budget. In the US, without a large marketing budget, this would be challenging to do now. Why? Because every Square and Opentable is knocking on their door and has been for years. There’s just so much noise small businesses tend to ignore. But in Indonesia, that isn’t the case…yet. The software landscape there is similar to the 1990s in the US. It’s harder to piggyback off of existing software infrastructure — whether it’s payments or platforms — but there’s also a lot of obvious opportunity in software that no one is going after. The same could be said about investing elsewhere in Southeast Asia or in LatAm or Africa. There are fewer startups to compete with for attention, and it’s less of a marketing game than building a software company in the US.

In addition, for companies pursuing developing technologies — such as in hardware or drug discovery, we’ve barely just scratched the surface of these technologies. There is so much opportunity left to be explored outside of software, and I suspect many US software investors will eventually have to rejigger their skillset to migrate away from strictly software into other technologies to find opportunities that don’t require playing as much of a marketing game. But eventually, marketing will become the name of the game for both global software markets and these other technologies.

In conclusion, the US software industry, for the most part, is no longer about technology. If you are highly technical, and you want to win on product and tech, your best bet is likely in building a business that is not strictly software in the US OR in building a software business for an international market. But if you want to win in the US software market, ironically, the best thing you can for your company is to really ramp up your performance marketing knowledge. Marketing is eating the world.

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In my last post, I talked about the ideal marketing machine you’re trying to build and how to think about it. I talked about lifetime value (LTV), customer acquisition costs (CAC), and payback period as the key terms you need to monitor.

Today, I talk about marketing funnels. I think most entrepreneurs have a general sense of what a marketing funnel is. But, what are the key components to look at? What should go into your funnel?

I talk about this in these next three videos:

What is a marketing funnel?

How to dissect and debug a marketing funnel by customer acquisition channel?

Where to spend your time debugging a marketing funnel?

Note: in these videos, I talk about 2 important dimensions to consider in looking at your marketing. Segment by 1) Customer acquisition channel and 2) Time

In these videos, we don’t talk about how to slide and dice your marketing data by time.

BUT, attend my online event on June 23, 2020 to learn how to slice and dice your marketing data by time using cohort analyses. Sign up today!

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