In this presentation we discuss the different areas for business acceleration, including stategic corporate partnerships, startup accelerators and acquisition offers.

1. 1
FELLOWS CLASS #8:
BUSINESS ACCELERATION AND ACQUISITIONS
JANUARY 28TH, 2015
Tuesday, February 3, 15

2. • LAST WEEK’S READING / VIDEO
• BUSINESS ACCELERATION & ACQUISITIONS LECTURE
• REAL WORLD PERSPECTIVE: BURTON MILLER, ROOST
• QUESTIONS
IN TODAY’S CLASS...
2
Tuesday, February 3, 15

3. 3
“A STARTUP IS A TEMPORARY ORGANIZATION IN
SEARCH OF A SCALABLE, REPEATABLE, PROFITABLE
BUSINESS MODEL”
LET’S DO A QUICK REFRESHER...
-­‐
STEVE
BLANK
Tuesday, February 3, 15

4. THE MVP:
4
BUILD
MEASURE
LEARN
LET’S DO A QUICK REFRESHER...
VALIDATED LEARNING:
• GROUND UP: FINE TUNE BASIC FEATURES
• CREATE ACTIONABLE METRICS
• DEMONSTRATE CAUSE AND EFFECT
• TEST HYPOTHESIS
• FAIL FAST, FAIL CHEAP
• ADDRESS KEY RISKS UPFRONT
• LET THE DATA TELL A STORY
• LISTEN AND LEARN FROM CUSTOMERS
Tuesday, February 3, 15

5. LET’S DO A QUICK REFRESHER...
5
“THE ONLY THING THAT MATTERS IS GETTING TO
PRODUCT/MARKET FIT. WHEN YOU ARE BPMF, FOCUS
OBSESSIVELY ON GETTING THERE””
-­‐
MARC
ANDREESSEN
Tuesday, February 3, 15

6. 6
SO... NOW WHAT?
COMPANIES HAVE DIFFERENT GROWTH RATES OVER THE FIRST 3 YEARS:
NATURAL: THE “NORMAL” RATE OF GROWTH GIVEN THE BUSINESS MODEL, MARKET
OPPORTUNITY, AND AMOUNT OF FUNDRAISING
*MOST US BUSINESSES, E.G. FRANCHISES OR GENERAL SERVICE COMPANIES
ACCELERATED: RAPID GROWTH PLANS & PARTNERSHIPS - “NATURAL” ON STEROIDS
Tuesday, February 3, 15

7. 7
AREAS OF ACCELERATED GROWTH
1
2
3
STRATEGIC CORPORATE PARTNERSHIPS
STARTUP ACCELERATORS
ACQUISITIONS
Tuesday, February 3, 15

8. 8
CORPORATE PARTNERSHIPS
Tuesday, February 3, 15

9. CORPORATE PARTNERSHIPS
9
EARLY STAGE COLLABORATION WITH BIG BRANDS
PROS:
• EARLY PROOF OF CONCEPT (VALIDATION)
• BUILD A BETTER MOUSETRAP
• POTENTIAL TO DISCOVER NEW USE CASES OR
REVENUE STREAMS
• BRANDS (SOMETIMES) LOVE FIRST MOVER
ADVANTAGE
• PRESS OPPORTUNITIES
• BARTER PILOT COSTS FOR INCREMENTAL
EXPOSURE (E.G. FACEBOOK POSTS, EMAIL BLASTS,
ETC.)
• LEVERAGE BRAND’S CRM FOR USER ACQUISITION
• RELATIONSHIP BUILDING
CONS:
• PARTNERSHIPS CAN CAUSE DISTRACTIONS
• REQUIRE SIGNIFICANT BANDWIDTH
• PILOTS ARE TYPICALLY LOW/NO REVENUE
• OFTEN SLOW TO EXECUTE
• LIKELY MINIMAL ON-GOING, OR LONG TERM
COMMITMENT
Tuesday, February 3, 15

