Call Girls Koregaon Park Call Me 7737669865 Budget Friendly No Advance Booking
Â
Changes in Venture Capital & Tech Startups (Nov 2013, Mumbai)
1. Changes
 in
 Tech
 Startups
Â
&
 Venture
 Capital
Â
@DaveMcClure
Â
#ABAF
 Mumbai
Â
Nov
 2013
Â
2. This
 TalkâŚ
Â
â˘âŻ
â˘âŻ
â˘âŻ
â˘âŻ
â˘âŻ
â˘âŻ
Industry
 Changes:
 Da$
 Punk
 Lean
 Startup
Â
Myth
 BusJng:
 The
 Series
 A
 Crunch
Â
500
 Strategy:
 Lots
 of
 Li8le
 Bets
Â
Venture
 Metrics:
 The
 Lean
 VC
Â
Scalable
 PlaMorms:
 Marke=ng
 &
 Distribu=on
Â
Demography=Geography:
 Local
 vs.
 Global
 Startups
Â
3. Dave McClure
Founding Partner & Chief Troublemaker, 500 Startups
00âs & 10âs:
â˘âŻ VC: Founders Fund, Facebook fbFund, 500 Startups
â˘âŻ Angel: Mashery, Mint.com, SlideShare, Twilio
â˘âŻ Marketing: PayPal, Simply Hired, Mint.com, OâReilly
80âs & 90âs:
â˘âŻ Entrepreneur: Aslan Computing (acqâd by Servinet/Panurgy)
â˘âŻ Developer: Windows / SQL DB consultant (Intel, MSFT)
â˘âŻ Engineer: Johns Hopkinsâ88, BS Eng / Applied Math
4. 500 Startups
Global Seed Fund & Startup Accelerator
â˘âŻ
What is 500?
ââŻ
ââŻ
ââŻ
ââŻ
ââŻ
â˘âŻ
$80M under management
30+ people / 10 investing partners
Locations: SV, NYC, MEX, BRZ, IND, CHN, SE Asia
1000+ Founders / 200+ Mentors
25+ positive exits in ~3 years
500+ Portfolio Coâs / 40+ Countries
ââŻ
ââŻ
ââŻ
ââŻ
ââŻ
ââŻ
ââŻ
ââŻ
ââŻ
ââŻ
ââŻ
ââŻ
ââŻ
ââŻ
ââŻ
ââŻ
ââŻ
ââŻ
Wildfire (acq GOOG, $350M)
MakerBot (acq SSYS, $400M)
Viki (acq Rakuten, $200M)
Twilio
SendGrid
Credit Karma
VivaReal
Udemy
Zozi
The RealReal
Virool
Visually
Gengo
PicCollage
9GAG
ZipDial
TradeBriefs
Tushky
6. Startup Investor Ecosystem
Bootstrap, KickStarter,
Crowdfunding
Y-Combinator
TechStars
Â
Â
Angels &
Incubators
($0-10M)
SV Angel (Conway)
Floodgate (Maples)
âMicro-VCâ Funds
($10-100M)
First Round
Union Square
Incuba=on
Â
SoftTech (Clavier)
Felicis (Senkut)
Series
 A
Â
True
âBigâ VC Funds
($100-500M)
Seed
Â
Foundry
Series
 B
Â
Atomico
Greylock
âMegaâ VC Funds
(>$500M)
A16Z
Sequoia
Series
 C+
Â
7. Changes in Tech Startups
â˘âŻ
LESS Capital required to build product, get to market
â⯠Dramatically reduced $$$ on servers, software, bandwidth
â⯠Crowdfunding, KickStarter, Angel List, Funders Club, etc
â⯠Cheap access to online platforms for 100M+ consumers, smallbiz, etc
â˘âŻ
MORE Customers via ONLINE platforms (100M+ users)
ââŻ
ââŻ
ââŻ
ââŻ
ââŻ
ââŻ
â˘âŻ
Search (Google)
Social (Facebook, Twitter)
Mobile (Apple, Android)
Local (Yelp, Groupon, FourSquare)
Media (YouTube, Pinterest, Instagram, Tumblr)
Comm (Email, IM/Chat, Voice, SMS, etc)
LOTS of little bets: Accelerators, Angels, Angel List, Small Exits
â⯠Y Combinator, TechStars, 500 Startups
â⯠Funding + Co-working + Mentoring -> Design, Data, Distribution
â⯠âFast, Cheap Failâ, network effects, quantitative + iterative investments
8. Industry
 Changes
Â
â˘âŻ
â˘âŻ
â˘âŻ
â˘âŻ
â˘âŻ
â˘âŻ
Â
Startup
 EďŹciency,
 Reduced
 Capital
 Costs
Â
Growing
 Market,
 Growing
 PlaIorms
Â
VC
 Industry
 Upheavals
 (2000,
 2008)
Â
Super
 Angel
 -Ââ>
 Micro
 VC:
 Seed
 Funds
 (ex:
 First
 Round)
Â
Incubators
 &
 Accelerators
 (ex:
 Y
 Combinator)
Â
Big
 VC
 (ex:
 A16Z)
 &
 PlaMorms
 (ex:
 Angel
 List)
Â
more
 info
 see:
 h.p://PreMoney.co
Â
Â
Â
9. Daft Punk Lean Startup:
Simpler, Faster, Cheaper, Smarter
Â
Â
Â
1.⯠Startup Costs = Lower.
