It’s not often that you hear about a seed round above $10 million. H, a startup based in Paris and previously known as Holistic AI, has announced a $220 million seed round just a few months after the company’s inception. It has managed to raise so much money so quickly because it’s an AI startup […]
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Longtime New York-based seed investor, Contour Venture Partners, is making progress on its latest flagship fund after lowering its target. The firm closed on $42 million, raised from 64 backers, for Contour Venture Partners Fund V, according to an SEC filing from May 17. The New York-based firm is targeting $70 million for its fifth […]
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Trawa simplifies energy purchasing and management for SMEs by leveraging an AI-powered platform and downstream data from customers.
© 2024 TechCrunch. All rights reserved. For personal use only.
The Israeli startup has raised $5.5M for its platform that uses “statistical AI” to generate synthetic data that it says is as good as the real thing.
© 2024 TechCrunch. All rights reserved. For personal use only.
“When an investor passes on you, they will not tell you the real reason,” said Tom Blomfield, group partner at Y Combinator. “At seed stage, frankly, no one knows what’s going to fucking happen. The future is so uncertain. All they’re judging is the perceived quality of the founder. When they pass, what they’re thinking in their head is that this person is not impressive enough. Not formidable. Not smart enough. Not hardworking enough. Whatever it is, ‘I am not convinced this person is a winner.’ And they will never say that to you, because you would get upset. And then you would never want to pitch them again.”
Blomfield should know – he was the founder of Monzo Bank, one of the brightest-shining stars in the UK startup sky. For the past three years or so, he’s been a partner at Y Combinator. He joined me on stage at TechCrunch Early Stage in Boston on Thursday, in a session titled “How to Raise Money and Come Out Alive.” There were no minced words or pulled punches: only real talk and the occasional F-bomb flowed.
At the heart of the venture capital model lies the Power Law of Returns, a concept that every founder must grasp to navigate the fundraising landscape effectively. In summary: a small number of highly successful investments will generate the majority of a VC firm’s returns, offsetting the losses from the many investments that fail to take off.
For VCs, this means a relentless focus on identifying and backing those rare startups with the potential for 100x to 1000x returns. As a founder, your challenge is to convince investors that your startup has the potential to be one of those outliers, even if the probability of achieving such massive success seems as low as 1%.
Demonstrating this outsized potential requires a compelling vision, a deep understanding of your market, and a clear path to rapid growth. Founders must paint a picture of a future where their startup has captured a significant portion of a large and growing market, with a business model that can scale efficiently and profitably.
“Every VC, when they’re looking at your company, is not asking, ‘oh, this founder’s asked me to invest at $5 million. Will it get to $10 million or $20 million?’ For a VC, that’s as good as failure,” said Blomfield. “Batting singles is literally identical to zeros for them. It does not move the needle in any way. The only thing that moves the needle for VC returns is home runs, is the 100x return, the 1,000x return.”
VCs are looking for founders who can back up their claims with data, traction, and a deep understanding of their industry. This means clearly grasping your key metrics, such as customer acquisition costs, lifetime value, and growth rates, and articulating how these metrics will evolve as you scale.
One proxy for power law, is the size of your addressable market: It’s crucial to have a clear understanding of your Total Addressable Market (TAM) and to be able to articulate this to investors in a compelling way. Your TAM represents the total revenue opportunity available to your startup if you were to capture 100% of your target market. It’s a theoretical ceiling on your potential growth, and it’s a key metric that VCs use to evaluate the potential scale of your business.
When presenting your TAM to investors, be realistic and to back up your estimates with data and research. VCs are highly skilled at evaluating market potential, and they’ll quickly see through any attempts to inflate or exaggerate your market size. Instead, focus on presenting a clear and compelling case for why your market is attractive, how you plan to capture a significant share of it, and what unique advantages your startup brings to the table.
Raising venture capital is not just about pitching your startup to investors and hoping for the best. It’s a strategic process that involves creating leverage and competition among investors to secure the best possible terms for your company.
“YC is very, very good at [generating leverage. We basically collect a bunch of the best companies in the world, we put them through a program, and at the end, we have a demo day where the world’s best investors basically run an auction process to try and invest in the companies,” Blomfield summarized. “And whether or not you’re doing an accelerator, trying to create that kind of pressured situation, that kind of high leverage situation where you have multiple investors bidding for your company. It’s really the only way you get great investment outcomes. YC just manufactures that for you. It’s very, very useful.”
Even if you’re not part of an accelerator program, there are still ways to create competition and leverage among investors. One strategy is to run a tight fundraising process, setting a clear timeline for when you’ll be making a decision and communicating this to investors upfront. This creates a sense of urgency and scarcity, as investors know they have a limited offer window.
Another tactic is to be strategic about the order in which you meet with investors. Start with investors who are likely to be more skeptical or have a longer decision-making process, and then move on to those who are more likely to move quickly. This allows you to build momentum and create a sense of inevitability around your fundraise.
Blomfield also discussed how angel investors often have different motivations and rubrics for investing than professional investors: they usually invest at a higher rate than VCs, particularly for early-stage deals. This is because angels typically invest their own money and are more likely to be swayed by a compelling founder or vision, even if the business is still in its early stages.
Another key advantage of working with angel investors is that they can often provide introductions to other investors and help you build momentum in your fundraising efforts. Many successful fundraising rounds start with a few key angel investors coming on board, which then helps attract the interest of larger VCs.
Blomfield shared the example of a round that came together slowly; over 180 meetings and 4.5 months worth of hard slog.