10. CORPORATE PARTNERSHIPS: GOLDILOCKS PRINCIPLE
10
“TOO HOT” .... (“STRATEGIC” OR “CORE”) “TOO COLD” ....
✓ POTENTIAL PARTNER BUILDS IT IN HOUSE
✓ POTENTIAL PARTNER SAYS YES, BECAUSE
THE PRODUCT IS SO DEFENSIBLE
✓ POTENTIAL PARTNER ACQUIRES TECH
✓ NOT USEFUL TO POTENTIAL CUSTOMERS
✓ NOT USEFUL TO POTENTIAL PARTNERS
✓ RE-LOOK AT YOUR PRODUCT/MARKET,
AND LIKELY PIVOT THE BUSINESS
TO BE A SUSTAINABLE BUSINESS, YOU NEED TO BE “JUST RIGHT”
TO BUILD A LONG TERM BUSINESS WITH CORPORATE PARTNERSHIPS, IT’S BEST TO BE
USEFUL TO LOTS OF PARTNERS - BUT NOT SO STRATEGIC THEY’RE UNWILLING TO RENT IT
Tuesday, February 3, 15

11. 11
CORPORATE PARTNERSHIPS
BUT WHAT’S MORE INTERESTING....
25 OF THE 30 FIRMS ON THE DOW JONES INDUSTRIAL
AVERAGE NOW HAVE CORPORATE VENTURE UNITS.
http://www.businessinsider.com/the-year-of-the-tiny-tech-acquisition-2015-1
WHAT DOES THAT MEAN?
BRANDS HAVE BECOME INVESTORS =
MORE $$$$$, AND OPPORTUNITIES FOR STRATEGIC FUNDING.
Tuesday, February 3, 15

12. CORPORATE PARTNERSHIPS
12
9 PORTFOLIO COMPANIES12 PORTFOLIO COMPANIES
20+ PORTFOLIO COMPANIES
25+ PORTFOLIO COMPANIES
*COMMUNICATION AND INVOLVEMENT BETWEEN THE VENTURE ARM AND CORE
BUSINESS VARIES BY COMPANY*
Tuesday, February 3, 15

13. ACCELERATORS
13
DESIGNED TO FOSTER RAPID GROWTH OVER A SPECIFIC TIME PERIOD:
• SMALL AMOUNT OF FUNDING IN EXCHANGE FOR EQUITY
• ON-GOING GUIDANCE ON BUILDING A BUSINESS AND FINDING PRODUCT/MARKET FIT
• ACCESS TO ROBUST MENTORSHIP NETWORK (E.G. SUCCESSFUL FOUNDERS, INVESTORS)
• TYPICALLY 3-5 MONTH PROGRAM, WITH 2-3 STARTUP CLASSES (“COHORTS”) PER YEAR
• # OF STARTUPS IN EACH CLASS VARIES BY ACCELERATOR
• OFFICE SPACE
• ACTIVE ALUMNI NETWORK
ACCELERATORS.
Tuesday, February 3, 15

14. TOP ACCELERATOR PROGRAMS
14
NOW OVER 4,900+ ACCELERATORS AROUND THE WORLD: 1,100+ IN THE US
http://www.f6s.com/programs
Tuesday, February 3, 15

15. 15
STARTUP ACCELERATORS
HOUSEHOLD NAMES WERE ONCE IN TOP ACCELERATOR PROGRAMS...
•STARTUPS COMING OUT OF ACCELERATORS TEND TO HAVE A HIGHER EXIT RATE, FEWER FAILURES,
AND RAISE MORE CAPITAL THAN THE AVERAGE STARTUP INDUSTRY
•WHICH ALSO TENDS TO LEAD TO HIGHER VALUATIONS FOR INVESTORS :)
Tuesday, February 3, 15

16. STARTUP ACCELERATORS
16
YCOMBINATOR GETS 7,500+ STARTUP APPLICATIONS... AND ACCEPTS ~125.
AND ACCEPTS ~10.TECHSTARS GETS ~1,500+ APPLICATIONS PER CLASS...
TOP ACCELERATORS ARE INCREDIBLY COMPETITIVE...!
TYPICALLY LESS THAN 2% GETS ACCEPTED
Tuesday, February 3, 15

17. ACQUISITIONS
17
TYPICALLY DRIVEN BY THE DESIRE FOR RETURNS BY SHAREHOLDERS
EXITS.
TALENT
“THE ACQUIHIRE”
TECH
“TALENT + PRODUCT”
ARE DESIRED
(OFTEN PRE-REVENUE)
BUSINESS
“FINANCIAL BASIS”
(REAL REVENUE/PROFIT,
DEFENSIBLE PRODUCT)
Tuesday, February 3, 15

