1. Bankers Versus GamblersThe Rise of Private RiskCapital Steve Blank www.steveblank.com Twitter: sgblank Slides: www.slideshare.net/sblank

2. The Rise of Risk CapitalFamily Money 1940’s - 1960’s J.H. Whitney 1st family office 1946 Laurance Rockefeller Draper Gaither & Anderson (1st limited Partnership) 1958 Spun out as Venrock in 1969 Bessemer East Coast focus Wide variety of industries

3. The Rise of Risk CapitalEast Coast VC Experiments 1946 American Research & Development George Doriot Right idea, wrong model (public VC firm) 1963 Boston Capital

4. The Valley Attracts Financial AttentionThe 1st West Coast IPO’s 1956 Varian 1957 Hewlett Packard 1958 Ampex

5. 1950’s – 1968 Stanford Engineering School sets up a secret 800-person military weapons lab

6. 1950’s – 1968 Stanford Engineering School sets up a secret 800-person military weapons lab The Valley’s Entrepreneurial Culture comes from this lab

7. Entrepreneurs WeaponsFinance Crisis Profit Motivation Customer Development Mgmt Tools Agile Development Business ModelDesign Design Thinking Stanford and the Cold War Silicon Valley’s 1st Wave Risk Taking Culture Entrepreneurial Outward-Facing Tech Universities Free flow of People/Info Infrastructure 24/7 Utilities Predictable Economic System Stable Legal System Research Universities

8. Soviet Union Launches Sputnik and the U.S. Venture Capital Industry Soviet satellite shocked the U.S. Galvanized congress New agencies/programs NASA ARPA National Defense Education Act SBA SBIC Act

9. The Rise of Risk CapitalSBIC Act of 1958 Gov’t match of private investments 3:1 700 SBIC funds by 1965 75% of all VC funding in 1968, 7% in 1988 Corporate Bank of America - George Quist, Tom Clauson Firemans Fund/American Express - Reid Dennis Private 1959 Continental Capital - Frank Chambers The Group; Bryan Edwards, McGanney 1962 Pitch Johnson & Bill Draper 1962 Sutter Hill

10. The Rise of Risk CapitalSBIC Act of 1958 700 SBIC funds by 1965 75% of all VC funding in 1968, 7% in 1988 Corporate Bank of America - George Quist, Tom Clauson Firemans Fund/American Express - Reid Dennis Private 1959 Continental Capital - Frank Chambers The Group; Bryan Edwards, McGanney 1962 Pitch Johnson & Bill Draper 1962 Sutter Hill

11. The Rise of Risk Capital“The Group” – the first Angels 1950’s First Bay Area “Angels” Reid Dennis William Bryan William Edwards William K. Bowes Daniel McGanney ~ 10 deals $75 -$300K

12. Reid Dennis Remembers “The first 25 electronics companies required total capital of $300k each and private individuals formed the basis of the early syndicates” “….in 1975, prior to the relaxation of ERISA laws, the entire VC industry raised $10m”

14. Rock and Davis 1961

15. Sutter Hill 1964

16. Patricof & Co. 1969

17. Kleiner Perkins 1972

19. Electron-Based VC’s

20. Entrepreneurs VentureFinance Crisis Profit Motivation Customer Development Mgmt Tools Agile Development Business ModelDesign Design Thinking Venture CapitalSilicon Valley’s 2nd Wave Risk Taking Culture Entrepreneurial Outward-Facing Tech Universities Free flow of People/Info Infrastructure 24/7 Utilities Predictable Economic System Stable Legal System Research Universities

21. Life Science-Based VC’s

22. Lean Angels

23. Venture CapitalSilicon Valley Today VentureFinance Entrepreneurs AngelFinance Crisis Profit Motivation Customer Development Mgmt Tools Agile Development Business ModelDesign Design Thinking Risk Taking Culture Entrepreneurial Outward-Facing Tech Universities Free flow of People/Info Infrastructure 24/7 Utilities Predictable Economic System Stable Legal System Research Universities

24. Finally Observations From Abroad

25. #1 Startups are Smaller Versions of Large Companies

26. #1 × Startups are Smaller Versions of Large Companies oops

27. #2 A startup is all about focus and execution of the business plan

28. #2 A startup is all about focus and execution of the business plan No business plan survivesfirst contact with customers ✓

29. #3 A startup is all about a great idea

30. #3 A startup is all about a great idea An A-teamwith a B-product always beats a B-team with an A-product ✓

31. #4 Companies execute business plansStartups search for business models

32. #3 Companies execute business plansStartups search for business models

33. #4 Companies execute business plansStartups search for business models ✓

34. #5 A startup is a temporary organization designed to search for a scalable and repeatable business model

35. #6 Startups need their own tools, different from those used in existing companies

36. #6 Startups need their own tools, different from those used in existing companies

37. #7 Customer Development = process to searchBusiness Model Canvas is the ScorecardAgile Engineering is How We Build Startups

39. Demo, demo, and demo!!

40. Proximity is paramount

41. Technology Design

42. Marketing

43. Demo and customer feedback

44. Research Labs

45. Equipment Manufacturers

46. Distribution Network

47. Service Providers

48. Cost Reduction

49. Remove labor force pains

50. Eliminate bio-waste hazards

51. Organic Farmers

52. Weeding Service Providers

53. Conventional Farmers

54. IP – Patents

55. Video Classifier Files

56. Robust Technology

57. Dealers

58. Direct Service

59. Indirect Service

60. … then Dealers

61. Asset Sale

62. Direct Service with equipment rental

63. … then Asset SaleValue-Driven

64. #9 Valuations are Inflating at a Rapid PaceEarly and Late Stage

65. #9 Valuations are Inflating at a Rapid PaceEarly and Late StageThe Game is On AgainGet In It!

66. Summary Cold War started Silicon Valley entrepreneurial culture Military was the key customer for Valley technologies Semiconductors, computers, Internet Venture Capital enabled by government funded VC’s SBIC Program Limited partnerships and Pension Funds made it scale