“This is actually the reality of most rounds that are done today: You read about the blockbuster round in TechCrunch. You know, ‘I raised $100 million from Sequoia kind of rounds’. But honestly, TechCrunch doesn’t write so much about the ‘I ground it out for 4 and 1/2 months and finally closed my round after meeting 190 investors,’” Blomfield said. “Actually, this is how most rounds get done. And a lot of it depends on angel investors.”
One of the most challenging aspects of the fundraising process for founders is navigating the feedback they receive from investors. While it’s natural to seek out and carefully consider any advice or criticism from potential backers, it’s crucial to recognize that investor feedback can often be misleading or counterproductive.
Blomfield explains that investors will often pass on a deal for reasons they don’t fully disclose to the founder. They may cite concerns about the market, the product, or the team, but these are often just superficial justifications for a more fundamental lack of conviction or fit with their investment thesis.
“The takeaway from this is when an investor gives you a bunch of feedback on your seed stage pitch, some founders are like, ‘oh my god, they said my go-to-market isn’t developed enough. Better go and do that.’ But it leads people astray, because the reasons are mostly bullshit,” says Blomfield. “You might end up pivoting your whole company strategy based on some random feedback that an investor gave you, when actually they’re thinking, ‘I don’t think the founders are good enough,’ which is a tough truth they’ll never tell you.”
Investors are not always right. Just because an investor has passed on your deal doesn’t necessarily mean that your startup is flawed or lacking in potential. Many of the most successful companies in history have been passed over by countless investors before finding the right fit.
The investors you bring on board will not only provide the capital you need to grow but will also serve as key partners and advisors as you navigate the challenges of scaling your business. Choosing the wrong investors can lead to misaligned incentives, conflicts, and even the failure of your company. A lot of that is avoidable by doing thorough due diligence on potential investors before signing any deals. This means looking beyond just the size of their fund or the names in their portfolio and really digging into their reputation, track record, and approach to working with founders.
“80-odd percent of investors give you money. The money is the same. And you get back to running your business. And you have to figure it out. I think, unfortunately, there are about 15 percent to 20 percent of investors who are actively destructive,” Blomfield said. “They give you money, and then they try to help out, and they fuck shit up. They are super demanding, or push you to pivot the business in a crazy direction, or push you to spend the money they’ve just given you to hire faster.”
One key piece advice from Blomfield is to speak with founders of companies that have not performed well within an investor’s portfolio. While it’s natural for investors to tout their successful investments, you can often learn more by examining how they behave when things aren’t going according to plan.
“The successful founders are going to say nice things. But the middling, the singles, and the strikeouts, the failures, go and talk to those people. And don’t get an introduction from the investor. Go and do your own research. Find those founders and ask, how did these investors act when times got tough,” Blomfield advised.
Jonathan Strimling faced a dilemma. His company had spent nine years working on chemical processes that could turn old cardboard boxes into high-quality building insulation. The good news was the team had finally cracked it: CleanFiber’s technology pumped out insulation — really good insulation. It had fewer contaminants and produced less dust than other cellulose insulation made from old newspapers. Insulation installers loved the stuff.
Now CleanFiber had to make more of it. A lot more.
Many founders and CEOs might be envious of the problem. But the transition from science project to commercial outfit is one of the hardest to pull off.
“It’s hard to launch your first-of-breed plant,” Strimling, the company’s CEO, told TechCrunch. “It did cost us more than we expected. It took us longer than we expected. And that’s fairly typical.”
Any startup is laced with a certain amount of risk. Early-stage companies are often unsure whether their technology will work or whether their product will find enough customers. But at that point, investors are more willing to stomach the risk. They know fresh startups are a gamble, but the amount required to get one off the ground is relatively small. It’s easier to play the numbers game.
The game changes, though, when startups emerge from their youth, and it becomes especially challenging when the company’s products are made of atoms, not ones and zeros.
“There’s still a lot of hesitancy to do hardware, hard tech, infrastructure,” Matt Rogers, co-founder of Nest and Mill, told TechCrunch. Those awkward middle stages are particularly hard for climate startups, which are dominated by hardware companies.
“You can’t solve climate with SaaS,” Rogers said.
The problem has come to dominate conversations about finance and climate change. There has been an explosion of startups in recent years that seek to electrify homes and buildings, slash pollution in industrial processes, and remove planet-warming carbon from the atmosphere. But as those companies emerge from the lab, they’re finding it hard to raise the kind of money they’ll need to build their first commercial scale project.
“That transition is just a really, really difficult one,” said Lara Pierpoint, managing director of Trellis Climate at Prime Coalition. “It’s not one that VC was designed to navigate, nor is it one that institutional infrastructure investors were designed to take on from a risk perspective.”
Some call this the “first of a kind” problem. Others call it the “missing middle,” describing the yawning gap between early-stage venture dollars and expertise on one end and infrastructure funds on the other. But those terms paper over the severity of the problem. A better term might be what Ashwin Shashindranath, a partner at Energy Impact Partners, calls “the commercial valley of death.”
Sean Sandbach, principal at Spring Lane Capital, puts it more bluntly, calling it “the single greatest threat to climate companies.”
The valley of death isn’t unique to climate tech companies, but it poses a bigger challenge for those that seek to decarbonize industry or buildings, for example. “When you’re making hardware or infrastructure, your capital needs are just very different,” Rogers said.
To see how, consider two hypothetical climate tech companies: one is a SaaS startup with revenue that recently raised a $2 million round and is looking for another $5 million. “That’s a good story for a traditional venture firm,” said Abe Yokell, co-founder and managing partner at Congruent Ventures.
