I recently came across a post by Eric Paley of Founders Collective. If you are not familiar with the Bostonian seed fund / angel group – it’s a pretty good one in my opinion. Anyway, the post was about how much business plans become irrelevant in the era of lean startups, agility and pivots. I couldn’t agree more with the spirit of the post. At EyeView, we only made a b-plan to apply to Harvard and MIT competitions and at SOOMLA we never bothered to write one and even if we have it would have been obsolete within 3 months.
Eric vs. Paul – should you have a deck or an executive summary
Eric claims that a deck has two main advantages:
- It’s easier to adjust as your plan changes
- Decks are more friendly as an investor material
On the other side of the spectrum, another big expert on startups, Paul Graham claims that the deck is obsolete and that a startup should only have an executive summary. His main points are:
- Never send out material as a pre-requisite for a meeting (I couldn’t agree more)
- For face to face communication, you need to know your story well enough to not need any visuals
- After the meeting, you can send executive summary for reference
Focus on your story first
So business plans are out – no argument there. However, there seems to be a difference of opinion about the roles of the deck and the executive summary. My personal experience is that decks that are optimized for presentation rarely tell a good story without the presenter. At the same time, executive summaries differ greatly on their effectiveness. My experience is that you need to focus on creating a story. When I’m saying a story, I’m referring to a series of if then arguments which prove that your company is going to generate the investor a huge win. For most investors this means an exit in the hundreds of millions. Here is an example:
- Company x has a great team. John sold 2 companies and Will registered 10 patents
- The market we are addressing is exploding, there are going to be some big wins here and we will be one of them
- We identified that 90% of audience y has a huge pain point
- Product z we are creating address the pain point perfectly
- Audience y loves product z so much that they recommend it to each other – numbers are through the roof
- Product z gives users much more value than the competition
- Any new user increases the barrier and makes it harder for the competition
- Companies/individuals in audience y typically allocate 10% of their annual budget for alternative solutions
- We found a way that allow us to spend no more than 10% of the product price in order to gain a new customer
- There are enough companies in audience y so that with the price of product x the company can generate $100M in revenues
Getting meetings, pitching the story and sending it after
Every startup company needs to have a story like that. It needs to be bullet proof and supported by facts wherever possible. If you have this, an executive summary just means writing it down in bullet points and sending over as a PDF with some supporting evidence and a chart where needed. A deck is just a visualization of the same bullet points. From this point, it becomes a matter of personal style and context. My usage preferences are:
- Optimizing the story – written bullet points with no deck
- Sending material to get a meeting – nothing, not happening, avoid at all costs
- Sending before a pre-booked meeting – written bullet points (executive summary)
- Casual pitching (coffee shop) – no deck, just verbal story
- Official pitching (meeting room) – verbal story with a deck (deck should have as little text as possible)
- Sending materials after the meeting – written bullet points (executive summary)
Reducing the amount of visual aids and boilerplate text around your story also has another interesting impact. It gives you much more clarity into the execution plan, the risks and the drivers of your business. This turns into better execution focus for you and your team.
