LinkedIn's Series B Pitch to Greylock_ Pitch Advice for Entrepreneurs

3/9/2015 LinkedIn'sSeriesBPitchtoGreylock:PitchAdviceforEntrepreneurs

http://reidhoffman.org/linkedinpitchtogreylock/ 1/49

ReidHoffmanEssaysonEntrepreneurship,CivicsandIntellectualLife

About

AtGreylock,mypartnersandIaredrivenbyoneguidingmission:alwayshelpentrepreneurs.Itdoesntmatterwhetheranentrepreneurisinourportfolio,whetherwereconsideringaninvestment,orwhetherwerecasuallymeetingforthefirsttime.

Entrepreneursoftenaskmeforhelpwiththeirpitchdecks.BecausewevalueintegrityandconfidentialityatGreylock,wenevershareanentrepreneurspitchdeckwithothers.WhatIvehonorablybeenabletodo,however,issharethedeckIusedtopitchLinkedIntoGreylockforaSeriesBinvestmentbackin2004.

ThispastMaywasthe10thanniversaryofLinkedIn,andwhilereflectingonmyentrepreneurialjourney,Irealizedthatnoonegetstoseethepresentationdecksforsuccessfulcompanies.Thisgavemeanidea:IcouldhelpmanymoreentrepreneursbymakingthedeckavailablenotjusttotheGreylocknetworkofentrepreneurs,buttoeveryone.

Today,IsharetheSeriesBdeckwithyou,too.Ithasmanystylisticerrorsandafewsubstantiveones,toothatIwouldnowchangehavinglearnedmore,butIrealizedthatitstillprovidesusefulinsightsforentrepreneursandstartupparticipantsoutsideoftheGreylocknetwork,particularlyacrossthreeareasofinterest:

howentrepreneursshouldapproachthepitchprocesstheevolutionofLinkedInasacompanytheconsumerinternetlandscapein2004vs.today

ReidHoffman

http://reidhoffman.org/http://greylock.com/http://reidhoffman.org/about/



Context

Advice

In2004,theconsumerinternetwasjustbeginningtorebound.Friendsterwasatitsheight,stronglybattlingMySpaceafterraisingitspremiumroundfromBenchmarkandKleinerinthefallof2003.Facebook,bytheway,wasnotyetonmostpeoplesradarsinthesummerof2004.

Friendstersvaluationsetthetonefortheentiresocialnetworkingspace.FriendsterandMySpacehadmillionsofusers,atonofengagement,andallthepressattentiontheywanted.PressandanalystscharacterizedLinkedIninoneoftwoways:LinkedInisaninterestingnichethatmightbeworthpayingattentiontoorLinkedInistheFriendsterforbusiness.Neitherisaparticularlygoodbackdropfor

Investorsseealotofpitches.Inasingleyear,theclassicgeneralpartnerinaventurefirmisexposedtoaround5,000pitchesdecidestolookmorecloselyat600to800ofthemandendsupdoingbetween0and2deals.Thegoalofanentrepreneuristobeoneofthosedeals.

First,understandyouraudience.Researchprospectiveinvestorsthoroughly.Whatkindsofbusinessesaretheylookingat?Whatmodel/criteria/triggersdotheyusetojudgewhetheraprojectwillbesuccessfulornot?Ifyoudonthavesomesenseoftheirpointsofview,yourlikelihoodofmakingthepitchgowellismorerandom.Youmayhappentoemphasizetherightpointsthatpiqueaninvestorsinterest,butyoushouldntleaveyourfinancinguptochance.

Second,understandthebroaderfinancingclimate.In



tryingtoraisecapital,because

1. wewerentthenaturalleaderofamarketortechnologytrendthateveryonewaspayingattentionto,

2. wedidnthavesubstantialorganicgrowth,and3. wehadnorevenue.

2004,investorsregainedinterestintheconsumerinternetagain.Friendsterraisedabigroundin2003MySpacestartedgainingtraction.Butwithsomanyinvestorsstilllickingtheirwoundsfromthedotcombust,manyfocusedonprovenbusinessmodels,suchasadvertisingorecommerce.Asaresult,weknewthatourpitchwouldneedtosteerintoinvestorsbiggestconcern:thelackofrevenue.

Context

Advice

Openwithyourinvestmentthesis,whatprospectiveinvestorsmustbelieveinordertowanttobeshareholdersofyourcompany.



Inourfirstslide,weanswerthreequestions:

WhatisLinkedIn?Thegraphicwechoseemphasizesthatitisanetworkofpeople.Whyisitvaluable?Becauseyoucanfindandcontactpeopleyouneed.Howisthisdifferent?BecauseunlikeGooglesearchorothermeans,itinvolvespeopleyoualreadytrust.

Althoughweknewthattherecruitingspacewouldbeourinitialbusinessopportunity,webelievedthenandknownowthatLinkedInismorethanjustarecruitingbusiness.Thus,ourpitchframedLinkedInasaplatformforfindingthepeopleyouneed,whichwecalledprofessionalpeoplesearch2.0,makingtheparalleltoGooglebecauseinvestorsunderstoodthatGooglewasvaluable.(Onslide5,Ibeginexplainingtheimportanceofpitchingbyanalogy.)

IfweframedLinkedInasonlyajobs/classifiedswebsite,mostsmartventurecapitalistswouldnothaveinvestedbecausethatseemedtolackthepotentialtobeabroadplatformthatcouldsustainalargebusiness.Ultimately,GreylocksinvestmentthesiswasthatLinkedInwouldbeagreatrecruitingbusinesswithanoptionformore.

Yourfirstslideshouldarticulatetheinvestmentthesisingenerally3to8bulletpoints.Then,spendtherestofthepitchbackingupthoseclaimsandincreasinginvestorsconfidenceinyourinvestmentthesis.

Forexample,ifIwerepitchingLinkedInsSeriesBtodaywithwhatInowknowaboutsuccessfulpitches,theinvestmentthesiswouldbe:

1. Massivelyvaluablepropertieswillbebuiltoffnetworks.

2. Therewillbedifferentnetworksfordifferentdomains.

3. Theprofessionaldomainwillbeonemassivelyvaluablenetwork.

4. Wearetheleaderintheprofessionaldomainwithviralgrowth.

5. Greatbusinessescanbebuiltoffthisnetwork,startingwithmatchingtalentandopportunity.

6. Itsanetworkeffectsbusiness,whichmeansithasinherentdefensibilitywithanetwork.

Clearlyarticulateyourinvestmentthesissoinvestorscanofferfeedbackthathelpsyourefineit,eventuallygettingtoaplacewhereyoubothagreeonit.Anydisagreementwilllikelycauseseriousproblemsdowntheroad.



Context

Advice

Normally,youdexpectustoexplainourproducti.e.,whatprofessionalpeoplesearch2.0is.Instead,ourstrategywastosteerimmediatelyintotherevenuequestionbecausethatwasthetopconcernofinvestorsin2004.Andremember,LinkedInwasaconsumerinternetplaywithmoderateconsumertractionandwithoutadimeofrevenue.

Toshowpotentialrevenuestreams,welistedthreeproducts:ads,listings,andsubscriptions.Theblueboxesidentifythecorrespondingmarketsforthoseproducts.Althoughtheblueboxesareequallysized,weknewthatthelargestportionofourrevenuewouldcomefromtherecruitingspace(the2ndblueboxlabeledJobs).

Whatwedidntknowwaswhichproductspecifically,listingsorsubscriptionswouldhavethehigherdollarvolume.Overthelongterm,weanticipatedthattheanswerwouldbesubscriptions,butwe

Thegeneralruleisonebusinessmodeldrivesthebusiness.Itstemptingtolistmultiplerevenuestreamsbecauseyouretryingtoprovethatyouwillbebig.Yetwhenconsumerinternetcompaniesdothis,investorsgenerallyseearedflag.