Contrast that with a deep tech company that doesn’t have any revenue and is hoping to raise a $50 million Series B to fund its first-of-a-kind project. “That’s a harder story,” he said.
As a result, “a good portion of our time consistently is spent with our portfolio companies helping them bring on the next stage of capital,” Yokell said. “We are finding people to fill the gap. But it’s not like you go to 20 funds. You go to 100 or 200.”
It’s not just the dollar amounts that make it more challenging to raise money. Part of the problem lies in the way startup financing has evolved over the years. Where decades ago venture capitalists used to tackle hardware challenges, today the majority tend to avoid them.
“We have a capital stack in our economy that was built for digital innovation,” rather than hardware advances, said Saloni Multani, co-head of venture and growth at Galvanize Climate Solutions.
The commercial valley of death has claimed more than a few victims. Over a decade ago, battery manufacturer A123 Systems worked feverishly to build not just its own factories, but also an entire supply chain to provide cells to companies like GM. It ended up being sold for pennies on the dollar to a Chinese auto parts giant.
More recently, Sunfolding, which made actuators to help solar panels track the sun, went belly up in December after it ran into manufacturing challenges. Another startup, electric bus manufacturer Proterra, declared bankruptcy in August in part because it had signed contracts that were unprofitable — making the buses simply cost more than anticipated.
In Proterra’s case, the struggles of mass manufacturing buses were compounded by the fact that the company was also developing two other business lines, one that focused on battery systems for other heavy-duty vehicles and another that specialized in charging infrastructure for them.
Many startups fall into this trap, said Adam Sharkawy, co-founder and managing partner at Material Impact. “As they get some early success, they are looking around themselves and saying, ‘How can we build our ecosystem? How can we pave the path to really scaling? How can we build infrastructure to prepare ourselves to scale?’” he said. “They lose sight of the core value proposition that they’re building, that they need to ensure execution on, before they can start to linearly scale the rest.”
Maintaining focus is one part of the challenge. Recognizing what to focus on and when is another. That can be learned with firsthand experience, something that’s often lacking in early-stage startups.
As a result, many investors are pushing startups to hire people experienced in manufacturing, construction, and project management earlier than they might otherwise do. “We always advocate for the early hiring of roles such as project manager, head of engineering, head of construction,” said Mario Fernandez, head of Breakthrough Energy Catalyst, which invests in large demonstrations and first-of-a-kind projects.
“Team gap is a big thing that we’re trying to address,” said Shashindranath, the EIP partner. “Most companies that we invest in have never built a large project before.”
To be sure, having the right team in place won’t matter if the company runs out of money. For that, investors have to dig deeper into their wallets or look elsewhere for solutions.
Writing more and bigger checks is one solution that many firms pursue. Many investors have opportunity funds or continuity funds reserved for the most successful portfolio companies to ensure they have the resources required to survive the valley of death. Not only does that give startups bigger war chests, but it can also help them access other pools of capital, Shashindranath said. Companies with bigger bank accounts have “additional credibility” with debt financiers, he said. “It’s signaling that helps in a lot of different ways.”
For companies building a factory, asset-backed equipment loans are also an option, said Tom Chi, founding partner at At One Ventures, “where in the worst-case scenario, you’re able to sell back the equipment at 70% of the value and you only have a little bit of debt cap to go repay.”
Yet for companies at the bleeding edge, like a fusion startup, there are limits to how far that playbook can take them. Some projects simply need lots of money before they’ll bring in meaningful revenue, and there aren’t many investors who are well positioned to bridge the gap.
“Early-stage investors, for a whole host of reasons, have struggled to support that middle process largely owing to the scale of their funds, the scale of the checks that they can write, and, to be candid, the realities of the returns that these assets are ultimately able to produce,” said Francis O’Sullivan, managing director at S2G Ventures. “Venture-like returns are exceptionally difficult to achieve once you move into this larger, more capital intensive, more project orientated, commodity-producing world.”
Typical early-stage venture investors aim for tenfold returns on investments, but O’Sullivan argues that perhaps a better mark for hardware-focused climate tech startups would be 2x or 3x. That would make it easier to attract follow-on investment from growth equity funds, which look for similar returns, before handing things off to infrastructure investors, which tend to aim for 50% returns. Problem is, most investors aren’t incentivized to work together, even within large money managers, he said.
On top of that, there aren’t many climate-focused VC firms that have the scale to provide funding in the middle stages, said Abe Yokell. “What we’re really betting on at this point is that there’s enough overlap [in interests] for the traditional venture firms to come in,” he said. “Now the problem, of course, is that over the last couple of years traditional venture has been very beat up.”
Another reason traditional venture firms haven’t stepped up is because they don’t truly understand the risks associated with climate tech investments.
“In hardware, there are things that look like they have technology risk, but actually don’t. I think that’s a massive opportunity,” said Shomik Dutta, co-founder and managing partner of Overture. “Then there are things that look like they have technology risk and still do. And so the question is, how do we bifurcate those pathways?”
One firm, Spring Lane, which recently invested in CleanFiber, has developed a sort of hybrid approach that draws on both venture capital and private equity. The firm performs a large amount of due diligence on its investments — “on par with the large infrastructure funds,” Sandbach said — which helps it gain confidence that the startup has worked through the scientific and technical challenges.
Once it decides to proceed, it often uses a combination of equity and debt. After the deal closes, Spring Lane has a team of experts who help portfolio companies tackle the challenges of scaling up.
