Keynote about going from an idea to a startup, pitch to a VC and get funding.

1. Venture Capital, Funding
& Pitching
Jonathon Southam - Business Development – Startup
Community, Amazon Web Services
@jonathonsoutham

2. Why do we talk about this?
• Work
with
many
startups
&
EMEA’s
leading
VC’s
• Discuss
many
startups
with
VC’s
&
get
feedback
on
pitches
• Not
biased,
no
agenda,
helping
AWS
startup
customers
succeed
“We
win
when
you
win
–
and
only
when
you
win”

3. Venture Capital Overview
Impact of Cloud on Venture Capital
What is a good pitch?

4. Venture Capital Overview
Impact of Cloud on Venture Capital
What is a good pitch?

5. Venture Capital
Startups!

6. Venture Capital
VC
Fund
General
Partners,
Principals,
VP’s,
Associates,
etc.
Startups
Need
for
Capital
Growth
Poten@al
Limited
Partners
Ins@tu@onal,
Government
&
High
Net
Worth
Individuals

7.
Two-sided platform model
Startups
With
need
for
capital
and
growth
poten@al
Capital
&
Value
Crea@on
connec@ons,
biz
dev,
GTM,
mentoring,
etc
Risk
&
Return
Reduce
Risk
&
deliver
Financial
Returns
Limited
Partners
Ins@tu@onal,
Government
&
High
Net
Worth
Individuals

8. “2
and
20”
So how does a VC make
money?

9. “2 and 20”
Management Fee. VC raises a fund of e.g.
$100M and gets $2M per year to operate
the fund (staff, expenses, etc.)
2%
Performance Fee. VC returns the profits
from the fund to the LP’s but gets to keep
20% of these profits
20%

10. Venture Funding

11. How much you get
How you get it

14. AUG-08
Nathan, Brian,
and Joe
JAN-09
$20K Accelerator
Y Combinator
NOV-10
$7.2M Series A:
Sequoia
Greylock
SV Angel
& others
JUL-11
$112M Series B
Andreessen Horowitz
General Catalyst
& others
APR-09
$600K Seed
Round
Sequoia
Y Ventures

15. 01 04
idea MVP monetizescale
Product Risk Market Risk Financial Risk
02 03

16. 01 04
idea MVP monetizescale
Seed Round
Series A, B, C, etc.
Incubator / Angel
Product Risk Market Risk Financial Risk
02 03
$0-250K
$250-$1M
$1M-$5M, or more

17. Venture Capital Overview
Impact of Cloud on Venture Capital
What is a good pitch?

18. “Amazon changed the VC industry.
This is mind boggling. That online
book company. Not … or anybody
else. Amazon. 100% of the credit.”
Mark
Suster,
serial
entrepreneur
and
Partner
at
Upfront
Ventures
hOp://www.bothsidesoRhetable.com/2011/06/28/understanding-­‐changes-­‐in-­‐the-­‐soRware-­‐venture-­‐capital-­‐industries/

19.
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
1995 – .com
Technology Startups require physical hardware and
proprietary software to build their business
Typical Series A
Spent on…
Innovation
$5-10M
• $2.5: marketing,
sales, etc.
• $2.5M on
infrastructure
• Not a lot, since
experimentation was
costly

20.
Typical Series A
Spent on…
Innovation
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2000: Rise of Open Source
Open source software drove technology costs down by 90%,
which spurred innovation in technology
$3-5M
• Less on Software–
LAMP
• More on development
• Still on infrastructure
• A lot more, as
experimentation is
less costly now

21.
Typical Series A Spent on… Innovation
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2005: Enter the Cloud
Pioneered by Amazon drove total operating costs
down by up to 90%
$500K
-3M
• Staff – the battle for
talent
• Customer Acquisition
• Explosion in
experimentation,
innovation, and
Startups

22.
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2007: Micro VC / Seed
Public Cloud led to explosion in the number of Startups
and the emerging of “micro VCs”
Angels
Incubators/
Accelerators
VC’s
Angels unite in
‘Super Angels’ for
Seed investments
thru VC-like setup
Boom in programs,
with micro
investments,
mentoring, etc.
Venture funds that
back early-stage
startups with <$1M

23. Why do VC’s care?
More deals
Shorter time to scale
Faster time to revenue
Lower ‘burn rate’
Higher valuation at exit

24. Venture Capital Overview
Impact of Cloud on Venture Capital
What is a good pitch?

26. Why is your pitch
important?
Because
it
shows
you
have
a
PLAN

27. What’s always there?
Product
Lots of product, product, product
Rosy Forecast
The infamous hockey stick

28. What’s always missing?
Business Model
not just WHAT, also HOW
Metrics
not just traction, also unit economics*
Strategy
What will you DO? How will you GROW?
Execution…

29. Ash
Fontana,
Founder
of
AngelList

30. Venture Capital, Funding
& Pitching
Jonathon Southam - Business Development – Startup
Community, Amazon Web Services
@jonathonsoutham