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GROW2010 Conference - Dave mcclure
 

GROW2010 Conference - Dave mcclure

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    GROW2010 Conference - Dave mcclure GROW2010 Conference - Dave mcclure Presentation Transcript

    • The Lean VC: a Silicon Valley 2.0 Story Dave McClure, 500 Startups ( @DaveMcClure ) http://500startups.com GROW conference - August 2010 – Vancouver, CA Re-Inventing Venture Capital & Angel Investing through Innovation, Incubation, & Iteration
    • Lean VC - Topics
      • Venture Capital 2.0 = Fewer, Smaller Funds (<$100M)
        • Death of Large Funds
        • Birth of Super Angel Funds
        • M&A Market Changes
      • Platforms = Distribution + Monetization (not Tech)
        • Search (Google)
        • Social (Facebook, Twitter)
        • Mobile (Apple, Android)
      • Incubators & Metrics = Many Small Experiments (most FAIL )
        • Y-Combinator, TechStars, SeedCamp
        • Betaworks, fbFund REV, Nitobi
        • 500 Startups
    • [Pardon The Blatant Commercial]
    • Dave McClure
        • 2001-2009:
        • Startup Investor: 500 Hats LLC, Founders Fund
        • Tech Marketing : PayPal, Simply Hired, Mint
        • Advisor, Angel Investor : 40+ Startups
        • Conf. Organizer : Web 2.0, O’Reilly, Startonomics
        • Stanford Visiting Lecturer : Facebook, Startup Metrics
        • 80’s & 90’s:
        • Entrepreneur : Founder/CEO Aslan Computing (acq.)
        • Developer : Windows Apps / SQL DB Admin
        • User Groups : E-Commerce, Internet, Client-Server
        • Engineer : Johns Hopkins ‘88, BS Eng / Applied Math
      GEEK, CODER, ENTREPRENEUR Blogger, Startup Advisor Internet Marketing, SuperAngel/Micro-VC
    • Professional Investments (Founders Fund: 43 deals, Q4/08-Q1/10, ~$3M) fbFund REV 22 incubator deals ($850K) FF Angel 21 seed deals ($2M)
    • Personal Investments (500 Hats: 26 deals, 2004-2010, ~$400K) LinkDex oneforty Networked Blogs MyGengo Votizen Postling EcoMom SiteJabber Graphicly WePay Plancast Recurly
    • 500 Startups LP Mountain View, CA – Founded 2010
      • Seed Fund & Incubator Program
      • Design , Distribution , Metrics ( AARRR! )
      • 30+ Portfolio Companies ($50K-250K)
        • Twilio
        • Wildfire
        • Sendgrid
        • MyGengo
        • Erply
        • MyGengo
        • Payvment
        • Tello
    • Venture Capital 1.0 = Too Big To FAIL WIN ? (at least for *Internet* Startups) Venture Capitalist? Super Angel.
    • Silicon Valley Investor Ecosystem True Ventures First Round Capital Benchmark Sequoia Angels & Incubators ($0-10M) “ Seed” Funds ($10-50M) “ Small” VC Funds ($50-250M) “ Large” VC Funds (>$250M) Y-Combinator TechStars SoftTech (Clavier) FloodGate (Maples) Felicis (Senkut) SV Angel (Conway)
    • Venture Capital: Still Relevant?
      • Good 4 big CAPex:
      • Hardware
      • Enterprise SW
      • Clean Tech
      • BioScience
      • Facebook, Zynga ,
      • Groupon
      • Not So Great 4:
      • Most Consumer / SMB Internet Startups
      • Consulting Shops
      • Lifestyle Biz
      • Porn, Gambling
    • More & Smaller Acquisitions
      • Mature Internet Platform Co’s:
        • GOOG, MSFT, YHOO, EBAY, AOL, AMZN, AAPL, INTU, ADBE, Fbook
      • Lots of Users, $$$
      • Outsourcing Innovation
      • Lots of M&A (but small)
      • Great for Angels & Entrepreneurs
      • Not so Great for (big) VCs
    • Platforms 2.0 Search, Social, Mobile
    • Web 2.0 : Good Times, G .
      • # Users, Bandwidth = Bigger .
      • Startup Costs = Lower .
      • Transaction$$$ = Better .
      • Building Product => Cheaper, Faster, Measurable
      • Getting Customers => Easier, More Predictable
      • Product & Market Decisions based on
      • Measured User Behavior
      R.I.P. *BAD* TIMES
    • Platform Viability Successful Platforms have 3 Things: 1) Features 2) Users 3) Money Users . . Money Features Growth Profit Profitable Growth Nirvana
    • Distribution Platforms
        • Customer Reach: 100M+
          • Search : Google (SEO/SEM)
          • Social : Facebook , Twitter, Zynga, LinkedIn
          • Mobile : Apple (iPhone, iPad), Android, Blackberry