Not every firm will be inclined to take that approach, which is why Pierpoint’s firm, Prime Coalition, advocates for more so-called catalytic capital, which includes everything from government grants to philanthropic dollars. The latter can absorb risk that other investors wouldn’t be keen to accept. Over time, the thinking goes, as investors get a deeper appreciation of the risks involved in middle-stage climate tech investing, they’ll be more inclined to place bets on their own, without a philanthropic backstop.
“I’m a big believer that human beings de-risk things through knowledge,” Multani said. “The reason I love seeing generalist firms invest in these companies is because it means they spent a bunch of time understanding the space, and they realize there’s an opportunity.”
However it happens, creating climate solutions through technology is an urgent challenge. The world’s countries have set a goal to eliminate carbon pollution in the next 25 years, which isn’t that long if you consider that it takes several years to build a single factory. To keep warming below 1.5°C, we’ll have to build a lot of factories, many of which have never been built before. And to do that, startups will need lots more money than is available today.
At CleanFiber, Strimling and his team haven’t just completed the company’s first factory, but have also expanded it. It’s now producing enough insulation for 20,000 homes every year. The next few facilities should take less time to build, but the hurdles on the road to opening the first were significant. “When launching the first-of-breed plant, you do run into things you don’t expect,” Strimling said. “We ran into a pandemic.”
Replicating that success across a range of industries won’t be easy or cheap. Still, plenty of investors remain optimistic. “The future will look different from the past,” Multani said. “It must.”
NOQX is a Stockholm-based startup on a mission to help companies improve their goal-setting, collaboration mechanisms and experiences. It has just raised a $200,000 pre-seed round to help accomplish its aims and, by extension, help out companies with employee counts ranging from 50 to 500 or so. The company hasn’t been around for very long — the team behind NOQX felt frustrated by a lack of effective goal management tools for companies and founded the company in 2023.
With “clarity of objectives” as its rallying cry, NOQX addresses a critical function of any business — and indeed, of pitch decks — so I was intrigued to see how well NOQX communicates this for itself.
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NOQX’s deck has 18 slides, none of which has any redactions, although the company omitted its competition slide. An 18-slide deck should cover everything (most startups do just fine with 16), but there are some omissions that leave it incomplete.
In the past 90-odd installments of this Pitch Deck Teardown series, I’ve generally stuck with a “three things that are good” and “three things that can be improved” format. I tried ever so hard to do that for NOQX as well but eventually gave up.
The bold design of NOQX’s deck made me want to love it, but in truth, reviewing this deck was a deeply frustrating experience. Aside from the crucial omission of an Ask and Use of Funds slide (it’s not uncommon to get it wrong, but it should at least be included!), just about every slide in the deck felt almost very good — but then stumbled by not including a critical factor or overlooking an important detail. The deck is essentially so vague that it seems the founders don’t have a firm grip on why they are doing what they are doing.
[Slides 2, 3, 4] That’s a lot of problem slides. Image Credits: NOQX
I was surprised to see NOQX break out three different problem slides. It is almost defensive, as if the company is desperate to convince investors that “Yes! I promise! There’s a real problem worth solving here!”
Investors are sharp. It’s far more effective to streamline this into a single, punchy slide. This approach spares everyone the boredom of repetition and sharpens the focus, ensuring the core issue shines without unnecessary fluff.
The problem slide should hit investors with a stark headline for a more compelling punch: “70% of companies are failing to achieve their goals” immediately sets the stage, signaling a significant and widespread issue. Below this headline, NOQX could have added three to five bullet points, each a mini-revelation on why this massive failure rate matters. These bullets need to pack a punch, highlighting the dire consequences for businesses and the economy, and the looming disaster if left unchecked. The idea is to make investors sit up and realize, “We can’t afford to ignore this.”
These bullet points should do more than just state the obvious; they need to align with what keeps investors up at night directly: opportunity and scalability. Each point should scream potential and profit, convincingly arguing why NOQX holds the golden ticket to a pressing, lucrative problem. By distilling the problem down to a single, impactful slide, NOQX would have cut through the noise, commanded attention, and made their case with the kind of clarity that demands a checkbook, not just a nod.
Saw this one coming, right?
[Slides 5, 6, 7] If you have too many solutions, you don’t have a solution. Image Credits: NOQX
From a storytelling point of view, it’s often worth divorcing the “solution” slide from the “product” slide. In this progression of slides, Slide 5 is kinda-mostly a solution slide, Slide 6 is kinda-sorta a value proposition slide, and Slide 7 plays the role of a product slide — but none of the slides are convincing.
Identifying the slides properly means that it becomes much easier to know what to include.
For a solution slide, it’s crucial to clearly articulate how your product or service solves the problem you’ve identified. This slide should succinctly explain why your solution is superior to existing alternatives. It’s worth keeping this part strategic and high level: You’re about to dive into the nitty-gritty on the product slide.
For the value proposition part of the story, founders must clearly define the unique benefits the product or service offers and why it stands out in the market. This slide should succinctly communicate what makes the startup’s offering valuable to potential customers and what differentiates it from competitors. It needs to highlight the distinct advantages it provides, such as cost-efficiency, superior technology, enhanced features or better user experience. In this case, NOQX’s value props are a bit of a nothingburger — fine at first glance, but not differentiated enough to really stand out from the competition.
For a product slide, you get to dive in and show the actual features and functionality that will help your customers get value from your product and solve their problem. Apart from the fact that “our awesome platform” is a bit cringe, it doesn’t actually say anything. Every startup in the world could say “our awesome platform,” which means you’re wasting that slide real estate for nothing. What is awesome about it? Why should investors care? How is it different or unique?