Thecharitableinterpretation,whichwastrueinourcase,isthatthecompanysteamdoesntknowwhichonemodelwillwork.Thebadinterpretationisthattheteamlacksfocusanddoesntunderstandthattheygenerallyneedtodrivetoonebusinessmodeltosucceed.

Wemadethemistakeoflistingthree



didntknowhowlongitwouldtaketogetthere.In2005,welaunchedallthreeproductsintheorderoflistings,subscriptions,thenadseventuallydiscoveringtwosurprisinginsights:

1. Theprincipalmarketforourlistingsandsubscriptionsproductsbecametherecruitingspace,insteadofbusinessdevelopmentandnetworking.

2. Subscriptionsbecametheproductwiththehighestdollarvolumefasterthanexpected.

Todayin2013,themajorityofLinkedInsrevenuecomesfromanenterpriseversionofoursubscriptionsproduct.

differentrevenuestreams.Asithappened,wedidenduppursuingallthreelinesofbusiness.AndLinkedInprovedtobeanexceptiontotheruleofthumb:ourdiversebusinesslineshavebeenastrongplus.

Generalrulessometimeshaveimportantexceptionswhichcanbetremendouslyvaluable.Thatstrueinbusinessstrategy,entrepreneurship,andevenpitchadvice.

Context

Advice

Withtherevenuequestionoutoftheway,wewere



Withtherevenuequestionoutoftheway,wewerereadytoexplainourproduct.Wehadtwoquestionstoanswer:Whatistheproduct?Andwhyisitnew?

Wearguedthatthewayprofessionalpeoplesearchwasdoneatthetime(1.0)wasinadequate.Tomakethisargument,welistedthreeimportantprofessionalbusinessproblems(findingserviceproviders,findingjobcandidates,andreachingprofessionals)thatweretimeconsuminganddifficulttoaccomplishwithexistingtechnologies.

Thekeyproblemwithexistingtechnologieswasadverseselection,specificallyconcerningtheincentivesofparticipantsandthereputationsystems:

Intheyellowpages,peoplewantedtobefoundbutthewaytheyrepresentedthemselveshadnothingtodowithhowgoodtheywere.Inoldschoolresumedatabases,mosttalentedprofessionalsdidntwantorneedtoparticipate.Indirectories,professionalsonlywantedtoparticipateifothertalentedprofessionalsdid,too.

So,howdoyoucreateaplatformwheretalentedprofessionalscanparticipate,befound,andbecontactable?Ouranswer:anetwork.Anetworksolvesthisproblembecausealloftheirfriendsandcontactswouldbeonitandfriendsoftheirfriends.Creatingtherightincentivesandreputationsystemwouldleadtoadirectorypeoplewouldbeapartof.

Steerintoyourinvestorsobjections.Therewillbeonetothreeissuesthatarepotentiallyproblematicforyourfinancingaddressthemheadon.Youhavethemostattentionfrominvestorsinthefirstcoupleslides.Mostinvestorsarrivewithquestions,andifyouproactivelyshowyouunderstandtheirprincipalconcerns,youearntheirattentionfortherestofyourpitch.

Forconsumerinternetpropertiesin2004,becausewehadjustgonethroughthedotcomwinter,investorsprincipalconcernwaswhetherornotyoucouldmakemoney.Asyourecall,webeganourpitchbysteeringintotherevenuequestionbecausewedidnthavetensofmillionsofusersoragrowthcurveoffthechartotherwise,wewouldvestartedwithoneofthose.

In2013,itswhetheryoucanbreakthroughthenoise.Today,thereareprobablyathousandconsumerinternetstartupsfoundedeveryquarterhowdoyoubecomeoneofthe1to3thatmatterina7yeartimeframe?Thosearethekindsofobjectionsyouneedtosteerintoatthebeginningofyourpitch.



Context

Advice

Mosttechnologyrevolutionsarefoundedononeortwosimpleconcepts.Oursimpleconceptwas:

Thenetworkprovidestheplatformforanewkindofpeoplesearch,whichcanbeaplatformtomanyotherbusinesses.

InordertobelievethatLinkedInwasagoodinvestment,ourinvestorswouldneedtobelievethattherewasabroadtrendofmovingfromdirectoriestonetworks(1.0to2.0),thatnetworkscouldbecomehugelyvaluable,andthataLinkedInpeoplesearchapplicationonanetworkwouldbeavaluableasset.

Wemayhavebeenthefirstfolkstalkingabouttheinternet2.0backinthesummerof2004,thoughTimOReillylaterpopularizedanddeepenedthemeaningofthephrase.

Show,donttell.Again,yourpitchinggoalsaretoincreaseinvestorsconfidenceinyourinvestmentthesisandleadthemtoasharedviewofyourcompanysproblems.Toaccomplishthis,youshouldshowratherthantellwheneverpossible.

Thewinningmomentforanentrepreneuriswhenaninvestorconcludesontheirownvolitionthataninvestmentthesisisworthwhile,ratherthanhavingtheentrepreneurtellthemwhattoconclude.

Forearlystagecompanies,itsimportanttoshowthatyoureonpath,thatyouhaveprospects,andthatyoucangettoyourvision.



Context

Advice

Onceinvestorsbelievedthatprofessionalpeoplesearchwasvaluable,thenextquestionwaswhetherinternet2.0(themovetonetworks)amplifiedthatvalueconsiderably.Todemonstratethis,weshowedhowthe2.0transformationcreatedvalueinothermarkets.

First,welookedatgoodslistings.1.0isbusinesseslikeonlineclassifiedsfornewspapers,whichwereunsuccessful.eBay,ontheotherhand,wasreallyvaluable.WhatsthedifferencewitheBay?eBayhasanetwork.Ithasreputation.Ithastransactionalhistories.Addinganetworktoonlineclassifiedsmadeitvaluable.(JustthinkofhowvaluableCraigslistwouldbeifithadidentityandreputation.)

Pitchbyanalogy.Everygreatconsumerinternetcompanygrowsuptobeauniqueorganization.Butintheearlydays,youwanttouseanalogiestosuccessfuloutcomestodescribewhatyourcompanyisandwhatitspotentialcouldbe.Timeisshortithelpstorefertowhatthoseinvestorsalreadyunderstand.

ThebestpitchIknowwasinHollywoodforafilmcalledMansBestFriend.ThepitchwasJawswithPaws.InvestorsthoughtthatifthemovieJawswasahugesuccess,maybeasimilarpremiseonlandwithadogcouldbeahugesuccess.Themovieturnedouttobeterrible,but



thepitchwasexcellent.

Context

Advice

Next,welookedatonlinepayments.Althoughonlinepaymenttransferalreadyexistedwithbanks,PayPalsmodelofanetworkofpaymentsiswhatmadeitunique.Theproblemwechoseforthisexamplewasfraud.Itisdifficultforbankstodetectfraudbecausetheydonthaveaccesstothewholepaymentsnetworktheyonlyhaveaccesstoindividualnodesinthatnetwork.

AnotherreasonweusedPayPalasanexamplewastoremindinvestorsthatIwaspartofPayPalsfoundingteam

Understandwhereanalogiesapplyandwheretheydonot.Pitchbyanalogybutdontnecessarilyreasonbyanalogy.Reasoningbyanalogy,whenyouredevelopingyourbusinessstrategy,isdangerous.

Instartupland,yourerunningacrossaminefield,sothedetailsmatterandyouhavetobecarefulwithyouranalogiesasyouconceivestrategy.Infact,whenImtheinvestorlisteningtoapitch,onedetailIconsideriswhethertheentrepreneurisbeingtoo



aminorexampleofshowing,nottelling. deludedbytheiranalogiesandnotthinkinghardenoughaboutexceptioncases.

Context

Advice

Inourthirdexample,wecontrastedAltavistaanditssearchalgorithmversusGoogleanditssearchalgorithmPageRank.PageRankisonemoreuseofnetworks:searchresultsthatleverageanoverallnetworkofpagesratherthanjustrelyontheoccurrencesofterms.

