This document discusses how the rules for starting ambitious startups have changed in recent years. It notes that operating costs are now more variable than fixed, teams can be effective even when distributed due to better collaboration tools, and major tech hubs like San Francisco and New York have become very expensive places to operate a startup. While challenges remain around managing distributed teams and navigating new fundraising models, the changes open opportunities for startups to experiment with new approaches.
3. The Old Model for Ambitious Startups
• Buy hardware, set up infrastructure (Thanks, Amazon!)
• Build a team in a central location
• Make that central location the Bay Area
• Build a product, find customers
• Raise capital from VCs
• IPO or M&A
5. Why the Change
The cost equation for startups has changed:
• Most startup costs are now variable, not fixed
• Less capital required to get started, test your idea
• Operating costs in some major metros are very high
• San Francisco and New York are very expensive locations
• Better collaboration tools = more distributed teams
• The tools are finally living up to the promise
7. Old Logic
Teams must be in one central
place to be effective
• Necessary to build culture
• Aids in communication
• Poor tools to enable remote
collaboration
Changing Narrative on Team Distribution
Today’s Reality
Teams can be distributed and still
be effective
• Good software for teamwork
• Broad access to LTE + Wi-Fi
enables work anywhere
• Improving understanding of
building culture for distributed
teams
8. The Coasts Are Expensive Places to Start
Starting a brand new company in SF or NYC is expensive
• Talent is abundant, but hiring is very competitive
• Dense markets attract talent, but also attract competition
• SF and NYC are very expensive places to operate
• Office space, housing, salaries and benefits all impact the
capital requirements for startups
• Increased company formation outside of the coasts
• Easier to start, but harder to grow?
9. Collaboration Tools (Finally) Work
• Video conferencing is reliable and cheap
• Videoconferencing generally works and is fairly cheap
• Group chat allows for inclusive conversations
• Team-based chat allows for continuous conversations across
locations and across teams
• Better support for cloud development and deployment
• Developing and deploying complex applications is much
easier with the latest cloud-based tools
10. Challenges Still Abound
• Centralized, Remote or Distributed?
• Should you go without a central office altogether?
• Hiring and Retaining in a Decentralized Model
• Having an office, hiring locally allows for office culture
• Management Requirements Differ
• Managing a team across space and time zones creates new
challenges for managers and teams
12. Old Model
Fewer rounds of fundraising,
simpler process:
• Angel / F&F round
• Series A
• Series B
• Growth Round
• IPO
Startup Fundraising Has Changed
The New World of Fundraising
More options and ways to raise
capital. Is this better?
• Angel / F&F
• Pre-Seed
• Seed
• Seed Extension
• Series A
13. More Fundraising Options = More Confusion?
More fundraising options mean more decisions to consider:
• What is a “seed round” today?
• How do I figure out which firms are right for me?
• How do I manage dilution across more rounds?
• More fundraising rounds = more time spent fundraising
• What are the right milestones for each round today?
• What do I do if I have an in-between round?
14. New Ways to Fundraise
Entrepreneurs have more options on how to raise money:
• ICOs, tokens and cryptocurrency
• Pre-orders, Kickstarter and crowdfunding
• Patreon and direct support by fans and customers
15. Staying Private Longer is the New Norm
Startups are staying private longer, creating new issues:
• Employee retention and options grants
• Does the 4-year option vesting period make sense?
• Secondary sale shares
• When should founders, employees and investors sell?
• Public market expectations for IPOs and M&A
• Does staying private longer pay off for companies?
17. Things to Consider
Most of the playbooks are stale, which is a good for you:
• There is not necessarily a ton of good “how to” material
for many of these new challenges
• Not all venture investors and pundits believe that the
world has changed and these things are true
• Change gives you license and opportunity to experiment
with how and where you set up your company
18. Most of the benefits go to the
companies that dive in and
figure this out before it’s well
understood and documented.