[Slide 8] A timeline to confusion. Image Credits: NOQX
I love a good timeline slide that shows what companies are trying to accomplish. Instead, this slide fails to understand who it is talking to. Perhaps this slide works in a sales deck when the founders are trying to explain its value to customers, but for an investor deck, this seems a little superfluous.
Overall, this slide falls between “how it works” and “value prop.” It’s not doing a great job at either, and it fails to meet the overall criteria for what to include in a pitch deck: Will this help you raise money? My gut sense is “no.”
[Slide 12] Traction is the past. Image Credits: NOQX
I love how colorful and visually appealing this slide is. What it is not, however, is a traction slide.
If you don’t have revenue yet, your traction slide should outline what you’ve done to de-risk the company. This slide not only fails to do that, but it also goes to December 2024. Your traction, per definition, is just about the past: accomplishments and milestones achieved to date. Ideally it’s presented as charts and graphs that show that growth is solid and accelerating. This looks like there isn’t any traction in the business. That makes sense; it’s a young company. But don’t try to trick your investors; they’ll see right through this, so just be upfront.
But all is not lost. This slide is sort of a “use of funds” slide, showing what the company is planning to do in the near future. That would be helpful, but it should have clear time goals around when it is planning to hit those milestones and what it needs to do to get there. “Smart investors” and “repeatable sales process” are important steps along the way, but they are obvious. Investors want to know what you’re going to do to get those investors and sales processes.
[Slide 16] Why, oh, why? Image Credits: NOQX
Having a great “Why now?” slide can help create FOMO and a sense of urgency. This slide just doesn’t do that. It’s a great start, don’t get me wrong, but well-informed investors will know all of this; it doesn’t add anything to the conversation. I’d have loved to see some insights or some thought leadership here. Why was there a shift in organizational structures? What’s the impact of meetings evolving? What is the impact of a leadership style shift? What does “a flow” goal setting and cadence even mean in this context?
I feel like I’m missing something significant here. Perhaps this slide only works when it has a voice-over, but pitch decks need to stand on their own two proverbial feet. And that might mean that you may need more than one pitch deck: one for voice-overs and one for sending ahead.
Your team slide is crucial and is doing a lot of heavy lifting in the context of an early-stage pitch. Let’s take a look at this one:
[Slide 17] A solid team, but I want more context. Image Credits: NOQX
There’s too much and too little going on in this slide. The slide has a lot of very small text on it, which I don’t love. It’s pretty conversational, which can work, but in this case, I think it comes up short.
“With a decade of experience in hyper-growth B2B-SaaS companies.” Yes, but which ones, and why is that relevant? The rest of the statement is a lot of words, but it’s not helping me, as an investor, ascertain whether the CEO is a great fit to build this company. Now I need to head to LinkedIn, but there’s no link, so I’m going to have to start Googling, and I’m finding myself frustrated; this could be so much easier and better.
The CTO’s bio is similarly frustrating: Senior developer at Klarna is impressive, but it isn’t clear whether the experience is directly relevant or overlaps with the mission, vision and products NOQX is pursuing. The rest of the bio doesn’t say much. Yes, of course you are a visionary leader who strives to break new ground and deliver exceptional experiences, but the same can be said for every startup CTO ever. Be more specific. Explain why you’re the gold-plated unicorn on a pile of unfair advantages and talents that lead me to believe I’d be crazy not to deploy money into this startup.
And finally, if your head of UX is a co-founder, we need to have a conversation about whether that makes sense. And if she’s not, what is she doing on your team slide? As an investor at the earliest stages, I’m investing in the founding team and its ability to build a solid team. I don’t need to know the team itself quite yet.
[Slide 13] This could have been copied out of a business textbook. That’s not a good thing, because all the specifics are missing. Image Credits: NOQX
Overall, the whole pitch deck seems really vague and nonspecific, which makes me (and investors) suspicious. Is it vague by accident, and if so, will this startup be able to explain what it is doing as it is growing and evolving? Worse, is it vague on purpose, because the founders know they’re not a great fit with the industry they are trying to enter?
Take this go-to-market slide, for example. This is barely even a brainstorm; it just outlines a generic sales process. Cold calling and email marketing: Yes, but where will it find its customers? What’s the top-of-funnel? What are the conversion rates?
Investors want to know who you are, what you’re doing, why you’re doing it, and how you’re thinking about the market and building a (potentially) multi-billion-dollar company in this space. They want to know who your customers are, what their existing options are and how you’re different. They want to know how you find and reach out to your customers, and they want to know how much you’re expecting to pay to acquire a customer, and how long you’re expecting them to stay around, and at what value.
None of those things are obviously present in this deck. That means that if I were to take a meeting with this startup, I’d have a lot of very pesky questions for them, such as:
All in all, the deck looks so good, but it lacks substance. Hopefully the company can figure that out ahead of raising its next round, or it may be in for a truly nasty surprise.
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When IVP recently announced the closing of its 18th fund, I called Eric Liaw, a longtime general partner with the growth-stage firm, to ask a few questions. For starters, wringing $1.6 billion in capital commitments from its investors right now would seem a lot more challenging than garnering commitments during the frothier days of 2021, when IVP announced a $1.8 billion vehicle.
I also wondered about succession at IVP, whose many bets include Figma and Robinhood, and whose founder and earlier investors still loom large at the firm — both figuratively and literally. A recent Fortune story noted that pictures of firm founder Reid Dennis remain scattered “in all sorts of places throughout IVP’s San Francisco office.” Meanwhile, pictures of Todd Chaffee, Norm Fogelsong and Sandy Miller — former general partners who are now “advisory partners” — are mixed in with the firm’s general partners on the firm’s website, which, visually at least, makes less room for the current generation.
