How I founded, bootstrapped, grew and sold my web startup(s) - MeshU 2009

Lessons Learned How I founded, bootstrapped, grew and sold my web startup(s) hashtag: #meshuCM Carl Mercier (@cmercier) cmercier@websense.com O U T S M A R T I N G E V I L S PA M

Who am I? O U T S M A R T I N G E V I L S PA M

Who am I? Founder and “ex-CEO” of Defensio.com • Anti-spam for social web applications • acquired by Websense (NASDAQ: WBSN) in January ’09 O U T S M A R T I N G E V I L S PA M

Who am I? Founder and “ex-CEO” of Defensio.com • Anti-spam for social web applications • acquired by Websense (NASDAQ: WBSN) in January ’09 Serial entrepreneur • 5th startup/project O U T S M A R T I N G E V I L S PA M

Before Defensio O U T S M A R T I N G E V I L S PA M

Before Defensio • Adonis Technologies (acquired in 2006) • Management software for leisure organization: camps, municipalities, conference & outdoors centers, ... O U T S M A R T I N G E V I L S PA M

Before Defensio • Adonis Technologies (acquired in 2006) • Management software for leisure organization: camps, municipalities, conference & outdoors centers, ... • AjaxWhois.com (acquired in 2008) • Ajaxiﬁed domain name lookup O U T S M A R T I N G E V I L S PA M

Before Defensio • Adonis Technologies (acquired in 2006) • Management software for leisure organization: camps, municipalities, conference & outdoors centers, ... • AjaxWhois.com (acquired in 2008) • Ajaxiﬁed domain name lookup • MyBinaries.com (acquired in 2004) • Premium newsgroups/usenet provider, e.g.: giganews.com, usenet.com O U T S M A R T I N G E V I L S PA M

Before Defensio • Adonis Technologies (acquired in 2006) • Management software for leisure organization: camps, municipalities, conference & outdoors centers, ... • AjaxWhois.com (acquired in 2008) • Ajaxiﬁed domain name lookup • MyBinaries.com (acquired in 2004) • Premium newsgroups/usenet provider, e.g.: giganews.com, usenet.com • Bincrawler.com (acquired in 2003) • One of the ﬁrst alt.binaries search engine O U T S M A R T I N G E V I L S PA M

bootstrapped. All of them choice. by O U T S M A R T I N G E V I L S PA M

Making money on the (some) web is not that hard. O U T S M A R T I N G E V I L S PA M

Making money on the (some) web is not that hard. Making hundreds of millions is VERY hard. O U T S M A R T I N G E V I L S PA M

Building a great product is NOT ENOUGH. O U T S M A R T I N G E V I L S PA M

O U T S M A R T I N G E V I L S PA M

Your product is 100% of the business. O U T S M A R T I N G E V I L S PA M

Your product is 100% of the business. Marketing is the other 100%. O U T S M A R T I N G E V I L S PA M

Stop thinking, Start working. O U T S M A R T I N G E V I L S PA M

Great hackers rarely make great businesses. 1337_H4X0R != :epic_win O U T S M A R T I N G E V I L S PA M

Starting a business is like running a marathon O U T S M A R T I N G E V I L S PA M

Starting a business is like running a marathon and a sprint. (at the same time? OMG!) O U T S M A R T I N G E V I L S PA M

NEVER GIVE UP O U T S M A R T I N G E V I L S PA M

Working alone sucks. O U T S M A R T I N G E V I L S PA M

Finding co-founders is hard. O U T S M A R T I N G E V I L S PA M

Great strategies come up by bouncing ideas around. O U T S M A R T I N G E V I L S PA M

Always focus on the end goal. O U T S M A R T I N G E V I L S PA M

Always focus on the end goal. Only execute on what really matters. O U T S M A R T I N G E V I L S PA M

Never neglect the business aspect. Wait a minute, I never signed up for this BS! O U T S M A R T I N G E V I L S PA M

Passionate users are your best asset. Please them. Let them spread the word. O U T S M A R T I N G E V I L S PA M

Frugality rules O U T S M A R T I N G E V I L S PA M

Frugality rules I’m the cheapest bastard alive! O U T S M A R T I N G E V I L S PA M

You need to survive 2 years O U T S M A R T I N G E V I L S PA M

How do you make money? O U T S M A R T I N G E V I L S PA M

It depends. O U T S M A R T I N G E V I L S PA M

Charging money is a good start! Duh! Who would have thought? O U T S M A R T I N G E V I L S PA M

Avoid competing with free O U T S M A R T I N G E V I L S PA M

if business_model == :ads forget_it! end O U T S M A R T I N G E V I L S PA M

unless... The user proﬁts from clicking the ads. O U T S M A R T I N G E V I L S PA M

unless... The user proﬁts from clicking the ads. or you’re Google. O U T S M A R T I N G E V I L S PA M

O U T S M A R T I N G E V I L S PA M

I’m a big fan of bootstrapping O U T S M A R T I N G E V I L S PA M

The joys of bootstrapping O U T S M A R T I N G E V I L S PA M

The joys of bootstrapping • Independence & Freedom O U T S M A R T I N G E V I L S PA M

The joys of bootstrapping • Independence & Freedom • You call your own shots O U T S M A R T I N G E V I L S PA M

The joys of bootstrapping • