the startup process
dan gould
vp, technology
fox interactive media (img cc flickr user karlequin)

you

here

startup

change the world

build something

make money

(lots of easier ways)

(img cc flickr user noelleandmike)

(img cc flickr user casasroger)

need you

value

about:me

entrepreneur

corridor

failed

good

social interfaces
machine learning

do

something

janitorial functions
$$$
people
idea
marketing
resources
engineering

why?

metric: do you know
your goal?
(boolean)

idea

matters? yes

> execution? no

100% * 100% = 100%
90% * 90% = 81%
100% * 0% = 0%

cc flickr user cayusa

people with
problems

niche
niche
niche
niche
niche
niche
niche
niche
niche

metric: can you show
me your ideal user?

mission

\"To serve the world's most engaged community.\" (AOL 2006)
dumb
\"To scout pro table growth opportunities in relationships, both
internally and externally, in emerging, mission inclusive markets,
and explore new paradigms and then lter and communicate
and evangelize the ndings.\"

A Computer on Every
Desk and in Every Home
(1975)

The World On Time

Organize All the
World’s Information

people

rst 5-10
==

don’t compromise

a -> a
b->c
c->d

metric: did i hire someone
better than myself?

incentivize

options

CEO 5-10%
COO 2-5%
VP 1-2%
(Ind) Board .5-1.5%
Director 0.3-1.2%
Lead Eng 0.5-1%
5+ exp Eng .33-.66%
Mgr, Jr Eng 0.1-0.33%
rough post-Series A

vesting
+ acceleration, etc

founders too

milestones

come up with a series
of milestones and
break down tasks to
get there
e.g.,
product design done
rst customer test
beta ready

prioritize relentlessly

types

right

consulting

lifestyle

cash ow

50% of $1M
or
5% of $20M

venture-backed

(img cc flickr user omnidirectional)

(img cc flickr user willie_901)

for most:
VC==wrong
(but it’s what I’m going to talk about)

fundraising

sex

(img cc flickr user irlandainquieta)

(some typical amounts)
self ?
3Fs 10-100K
angel 200K-1M
vc (series a) 1-8M
vc (series b) 5-25M
mezz 25+M
IPO $lots

friends & family

(img cc flickr user martin_hartland)

angels

successful entrepreneurs
retired execs
professional angels
“trailblazers”
angel groups

sophisticated

risk / reward

equity

Guy Kawasaki’s rule of thumb:
$500K per engineer
-$250K per MBA
(said for series a in a better market)

convertible
disappearing in this market
disappeared

(last deals i saw for conv angel rounds
w/1st-time entrepreneurs in this market
before they stopped)
75% warrant coverage
50% discount
10% per month warrant coverage
20-30% discount in good market

vc

pensions,
endowments
carry

“sure bets”

success:
20 investments
13 op/sideways
5 2-3X
2 10X

10Xes pay

only 10X potential

1000 plans
250 initial pitches
12 due dilligence
6 investments

(img cc flickr user protoflux)

(img cc flickr user bargas)

angel
portfolio
entrepreneur
advisor
lawyer
CS profs

advisors

advice <-> $

pitch

practice

10

1 hour:
20 mins - VC late
20 mins - pitch
20 mins - questions

team

elevator pitch

revenue model

customer acquisition

competition/barriers

amount

milestones

customer traction

1-page exec sum

deal

Company Value
$2M

Cash in the bank
$1M
Company Value
$2M

Cash in the bank
$1M
}
$3M
Company Value
$2M

before
= $2M
100%
Your Share

after
33%
= $2M
67%
Your Share VC Share
(but you did give up a bunch of rights)

eventual size
discounted for time,
risk, dilution

people risk
market risk
execution risk
competition risk
technology risk
financing risk

competition

(img cc flickr user ohadby)

preferred shares
vetoes over sales/stock iss
liquidation preferences
board seats
protective provisions
ratchets
etc.

(img cc flickr user millzero)

nancing = work

success!= nancing

success=pro ts

pro ts
products & sales

cc flickr user davestfu