Whenpitchingbyanalogy,anchoryourbusinesstoothervaluablebusinessestosignalthatyourbusinesswillbevaluable,too.Ourunderlyingargumentwasthatthenetworkenablesrevenue.Tomakethispoint,weshowedhownetworksenabledrevenueforeBay,PayPalandGooglethreecompaniesthatanyonewouldvewantedtoinvestin.



Context

Advice

Finally,wecontrastedLinkedInagainstbothMonsterandLexisNexisbecausewewantedtoshowthatLinkedInwouldaddvaluetoallvaluableapplicationsrelatedtoprofessionalpeoplesearche.g.,recruiting(representedbyMonster)andservicedirectories(representedbyLexisNexis).

HowvaluablecouldLinkedInbe?Well,wepointtoMonster,LexisNexis,andotherinformationserviceprovidersandsay,Whatevermultiplieryouappliedtothelast3slidesabouthownetworksamplifythevalueofcompanieslikeeBayandPayPalapplythatnowtoLinkedIn.

LinkedInwouldcreateanetworkedresumedocumentaresume2.0insteadoftraditionaljoblistingswithprivateresumes.WhenyourefindingpeopleonLinkedIn,yourefindingthemthroughanetworkasopposedtoaresumedatabase.Wealsoknewthatnetworkswouldimproveinformationreputationsystems,allowing

Avoiddebatingthevalidityofyouranalogies.Ifsomeonepushesbackandtriestochallengeelementsofananalogy,dontletyourselfgetdrawnintoabackandforth.Analogiesareaconceptualframework,sotheyrenotgoingtobe100%accurate.

However,somanyentrepreneurstrytopitchbyanalogythatsomeinvestorshavefatiguewhentheyseeit.Ifyouhaveagoodanalogy,useit.Butifyoudonthaveagoodone,dontincludeonejusttohaveone.Itsbettertohavenoanalogythanabadone.



peopletofindthebestpossibleinformation.

Today,networksunderlietheinformationreputationsystemsofmanyconsumerinternetcompanies,includingLinkedIn,Facebook,andTwitter.

Context

Advice

Here,weremindinvestorsthatthisinvestmentdecisioncomesdowntowhetherornottheybelievethatanetworkcreateshugevalue.

Anygoodideahaslegitimatereasonswhyitwontwork.Inordertoachieverealsuccess,youneedtobecontrarianandright.

DuringLinkedInsSeriesA,whenwepitchedtheimportanceofbuildingthenetwork,theclassicobjectionwasthatthenetworkwouldntbevaluabletothefirstmembers,sowhy



Eventhoughweknewwewouldmonetize,wearguethatinvestorsshouldntbethinkingaboutourcurrentrevenuenumbers.Instead,theyshouldthinkaboutthenetworkweestablishedbecausethatswhatultimatelywins.WespentourSeriesAcapitalbuildingthenetwork,soweneededinvestorstoagreethatthenetworkwasmoreimportantthanrevenue.

Becauseourinvestmentthesiswasultimatelyunprovable,theargumentwemadeinslides5through9isoneofthestrongestpartsofthepresentation.

woulditgrow?Forthefirst500,000orsomembers,thevalueofthenetworkiszero.WhatIknewthatmanydidntwasthatacombinationofcuriosityandaviralgamemechanicwouldslowlygettoamillionpeople,atwhichpointthenetworkbecomesvaluable.

DuringLinkedInsSeriesB,GreylocksbetwasthatLinkedInhadgoodprospectstotransformtherecruitingindustry,andthatifwebuiltupabroadprofessionalplatform,wecouldpotentiallydomuchmore.GreylockinvestedinLinkedInatroughly$0.60pershare.Whenyoucomparethattoourcurrentpublicmarketprices,youseeanexampleofcontrarianandrightventureinvesting.

(TolearnmoreaboutGreylockssideofthisstory,readDavidSzespostattheGreylockblog.)

https://medium.com/@greylockvc/early-principles-of-linkedin-a-reflection-of-our-series-b-investment-20f95ff5feb5



Context

Advice

Inslides10and11,wecomparedwhatwepromisedinourSeriesApitchwithwhatweactuallydid.OuroverdeliveryagainstourSeriesApredictionsprovidedstrongevidencetonewinvestorsthatwecouldexecuteagainstourplan.

LinkedInsSeriesBwasaconceptpitchbecauseourdataatthatpointwasntimpressive.Atthetime,Friendsterhadabout10.5MMusersandMySpacehad2.5MMusers.LinkedIn,atthetime,wasstillapproachingitsfirstmillionusersanddidnothaveadimeinrevenue.

Yourinvestmentthesisiseitherconceptdrivenordatadriven.Whichkindyouarepitching?

Inadatapitch,youleadwiththedatabecauseyouareemphasizinghowgoodthedataalreadyis.Investorsthereforeevaluateyourcompanybasedonthedata.WhenLinkedInwentpublic,itwasadatapitchtopublicmarketinvestors.Weshowedinvestorsamultiyeartrackrecordofdata.

Ifitsaconceptpitch,ontheotherhand,theremaybedata,butthedatasupportsayetundevelopedconcept.Aconceptpitchshowsyourvisionforhowthefuturewillbeandhowyouwillgettothatfuture,soinvestorswillwanttobuyapieceofit.Thus,conceptpitchesdependmoreonpromisedfuturedataratherthanpresentdata.Whenyouredoingaconceptpitch,itsespeciallyimportanttoconsiderpitchingbyanalogy.



Context

Advice

Inslides12and13,weassertedthreethings:

Theprofessionalspaceisvaluable,evenifyouthinkitslessvaluablethanotherspaces.LinkedIncanprovidethebestproductandbethestrongmarketleaderinthisspace.Wehaveevidencethatwereenroutetomarketleadership.

Backin2004,eachofthesecompanieshadacounterpitchtoLinkedIn:Ryzehadalotmoreactive,engagedusers.OpenBChadhigheractivityratesandrevenueperuser.AndSpokehadmorecomprehensivedatabecausetheywereuploadingentireaddressbooks.

Incontrast,wearguedthatthegrowthofthenetwork

Oneingredientthispitchlacks,whichInowthinkisessentialtomodernpitches,isourriskfactors.Experiencedinvestorsknowtherearealwaysrisks.Iftheyaskyouaboutyourriskfactorsandyoucantanswer,youvelostallcredibilitybecausetheyassumeyouareeitherdishonestordumb.

Dishonestifyouvethoughtabouttheriskfactorsbutchoosenottosharethem,whichisabadwaytobuildtrustandapartnership.Dumbifyouarentsmartenoughtounderstandthatallprojectshaveriskfactorsincludingyours.



wasthekeyvariable,whichturnedouttoberight.AsLinkedIngrew,sodidourcompetitiveedge,asmoreandmoremembersinvestedactivityanddataintoournetwork.

Today,LinkedInhasasubstantialamountofusertrustwithitsmembers,whogiveuspermissiontousetheirdatabecausetheyhavetherightcontrolovertheirdataandbecausetheyvoluntarilyparticipateinournetwork.

Explicitlyidentifytherisksthatcouldthwartyoursuccessandhowyouwillmitigatethem.Andinsteadofwaitinguntilinvestorsaskaboutyourrisks,sharethemproactivelysoyoubuildtrust.

Context

Advice

Entrepreneursoftensaytheyhavenocompetition,

assumingthatsanimpressiveclaim.Butifyouclaim



Ourinvestorsdidntneedtoworryaboutthetopleftquadrantofcompetition(Friendster,Myspace,Orkut,andTribe.net)becausethosefocusedonthesocialside,whichweassertedwasanentirelydifferentspacefromLinkedInsprofessionalspace.OurinvestorsdidntneedtoworryaboutBranchIT,VisiblePath,etc.,becausethosemostlyfocusedonenterprisesinsteadofindividualprofessionals.