          • Media : YouTube /Video, Blogs, Photos
          • Email/IM : Gmail , Yahoo, Microsoft
    • Web 2.0 Business Model: KISS 
      • 1) Re-invent Web 1.0 Businesses
        • Make a Website, a Widget, an App
        • Sell Stuff to People (Transactions, Subscriptions)
      • 2) add Web 2.0 Tech nology
        • Search , Social , Mobile
        • Google , Facebook , Apple
        • Email, ECommerce
      • 3) Get Customers , Make Money G
        • Distribution
        • Distribution
        • Distribution
    • Startup Incubators Lots of Hot, Cool, Web 2.0! (+ lots of FAIL .)
    • Incubator 2.0: Fast, Cheap, FAIL
      • Incubators growing in popularity, acceptance
      • Supportive ecosystem for startups (angels, VCs)
      • Efficient use of investment capital ($0-100K)
      • High fail rate (60-80%) => large initial sample size
    • Incubator 2.0: Education, Collaboration, Iteration
      • Focus on education & shared resources
      • Success based:
        • many small startup experiments
        • common platforms, problems & solutions
        • physical proximity, open/collaborative environment
        • fast fail, iteration, metrics & feedback
      • Incremental investment; high-risk, but high-reward
    • fbFund REV
      • fbFund REV : Facebook “Social” Incubator: invest in startups, apps, websites based on Facebook platform & Facebook Connect.
      • 22 startups @ ~$35K each ($850K total)
      • 3 month program: Technology, Design, Marketing, Business topics
      • Success: ~ 8 startups funded >$500K – Wildfire Interactive raised $4M
    • Startup Metrics: Lean Startup & Lean VC Measure Stuff, Iterate. (Rinse & Repeat.)
    • Startup 2.0: “Lean Investor” Model
      • Method : Invest in many startups using incremental investment, iterative development. Start with lots of small experiments, filter out failure, and expand investment upon success… ( Rinse & Repeat) .
      • Incubator : $0-100K (“ Build & Validate Product ”)
      • Seed : $100K-$1M (“ Test & Grow Market ing Channels” ”)
      • Venture : $1M-$10M (“ Maximize Growth & Revenue ”)
    • Investment #1: Incubate (“Product”)
      • Structure
        • 1-3 founders
        • $25K-$100K investment
        • Incubator environment: multiple peers, mentors/advisors
      • Build Functional Prototype / “ Minimum Viable Product ” ( MVP ):
        • Prototype->Alpha, ~3-6 months
        • Develop Minimal Critical Feature Set => Get to “ It Works ”
        • Instrument Basic Dashboard, Conversion Metrics
        • Test Cust. Adoption (10-1000 users) / Cust. Satisfaction (Scale: 1-10)
      • Demonstrate Concept, Reduce Product Risk, Test Functional Use
      • Develop Metrics & Filter for Possible Future Investment
    • Investment #2: Seed (“Market”)
      • Structure
        • 2-5 person team
        • $100K-$1M investment
        • Syndicate of Angel Investors / Small VC Funds
      • Improve Product, Expand Market , Test Revenue:
        • Alpha->Beta, ~6-12 months
        • Customer Sat ≥ 6 => Get to “ Doesn’t Suck ”
        • Setup A/B Testing Framework, Optimize Conversion
        • Test Marketing Campaigns, Cust Acqstn Channels
      • Prove Solution/Benefit, Assess Market Size
      • Test Channel Cost, Revenue Opportunity
      • Determine Org Structure, Key Hires
    • Investment #3: Venture (“Revenue”)
      • Structure
        • 5-10 person team
        • $1M-$5M investment
        • VC Investors
      • Make Money , Get to Sustainability:
        • Beta->Production, 12-18 months
        • Customer Sat ≥ 8 => “ It Rocks, I’ll Tell My Friends ”
        • MktgPlan => Predictable Channels / Campaigns + Budget
        • Scalability & Infrastructure, Customer Service & Operations
        • Connect with Distribution Partners
      • Prove/Expand Market, Operationalize Business
      • Future Milestones: Profitable/Sustainable, Exit Options
    • Summary
      • Venture Capital 2.0 = Fewer, Smaller Funds (<$100M) + More, Smaller Exits (<$100M)
      • Platforms 2.0 = Distribution + Monetization, not Tech
      • Incubators, Metrics = Many small Experiments (most FAIL ).
        • Measure Stuff.
        • Iterate, Iterate, Iterate.