Over the long term, we anticipated that the answer would be subscriptions, but we didn’t know how long it would take to get there.In 2005, we launched all three products — in the order of listings, subscriptions, then ads — eventually discovering two surprising insights: The general rule is one business model drives the business.Although the blue boxes are equally sized, we knew that the largest portion of our revenue would come from the recruiting space (the 2nd blue box labeled “Jobs”).What we didn’t know was which product — specifically, listings or subscriptions — would have the higher dollar volume.
Yet when consumer internet companies do this, investors generally see a red flag.Open with your investment thesis, what prospective investors must believe in order to want to be shareholders of your company.Your first slide should articulate the investment thesis in generally 3 to 8 bullet points.Instead, our strategy was to steer immediately into the revenue question because that was the top concern of investors in 2004.And remember, Linked In was a consumer internet play with moderate consumer traction and without a dime of revenue.(On slide 5, I begin explaining the importance of pitching by analogy.) If we framed Linked In as only a “jobs/classifieds” website, most smart venture capitalists would not have invested because that seemed to lack the potential to be a broad platform that could sustain a large business.Ultimately, Greylock’s investment thesis was that Linked In would be a great recruiting business with an option for more.The goal of an entrepreneur is to be one of those deals. You may happen to emphasize the right points that pique an investor’s interest, but you shouldn’t leave your financing up to chance. In 2004, investors regained interest in the consumer internet again.Friendster raised a big round in 2003; My Space started gaining traction.Neither is a particularly good backdrop for trying to raise capital, because Investors see a lot of pitches. What model/criteria/triggers do they use to judge whether a project will be successful or not?In a single year, the classic general partner in a venture firm is exposed to around 5,000 pitches; decides to look more closely at 600 to 800 of them; and ends up doing between 0 and 2 deals. If you don’t have some sense of their points of view, your likelihood of making the pitch go well is more random.