Instead,whatinvestorsshouldhavepaidattentiontowasthecompaniesintheblueboxRyze,OpenBC,ZeroDegrees,andSpoke.Ifinvestorsagreed,theirnextquestionwasusuallyWhatsyourcompetitivestrategyineachcase?Wethoughtwehadaviablecompetitivestrategyineachofthesecases.

assumingthatsanimpressiveclaim.Butifyouclaimthatyoudonthavecompetition,youeitherbelievethemarketiscompletelyinefficientornooneelsethinksyourspaceisvaluable.Botharefolly.

Themarketisefficient,eventuallyifavaluableopportunityemerges,otherswilldiscoverit.Tobuildcredibilitywithinvestors,youwanttoshowthatyouunderstandthecompetitiverisksandshowwhyyouregoingtowin.

Expressyourcompetitiveadvantage.Whyareyougoingtobreakoutofthepack?Whatisyouradvantage?Anunderstandingofproductmarketfit?Isitatechnologyadvantage?Whatsyourdifferentialbusinessstrategy?Yourdifferentialgrowthstrategy?Yourdifferentialproduct?Ifyouarentclearanddecisive,investorswontbelieveyouhaveanedgethatcanleadtosuccess.

Context



Advice

ThisslideisatestimonytoournervousnessaboutourorganicgrowthcomparedtoFriendsterandMySpace.Again,becausethispitchisaconceptpitch,wewantedtoconvinceinvestorstobetonourfuture.Thus,wewantedtoshowsuccessfulorganizationsthatwerecommittedtooursuccess.

Thisismostlyamistakeslidebecausecustomerslidesaremoreappropriateforenterprisepitches.Greatcustomersarepredictiveoffuturecustomersforenterprisebusinesses.Ontheconsumerinternet,however,thisisasignoftroublebecauseitindicatesthattheentrepreneurmaynotunderstandhowtheconsumerinternetworks.

Generallyspeaking,consumerinternetbusinessesneedgrassrootsandindividualadoptionratherthanorganizationspromotingit.Althoughweknewthisatthetime,weviolateditbecausewewerenervousaboutouradoptionandbecausewethoughtwemightbeauniqueexception.

Context



Advice

Tobringhometheargumentthatinvestorsshouldbelieveinusinthefuture,weshowwhatweaccomplishedafterspendingthemajorityofourSeriesA$4.7MMfinancing.

AsIsaidearlier,youwanttoshowfocusinyourdecksbyemphasizingwhatyourereallybettingon.However,showsomemaneuverability.Dontjustsaythatyouhavefivedifferentoptions.Instead,saythatyouredoingone,butyoualsohavesomefallbackormaneuveringoptions.

Forexample,ifweweredoingtheSeriesBpitchin2004withmyknowledgeoftoday,wewouldemphasizethatLinkedInwouldstartbytransformingonebusinesstherecruitingindustry,byshiftingitfromapostingmodeltoasearchingmodel.Then,inourtalkingpoints,wewouldhighlightsomeoftheotherbusinesseswecantransformwithourplatform.

InvestinA,butheresBtoshowthatwecouldcontainthatrisk.Investorswouldappreciatethisbecauseyoureidentifyingareasonableriskanddemonstratingthatyouhaveactuallythoughtaboutwhatyouwoulddoiftheprimaryplandoesntplayoutasyouexpect.



Context

Advice

Onepurposeofthisslidewastohedgeourbetongettinggrowth.Ifaninvestorthoughtnoneofthenumbersinthepriorslideweregoodenough,weaddedbusinessdevelopmentasanadditionalfactor.

Theotherpurposeofthisslidewastodemonstratemarketleadershipbyshowingthatimportantorganizationswerecomingtotalktous.

Ultimately,neitherofthetwodealsshownaboveendedupdeliveringsubstantivevalue.

Itsalwaysbettertohavelessslides,butitsmuchmoreimportanttohaveagreatdeck.Agreatdeckneedstoaddressallimportantconcernsandtellyourstoryeffectively.Sometimes,thatmeanssettingupanarrativeoverseveralslides.

Dontstressabouttheexactnumberofslides.Entrepreneursoftenhearadvicethattheirdecksshouldbeaparticularlength.I,forexample,recommendalengthof20to25slides.Buttheseareonlyrulesofthumb,whichmeansyoucanviolatethemifyouhaveagoodreason.

LinkedInsSeriesBdeckcontainedacoupleslidesthatwespentlittletonotimetalkingabout,butweincludedthembecausetheyhadinformationthatshowedinvestorswehadthoughtaboutalltheimportantdetails.Eventhoughweglossedoverthoseslides,investorsknewtheycouldcomebacktothoseslideslateranddigintothemifnecessary.



Context

Advice

Bythispointinthepresentation,ourgoalwastoleadinvestorstobelieve:

1. Anetworkempoweredpeoplesearchapplicationcouldbereallyvaluable.

2. Wearethemarketleaderinestablishingthenetwork.3. Wehaveaviableplanforestablishingrevenueoffthe

network.

Here,wearguethatwehaveaviralproductthatcreatesanetworkthatpossessesnetworkeffects.Wedidnttrytoestablishtheviraldynamicwejustassertedit.Iexplainedmoreofthestrategyinperson,butwealsodidntwanttocoveritmuchinwritingbecauseviralitywasaprettydeepsecretintheindustryatthetime.

Today,giventhatviralityhasachievedbuzzwordstatus,you

WhenpitchingVCs,thinkabouttheindividualpartnerinthecontextoftheirpartnership.Makesuretheindividualpartnerhasstrongcohesionandtrustwiththepartnershipandisresponsibleforyourtypeofbusiness.

Inthefinancingprocess,theindividualventurepartnerperformstheduediligenceonthesubstancebehindacompanyspitche.g.,theinvestmentthesis,thecompetition,thepeople,etc.Thepartnerthenassertstheinvestmentthesisandwhytheybelieveittothepartnership.

Ultimately,youresellingthepartnership,sogivetheindividualpartnerthetalkingpointstobesuccessful.Whatwillthatpartnertelltheir



usuallyhavetoshowevidencethatyouknowwhatviralityisandhowitworks.Surprisingly,therearestillfewpeoplewhounderstandvirality.

partners?Putyourselfintheirshoes.

Context

Advice

Earlierinthepitch,wearguedthatestablishingthenetworkwasourfirstprioritywithourSeriesA.OurSeriesB,however,wasaboutgettingtorevenue,sohowwerewegoingtodothat?Beforewedetailourrevenueplans,weremindinvestorswhythevalueofthenetworkcreatedgoodbusinessesacrosseBay,PayPal,andGoogleourpreviousexamplesofnetworkenabled2.0businesses.

Eachexamplegeneratesconsiderablerevenueoutofthe

Peoplefrequentlythinkthemostfundamentalstrategyofastartupisitsproductstrategy.Infact,themostfundamentalstrategyisthefinancingstrategy.Ifyourcompanyrunsoutofgas(finance),yourcompanywilldienomatterhowgoodyourproductstrategyis.Frequently,theproduct/servicestrategyishardertodevelop,butthefinancingstrategyshouldbetherefirst.



networkdespitenotchargingpeopletobeinthenetwork.Eachexamplehasanetworkpoweringitsrevenuegeneratingapplications.YoudontpayfortheeBayreputationsystemyoupayforthetransaction.YoudontpayforPayPalsfraudsystem,butthefraudsystemenablesthosetransactionstogothroughornotandtobeprofitable.YoupayforAdWords,nottheregularsearchresults.

LinkedInsfinancingplayedoutasfollows:TheSeriesAwasaconceptpitchforbuildingthenetwork.TheSeriesBwasaconceptpitchforgettingtorevenue.TheSeriesChadtobeadatapitchthatshowedeitherhowwecouldgettoprofitabilityorthatwewereprofitable.(Infact,ourSeriesCshowedprofitabilityandsowefocusedongrowth.)AndSeriesDendedupbeingWecanscaletoabigopportunity.