Not last, I wanted to talk with Liaw about Klarna, a portfolio company that made headlines last month when a behind-the-scenes disagreement over who should sit on its board spilled into public view. Below are parts of our chat, edited for length and clarity. You can listen to the longer conversation as a podcast here.
Congratulations on your new fund. Now you can relax for a couple of months! Was the fundraising process any more or less difficult this time given the market?
It’s really been a choppy period throughout. If you really rewind the clock, back in 2018 when we raised our 16th fund, it was a “normal” environment. We raised a slightly bigger one in 2021, which was not a normal environment. One thing we’re glad we didn’t do was raise an excessive amount of capital relative to our strategy, and then deploy it all very quickly, which other folks in our industry did. So [we’ve been] pretty consistent.
Did you take any money from Saudi Arabia? Doing so has become more acceptable, more widespread. I’m wondering if [Public Investment Fund] is a new or existing LP.
We don’t typically comment on our LP base, but we don’t have capital from that region.
Speaking of regions, you were in the Bay Area for years. You have two degrees from Stanford. You’re now in London. When and why did you make that move?
We moved about eight months ago. I’ve actually been in the Bay Area since I was 18, when I came to Stanford for undergrad. That’s more years ago than I care to admit at this point. But for us, expansion to Europe was an organic extension of a strategy we’ve been pursuing. We made our first investment in Europe back in 2006, in Helsinki, Finland, in a company called MySQL that was acquired subsequently by Sun [Microsystems] for a billion dollars when that was not run-of-the-mill. Then, in 2013, we invested in Supercell, which is also based in Finland. In 2014, we became an investor in Klarna. And [at this point], our European portfolio today is about 20 companies or so; it’s about 20% of our active portfolio, spread over 10 different countries. We felt like putting some feet on the ground was the right move.
There has been a lot of drama around Klarna. What did you make of The Information’s reports about [former Sequoia investor] Michael Moritz versus Matt Miller, the Sequoia partner who was more recently representing the firm and has since been replaced by another Sequoia partner, Andrew Reed?
We’re smaller investors in Klarna. We aren’t active in the board discussions. We’re excited about their business performance. In many ways, they’ve had the worst of both worlds. They file publicly. They’re subject to a lot of scrutiny. Everyone sees their numbers, but they don’t have the currency [i.e., that a publicly traded company enjoys]. I think [CEO and co-founder] Sebastian [Siemiatkowski] is now much more open about the fact that they’ll be a public entity at some point in the not-too-distant future, which we’re excited about. The reporting, I guess if accurate, I can’t get behind the motivations. I don’t know exactly what happened. I’m just glad that he put it behind them and can focus on the business.
You and I have talked about different countries and some of their respective strengths. We’ve talked about consumer startups. It brings to mind the social network BeReal in France, which is reportedly looking for Series C funding right now or else it might sell. Has IVP kicked the tires on that company?
We’ve researched them and spoken to them in the past and we aren’t currently an investor, so I don’t have a lot of visibility into what their current strategy is. I think social is hard; the prize is massive, but the path to get there is pretty hard. I do think every few years, companies are able to establish a foothold even with the strength of Facebook-slash-Meta. Snap continues to have a strong pull; we invested in Snap pretty early on. Discord has carved out some space in the market for themselves. Obviously, TikTok has done something pretty transformational around the world. So the prize is big but it’s hard to get there. That’s part of the challenge of the fund, investing in consumer apps, which we’ve done, [figuring out] which of these rocket ships has enough fuel to break through the atmosphere and which will come back down to earth.
Regarding your new fund, that Fortune story noted that the firm isn’t named after founder Reid Dennis as proof that it was built to outlive him. Yet it also noted there are pictures of Dennis everywhere, and others of the firm’s past partners, and now advisers, are very prominently featured on IVP’s site. IVP talks about making room for younger partners; I do wonder if that’s actually happening.
I would say without question, it’s happening. We have a strong culture and tradition of providing people in their careers the opportunity to move up in the organization to the highest echelons of the general partnership. I’m fortunate to be an example of that. Many of my partners are, as well. It’s not exclusively the path at the firm, but it’s a real opportunity that people have.
We don’t have a managing partner and we don’t have a CEO. We’ve had people enter the firm, serve the firm and our LPs, and also as they get to a different point in their lives and careers, take a step back and move on to different things, which by definition does create more room and responsibility for people who are younger and now are reaching that prime age in their careers to help carry the institution forward.
Can I ask: do those advisers still receive carry?
You can ask, but I don’t want to get into economics or things along that dimension. So I’ll quietly decline [that question]. But we do value their inputs and advice and their contributions to the firm over many years.
There’s obviously a valuation reset going on for every company seemingly that’s not a large language model company, which is a lot of companies. I’d guess that gives you easier access to top companies, but also hurts some of your existing portfolio companies. How is the firm navigating through it all?
I think in terms of companies that are raising money, the ones that are most promising will always have a choice, and there will always be competition for those rounds and thus those rounds and the valuations associated with them will always feel expensive. I don’t think anyone has ever reached a great venture outcome feeling like, “Man, I got a steal on that deal.” You always feel slightly uncomfortable. But the belief in what the company can become offsets that feeling of discomfort. That’s part of the fun of the job.
When Josh Silverman started shopping around the idea for his methane-eating microbe startup, Windfall Bio, eight years ago, the market just wasn’t ready. Nobody cared about methane, he said. Companies were instead focused on lowering their carbon emissions. But a few years later, the market is starting to come around.
