Welcome to Flash Feedback by Volition Capital, where we will be looking at real pitch decks from real companies and taking you behind the scenes to help you understand how an investor processes the pitch as they review it. In each episode, we will feature one pitch deck, review it quickly, and provide real-time perspectives as we walkthrough. At the conclusion of each episode, we will elevate two or three key take-home learnings that will hopefully be helpful for founders and management teams as they think about how to position and present their own businesses.
Flash Feedback Episode II: The Tree center
Hi, I’m Larry Cheng, Co-Founder and Managing Partner at Volition Capital, and I’m excited to welcome you to another episode of Flash Feedback, where we evaluate real paychecks from real companies, and I offer you an investor’s point of view in the inside perspective.
Before I begin, I want to thank you for all of your feedback directly to me about how these episodes have been helpful to you and how you’ve been sharing them with your friends. We appreciate the support and one of the requests is to actually talk about a pitch deck that has broader challenges to it. So, I’m going to I’m going to do that today with a company that has a very memorable pitch deck: SEOMoz from 2011….and, a very, very memorable entrepreneur Rand Fishkin. In my entire career, I think he is probably the most transparent, open entrepreneur that I have ever met. He published everything about the business on his blog. He published the financial performance, all the challenges. He even published his departure on the blog, and he certainly published this pitch deck as well. So, I’m excited to cover this with you today and we’ll see where we go.
All right. Here is SEOMoz.
Here’s the title slide. Where we’re going to do today is just run through any slide very quickly, 5, 10, or 15 seconds. But, if there are a couple of spots where I want to emphasize something, I’ll spend a little more time.
Starting point is a history slide. Noisy slide, starts in 1981, but it talks about how the company started as a consultancy. And, now it’s a SAS business in the search engine optimization space as CEO. Generally, I would just say not a great thing to paint your business as being decades old. It gives a sense to an investor that the company is taking a long time to figure out its momentum. And, so, I’m not sure this is the strongest slide, it’s also a bit noisy. Nonetheless, it does paint the history of the company well.
The next slide, again, a bit of a noisier slide. But, if you look into it, is showing a strong software growth from four hundred thousand in ‘07 to projected twelve and a half million 2011. That’s great. I might have opted to simplify this slide by just giving it a header that is the primary take away of the slide, but overall, when you dive into it, there’s strong software growth as they transition out of their consulting business.
Next slide: How do we do that? That’s a good question to frame the next section, lots of inbound marketing sources, email, white papers, SEO, infographics and so forth. I think every marketer can appreciate that.
So, what do they do in this midst? They develop software, help you measure, improve understanding of that channel, which is very diffuse.
Now, we’re going to dive into the macro economic trends. I’m just going to preview…but, I actually think this is actually one of the stronger aspects of the deck.
So, they’re saying here that there is all this spend that is spread across your channels, but behavior is that people are selling tons of time on the Internet. So, the Internet deserves more spend. That’s kind of the point of this slide. I actually think that point could have been made more clearly. But I think it’s a good, solid point overall to set up the macro section again here at the probably the one of the strongest slides in the deck, which is you’re they’re saying organic traffic drives 90 percent plus of your traffic when it garners a very small amount of spend. All the money is chasing Paid traffic, which drives less than 10 percent of your traffic. So, what they’re saying is this is logically inconsistent, that there are billions spent that are about to move to organic traffic. They’re at the front end of that. So, they’re sitting at the front end of a significant secular growth market. And, I think that this is one of the strongest aspects of the deck.
And then everyone wants data. This is probably a bit of a throw away slide, in my estimation. But they’re saying there are safer from helps to drive data, understanding and efficiency.
And now, the value prop. That’s the problem there to solve all of these different channels of organic traffic are hard to understand, hard to measure, hard to prioritize.
A marketers’ challenge is lots of tools that are working with and therefore, these guys, presumably, SEOMoz, presumably organizes that. I don’t love meta-layer businesses because you’re always at risk of some of the underlying tools that you’re using, just becoming better and addressing some of the meta value proposition. But, I think a lot of marketers can identify with this and specifically they’re driving that.
The pain point is sort of optimizing these channels. So, driving home the pain point in value prop here is the target market. I think this is this actually turns out to be one of the stronger sections, but I think it starts out a bit noisy again. Here, they’re trying to say they have all of these different target customers, but it’s presented in a very noisy way that almost makes it feel like there isn’t a target customer. So, there’s a slide later that I think is much better. But this this one makes it seem very diffuse. They’re saying here their target market is at the intersection of companies that very much value organic traffic, that also have competency to manage it.