Context

Advice

Tothispoint,ourconceptualargumentforgettingtorevenuewasthis:Justas



networksenabledrevenueacrosseBay,PayPal,andGoogleinthepreviousslide,thenetworkwillenablerevenueforLinkedIn,too.Butwealsohadaconcreteplan,whichwebegandetailinginthisslide.

Wereturntothethreerevenuemodelsfromthebeginningofthepitch,introducingtheproductnamesforthefirsttime:anadsproductcalledInLeads,ajoblistingsproductcalledOpportunities,andasubscriptionsproductcalledNetworkPlus.

Again,ourargumentisthatwehaveanetworkthatsvaluablewhichwillenablerevenue.ThisslidereinforcesthefactthatweachievedavaluableoutcomeinseriesA(buildingthenetwork),soitmadesensenottohaverevenueyet.Butnowitwastimetogettorevenue.

Alwaysthinkaboutthenextround.Theusualtempoforraisingmoneyfromventurecapitalisataminimumofayearbetweenfinancings.Everytimeyouraisearound,youshouldbethinkingaboutthenextround.Whowillbethenextinvestorsyoupitch?Whatwilltheirconcernsbe?Whatwillyouneedtosolvenext?Howwillyouraisemoneylater?

Expectthatfutureinvestorswilllookattodaysdeck.WhenIcreatedourSeriesAdeck,Ipresentedagrowthcurvethatwouldbegoodenoughtogetaninvestment,butIalsohadconfidencethatIcouldbeatit.IwantedtobeabletogointomySeriesBpresentationandsay,HereswhatIsaidbefore,andhereshowIdid.BecausewebeatourSeriesAexpectationsfornetworkgrowth,investorscouldcomfortablytrustourpromisetobuildrevenuewithourSeriesBfinancing.



Context

Advice

Aboveisanotherversionofsayingthatwebuiltanetworkanditstimetobuildtherevenue.

Tosomedegree,thisissomewhatanemptyplaceholderslide,butasthelastslideinthenetworkenablesrevenuesequence,itprovidesaclearvisualforunderstandingtheconcept.ImnotsureIwouldkeepthisslideinretrospecthowever,Irememberthatwetalkedtoitwell.

Reinforcekeyconceptswhendeliveringaconceptpitch.Diagramsareonewaytoaccomplishthis,helpinginvestorsvisualizekeyconcepts.Inourpitch,wewantedtomakesureinvestorsunderstoodthatyoubuildthenetworkfirstandthenyoucanbuildaplatformofbusinessesontop.

Itshelpful(butnotmandatory)toputyourthesisineachofthetitles.Ifaninvestorsequencedthroughthetitles,theydbeabletogetasenseoftheflowoftheargument.Thisisespeciallyhelpfulwheninvestorsaresharingthedeckswiththeirinvestmentpartners.



Context

Advice

Investorsfrequentlyask,Whatsanexistingbusinessthatslikeyourbusinessthatyoucouldoccupy?ThisiswhymanyentrepreneursincludeaslideabouttheirTotalAddressableMarket(TAM),theunderlyingrevenueopportunityforaproductorservice.

Smartventurecapitalistssawthatwehadinterestingcomparables,butdidntspendmuchtimeonthisslide.Themoreimportantquestionwaswhethertheybelievedwecouldbuildouttheseproducts.

Asahistoricalnote,wespentsometimethinkingaboutsearchads,butrealizedwecouldntreallymakeitwork.Thefirstproductwelaunchedwasjoblistings,thensubscriptionswhichwascalledNetworkPlus.NetworkPlusendedupbeingtargetedatnetworkersandoutboundprofessionals,whowere

Showafocusonbottomuptacticsforyourstrategy.Andshowthatyourefocusedonthemetricsthatmatter:revenuenumbers,engagementtraction,etc.

Frequently,youngentrepreneursputinslidesthatshowtheirbusinesstotaladdressablemarket(TAM)toestablishsomecredibility.Problemis,mostinvestorsdonttrustthesourcesofthatinformation,soentrepreneursarentestablishinghugecredibilitybysayingtheyveclaimedamarketwithahugeTAM.

TAMslidesquotepeoplewhohaveincentivesforartificialinflation,soentrepreneursriskdemonstratingthattheyhavenorealsenseofhowtotakedominanceofthemarket.Ifyoudochoose



thenwillingtopaymoremoneyperperson.Itwasntforeveryprofessionalitwasforprofessionalswithoutboundneeds.

toincludeaTAMslide,dontlingeronitbecauselingeringsaysthatyoudontreallyunderstandthatthegameisplayedbottomup,notTAMdown.

Context

Advice

AboveisamockupofhowInLeads,aproductthatwasntbuiltyet,couldwork.ThepointwastodemonstratewhypeoplewouldpayforalistingonLinkedInasopposedtojustbuyingAdwords.

WeonlyusedinLeadsasabrandinthisdeck.BythetimewegotaroundtobuildingourMarketingSolutionsbusiness,wehadadifferentconceptofadvertisingthan

Showyourproductratherthansayingyouintendtobuildabestofbreedproduct.Ideally,youwanttohavetheproductbuilt.Otherwise,youshouldshowwhatyouhaveinmindwithamockup.

Amockupisbetterthannothingbecauseitincreasesinvestorsconfidencebyshowingthatyourethinkingconcretelyabouttheproductandallowsthemtoevaluate



InLeads. yourplan.

Context

Advice

WeincludedthisslidebecauseoftheanalogytoGooglesAdwords,whichwasandisthemostamazingoftheinternetbusinessesthusfar.Obviously,therearemanyideasthatareconceptuallypossibleatLinkedIn,butwedidntbuildInLeadsbecausethesearchtrafficwasnthighenoughtogettheecosystemgoingatthetime.

Whenindoubt,leadwithwhatwillmakethemostsensetoinvestors.WeneverlaunchedInLeads,butweledwithitbecausein2004everyoneunderstoodthatAdWordswasagoldengoose.Sincewewerentdecidedontheexactsequencingofourrevenueplan,weledinthepitchwiththeonewhosevaluepropositioncouldeasilybeunderstoodbyinvestors.



Context

Advice

Theabovemockupreinforcestheideathatanetworkoverlayimprovesjobpostingsandreferencechecking.Forexample,thenetworkenablesjobseekerstogetintroductionstopeopleinthegrouptheyrebeinghiredinto,ortopeoplewhocouldtalktothathiringgroup,ortothehiringmanagerthemself.Thenetworkenablesjobseekerstoreferencecheckwhetheracompanyisagoodplacetowork,orfindsomeonetoperformaninformationalinterviewwith.

Fastforwardto2013andmostpeoplerecognizethatLinkedInhasapoolofprofessionalidentities/CVs/profiles,buttheydontfullyrecognizehowdeepthereferencecheckingcapabilitiesof

Inconceptpitches,youresellingastory,sonaturallytherewillbepeoplewhodontbelievethatstory.Thatsokaybecauseyoudontneedeveryonetobelieveityouonlyneedtherightpeopletobelieveit.Naturally,youwanteveryonetothinkyourbusinessisamazing,butdontgetdeludedbythat.Startupfinancingisnotapopularitycontesteveryonesayingyesisirrelevanttoyou.Itsmoreimportanttohavetherightpersonsayyesthanitistohaveeveryonesayyes.

Thebestoutcomeisaninvestorwhocanhelpyoubuildthecompanyandrealizeamarketopportunity.Putanotherway,theidealfinancingpartnerisafinancingcofounder.Thisiswhyalreadywealthyentrepreneursraise



ourproductis.YoucanusetheinformationonLinkedIntoidentifyreferentialinformation,allowingyoutoprioritizewhomyourereachingoutto.Youcanreferencecheckawidevarietyofprofessionalsincludingdomainexpertsandserviceprovidersbothbeforeandafteryoumeetthem.Plus,itgoesinbothdirectionsemployeescanreferencecheckprospectivemanagers,andmanagerscanreferencecheckprospectiveemployees.