2.⯠# Users, Bandwidth = Bigger.
3.⯠Transaction $$$ = Better.
Ăď⯠Building Product => Cheaper, Faster, Better
Ăď⯠Getting Customers => Easier, More Measurable
Iterative Product & Marketing Decisions
based on Measured User Behavior
10. Before & After 2 Dot-Com Crashes
Daft Punk Startup: Simpler, Faster, Cheaper, Smarter
Before
 2000
Â
â˘âŻ Sun
 Servers
Â
â˘âŻ Oracle
 DB
Â
â˘âŻ Exodus
 HosJng
Â
â˘âŻ 12-Ââ24mo
 dev
 cycle
Â
â˘âŻ 6-Ââ18mo
 sales
 cycle
Â
â˘âŻ <100M
 people
 online
Â
â˘âŻ $1-Ââ2M
 seed
 round
Â
â˘âŻ $3-Ââ5M
 Series
 A
Â
â˘âŻ Sand
 Hill
 Road
 crawl
Â
â˘âŻ Big,
 Fat,
 Dinosaur
 Startup
Â
Acer
 2008
Â
â˘âŻ AWS,
 Google,
 PayPal,
 FB,
 TW
Â
â˘âŻ Cloud
 +
 Open
 Source
 SW
Â
â˘âŻ Lean
 Startup
 /
 Startup
 Wknd
Â
â˘âŻ 3-Ââ90d
 dev
 cycle
Â
â˘âŻ SaaS
 /
 online
 sales
Â
â˘âŻ >3B
 people
 online
Â
â˘âŻ <$100K
 incub
 +
 <$1M
 seed
Â
â˘âŻ $1-Ââ3M
 Series
 A
Â
â˘âŻ Angel
 List
 global
 visibility
Â
â˘âŻ Lean,
 Li8le,
 Cockroach
 Startup
Â
11. Series A Crunch: Good or Bad?
Series A rqmts: $1M revenue, 1M active users,
10M downloads, 100% YoY growth
â˘âŻ Lots of Incubation / Seed startups will âfailâ
â˘âŻ BUT: Fail Budget = $50-$500K, not $5M+
â˘âŻ Many âfailedâ startups = ramen-profitable, small
acquisition, or MBA alternative (<$100K)
â˘âŻ Series A/B VCs have lots to choose from
â˘âŻ Overall, founders / market getting smarter
â˘âŻ More focus on customers, problems, revenue
â˘âŻ Many die, some survive (1-5x), a few thrive (20x+).
12. Silicon Valley 2.0:
Lots of Little Bets
aka âMoneyBall for Startupsâ
â˘âŻ
â˘âŻ
VC Evolution: Physician, Scale Thyself (Aug 2012)
MoneyBall for Startups, 500 Startups Investment Thesis (Jul 2010)
13. 500
 Strategy:
 âLots
 of
 Li.le
 Betsâ*
Â
Quan=ta=ve
 Inves=ng
 before
 Trac=on
Â
1)
 Make
 lots
 of
 limle
Â
bets
 pre-ÂâtracJon,
Â
early-Ââstage
 startups
Â
2)
 acer
 6-Ââ12
 months,
 idenJfy
Â
top
 20%
 performers
 and
Â
double-Ââdown
 higher
 $$$
Â
250+
 companies
 @
 $25-Ââ100K
Â
Â
(1st
 check)
Â
Â
-Ââ
 Assume
 high
 failure
 rate
 (up
 to
 80%)
Â
Â
Â
Double-ÂâDown
 a'er
 Trac=on
Â
50+
 âwinnersâ
 @
 $100K-Ââ$1M
Â
Â
(2nd
 +
 3rd
 check)
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
-Ââ
 -Ââ
 Target
 10+
 exits
 @
 $100M+
Â
Â
3)
 conservaJve
 model
 assumes
Â
-Ââ⯠5-Ââ10%
 large
 exits
 @20X
 ($50-Ââ100M+)
Â
-Ââ⯠10-Ââ20%
 small
 exits
 @5X
Â
 ($5-Ââ50M)
Â
Â
Â
13
Â
*See Peter Sims book: âLittle Betsâ
14. The Lean VC:
Lots of Little Bets, Incremental Investment
Method: Invest in lots of startups using incremental
investment, iterative development. Start with many
small experiments, filter out failures, and expand
investment in successes⌠(Rinse & Repeat).
