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Six Startup Lessons & The Essence of Venture Capital

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Lecture to Latvian IT and startup community in RBS.

Lecture to Latvian IT and startup community in RBS.

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  • Et teiega samast asjast räägiks, siis mis on startup. SurmaorgMiljon midagi

Six Startup Lessons & The Essence of Venture Capital Six Startup Lessons & The Essence of Venture Capital Presentation Transcript

  • The Art of the StartSix lessons for startups
    Allan Martinson, MTVP
    Latvian IT Cluster/RBS, Nov 26, 2010
  • Valley of Death
    The One Million Land
    Startup:
    A vehicle to drive thru
    Death Valley
  • A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty Eric Ries
  • My startup (and not so startup) life
    Baltic
  • 6 lessons on how to grow your stupid little startup into SOMETHING
  • How does a startup start?
  • Lesson 1: It’s all about people
  • It does not start from a business idea
    It starts from people
    2 founder rule
    Skeptic
    Leader
    Incubation takes years
    Multi-skilled talents
    Team &
    Values
  • Pick your friends wisely
    Your future income will be the average of 5 of your closest friends
    Pick your friends wisely
    Your future income = average of your 5 closest friends
  • Lesson 2: The origin of great business ideas
  • My moment of epiphany?
    Povarskaya St, Moscow
    March 1990
  • This does not happen
  • Three origins of great startups
    Copycats:Copy existing business model to new markets
    Evolutionary:Seek better solution to existing problems
    Revolutionary: Seek unknown solution to unknown problems
    The best ideas come on cross-roads of trends and disciplines
  • The What
    The 30-seconds pitch: tell your granny
    Who is your customer
    What does your company do for this customer
    Why are you better than competition
    Do you pass the “Google test”?
  • Why I will never invest in IT services any more
    Company 1:
    Platform business
    Company 2:
    IT services
  • Lesson 3: The art of pivot
  • The life of any startup can be divided into two parts – before product/market fit and after product/market fit
    Marc Andreessen
  • Why pivot?
    Not a single great company follows
    its original business idea
    Failure is not a problem
    Slow failure is a problem
  • The importance of milestones
    MVP (Minimum Viable Product): 48 hrs – 3 months
    Initial customer validation: 1 week – 6 months
    One million something (users, $$$, etc): 1-2 years
    You shall pivot if:
    Your solution seeks a problem, not vice versa
    Nobody wants to use your product – even you
    You have ceased to believe into your company for >1 month
  • Lesson 4: The Need For Speed
  • Why speed?
    Startups, by very definition, are probabilistic
    Success seems intentional only in retrospective – impossible to compute
  • Works in startups, too
    20% of more effort will result in many times better result after some time
  • In probabilistic environments,
    speed and focus
    are the best boosters of success rate
    And hunger is the best factor
    contributing to it
  • The ultimate example of being focused
    “I was too busy, I didn’t do things like that… I just didn’t go and meet new people who were involved in investments.”
    Bill Gates on initially refusing to
    meet Warren Buffet
    Interview with Financial Times, Oct 2010
  • Lesson 5: Importance of right signals
  • Importance of the right signals
    With whom do we compare ourselves?
    What do our customers, investors, partners really think?
    Are we insiders or foreign?
    Nothing replaces human interaction even in internet era
    Silicon Valley is the focal point of information, emotions and ideas
    It is the mental state
  • Being Latvian is
    a full-time job
  • Lesson 6: Where to find smart investors
  • Raising venture capital is the art of younger men seducing older men
    - Anonymous
  • Typical lifecycle of a high-tech company
    Market share
    Commercial launch
    “Beta”
    +
    Prototype
    Breakeven!
    Users &
    traction
    Revenues
    Idea
    Bureaucracy
    0
    Paid CEO
    Profits
    Sales structures
    -
    2-3 Y
    3-7 Y
    18-24 mo
    9-18 mo
    2 10 50 200 500 employees
    FFF
    $10-500K
    A-round
    $1-10m
    B-round
    $5-50m
    IPO or
    exit
  • Typical life cycle in figures
  • What shall you know about VCs
    Venture capital (LPs) and venture capitalists (GPs) are not the same
    VCs are in the business of saying NO and then making money
    You can divorce your wife but you cannot divorce a VC
    You shall like, but not love each other
    If in doubt, pick the smartest
  • Thank you!
    allan.martinson@mtvp.eu