18. ACQUISITIONS
18
2014 WAS A YEAR OF MAGICAL UNICORNS....
Tuesday, February 3, 15

19. 19
ACQUISITIONS
ONE OF THE MOST ACTIVE YEARS IN TECH M&A:
5 $BILLION+ EXITS: *10 COMPANIES, $32B+ LATER...(DROP THE MIC HERE)
$3B
$3.2B
$555MM
$2B
$19B
$970MM
$640MM$2.5B
*2014 Google acquisitions DeepMind ($500MM+) and Skybox ($500MM) not shown
Tuesday, February 3, 15

20. 20
ACQUISITIONS
BUT IT’S NOT JUST THE “USUAL SUSPECTS” ANYMORE...
TRADITIONAL HOUSEHOLD BRANDS ARE ACQUIRING STARTUPS TO REACH END USERS
BETTER AND CREATE GREATER EFFICIENCIES IN THEIR OWN BUSINESS
15 STARTUP
ACQUISITIONS!
Tuesday, February 3, 15

21. 21
ACQUISITIONS
“BOUTIQUE” ACQUISITIONS:
DEALS UNDER $100MM TRANSACTION SIZE WHERE BOTH THE PRODUCT AND SELLING
TEAM EXPERIENCE IS THE PRIMARY DRIVE OF THE DEAL, INVESTORS AND SELLING TEAM
MEMBERS BOTH SEE FAVORABLE GAINS.
Tuesday, February 3, 15

22. 22
ACQUISITIONS
NATIONAL VENTURE CAPITAL ASSOCIATION IS SHOWING STRATEGIC INVESTMENTS BY
CORPORATES ARE AT LEVELS NOT SEEN SINCE 2000 - AND IS EXPECTED TO REACH ~$3.5B IN 2014.
http://www.businessinsider.com/the-year-of-the-tiny-tech-acquisition-2015-1
Tuesday, February 3, 15

23. ACQUISITIONS
23
BUT... WILL ENTREPRENEURS WANT TO SELL FOR THAT AMOUNT?
MAYBE, OR MAYBE NOT.
• DESIRE TO BUILD A BIGGER, LONG TERM COMPANY
• MAY THINK YOU CAN SELL FOR MORE (“THE UNICORN SYNDROME”)
• YOUR INVESTORS AREN’T SATISFIED WITH THE SALE PRICE (AND THEY HAVE MAJORITY CONTROL)
• DON’T WANT TO HAVE YOUR STARTUP SHUT DOWN
• DON’T WANT TO GIVE UP CONTROL TO NEW BUYER
• MIGHT NOT BE A FIT WITH THE BUYER
• “INVINCIBLE” ENTREPRENEUR PERSPECTIVE
Tuesday, February 3, 15

24. ACQUISITIONS
24
YOU GOTTA KNOW WHEN TO HOLD ‘EM...
✓ TURNED DOWN $1B OFFER BY
YAHOO IN 2006...
✓ ZUCKERBERG IS NOW
PERSONALLY WORTH $13B+
✓ MORE THAN 1,000 EMPLOYEES
ARE MILLIONAIRES
✓ TURNED DOWN $3B OFFER FROM
FACEBOOK
✓ ROLLING OUT MUSIC FEATURES
✓ ACQUIRING STARTUPS
✓ RUMORED TO HAVE TURNED
DOWN $300M+ OFFER FROM GOOGLE
✓ PROJECTED TO BE WORTH BILLIONS
✓ USER GROWTH AND ENGAGEMENT
REMAINS HIGH
http://www.businessinsider.com/startups-that-rejected-100-million-offers-2013-5
Tuesday, February 3, 15

25. ACQUISITIONS
25
(AND PERHAPS?), KNOW WHEN TO FOLD ‘EM...
✓ TURNED DOWN $100MM OFFER
✓ LOST TRACTION, LAID OFF STAFF
✓ ACQUIRED FOR ~$20MM...
✓ IN 2012 IT HAD A $370MM VALUATION.
✓ COMPETITOR SOCIALCAM SOLD FOR
$60MM QUICKLY AFTER THE LAUNCH
✓ TURNED DOWN GOOGLE’S $100MM
OFFER
✓ LATER SOLD TO YAHOO FOR A
FRACTION OF THE PRICE (~$40MM)
✓ TURNED DOWN YAHOO, FACEBOOK’S
$100-120MM OFFER IN 2010
✓ 4 YEARS LATER... STILL PROVING
THEIR BUSINESS MODEL
✓ RAISED $162MM+ FROM INVESTORS
✓ TURNED DOWN GOOGLE’S $100MM
OFFER 3 MONTHS AFTER LAUNCH
✓ IN CONVERSATIONS WITH APPLE
✓ RAISED $75MM+ FROM INVESTORS
http://www.businessinsider.com/startups-that-rejected-100-million-offers-2013-5
Tuesday, February 3, 15

