Transcript of "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)
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
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?
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
Agile Software Development Start Small Minimum Viable Product Iterate quickly Track user data Flexible software Release frequently Cycle weekly or every two weeks
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)
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