Approach VCs that have an interest or expertise in your market sector. Create pitch decks that are tight, disciplined and get right to the selling points.
Nick shares thoughts about how to ride the entrepreneurial tide without getting lost in a sea of competitors. As a wrap up with take a quick look at what’s on the horizon for Differential Ventures and the VC industry overall as we head into a huge period of growth and unknown implications related to big data.
Key Takeaways
0:00 | Introduction to Nick and background on his transition from sales and marketing to VC, including a return to school for new credentials and redefinition of the role he wanted to play.
3:00 | VC is not a good fit for everyone. Investors don’t typically have a lot of control, which operators tend not to like. Nick, however, enjoys being a behind the scenes mentor, leveraging his experience to help new ventures.
4:52 | Nick can’t respond to every inbound pitch or request for a meeting. Thousands of pitch decks come in over the transom, so the team has no choice but to narrow the pool in order to optimize offerings within Differential’s areas of focus.
6:33 | The Shark Tank Effect. The reality is that if a VC is spending time on your deck, they have some level of familiarity. So get to the meat of the proposal right out of the gate! You aren’t making a pitch to a general primetime TV audience.
8:50 | You’ve got about 45 seconds of attention span when you’re giving a pitch, so kick off strong. Frontload your high points – What are we doing, why it’s important and how this team is uniquely qualified. After that you can go wherever the investor wants to take you.
12:10 | Excel spreadsheets are great, but they can be a red flag. At the early stage, numbers and projections are nice but Nick is somewhat biased towards founders who are scrappy and all about getting out there and figuring out how to get their enterprise launched
13:40 | Nick explains how seed funders assess prospective investments based on metrics very specific to the type of product or service, its founder and team, traction and IP.
15:20 | Nick describes what it is that stands out when he’s considering a startup venture, its founding team and potential. The reasons people commit to ventures are varied and not always realistic.
17:35 | The logos on decks are often misleading. It’s critically important to drill down and understand the relationships in this compressed investment environment. There is pressure but you need to work faster – not ease off – on the due diligence. Clarity early on is critically important down the line if/when things go sideways.
20:42 | Bootstrapping can be great – if it works out (which is infrequent). Seed funding also isn’t always the right fit. Timing and ripeness both influence decisions about the best business model for startups in the process of launching.
22:33 | Nick reflects on an example of misjudgment and how he recalibrated a situation in which he recognized that he’d taken on a role that wasn’t the right fit. Knowing how – and when – to switch up a strategy is crucial if you don’t want to land in a ditch.
25:33 | What projects are most exciting on Nick’s horizon? Differential is very dialed into AI and machine learning and how it will scale. Use cases, privacy issues, adoption across multiple sectors are all subjects of interest and study. Remote work has been an accelerator.
27:45 | Nick calls out some of the industry leaders (FB and Amazon) in the AI space and what they’ve pioneered in the use of data science thus far in these early days.
Quotes
“My passion is around data and AI and machine learning and where it’s going to go in the next 20-25 years and having a VC fund with dozens of portfolio companies tackling various parts of that problem.” [4:05]
“The shocking, or frustrating, thing for me is sometimes I’ll be going through this long deck and losing interest when I get to the end and see, ‘My God! This company has amazing traction’ … You really want to get that upfront.” [7:09]
“It’s interesting when people want to do something creative and are trying to stand out. But we’re kind of programmed to interpret data in a very consistent and similar way” [10:30]
“Being an entrepreneur and being the founder of a venture capital fund is a crazy thing to do. You really have to understand why somebody is in it and why they’re going to stick with it when the inevitable bumpy times come along.” [15:29]
“When you go into any relationship it’s really important to go through a legal process, a term sheet process. It’s uncomfortable but you’re hammering out what happens when things don’t go right, if things don’t go right. It’s important to take that time.” [19:18]
“If I’m not passionate about something – if I don’t really believe in what I’m doing and stand behind the product – I can’t sell it. I’m not a good salesperson. In fact, I’m terrible.” [23:47]
“There are some things you just can’t fix and you have to be okay with that. It’s exponentially more true as an investor than even as an employee.” [24:00]
“We like investing in responsible AI and have a healthy expectation on what the limitations of AI and machine learning might be – not that we’re opposed to trying things that might break or test those limits, because that’s venture capital.” [29:20]
Follow Nick Adams:
LinkedIn: https://www.linkedin.com/in/nickadams11
Website: https://www.differential.vc/
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September 8, 2022
28:33 minutes