Thedifferencebetweenagreat,agood,amediocreandabadhireareenormouslydisastrousintermofpotentialimpactonyourbusiness.Improvingthequalityofhiresorincreasingthespeedofthehiringprocesssavesprofessionalstimeandmoney.Thatsaworthyvalueproposition.

moneyfromexperiencedinvestorsfortheirnextstartup:theyknowpartneringwithangelsandventurecapitalistsisaboutmorethanjustthemoney.

Sadly,manyinvestorsactuallyaddnegativevalue,soaninvestorwhoaddsnovalue(dumbmoney)butwhodoesntinterferewiththeoperationalprocesscansometimesbeadecentoutcome.Butideallyyoufindaninvestorwhocanproactivelyaddvalue(smartmoney).

Howdoyouknowifaninvestorwilladdvalue?Payattentiontowhethertheyarebeingconstructiveduringthefinancingprocess.Dotheyunderstandyourmarket?Aretheirquestionsthesamequestionsthatkeepyouupatnight?Areyoulearningfromtheirfeedback?Aretheypassionateabouttheproblemyouretryingtosolve?



Context

Advice

Thisslideisoverkill,andinhindsightIwoulddeleteit.Weweretryingtoshowratherthantellinvestorsthatourjoblistingsproductwouldhavecustomersbydisplayingcustomerfeedback.Weusedquotesasevidenceofproductmarketfit,showingthattherewerepeoplewhowouldactuallyusethevaluepropositionsofournetworkbasedlistings.Butthiswasaweakeffort.Ifinvestorsdidntalreadybelievethis,thisslidedidnothelp.Andiftheydobelieve,thisslidedidnotincrementtheirbelief.

Internaldataispreferableoveranecdotalthirdpartydata.Sincewedidnthavedatatobackupvariousassertionsaboutourproductmarketfit,wehadtorelyonquotesfromcustomersandpresssources,whichweakenedourpitch.

Althoughusingquoteswasntparticularlyhelpfulinourpitch,itisimportanttoalwaysbetalkingwithsmartpeopletosolicittheirfeedback.Talktoyournetworktoevaluateyourideasandevaluateyourpitch.Halfthetime,thefeedbackisirrelevantevensmartinvestorsmaynotunderstandyourideabutyoushouldstillbelisteningcarefullybecauseyoumaylearnvaluableinsights.Ifyouarespeakingwithabunchofsmartpeopleandasimilarthreademerges,theressomethingtothatthreadandyoushouldpayattentiontoit.

Bewaryofconfirmationbias.Itsonlynaturalthatanentrepreneurwantstohearthattheirideaisgreat,butyoudontwantpeopletellingyouthatbecauseitdoesnthelpyou.Thequestionsyoushouldalwaysaskare:Whatswrong?Whatsbroken?Whywontitwork?Whatdoyouthinktherisksare?Peoplebydefaultwillwanttogiveyougoodfeedbackratherthanbad,soyouhavetoasknegativequestions.



Context

Advice

Asaplatformforchangingtheworldofworkandenablingindividuals,jobsisoneimportantapplicationbuiltuponLinkedInsprofessionalnetworkbutitsnottheonlyone.Webelievedthegeneraldiscoveryofpeoplewouldbereallyvaluable,whichiswhywesayLinkedInisnotonlyaboutjobsintheslideabove.

Thepurposeofthisslidewastoshowthatwewerefocusedontherecruitingindustryasakeymarket,butwewerenervousaboutbeingpigeonholedasajoblistingssite.AmongSiliconValleyinvestors,MonsterandHotJobswerenotconsideredgreat,investablebusinesseseventhoughMonsterhada$4Bmarketcapbecauseoftheconstantamountofchurnforjobslistings.Whatsmore,thesalesandmarketingcostsofacquiringlistingsareexpensive.

Takecompetitionagainstyourpotentialrevenuestreamsseriously.Beingdetailedaboutyourcompetition,especiallylistingthespecificcompanies,helpsincreaseinvestorconfidence.

Identifytherightmetricsforsuccess.FocusonrevenueandactivityratherthanmarketcaporTotalAddressableMarketnumbers.Althoughwehadsomerealgrowthinamonth,wehadnorevenue,soournumberswerenotyetimpressive.However,byhighlightingrevenueandgrowthasthemostimportantsuccessmetricsintherecruitingspace,weprovedthatwewereseriousandthoughtfulaboutthespaceandshowedthatweunderstoodthemetricsthatmatter.



Context

Advice

Aboveisthemockupforthesubscriptionsproduct,thencalledNetworkPlus.RatherthanjustsayingwewouldhaveaproductthatdoesX,wewantedtoshowaspecificproductidea,backedbymarketresearch,thatwastangibleindetail.Againweusedquotestoshowfolkswhowerealreadyfindingthisvaluepropositionuseful.

WhatwealsoshowedinthisslidewasthateventhougheveryLinkedInmemberhadtheabilitytosearch,therewasadifferencebetweenfreeandpaidaccounts.Wewereunderpromisingandoverdelivered,ultimatelygivingpaidaccountsvisibilityoftheentirenetwork.Today,LinkedInPremiumsubscriptionsprovidemorepowerfultoolssuch

Underpromiseandoverdeliver.Internally,ourteamexpectedthatpaidmemberswouldpotentiallygetaccesstothewholenetwork,butwehadtomakesurethatthenetworkwouldbecomfortablewiththis.Soweshowedfourdegreestoourinvestors,tobesure.

Showthatyourepayingattentiontothemarket.Insteadofmerelysayingthatweknewproductmarketfitiskey,wewantedtoshowthatwedidthe



ascontactinganyonewithInMailMessagesandthefulllistofwhosviewedyourprofiletoeasilyfind,contact,andmanagetherightpeoplefortheirprofessionalneeds.

Designingthesubscriptionproductthiswaycreatedmorevalueforourmembers,whichmadethenetworkitselfmorevaluable.ThenumberonevaluefortheentirehistoryofLinkedInhasbeenMembersfirst.Evenwhilebuildingthesubscriptionproduct,itwasimportanttohaveaproductthatworkedforsubscribersandmembers.

work.Weusedquotestoshowthatweweretalkingtocredibleindividualsstrugglingtosolveourproblemwhoweregivingusfeedbackonourproducts.Thereareothermethods,ofcourse,suchasgraphsanddata.Butifwedsimplysaid,Werefocusedonproductmarketfit,thatdoesntshow,thattells.

Context

Advice

BecauseNetworkPluswasgoingtobeasubscriptionservice,wewere



worriedthataninvestormightpointoutthatthiswasnothowMonstersjoblistingsworkedatthetime.Asacomparable,wepointtothemarketforpersonaldatingwhichhasasimilarvaluepropositiontoprofessionalnetworkingbecauseitusessubscriptionservicesandhaslargedollarspend.

Subscriptionswasoneofthemajorbusinessmodelswepitched,butin2004,fewinvestorsbelievedsubscriptionswouldwork.Mostinvestorssawtheinternetasanadvertisingmedium,eventoday.LinkedInisoneofthecompaniesthathasproventhatsubscriptionscanworkforconsumerinternetproducts.

Oneofthevirtuesthatentrepreneursgetfromtalkingtomanyinvestorsduringthefinancingprocessisawisdomofcrowdsthathelpsyoufigureoutwhattherealrisksare.WhenIwaspitchingSocialNet(myfirststartupcompanywhichwasadatingservicesimilartoMatch.com),whatIheardfromnumerousinvestorswasthisconcern:IfsomeoneusesSocialNettofindapartnerandsucceeds,thentheyrenolongeracustomer,whichmeansyouintrinsicallyhaveamassivechurnproblem.Asitturnsout,thatsignalwasabsolutelyright.Listingbusinesseshavetosolvethischurnproblembyfiguringouthowtohavelifelongcustomers,whichisalwaysatargetforgreatbusinesses.



