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Startup university - 5. funding & financials
 

Startup university - 5. funding & financials

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How to Start and Grow your Startup

How to Start and Grow your Startup
5. Growth
-Funding
-Financials

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    Startup university - 5. funding & financials Startup university - 5. funding & financials Presentation Transcript

    • Funding & Financials Funding  for  startups   Financials  for  startups  
    • Funding  for  startups  •  Development  Stages  •  The  Lean  Investor  Model  •  Financing  terms  &  issues  
    • Funding  for  startups  •  Development  Stages   Growth/   Incuba@on   Follow-­‐up   Early  Exit    •  Important:  product  and  service  businesses  are  very  different!  
    • Funding  for  startups  •  Development  Stages  –  Funding  &  objec;ves  by  stage   Growth/   Incuba@on   Follow-­‐up   Early  Exit   •  20-­‐25  startups   •  5-­‐10  companies   •  3-­‐5  companies   •  $15k  per  startup   •  $150k  per  company   •  Early  exit  or   •  Develop  v1.0  of   •  Complete  addi@onal   growth  at   product   product  features   scale  through   •  Get  first  orders   •  Expand  distribu@on   tradi@onal  VC/ •  Validate  market   •  Complete  team   PE  model  
    • Funding  for  startups  •  “Lean  Investor”  Model   –  Method:  Invest  in  startups  using  incremental  investment,   itera@ve  development.    Start  with  lots  of  small   experiments,  filter  out  failure,  and  expand  investment   upon  success.   –  Incuba@on:  $10k-­‐50k  (“Product  &  Market  Viability”)   –  Follow-­‐up:  $100k-­‐$500k  (“Expand  Distribu@on”)   –  Venture:  $1M-­‐$5M  (“Maximize  Revenue”)     Source:  Dave  McClure  
    • Funding  for  startups  •  Investment  #1:  Incuba;on  (“Product  &  Market”)   –  Structure   •  1-­‐3  founders   •  $10k-­‐$50k  investment   •  Incubator  environment:  mul@ple  peers,  mentors/advisors   –  Build  “Minimum  Viable  Product”  (MVP)  &  Test  Market:   •  3-­‐6  months   •  Develop  Minimal  Cri@cal  Feature  Set   •  Instrument  Basic  Dashboard,  Conversion  Metrics   •  Test  Customer  Adop@on  (10-­‐1000  users)   –  Demonstrate  Concept,  Reduce  Product  &  Market  Risk,  Test   Func@onal  Use   –  Develop  Metrics  &  Filter  for  Follow-­‐on  Investment   Source:  Dave  McClure  
    • Funding  for  startups  •  Investment  #2:  Follow-­‐up  (“Distribu;on”)   –  Structure   •  2-­‐5  person  team   •  $100k-­‐$500k  investment   •  Syndicate  of  Angel  Investors  /  Small  VC  Funds     –  Improve  Product,  Expand  Market,  Test  Revenue   •  6-­‐12  months   •  Test  Marke@ng  Campaigns  &  Mul@ple  Customer  Acquisi@on   Channels     •  Setup  A/B  Tes@ng  Framework,  Op@mize  Conversion   –  Prove  Solu@on/Benefit  with  a  larger  customer  base   –  Test  Channel  Costs,  Revenue  Opportunity   –  Determine  Organiza@onal  Structure,  Key  Hires   Source:  Dave  McClure  
    • Funding  for  startups  •  Investment  #3:  Venture  (“Revenue”)   –  Structure   •  5-­‐10  person  team   •  $1M-­‐$5M  investment   •  VC  Investors   –  Make  Money,  Get  to  Sustainability:   •  12-­‐18  months   •  Marke@ng  Plan  -­‐  Predictable  Channels,  Campaigns  &  Budget   •  Scale  &  Infrastructure,  Customer  Service  &  Opera@ons   •  Connect  with  Distribu@on  Partners   –  Expand  Market  &  Revenue,  Opera@onalize  Business   –  Future  Milestones:  Profitable/Sustainable,  Exit  Op@ons   Source:  Dave  McClure  
    • Funding  for  startups  •  Financing  terms  &  issues   –  Valua@on   –  Stock  ves@ng   –  Employee  Stock  Op@on  Plan   –  Stock  types     –  Conver@ble  Debt   –  P/E  ra@o   –  Dividends  vs.  re-­‐investment   Source:  Venture  Hacks  
    • Funding  for  startups  •  Learn  more   –  Dave  McClure,   Lean  Investor  Model   –  Venture  Hacks  
    • Financials  for  startups  •  Financial  statements  •  Basic  Financial  Models  •  Key  Elements  of  Financial  Statements  •  Issues  to  keep  in  mind  
    • Financials  for  startups  •  Financial  Statements   –  Income  Statement  (profitability)   –  Balance  Sheet  (investment  targets  &  sources)   –  Statements  of  Cash  Flows  (mee@ng  obliga@ons)   •  CFIMITYM!   Source:  McKinsey  &  Co.  
    • Financials  for  startups  •  Basic  Financial  Models   –  Online  Soeware  Subscrip@on   •  Salesforce.com,  37  Signals   –  Soeware  development  &  licensing   •  Microsoe,  Oracle,  Mobile  apps,     –  Marketplace   •  eBay,  Expedia   –  User  &  demand  aggrega@on   •  Mint.com  
    • Financials  for  startups  •  Key  Elements  of  Financial  Statements   Revenues   •  Product   •  Services   =Total  Revenue     Cost  of  Sales   •  Infrastructure   •  Support   •  Cost  of  Services   =Gross  Income  
    • Financials  for  startups  •  Key  Elements  of  Financial  Statements   Other  costs   •  Research  &  Development   •  Sales  &  Marke@ng   •  General  &  Administra@ve   =EBITDA   Taxes,  Deprecia@on  &  Amor@za@on   =Net  Income    
    • Financials  for  startups  •  Issues  to  keep  in  mind   –  Assump@ons  –  overall  &  per  unit   •  Validate  assump@ons  on  a  small  scale   •  Use  a  bojom-­‐up  approach   –  Changes  over  @me   •  For  example,  marke@ng  costs  per  user  can  go  down  due  to   network  effects  and/or  branding  
    • Financials  for  startups  •  Learn  more   –  Morgan  Stanley,   How  to  read  financial  statements   –  McKinsey  &  Company,   Business  Plans   –  Microsoe,  Oracle,  Salesforce.com,  eBay,  Expedia  Financial  Statements