Here’s one of the stronger slides, again, of the entire deck, which is they’re defining their customer by title. And I think that’s a great way to define it. Half of customers are more are directors of marketing specialists. Another third or so are still consultants. And what this does is when you can define your customer very clearly, it makes the investor believe that you know who your customer is be, you know how to target them. But there’s an added benefit of me thinking, well, there are specialists at millions of companies. So, the market is also broad. And it’s a huge market, which when you tie back to the macro trends, it’s a huge market. Spend is going to grow. So, I think this slide is sort of one of the anchors as well of the deck.
All right. Where are we today? This is back in 2011, obviously strong numbers, a strong number of subscribers, strong revenue growth and so forth. I think the one data point that causes more concern on this slide and kind of always everything else is that it’s a nine-month implied customer life. I would not have left that point out there on the island unaddressed because everything else is strong. But that is that’s very troubling from an investor perspective, because even if you’re growing today, if you only have a nine-month customer life, that growth will ultimately taper out. So, I think that could have probably been addressed or taken out. Second slide talks about tremendous traffic, strong subscriber base and so forth, and strong conversion rates. Again, all sort of good, good metrics. All right. Plan specifics around their investment, around raising 20-25M million, some mix of liquidity and growth capital. I think that’s laid out clearly.
This is an interesting section. Normally you don’t see a business risk section in these types of decks and it’s going to be about four slides long. This gets to Rand Fishkin’s transparency MO. You’ll see it says Business risks that Google integrates more functionality, that Facebook as a closed web closed ecosystem becomes hard to work with, just different shifts in marketing that they don’t adapt to, and then that they screw up and their reputation suffers, etc. Four or five slides in a pitch deck to risk, I think, is probably too much. But it is an example of sort of ultimate transparency. So, probably a little bit too much weighting here.
All right. Use of funds. I mean, just say one of the issues of this section is I like that they lay it out, but it’s almost too many uses, as you’ll see, expand the audience, expand product, you know, 6, 7, 8 different releases and product roadmap and so forth. So that’s fine…But then that’s later on. Growth in the team across product engineering, marketing operations, customer success, retention team growth in sales and marketing investments, both in technology investments, growth and product investments and potential acquisitions. It’s just too much. And I appreciate that when you raise capital, you’re going to have to spend it on many different things. But, you kind of want to elevate sort of what are the one or two areas that you’re really going to invest in with this capital that’s going to have disproportionate impact on the company? And I think this got a little bit diffuse.
All right, closing out the deck, why is SEOMoz uniquely positioned to win… sort of four key takeaway points. A passionate community… here is one of the missed opportunities. They do have a passionate community. Three hundred thousand plus users. I wish they kind of expanded on that point and quantified that point because it’s one of the strengths of the company, rather than just having it be a summary point at the end. Technology lead, strong growth, unique culture. All true. I would have probably put in and reminded folks of the macro trends that are driving this business, which I think is one of the stronger points. And then lastly, their aspiration to be a billion-dollar company.
So, all right. That’s the SEOMoz deck. Let’s talk about some of the key takeaways. And, I’m going to do positives and negatives here. So, on the positive side, one is positioning your company inside of a strong secular growth market or a strong secular shift. That’s what they did in the macro trends section, talking about how it’s completely illogical that all this money is going to paid and not organic when organic is driving all the traffic. I aligned with that. And it makes you think that the companys’ at the front end of a big shift have spent towards organic and see optimization.
Number two, the more clearly you can define your customer, the more believable your ROIC and your growth story is. So, they did a great job defining their customer by title and by proportion of customers, by specific titles. Very unique, very believable. And it actually made me think I know those titles exist in millions of companies. So, this company has tremendous potential in breadth. And thirdly, I would say get your investor to nod their head throughout the deck, get them to align. I thought I did a nice job positioning a number of just key takeaway points I think any rational human being would align with. And, so, I was not in my head for that. And by the end, you want them nodding about the entire company. And so that starts by building up different slides that that the investor aligns with. So, lots of positives in the deck.
Here are some areas to improve upon: Number one, clearly explain what the company does. I did not leave this deck understanding specifically what the company does and what their software platform does. And so that was missing. I thought they did a good job on the macro, perhaps not a great job on the micro, which is what is the product do and give some examples. And that was kind of all missing throughout the deck, I would say.
You also want to simplify some of those noisy slides so that you can have one clear takeaway point. Sometimes more is not better. I think some of those slides could have been narrowed down and landed with a stronger punch. And, lastly, because I know this company, you would see in various points, it talked about a community, hundreds of thousands of users, millions of visitors. There’s real passion around this company. I would say if you have customer passion quantified for the investor so they can see it and they can know and they can touch it. And this this really didn’t make that customer passion, that whole SEOMoz community and the passion they have the tangible enough. I think there are missed opportunities to quantify customer passion.
Overall, I thought some positive some areas to work on, but very unique tech in a very unique entrepreneur and company. We’re grateful to cover it today. Once again, if you want to have your paycheck either considered for publication or just for feedback on the side, we’re happy to do that. Submit you deck here.