Context

Advice

Again,weaddressrevenuetobuildconfidencethatabusinesswillcome.Wedidlistingsfirstbecauseitshowsallmembersthevalueofthenetwork.Next,wedidsubscriptionswithafocusonHR/recruiting/jobsbecausewerealizedthatwaswhatpeopleprimarilyusedoursearchfor.Wealsofiguredoutthatsubscriptionswouldbethemarketentrystrategyforourrecruitingproduct.

LinkedInhassuchavaluable,aspirationaluserbasethatthesubscriptionsproductisntjustpopularwithjobhunters,itspopularwithbusinessdevelopers,journalists,venturecapitalists,networkers,andmore.

AsIsaidearlier,weneverlaunchedInLeads.Whatwediscoveredwhilethinkingthroughthesearchadsproductwasthatpeoplearentlookingforpeoplewhoareadvertisingtothemtheyrelookingforthepeopletheyretryingtofind.Soweonlygottodoingselfserviceadvertisingmuchlater.Inthemeantime,wereservedaspacewithbrandadvertising.

Bedecisiveandship.Includingspecificdates,forexample,showsdecisiveness.Beingdecisivedoesntmeanthatyouhavetostickwithyourdecisions.Goodinvestorsexpectyoutoiterateoftenasyoufigureoutwhatproductwillgrowyourmarket.Greylockdidntmindthatwedidntfollowthistimelineclosely.Whatmatteredwasthatwemadeprogress,whilebeingdefinitiveaboutourcompanysplaybookanddemonstratinganabilitytomakedifficultdecisions.

Whileitsimportanttothinkcarefullyaboutyourfuture,dontthinktoofarintothefuture.Youwillchange,theworldwillchange,andthecompetitivelandscapewillchange.Itisuseful,however,tohaveastrategicdirectionsupportedbyconfidentprojections.Afterall,successfulbusinessesoutdotheircompetitionbybetteranticipatinglongtermstrategy.



Context

Advice

Finally,wegettopartofourinvestmentthesis.Wehaveviralityandgrowthforaprofessionalnetwork,andwehaverevenuethatcancomethroughthreepatterns.

Becausewehaveviralgrowthanddigitalgoods,wecanhavehighoperatingmargins.Andthehardestpartisestablishingthenetworkwhichthenhasnetworkeffectsasaplatformforvaluablebusinesses.Thatstheessenceofourpitch,whichweshouldhavestatedatthebeginning.

Bewaryofadjectivesandespeciallyadverbs.Anytimeyouusequalifierslikevery,youreoverstatingyourpoint,whichshowsthatyourenervousaboutit.WhenImbeingpitchedasaninvestorandIseesuchqualifiers,ImakesuretoaskquestionsaboutthoseareasbecauseIknowtheentrepreneurismostnervousaboutthem.Inthisslide,Ishouldhaveusedhighinsteadofveryhigh.Asyouknow,wewerenervousaboutthepathtorevenue,andthisshowedthatnervousness.



Context

Advice

Thekeyissueweweresteeringintowaswhetherwehadabusinessornot.

Havereasonablenumbersandassumptionsthatcanpasstheblinktestduringthepitch.Investorswanttomakeaquickassessmentthatyouhaveanintelligentviewofthemodelofyourbusiness,andtheyknowthoseassumptionscanlaterbevalidatedbyduediligence.Youdontwantinvestorstofixateonclaimsthatappearcrazy.



Context

Advice

Sometimes,inSeriesBpitches,aslidelikethiswouldbeanappendixslide.Asamatteroffact,forthevastmajorityofourpresentations,wedidntspendanytimeonthisslide.Credibleinvestorsweregladtoseeitbecausetheslideshowedthatwewerethinkingabouttherevenuequestion.

Again,wewerenervousaboutgettingthefinancingpastthelackofrevenuesowekeptshootingatitfromdifferentdirections.Hereweresaying,Look,withaSeriesBwecangettooperatingprofitability,which,bytheway,wedid.

Infact,whenLinkedInreceivedtheHBSAwardin2010forEntrepreneurialCompanyof

Asuccessfulfinancingprocessobviouslyresultsinyouraisingcapitalforyourcompany,butitalsoresultsinapartnershipthatdeliversbenefitsbeyondjustmoney.Forexample,greatinvestorscansignificantlyboostthestrengthofyournetwork,whichhelpsinrecruitingemployeesandacquiringcustomers.Greatinvestorscanalsobeasourceofnetworkintelligence,soyoucanbetterprepareforlikelychallengesandopportunitiesahead.



theYear,ourSeriesAinvestorMarkKvammeshowedthatwithaoneyeardelay(whichwedeliberatelydidtogrowthenetwork)wecloselyfollowedtherevenuemodelwegaveinourSeriesA.ThatalmostneverhappenswithSeriesAprojections.

Context

Advice

Aftershowingwhatthemarketisandwhatyoucando,nowyoucanshowthepeoplewhocanmakeithappenthekeyleadersoftheteam.

Youhavethemostattentionfrominvestorsinthefirst60secondsofyourpitch,sohowyoubeginisincrediblyimportant.Onecommonmistakeisputtingtheteamslideearlyinthedeck.Theteambehindyourideaiscritical,butdontopen



AftermyselfisSarah,whomadesureouroperationscouldruntoscale.NextwasAllen,whoshowedexperienceinthesocialspace.JeanLucshoweddeeptechnologycapabilities.Konstantinshowedstartupexperienceandanunderstandingofproductmarketfit.Ericalsoshoweddeeptechnologycapabilities,provingourtechnicalchops.AndMattwasatalentedgeneralistwhoworkedcloselyonthisdeckandfinancingprocesswithme.Additionally,Mattcametothemajorityofthepitches.

withthat.Instead,openwiththeinvestmentthesis.

Thisadviceappliestoseedfundingrounds,too.Yes,seedinvestorsunderstandthatearlystagecompanieshavemanyunknownsandtheideawillchangealot,sotheylookcarefullyatthepeopletoseewhethertheteamwillbeabletoadapt.Butevenatthisstage,leadwithyouroverallinvestmentthesis.Persuadeinvestorsthatyourinvestmentthesisisintriguing,thenshowwhocanmakeithappen.

Context

Advice

http://www.linkedin.com/in/jvaillanthttp://www.linkedin.com/in/sarahimbachhttp://www.linkedin.com/in/ericlyhttp://reidhoffman.org/linkedin-pitch-to-greylock/www.linkedin.com/in/mattcohlerhttp://www.linkedin.com/in/abluehttp://www.linkedin.com/in/konstantin



Becausewehadzerorevenueatthetimeofthepitch,itwasespeciallyimportantforustogiveourinvestorsconfidencethatourteamwouldexecute.Tothisend,wemadesuretoincludebothathoroughslideofourteamandathoroughslideofthebroadernetworkofinvestorsandadvisorsbackingthecompany.

Onebenefitofgoingwithtoptierventurecapitalisthattheytendtohavegoodpredictiontrackrecords,whichhelpsestablishcredibilityforearlystagebusinesses.GiventhatSequoiaCapitalisatoptierVC,wegaveSequoiaprominentplacement(includingtheirlogo)onthisslide.AsapartneratGreylock,IveencouragedmyportfoliocompaniestodothesamewithGreylock.

Peoplefrequentlysaythatyoushouldworkyourwayuptotheinvestorsyoumostwanttoworkwith.Instead,identifytheinvestorsyoumostwantandtheinvestorswhoaremostlikelytosayyes.Thesearenotnecessarilythesamepeople(thoughitsexcellentiftheyare).Approachyourlikelyinvestorsandyouridealinvestorsatthesametime,becauseyourlikelyinvestorsprovideatemporalforcingfunctionbywhichyoumightendupwithyouridealinvestors.

