Lightspeed & Grafana Founders Discuss Pitch Decks & Pricing

The Journey of Grafana Labs' Funding: A Look Behind the Scenes

Prior to becoming a partner at Lightspeed Venture Partners, Gaurav Gupta recognized the potential of Grafana Labs, the organization behind the widely-used open-source analytics platform, Grafana. However, securing an investment proved challenging, as Raj Dutt, Grafana’s co-founder and CEO, initially resisted early offers.

This week’s episode of Extra Crunch Live featured both Gupta and Dutt detailing the process of their collaboration, ultimately leading to Grafana’s Series A funding round – and subsequently, its Series B. They also presented a walkthrough of Grafana’s initial Series A pitch deck.

Key Insights from the Discussion

Gupta highlighted the specific elements of the pitch that resonated with him and explained how he effectively conveyed these points to the wider partnership team at Lightspeed. His analysis provided valuable insight into the investment decision-making process.

Furthermore, Gupta and Dutt provided constructive criticism on pitch decks submitted by viewers, offering their perspectives on the characteristics of a compelling founder presentation. They revealed the methods VCs employ when reviewing pitch decks.

The conversation shed light on how venture capitalists actually assess and interpret the information presented in pitch decks, offering practical advice for entrepreneurs.

Resources and Further Information

Key takeaways from the discussion are summarized below, alongside a complete recording of the conversation. This provides a comprehensive resource for those interested in venture capital and startup funding.

New installments of Extra Crunch Live are recorded each Wednesday at 12 p.m. PST/3 p.m. EST/8 p.m. GMT. A schedule for February’s episodes can be found here.

Grafana: An open-source analytics and interactive visualization web application.
Lightspeed Venture Partners: A venture capital firm investing in early-stage companies.
Extra Crunch Live: A live interview series focusing on startup and venture capital topics.

Episode Overview:

This episode provides a detailed look into the origins and growth of Grafana. It covers key moments and discussions surrounding the company's development.

Key Discussion Points:

The initial encounter of the founders is explored, beginning at the 2:20 mark.
A review of Grafana’s original pitch deck is presented, starting at 12:25.
The complexities of building an enterprise ecosystem are analyzed from 26:00 onwards.
A thorough pitch deck teardown is conducted, commencing at 33:00.

The conversation delves into the challenges and strategies employed by Grafana as it navigated the competitive landscape.

Listeners will gain insights into the early stages of the company and the evolution of its core offerings.

The episode offers a valuable perspective on the process of securing funding and establishing a strong market presence.

Specific attention is given to the nuances of appealing to enterprise clients and building a sustainable business model.

The pitch deck teardown segment provides practical advice for entrepreneurs seeking to refine their own presentations.

The Initial Connection

Upon joining Lightspeed in June 2019, Gupta immediately initiated contact with Dutt and the team at Grafana Labs. His attempts to connect via text message, phone calls, and email initially yielded minimal engagement.

Despite the lack of response, Gupta arranged a trip to meet the team in Stockholm. Even with this planned visit, securing a firm commitment from Dutt proved challenging.

Dutt and Gupta recounted this period with amusement. Dutt explained that his disorganization and uncertain travel schedule, combined with Grafana not actively seeking funding at the time, contributed to the slow response. However, Gupta’s persistence ultimately led him to send a direct and assertive email.

Gupta admitted there was a moment of frustration. “I considered abandoning the effort,” he stated, “but then Raj finally responded.” He noted that expressing his frustration, while unconventional for venture capitalists, proved effective in this instance.

The eventual meeting proved productive, with the two men establishing a rapport. Dutt attributed this to Gupta’s prior experience within companies like Splunk and Elastic, allowing for substantive discussions. Gupta characterized the encounter as a fast-paced and engaging experience.

Dutt highlighted a key factor in his positive impression of Gupta. “Gaurav presented as a relatively new VC,” he said, “and he didn’t embody the typical venture capital persona, which I found appealing.”

Currently, Gupta and Dutt maintain frequent communication without a rigid schedule of weekly meetings. They engage in several conversations each week, discussing industry developments, Grafana’s offerings, and the company’s future direction.

Grafana’s Initial Pitch Deck Presentation

Raj Dutt, of Grafana, shared the company’s pre-Series A pitch deck with the Extra Crunch Live audience – a deck he had previously sent to Gaurav Gupta and Lightspeed Venture Partners prior to their initial meeting.