26. ACQUISITIONS
26
THE TALE OF OMGPOP AND DRAW SOMETHING...
A STRUGGLING MOBILE
GAMING STARTUP...
FINALLY HIT IT BIG... 35MM
DOWNLOADS, 1BILLION
DRAWINGS - IN 6 WEEKS...
~$180MM LATER... OH, AND
IT’S SINCE SHUTTERED THE NY
OFFICE, AND LAID OFF MOST
ITS STAFF
KNOW WHEN TO WALK AWAY... KNOW WHEN TO RUN!
http://www.businessinsider.com/startups-that-rejected-100-million-offers-2013-5
Tuesday, February 3, 15

27. ACQUISITIONS
27
WHAT ARE THE LESSONS LEARNED?
• TIMING IS EVERYTHING.
• RAISING LESS MONEY CAN RESULT IN HIGHER RETURNS
• WITH CONSUMER APPS, SOMETIMES ITS BEST TO SELL QUICKLY IF THERE’S TRACTION POST LAUNCH
• HAVE OPEN AND HONEST CONVERSATIONS WITH YOUR INVESTORS AND ADVISORS ABOUT
ACQUISITION OFFERS
• THE MORE YOU RAISE, THE HIGHER THE ACQUISITION PRICE INVESTORS WILL EXPECT
• DONT FORGET... THE ODDS AS A STARTUP ARE STILL STACKED AGAINST YOU!
Tuesday, February 3, 15

28. ACQUISITIONS
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THINGS TO CONSIDER:
IT CAN BE DIFFICULT TO SELL WHEN...
✓ STARTUP HAS RAISED TOO MUCH $$, AT
AN INFLATED VALUATION
✓ CORE PRODUCT HAS LOST TRACTION
✓ CORE PRODUCT NOT DEFENSIBLE
✓ STARTUP IS DIFFICULT TO VALUE
✓ KEY SHAREHOLDERS DON’T WANT TO SELL
IT HELPS TO GET ACQUIRED WHEN...
✓ STARTUP ISN’T OVER-FUNDED
✓ TEAM HAS A GREAT TRACK RECORD IN
PREVIOUS COMPANIES
✓ STARTUP TECH/TEAM ARE CONSIDERED
EXCELLENT, DIFFICULT TO REPLACE
✓ THERE’S A CORE BUSINESS
Tuesday, February 3, 15

29. IPOS
29
A FINAL APPROACH TO RAISING MONEY AT A GOOD VALUATION.
IPOS.
“WITH GREAT POWER COMES
GREAT RESPONSIBILITY...”
BUT “GOING PUBLIC” HAS NEW CHALLENGES...
✓ FOCUS SHIFTS TO SHORT TERM QUARTERLY GOALS
✓ ADDITIONAL REPORTING AND DISCLOSURES CAN
BE A DISTRACTING BURDEN
✓ VALUATION DISCONNECT BETWEEN THE PUBLIC
AND PRIVATE MARKET
✓ PUBLIC MARKETS CAN BE DEMANDING, AND
UNFORGIVING
✓ VERY LONG, EXPENSIVE, TIME CONSUMING PROCESS
Tuesday, February 3, 15

30. REAL WORLD PERSPECTIVE
30
BURTON MILLER
• CO-FOUNDER AND COO
• YCOMBINATOR GRADUATE
• STARTED CODING AT 12 YEARS OLD
• BUILT PRODUCTS ACROSS MULTIPLE INDUSTRIES-
FROM SOFTWARE TOOLS TO MISSILE SYSTEMS
FOUNDER SPOTLIGHT!
Tuesday, February 3, 15

31. • FEBRUARY 5TH: PERFECTING YOUR PITCH!
• BREAKOUT SESSIONS WITH OUR PORTFOLIO FOUNDERS
• HAVE THE ROUGH DRAFT OF YOUR PITCH DECK READY
• CLASS WILL BE IN THE HYDE SPACE AND GO UNTIL 130P
NEXT WEEK...
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Tuesday, February 3, 15

32. CONTACT:
JESSICA PELTZ, PRINCIPAL
JPELTZ@KBSP.VC
JOSH ENGROFF, MANAGING PARTNER
JENGROFF@KBSP.VC
QUESTIONS?
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Tuesday, February 3, 15

33. Tuesday, February 3, 15