â˘âŻ Incubator: $0-100K (âBuild & Validate Productâ)
â˘âŻ Seed: $100K-$1M (âTest & Grow Marketing Channelsââ)
â˘âŻ Venture: $1M-$10M (âMaximize Growth & Revenueâ)
15. Investment Stage #1:
Product Validation + Customer Usage
â˘âŻ Structure
â⯠1-3 founders
â⯠$25-$100K investment
â⯠Incubator environment: multiple peers, mentors/advisors
â˘âŻ Test Functional Prototype / âMinimum Viable Productâ (MVP):
ââŻ
ââŻ
ââŻ
ââŻ
Prototype->Alpha, ~3-6 months
Develop Minimal Critical Feature Set => Get to âIt Works! Someone Uses It.â
Improve Design & Usability, Setup Conversion Metrics
Test Small-Scale Customer Adoption (10-1000 users)
â˘âŻ Demonstrate Concept, Reduce Product Risk, Test Functional Use
â˘âŻ Develop Metrics & Filter for Possible Future Investment
16. Investment Stage #2:
Market Validation + Revenue Testing
â˘âŻ Structure
â⯠2-10 person team
â⯠$100K-$1M investment
â⯠Syndicate of Angel Investors / Small VC Funds
â˘âŻ Improve Product, Expand Customers, Test Revenue:
ââŻ
ââŻ
ââŻ
ââŻ
Alpha->Beta, ~6-12 months
Scale Customer Adoption => âMany People Use It, & They Pay.â
Test Marketing Campaigns, Customer Acquisition Channels + Cost
Test Revenue Generation, Find Profitable Customer Segments
â˘âŻ Prove Solution/Benefit, Assess Market Size
â˘âŻ Test Channel Cost, Revenue Opportunity
â˘âŻ Determine Org Structure, Key Hires
17. Investment Stage #3:
Revenue Validation + Growth
â˘âŻ Structure
â⯠5-25 person team
â⯠$1M-$10M investment
â⯠Seed & Venture Investors
â˘âŻ Make Money (or Go Big), Get to Sustainability:
ââŻ
ââŻ
ââŻ
ââŻ
ââŻ
Beta->Production, 12-24 months
Revenue / Growth => âWe Can Make (a lot of) Money!â
Mktg Plan => Predictable Channels / Campaigns + Budget
Scalability & Infrastructure, Customer Service & Operations
Connect with Distribution Partners, Expand Growth
â˘âŻ Prove/Expand Market, Operationalize Business
â˘âŻ Future Milestones: Profitable/Sustainable, Exit Options
18. EducaJon
 +
 Community
 +
 PlaMorms
Â
â˘âŻ
â˘âŻ
â˘âŻ
â˘âŻ
â˘âŻ
â˘âŻ
Cri=cal
 Skills:
 Engineering,
 Design,
 MarkeJng
Â
Distribu=on:
 Search,
 Social,
 Mobile,
 Video,
 Local
Â
Global:
 LatAm,
 Asia,
 India,
 EU,
 ME,
 Africa
Â
Social:
 LinkedIn,
 Quora,
 Angel
 List
Â
Angel
 List,
 Second
 Market,
 Trusted
 Insight
Â
Dashboard.io,
 MamerMark,
 Funders
 Club
Â
22. Local
 vs
 Global?
Â
â˘âŻ
â˘âŻ
â˘âŻ
â˘âŻ
â˘âŻ
Emerging
 /
 Developing
 Markets
Â
Global
 Languages:
 English,
 Chinese,
 Spanish,
 Arabic
Â
CriJcal
 Factors:
 Educa=on,
 Mentorship,
 Capital
Â
Capital
 Availability:
 Incuba=on,
 Seed,
 Series
 A
Â
PosiJve
 Macro:
 Payments,
 LogisJcs,
 Mobile/Web
Â
PenetraJon,
 Growing
 Middle
 Class,
 Distribu=on
Â
23. Global Trends
â˘âŻ Growth of Global Languages (see Gengo.com)
â⯠1B+ speakers: Mandarin, English
â⯠300-500M+ spkrs: Spanish, Arabic
â˘âŻ Smart Device Proliferation
â⯠mobile, tablet, TV, console, auto, home, etc
â˘âŻ
â˘âŻ
â˘âŻ
â˘âŻ
â˘âŻ
â˘âŻ
More Young, More Old ($$$) Users Online
More Bandwidth, More Video, More Social, More Mobile
Wealthy Chinese + Indian, Web + IRL Globetrotters ($$$B)
Acceleration of Global Payment, E-Commerce, Logistics
Dramatically Reduced Cost: Product Dev, Customer Acqstn
Global Distribution Platforms
â⯠US/EU: AAPL, FB, AMZN, GOOG (Search, YouTube, Gmail, Android), TWTR
â⯠Asia: Baidu, Tencent/WeChat, Alibaba, Sina, NHN, Yahoo-J, Softbank, Rakuten
24. QuesJons?
 Comments?
Â
â˘âŻ Thanks
 for
 Listening
Â
â˘âŻ Feedback
 Appreciated
Â
Â
G
KLIN
HEC
â˘âŻ More Info?
ââŻ
ââŻ
ââŻ
ââŻ
http://500.co (our company)
http://500hats.com (my blog)
https://angel.co/500startups (our fund)
Dave McClure, @DaveMcClure
Â