Menlo Park–based Windfall Bio raised a $28 million Series A round to expand its commercialization efforts. The round was led by Prelude Ventures with participation from Amazon’s Climate Pledge Fund, Incite Ventures and Positive Ventures, among others, as well as existing investors, including Mayfield.
Windfall works with industries that produce large levels of methane, such as agriculture, oil and gas, and landfills. The startup supplies methane-eating microbes that absorb methane emissions, turning them into fertilizer. Companies can either utilize the fertilizer themselves, if they are in the agriculture sector, or they can sell it as a revenue stream.
“We think there is a big opportunity to leverage this natural ecosystem that gives us a low-cost solution without needing massive investments in capital like we are seeing for these other carbon capture technologies,” Silverman said.
While it took a couple of years to really get investors and companies on board, Silverman said that since the Windfall raised its seed round last year and emerged from stealth in March 2023, demand has been high.
“We have had a massive influx from all continents and all verticals; huge amounts of excitement,” Silverman said. “It’s profitable for everybody regardless of the industry. Everyone wants to reduce their carbon footprint, and they want to do it in a way where they make money and there aren’t many solutions.”
Silverman says that carbon capture was the only focus for so long because once carbon is in the atmosphere, it lasts forever, compared to methane’s 10- to 12-year lifespan. A few decades ago, when people thought about climate change, they were looking for more long-term solutions. But now that the impacts of climate change are both more clear and worsening, people are waking up to the need for both short-term and long-term solutions.
“We have literally missed every single climate target we have put in place,” Silverman said. Not a single G20 country has the policies needed in place for it to reach the Paris Agreement’s emission-reduction targets, for example. “If all you are doing is looking out in the future and not doing the day to day, you miss those targets and miss what is right in front of you. We need to manage the short-term climate factors, or we won’t be around to deal with the long-term.”
The lack of attention to methane is also surprising because methane actually can create a better ROI for companies than their carbon-reduction efforts.
Carbon is waste, which means that when companies capture it, they do so largely just to get rid of it, as opposed to turning it into something else. In comparison, methane is energy, which means it can be captured and repurposed much easier than carbon. Essentially, companies can reduce carbon for potential cost savings down the road, or a super legit carbon credit, while focusing on methane can actually make them money if they work with a company like Windfall.
This deal also stood out to me because Windfall lies within a growing category of startups focused on mitigating the climate issues of today and not just the ones down the road. While it is good for companies to be focused on mitigating the long-term impacts of climate change or trying to prevent future climate-induced events, we need solutions now.
It reminded me of Convective Capital, a venture fund I’ve written about before that’s dedicated to wildfire tech. It’s not dedicated to the tech that helps prevent them but rather tech that helps society adapt to the impact of increased wildfires now. Firm founder Bill Clerico told TechCrunch in 2022 that while it’s great to build long-term solutions, those mean nothing if your home is in danger from wildfires this summer.
Silverman said the market is still in the early innings of coming around to the potential benefits of investing in methane-reduction technology. But progress is good, and though he might be biased, Silverman is happy to see funding heading to a climate company that isn’t another carbon credit startup. I agree with him there.
“It was a long road getting here, lots of years of zero traction,” Silverman said. “Now that the traction is there and there aren’t very many people working in this area, there aren’t that many competitors. We are the best of the very few options. As I’ve said, ‘in my land of the blind, the one-eyed man is king.’”
Xpanceo is betting big on turning us all into cyborgs with smart contact lenses, securing a cool $40 million to make our sci-fi dreams a reality. Co-founders Roman Axelrod and Valentyn S. Volkov are on a mission to ditch traditional gadgets and make everyone’s eyes the new screens. Who needs smartphones when you can blink to browse? As they push the boundaries of what’s possible with optoelectronics and new materials, one can’t help but wonder if we’re heading toward a future where losing your contacts could mean missing your next Zoom meeting.
We’re looking for more unique pitch decks to tear down, so if you want to submit your own, here’s how you can do that.
Xpanceo has shared its complete presentation deck, consisting of 19 slides, with TechCrunch. Although the slide list suggests that the team has covered everything, a closer look at the deck’s contents reveals that some areas might not be as comprehensive as they seem.
There’s a lot of really good storytelling happening here.
[Slide 2] A clear problem statement. Image Credits: Xpanceo
The presentation effectively begins with a clear problem statement, setting the stage for a focused discussion on the challenges and opportunities in the realm of augmented reality (AR) and wearable technology. This explanation is crucial, as it immediately frames the issues that Xpanceo is addressing with its innovative smart contact lens project. By articulating the problems upfront, the deck ensures that the audience understands the context and significance of the technology being developed, which is essential for garnering support and enthusiasm for the project. I love that.
The inclusion of a timeline detailing the evolution of computing technology within the presentation is particularly clever. This historical perspective not only educates the audience about the progression and milestones in computing but also situates Xpanceo’s work within a larger narrative of technological advancement — and many of those advancements made a lot of investors very wealthy indeed.
Addressing the shortcomings of AR as it stands, the presentation acknowledges that the tech has not yet achieved widespread adoption primarily due to poor product offerings that have failed to resonate with consumers. This is true, and it shows that Xpanceo is aware of the hurdles faced by previous AR technologies and is committed to overcoming these challenges.
[Slide 3] Easing into the “solution” is a great approach. Image Credits: Xpanceo
There’s a big difference between a “solution” and a “product” slide. Xpanceo’s take here is refreshingly clear on the differences.
