10. [ This Talk ]
⢠Changes in Building Technology Startups
⢠Changes in Venture Capital Investing
⢠Building Startup Ecosystems
11. VC Industry Changes
⢠Lean Startup Efficiency, Reduced Capital Costs
⢠Global Market: 3B->6B Internet/Smartphone Access
⢠Billion-People Distribution Platforms, âGrowth Hackingâ
⢠Improved Monetization, Payments Infrastructure, Logistics
⢠Explosion of âUnicornsâ, Large VC Displacing IPOs (ex: A16Z)
⢠Micro VC: Seed Funds (ex: First Round Capital)
⢠Global Market of Angels, Accelerators (ex: YC, 500), Acquirers
⢠Startup Ecosystems, Funding Platforms (ex: Angel List, Kickstarter)
more info: http://PreMoney.co
12. Investor Education
⢠Startups are NOT Real Estate
⢠Most Startups Fail / Power Law Returns
⢠Portfolio Approach (20-50+ investments)
⢠Legal Structure, Financial Structure
⢠Syndication + Co-Investment
⢠Access to Downstream Capital
⢠Exits & Liquidity
12
13. 500 Strategy: Lots of Little Bets*
1) make lots (>100) of
investments in
early-stage startups
3) wait 3-10 years for returns:
-10-20% small exits @1-5X (<25M+)
-5-10% larger exits @5-20X ($25-250M+)
-1-2% unicorns @20-50X+ (>$250M-1B+)
*See Peter Sims book: âLittle Betsâ
2) over next 2 years,
double-down on top 20%
14. The Lean Investor
Make lots of little bets:
⢠Start with many small âexperimentsâ
⢠Filter out failures + small wins
⢠Double-down on stuff that looks like itâs working
⢠Incubation: $0-100K (âBuild & Validate Productâ)
⢠Seed: $100K-$1M (âTest & Grow Marketing Channelsââ)
⢠Venture: $1M-$10M (âMaximize Growth & Revenueâ)
15. Investment Stage #1: â¨
Product Validation + Customer Usage
⢠Structure
â 1-3 founders
â $25-$100K investment
â Incubator environment: multiple peers, mentors/advisors
⢠Test Functional Prototype / âMinimum Viable Productâ (MVP):
â Prototype->Alpha, ~3-6 months
â Develop Minimal Critical Feature Set => Get to âIt Works! Someone Uses It.â
â Improve Design & Usability, Setup Conversion Metrics
â Test Small-Scale Customer Adoption (10-1000 users)
⢠Demonstrate Concept, Reduce Product Risk, Test Functional Use
⢠Develop Metrics & Filter for Possible Future Investment
16. Investment Stage #2: â¨
Market Validation + Revenue Testing
⢠Structure
â 2-10 person team
â $100K-$1M investment
â Syndicate of Angel Investors / Small VC Funds
⢠Improve Product, Expand Customers, Test Revenue:
â Alpha->Beta, ~6-12 months
â Scale Customer Adoption => âMany People Use It, & They Pay.â
â Test Marketing Campaigns, Customer Acquisition Channels + Cost
â Test Revenue / Unit Economics, Find Profitable Customer Segments
⢠Prove Solution/Benefit, Assess Market Size
⢠Test Channel Cost, Unit Economics, Revenue Opportunity
⢠Determine Org Structure, Key Hires
17. Investment Stage #3: â¨
Revenue Validation + Growth
⢠Structure
â 5-25 person team
â $1M-$10M investment
â Seed & Venture Investors
⢠Make Money (or Go Big), Get to Sustainability:
â Beta->Production, 12-24 months
â Revenue / Growth => âWe Can Make (a lot of) Money!â
â Mktg Plan => Predictable Channels / Campaigns + Budget
â Scalability & Infrastructure, Customer Service & Operations
â Connect with Distribution Partners, Expand Growth
⢠Prove/Expand Market, Operationalize Business
⢠Future Milestones: Profitable/Sustainable, Exit Options
18. [ This Talk ]
⢠Changes in Building Technology Startups
⢠Changes in Venture Capital Investing
⢠Building Startup Ecosystems