However, it was the subsequent discussions between Dutt and Gupta that ultimately catalyzed the investment deal, as Dutt emphasized. He encourages founders to prioritize organic conversations over relying solely on pitch deck presentations.

Gupta and Dutt collaboratively reviewed the deck, dissecting its core narratives and key themes in preparation for a more detailed pitch to the broader Lightspeed partnership.

Open-Source Traction Highlighted

“The slide detailing the company’s open-source traction was particularly compelling,” Gupta stated. “Specifically, the sheer number of active instances running was remarkable. The data presented was undeniably impactful.”

lightspeed’s gaurav gupta and grafana’s raj dutt discuss pitch decks, pricing and how to nail the narrative

Gupta further recalled a slide showcasing Grafana dashboards deployed at various prominent companies. He noted the powerful visual impact of demonstrating the product’s presence in critical operations at organizations like SpaceX.

This visibility, he explained, creates a strong emotional connection for potential investors when evaluating the company’s value.

Crafting a Compelling Narrative

Dutt shared that, reflecting on his experience with multiple pitch decks, the initial step involves constructing a unified and coherent narrative.

“Present a clear progression from your origins to your future aspirations, ensuring all elements align, rather than simply presenting data points or asserting your company’s merits,” Dutt advised. “A well-crafted story is demonstrably more persuasive.”

He also pointed out that investor priorities can vary significantly. While some venture capitalists may not fully appreciate the nuances of open source, others possess a deep understanding of its potential.

The Importance of Practice

Dutt emphasized the value of consistent practice in refining one’s pitch. He acknowledged that his initial presentations of Grafana Labs were less polished.

“Initially, I found articulating the Grafana Labs story more challenging,” Dutt admitted. “We were deeply focused on building open-source projects and developing quality software, and hadn’t fully considered the overarching narrative. This has improved over time, becoming clearer as we’ve developed the business.”

Despite the overall positive impression, Gupta initially expressed skepticism regarding Grafana’s strategy within the broader open-source ecosystem.

“To be frank, I was initially doubtful about this approach when I first met Raj,” Gupta confessed. “However, Raj successfully convinced me that this represents the future. The process of debating and having your perspective shifted by someone instills a greater level of confidence.”

The Evolving Enterprise Landscape

A significant trend observed within the enterprise sector is the transition from traditional subscription-based pricing models to those based on actual usage.

Gupta highlighted that, specifically concerning enterprise infrastructure, usage-based pricing can inadvertently disadvantage companies as their user base expands. Previously, the standard practice involved forecasting potential usage and selling capacity exceeding those estimates, often leading to customer dissatisfaction. Conversely, a pay-as-you-go approach is perceived as equitable by all parties involved, he noted.

“In practice, however, developing a product capable of scaling effectively under such a model presents substantial challenges,” Gupta stated.

Our discussion also encompassed the broader topic of product pricing strategies. Founders often prioritize product development and problem-solving, understandably so. However, the task of packaging and assigning a price to that product can be daunting when the time arrives.

Dutt characterized pricing as an ongoing refinement process at Grafana, describing it as a “continual and challenging issue.” He explained that the company’s initial assumptions regarding their target customer base proved inaccurate.

Upon its initial release, Grafana’s team anticipated primarily serving small and medium-sized businesses (SMBs) with lower entry costs and usage-based pricing. However, they quickly discovered that larger organizations demonstrated a greater willingness to invest in the product, necessitating a strategic shift and a focus on competing for Fortune 500 clients.

“My observation is that many companies tend to undervalue their offerings rather than overprice them,” Dutt commented. “This is, at least, my intuition within this market. We currently offer two distinct products with corresponding sales strategies. We have a dedicated enterprise product, alongside a cloud-based offering, and employ both self-service and traditional enterprise sales approaches. Harmonizing these elements is complex; we are still navigating these challenges. It’s undeniably a multifaceted and delicate subject.”

Analyzing Pitch Deck Presentations

The concluding segment of the session focuses on the intended recipients of pitch decks: potential investors. Participants were given the opportunity to submit their pitch decks for review and feedback from the featured speakers. A comprehensive analysis of these decks is available in the video linked below, with key takeaways from Gupta and Dutt highlighted here.