The solution slide is strategic in nature, emphasizing a broader, more adaptable approach rather than focusing solely on the product. This strategic mindset is crucial, as it shifts the emphasis from the specifics of the product to the underlying philosophy of problem-solving.
I love that the solution is articulated in a clear and accessible way, deliberately avoiding excessive detail. This clarity is essential for communicating effectively with stakeholders, including investors, potential customers and team members. By keeping the solution straightforward and easy to understand, the team ensures that everyone involved has a solid grasp of the core concept and objectives. This level of transparency fosters trust and alignment among all parties, which is important for collaborative efforts and the overall success of the project.
From there, you can drop into the details: the product.
Again, Xpanceo does a great job:
[Slide 4] This slide draws investors in. Image Credits: Xpanceo
The product slide does an excellent job of presenting the product in a clear and engaging manner, avoiding the common pitfall of descending into overly technical language that can alienate or confuse the audience. This approach is particularly powerful given the complex nature of the technology involved.
Smart contact lenses that integrate advanced computing capabilities directly into the user’s visual field feels like magic. Still, by maintaining straightforward and accessible language, the slide ensures that the innovation can be understood and appreciated by a broad audience, which is crucial for generating interest and support among potential investors.
I particularly love how this clarity helps set the stage for deeper discussions, all without getting lost in the complex technological language that no doubt happens in the lab. It strikes the right balance between simplicity and informativeness.
This deck is really good. But is it perfect?
Nope. Let’s dive in.
What? Image Credits: Getty Images
The biggest problem with the Xpanceo deck isn’t what is in there, but rather what isn’t.
One critical element missing from the deck is the “ask” slide, which is essential when seeking venture capital funding. It’s surprising how often founders overlook this component in their pitch decks. When raising money, it’s not the time to be reticent or indirect. Clearly stating what is being asked for — be it staffing, resources or partnerships — demonstrates to potential investors a well-thought-out plan and a serious commitment to the startup’s future. This helps investors quickly understand the needs and assess whether they align with their investment criteria.
Including a specific ask in the presentation also conveys that there is a realistic understanding of what the startup requires to succeed. It shows that careful consideration has been given to how much funding is needed, what it will be used for, and how it will help the company achieve its goals. This level of detail and transparency adds credibility to the pitch and instills confidence in potential investors about the management and planning capabilities. It positions the entrepreneurs as serious individuals who are not merely experimenting but are committed to building a sustainable business.
Slides 6 and 7 make a case for both a B2B and a B2C model. That’s not a great call.
[Slide 6] A use-case brainstorm is clever, but it’s important to come up with the real use cases that drive the investment decision. Image Credits: Xpanceo
B2B and B2C business models are fundamentally different beasts. Very few companies are able to do well with one strategy, never mind both.
B2C sales are distinguished by direct interactions with individual consumers, focusing on emotional engagement, brand identity, and creating personalized customer experiences. This model thrives on short sales cycles and immediate purchase decisions, making it crucial for companies to invest in understanding consumer behaviors and crafting marketing strategies that resonate on a personal level. Even if companies occasionally purchase under a B2C model, they should be treated as consumers in the sales process to maintain simplicity and efficiency in marketing efforts.
Conversely, B2B sales involve more complex transactions with other businesses, characterized by longer sales cycles, higher transaction values, and a focus on practical benefits and cost-effectiveness. This model requires strong, credible relationships and often involves customized solutions to meet specific business needs. While it’s less common, consumers may sometimes engage with products designed for business use, highlighting the flexibility required in sales strategies. Ultimately, focusing on a B2B or B2C sales organization should align with the startup’s core capabilities and strategic goals, shaping the narrative in their startup pitch to attract potential investors.
Trying to do both won’t work, so pick one, and explain why that’s the right choice.
[Slide 9] Sure, there are a lot of contact lens users. But are they really a proxy for Xpanceo customers? Image Credits: Xpanceo
When assessing the potential market size for Xpanceo’s contact lenses, it’s crucial to differentiate the nature of the product from traditional contact lenses. Or, put differently: Is the market for Xpanceo’s product people who are already wearing contacts? The company seems to think that everyone who wears contacts wants smart contacts. But that’s probably not accurate.
Xpanceo’s offerings are not merely an alternative to spectacles for optical correction but rather function as a wearable device. This distinction is significant because the target market for Xpanceo may not align directly with the existing base of contact lens users. Instead of evaluating the total number of contact lens wearers, a more relevant metric might be the usage of related technology such as smartphones or smartwatches, which reflects a tech-savvy consumer base more likely to adopt new wearable technologies. This approach can help in identifying not just a broad audience, but also one that is more likely to embrace innovative products.
Xpanceo’s go-to-market strategy plays a pivotal role in determining its primary consumer segment. If the product is designed for mass market consumption, the strategy should focus on identifying and engaging an early adopter group. This group typically consists of tech enthusiasts who are keen on exploring and adopting cutting-edge technologies. These early adopters could provide the initial traction needed to penetrate the market, acting as influencers and validators for the broader consumer base. Their feedback is also invaluable when it comes to refining the product and enhancing its appeal to subsequent buyers.
I think the company is trying to show that its market is huge, but I doubt that contact lens wearers are a proxy. I wear contacts, but only when I’m doing contact sports (martial arts or scuba diving). But even if I had never worn contacts a day of my life, I’d be eager to try the Xpanceo solution.
I think the company is trying to compare oranges to Apple computers.
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Founded in 2017, Atoms Lanka Solutions is a provider of IT consulting and software development services. Throughout the company’s history, we have worked with over 160 customers from 5+ countries..
