Sba 20111003b - starting your own web startup

Allan ChaoStartup V8allan@StartupV8.comSan Francisco SBA 2011

Introductions Who you are What you do What’s your Startup Idea?

The Agenda Why?  Defining “Web Startups”?  Risk and Reward Lean Startup Methodology  A new kind of model  Customer Development  Agile Software Development Web Application Product Development  Web apps  Mobile apps Equity Financing and Incubation  Angel Investors and Venture Capitalists  The pitch system Startup Marketing  Pre-alpha, alpha, closed beta, beta, launch

Web Startups… What are they? Web  Websites, Mobile apps, Tablets  Infrastructure  Software as a Service Startups  New and unproven business model  = New way of solving an existing problem  Disruptive innovation = disrupts the existing market

Big and Famous Web Startups Amazon.c (1994) Ebay (1995) Googl (1998) Paypal (1998) Wikipedia (2001) LinkedIn ( (2003) Facebook (2004) YouTube (2005) Twitter (2006)

Literally Thousands More

Risk and Reward Literally thousands of web startups… Lots of direct competitors for every idea… Very few startups break even… Even fewer become very profitable… But those that are extremely successful… (over 1,000:1)  change the world (or at least their industry)  make MEGA $$$$$$$$$$$$ (via IPO or Acquisition)

How to Be Successful? The idea is worth $0.00 = nothing Execution is everything!! What does that mean? How do you “Execute”? Business Plans vs. The Lean Startup  Business Plans = Plan and Pray  Lean Startup = Release and React Lean Startup  Low overhead, low costs  Agile Software Development  Rapid customer-centric development

The Lean Startup (Eric Ries) A methodology/philosophy of building startups 1. Use of free and open source software  Groupon was started as a wordpress blog 2. Agile Software Development  Release as frequently as possible  Iterate development as quickly as possible 3. Ferocious customer-centric rapid iteration  Customer Development Process  Build a minimum viable product – launch fast!  Learn from your users/customers

Customer Development Process Customer Discovery = Understanding your customers Customer Validation = Develop a Repeatable Sales Process with early evangelist buyers Customer Creation = Scaling your customers from few to many Company Building = Rebuild your company’s organization and management. Re-look at your mission

Customer Discovery

Customer Validation

Customer Creation

Company Building

Software Product Development Creating the Minimum Viable Product (MVP)  Functional Requirements  Wireframes  Graphic Design  Code  Content (Copywriting, Social Media accounts, analytics, etc.)  Deploy (aka Release)

Functional Requirements Questions to answer  What customer problem does this product solve?  What are the customer use cases?  How will the customer use this product to solve his problem?  How will the product make money?

Sitemap

Wireframes

Graphic Design

Code HTML, CSS, Javascript, Jquery, Node.js, Django, python, Ruby on Rails, PHP, .NET, Java, ….

Content Every single screen Instructions to the user Search-Engine-friendly content  Long tail keywords  Content Uniqueness Any emails that are sent? Blog posts? PR releases? Analytics tools

Traditional Software Development

Agile Software Development Start Small  Minimum Viable Product Iterate quickly  Track user data  Flexible software  Release frequently Cycle weekly or every two weeks

WebApp Product Development Scale development with your business  Do *NOT* invest $ thousands up-front without customers Initial MVP: Something **Very Simple** = $5000 - $15,000  Groupon started with a Wordpress blog  Orders were done by email (no online form) After market is validated, invest in custom software  Expensive and time consuming  Specialist coders Nearly infinite depth of programming skills required  HTML, CSS, Javascript  Node.js, php, python, .NET, Java, AJAX, Ruby on Rails, etc.

MobileApp Product Development Similar process to Web application development Costs more: average prototype costs  1-3 screens: $5,000-$10,000  5-15 screens: $10,000-$20,000  “fully featured” app: $20,000+ Each platform is independent:  iOS (iPhone)  Android  BlackBerry  Windows Mobile Cheap hack: build a web-app that looks like a native app

Equity Financing Goal = Give away significant ownership of your company to raise money and bring on talent. Founders  Very generally, founders start with an equal split 50-50 or 33-33-33  More complicated ways to calculate… google “founder equity calculator”  Experienced co-founders will laugh at you if you think the “idea” is worth significantly more: e.g. 80-20. Capitalization tables to predict effects of dilution Employees expect to get vesting stock

Equity Rounds Friends and Family $50-250k Angels up to $1 M Super angels up to $2.5 M VCs Series A $3+ M Normally 2-3 rounds… ABC exit. Rounds DEF = “cramdown” rounds… bad terms The one goal of investors is to exit. $$$$$

Equity Financing caveats Takes a long, long, long time to raise money. Very involved process Prepare to spend money to raise money  Preparation workshops  Preparing Presentations  Flights to investors  Dinner Beware of losing your company Term sheets must be reviewed by your lawyer!

Alternative Financing Crowd Funding  Kickstarter.com  Rockethub Competitions / Grants Solo Funding  Bank loans unlikely  Second mortgage  Credit cards!!?? Start eating ramen noodles 

Incubation Programs that help entrepreneurs get started on their projects in exchange for 5-10% equity  Very small seed capital ($20,000)  Networking and relationship building  Presentations to angel investors Application based… very competitive (internationally)

Incubator Examples Incubators  Y-combinator (Mountain View, CA)  Techstars (Boulder, CO)  Excelerate Labs (Chicago, IL) Graduates of Incubators  Dropbox  Scribd  Reddit  Justin.tv  Posterous

Startup Marketing Marketing Strategy  Publicity when you want it, not as a random event  Publicity after you know what your business is about Popular Startup news  Techcrunch  Crunchbase  Engagdet  Venturebeat  Mashable  Digg

Thank you! After you complete the evaluation forms, please pick up my business card at the back of the room.Allan ChaoStartup V8allan@StartupV8.com

Sba 20111003b - starting your own web startup

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