AlthoughIhadidentifiedDavidSzeandGreylockastheinvestorsImostwanted,Ipitchedanotherfirmfirst.TheyrespondedbyrollinginwithanofferbeforeIpitchedGreylock.SinceDavidandthepartnershipatGreylockknewIhadanoffer,theygavemeatermsheetthedayafterIpitchedthem.

Stayaboveboardsoyoukeeptrustwithprospectiveinvestors.Iwasforthrightwiththefirstventurefirmaboutmyintentions,tellingthemthattheyreceivedthefirstlook,andthatIwouldtalktoafewmorefirmstoputtimepressure.AndGreylockknewIhadgottenatermsheettoacceleratetheirdecisionprocess.

Naturally,thefirstfirmwasdisappointedwhenIturnedthemdown,buttheywerentsurprised.Whiletheyworriedtheirearlyofferwouldbeshopped,sometimesfirmsendupgettingthedealthatway,orsometimestheygettoparticipateinthedealbecauseoftheirearlyoffer.Investorsknowthatsmartentrepreneursintendtogetagoodtermsheetearly,buttheyhavetotrytowinthedeal.



Context

Advice

AswerewrappinguptheSeriesBpitch,wewantedtoremindinvestorsthatwespentthe$4millionfromourSeriesAandaccomplishedalot,toincreasetheirconfidenceingivingus$10milliontoturnthenextcard.

Whenyourestartingout,youwanttoshowinvestorsthatyoucanbuildintoagreatbusiness,whichsometimesleadstohyperbolicstatements.Itsokaytobehyperbolic,tobeaggressive,tobevisionary.Avoidadverbsandadjectiveswhenpossible,butyouwanttoshowthatyouhavestrongforwardmotion.Inthispitch,wewantedtoshowthatwebelievedthiswouldbeahuge,valuableplatform.Intheend,whatmatterstoinvestorsisthattheinvestmentturnsoutwell.



Context

Advice

Thereasonwereusedthisslidefromthebeginningofthepresentationwastoindicatetheendofthepresentation,whilereturningtothehighlineofhowtoconceptualizethebusinessandremindinginvestorsofthevalueproposition.Weleftthisslideuponthescreenwhiletakingquestions,soitservedasabufferfortheappendix.

ThereasonwedidntkeepanAppendixslideupwasthatwedidntwantinvestorstoseethatwehadanappendix,requiringustogothroughallourpreparedslides.Wewerehappytogototheappendix,butweonlywantedtogettoitifwewereaskedthepertinentquestions.

Youshouldendonaslidethatyouwantpeopletobepayingattentionto.AplaceholderslidethatsaysonlyAppendixorQ&Aisneverthat.Instead,closewithyourinvestmentthesis.Weshouldhaveblendedthisslidewiththepreviousslide(#36)toendononeinvestmentthesisslide,whichwouldbeleftuponthescreenwhileansweringquestions.Youwantthatslidetoremindyourinvestorswhytheyshouldinvestinyourcompany.

Inowbelieveyoushouldbeginandendwiththeinvestmentthesis.Thebeginningiswhenyouhavethemostattention,andtheendiswhenyoushouldreturntothemostfundamentaltopictodiscusswithyourinvestors.Plus,asyoutalkabouttheinvestmentthesis,youlearnfromyourinvestorshowtoimproveit.Smartinvestorsshouldaddtoyourthinkingabouttheinvestmentthesis.



Context

Advice

Ourpresentationincludedfiveappendixslides,whichweveomittedforbrevity.

1.AbetterwaytofindprofessionalsonlineThisslideshowedamockupofwhataprofessionalsearchproductcouldlooklike.

2.Professionalnetworking,notsocialnetworkingThisslideaddressedthequestion:Isntsocialmuchmorevaluablethanprofessional?Weshowedhowthetwodomainsworkdifferently.ThiswasparticularlyprescientwhenFacebookcamealong.Socialversusprofessionalascategoriestookalongtimetoestablish,buteventhenwithFriendsterand

Youdonthavetohaveanappendix,butifyouanticipate



others,thetwodomainsworkdifferently.

3.KeyassumptionsbehindfinancialsWeshowedthisslidetoaddresstheassumptionsbehindourfinancialmodelsgoingtoprofitability.

4.LinkedInInLeadsimprovesonGoogleAdWordsmodelThisslidewasincaseinvestorsfocusedonadvertising,sincewehadledthepresentationwiththatandmanyinvestorsassumedthatconsumerinternetcompaniesrequiredadvertisingmodels.Fortunately,wealmostneverusedtheslidebecausesmartinvestorslikeGreylockpickedupthattherewasanHRspace.

5.ReputationbasedprioritizationofcandidatesThisslideshowedhowLinkedInsOpportunitiesmodelwouldimprovethetraditionaljobsitemodel.

seriousquestionsfromthekindsofinvestorsyouwant,preparingappendixslideswithstructuredanswersisimpressive,showingthatyouveconsideredallofyourbusinesschallenges,opportunities,andcomparisons.Appendixcontenttypicallyfallundertwocategories:providingadditionalinformationoraddressingobjections.

ClosingReflections

Today,LinkedInseemslikeanobviousinvestmenttohavemadein2004.ButatthetimeoftheSeriesBfinancing,LinkedInhadspentits$4millionfromSeriesAbuildinganetworkthatwasmuchsmallerthanFriendster,MySpace,etc.Wehadnorevenue,orevenrevenuecapableproducts.

Thejourneyfromfounding,tomultipleroundsoffinancing,toIPO,wasnoteasy.AllstartupsgothroughrealValleyoftheShadowmoments,inwhichtheywonderwhytheyeverthoughttheirbusinesswasagoodidea.AtLinkedIn,wehadthesemoments.Asanentrepreneur,IfoundDavidSzeandGreylocktobeatremendousallythroughtheprocess.And,DavidhadthevisiontoinvestinLinkedInwhenitlookedtomostoftheinvestingcommunitylikeanoddniche.

HowdidIgetGreylockonboardinthefirstplace?Itstartedwiththispitchdeck.Agoodpitchhelpsgetgreatinvestors,becauseitbuildsastrongrelationshipthroughclearcommunicationandvision.

Sogoodfortunebuildingyourownpitchdeck.AndIhopeitmarksthestartofanexcitingentrepreneurialjourney.

Wechangedsomeofthetexttobelesshyperbolicallyambitiousonslides9,1214,18,19,31,and36.Apubliccompanyshouldavoidpublishingforwardlookingprojectionsandambitionseveniftheyrefrom2004.Asanentrepreneurpitchingaprivatecompany,itisofcoursecriticaltobeforwardlookingandambitious.

ThankstoIanAlasandBenCasnocha,amongothers,fortheirhelpandfeedback.

2015ReidHoffman.

About

http://www.linkedin.com/in/ianbennettalas/http://www.linkedin.com/in/bencasnocha/http://reidhoffman.org/about/https://twitter.com/intent/tweet?original_referer=http%3A%2F%2Freidhoffman.org%2Flinkedin-pitch-to-greylock%2F&text=LinkedIn%E2%80%99s+Series+B+Pitch+to+Greylock%3A+Pitch+Advice+for+Entrepreneurs+&url=http%3A%2F%2Freidhoffman.org%2Flinkedin-pitch-to-greylock%2Fhttps://www.facebook.com/sharer/sharer.php?u=http%3A%2F%2Freidhoffman.org%2Flinkedin-pitch-to-greylock%2Fhttp://reidhoffman.org/http://www.linkedin.com/shareArticle?url=http%3A%2F%2Freidhoffman.org%2Flinkedin-pitch-to-greylock%2F&title=LinkedIn%27s+Series+B+Pitch+to+Greylock

LinkedIn's Series B Pitch to Greylock_ Pitch Advice for Entrepreneurs

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Transcript of LinkedIn's Series B Pitch to Greylock_ Pitch Advice for Entrepreneurs