1. Allan Chao
Startup V8
allan@StartupV8.com
San Francisco SBA 2011

2. Introductions
 Who you are
 What you do
 What’s your Startup Idea?

3. The Agenda
 Why?
 Defining “Web Startups”?
 Risk and Reward
 Lean Startup Methodology
 A new kind of model
 Customer Development
 Agile Software Development
 Web Application Product Development
 Web apps
 Mobile apps
 Equity Financing and Incubation
 Angel Investors and Venture Capitalists
 The pitch system
 Startup Marketing
 Pre-alpha, alpha, closed beta, beta, launch

4. Web Startups… What are they?
 Web
 Websites, Mobile apps, Tablets
 Infrastructure
 Software as a Service
 Startups
 New and unproven business model
 = New way of solving an existing problem
 Disruptive innovation = disrupts the existing market

5. Big and Famous Web Startups
 Amazon.c (1994)
 Ebay (1995)
 Googl (1998)
 Paypal (1998)
 Wikipedia (2001)
 LinkedIn ( (2003)
 Facebook (2004)
 YouTube (2005)
 Twitter (2006)

6. Literally Thousands More

7. Risk and Reward
 Literally thousands of web startups…
 Lots of direct competitors for every idea…
 Very few startups break even…
 Even fewer become very profitable…
 But those that are extremely successful… (over 1,000:1)
 change the world (or at least their industry)
 make MEGA $$$$$$$$$$$$ (via IPO or Acquisition)

8. How to Be Successful?
 The idea is worth $0.00 = nothing
 Execution is everything!!
 What does that mean? How do you “Execute”?
 Business Plans vs. The Lean Startup
 Business Plans = Plan and Pray
 Lean Startup = Release and React
 Lean Startup
 Low overhead, low costs
 Agile Software Development
 Rapid customer-centric development

9. The Lean Startup (Eric Ries)
 A methodology/philosophy of building
startups
 1. Use of free and open source software
 Groupon was started as a wordpress blog
 2. Agile Software Development
 Release as frequently as possible
 Iterate development as quickly as possible
 3. Ferocious customer-centric rapid
iteration
 Customer Development Process
 Build a minimum viable product – launch fast!
 Learn from your users/customers

10. Customer Development Process
 Customer Discovery = Understanding your customers
 Customer Validation = Develop a Repeatable Sales Process with
early evangelist buyers
 Customer Creation = Scaling your customers from few to many
 Company Building = Rebuild your company’s organization and
management. Re-look at your mission

11. Customer Discovery

12. Customer Validation

13. Customer Creation

14. Company Building

15. Software Product Development
 Creating the Minimum Viable Product (MVP)
 Functional Requirements
 Wireframes
 Graphic Design
 Code
 Content (Copywriting, Social Media accounts, analytics, etc.)
 Deploy (aka Release)

16. Functional Requirements
 Questions to answer
 What customer problem
does this product solve?
 What are the customer
use cases?
 How will the customer
use this product to solve
his problem?
 How will the product
make money?

17. Sitemap

18. Wireframes

19. Graphic Design

20. Code
 HTML, CSS, Javascript, Jquery, Node.js, Django,
python, Ruby on Rails, PHP, .NET, Java, ….

21. Content
 Every single screen
 Instructions to the user
 Search-Engine-friendly content
 Long tail keywords
 Content Uniqueness
 Any emails that are sent?
 Blog posts?
 PR releases?
 Analytics tools

22. Traditional Software Development

23. Agile Software Development
 Start Small
 Minimum Viable
Product
 Iterate quickly
 Track user data
 Flexible software
 Release frequently
 Cycle weekly or every
two weeks

24. WebApp Product Development
 Scale development with your business
 Do *NOT* invest $ thousands up-front without customers
 Initial MVP: Something **Very Simple** = $5000 - $15,000
 Groupon started with a Wordpress blog
 Orders were done by email (no online form)
 After market is validated, invest in custom software
 Expensive and time consuming
 Specialist coders
 Nearly infinite depth of programming skills required
 HTML, CSS, Javascript
 Node.js, php, python, .NET, Java, AJAX, Ruby on Rails, etc.

25. MobileApp Product Development
 Similar process to Web application development
 Costs more: average prototype costs
 1-3 screens: $5,000-$10,000
 5-15 screens: $10,000-$20,000
 “fully featured” app: $20,000+
 Each platform is independent:
 iOS (iPhone)
 Android
 BlackBerry
 Windows Mobile
 Cheap hack: build a web-app that looks like a native app

26. Equity Financing
 Goal = Give away significant ownership of your
company to raise money and bring on talent.
 Founders
 Very generally, founders start with an equal split 50-50
or 33-33-33
 More complicated ways to calculate… google “founder
equity calculator”
 Experienced co-founders will laugh at you if you think
the “idea” is worth significantly more: e.g. 80-20.
 Capitalization tables to predict effects of dilution
 Employees expect to get vesting stock

27. Equity Rounds
 Friends and Family $50-250k
 Angels up to $1 M
 Super angels up to $2.5 M
 VCs Series A $3+ M
 Normally 2-3 rounds… ABC exit.
 Rounds DEF = “cramdown” rounds… bad terms
 The one goal of investors is to exit. $$$$$

28. Equity Financing caveats
 Takes a long, long, long time to raise money.
 Very involved process
 Prepare to spend money to raise money
 Preparation workshops
 Preparing Presentations
 Flights to investors
 Dinner
 Beware of losing your company
 Term sheets must be reviewed by your lawyer!

29. Alternative Financing
 Crowd Funding
 Kickstarter.com
 Rockethub
 Competitions / Grants
 Solo Funding
 Bank loans unlikely
 Second mortgage
 Credit cards!!??
 Start eating ramen noodles 

30. Incubation
 Programs that help entrepreneurs get started on their
projects in exchange for 5-10% equity
 Very small seed capital ($20,000)
 Networking and relationship building
 Presentations to angel investors
 Application based… very competitive (internationally)

31. Incubator Examples
 Incubators
 Y-combinator (Mountain View, CA)
 Techstars (Boulder, CO)
 Excelerate Labs (Chicago, IL)
 Graduates of Incubators
 Dropbox
 Scribd
 Reddit
 Justin.tv
 Posterous

32. Startup Marketing
 Marketing Strategy
 Publicity when you want it, not
as a random event
 Publicity after you know what
your business is about
 Popular Startup news
 Techcrunch
 Crunchbase
 Engagdet
 Venturebeat
 Mashable
 Digg

33. Thank you!
 After you complete the evaluation forms,
 please pick up my business card at the back of the room.
Allan Chao
Startup V8
allan@StartupV8.com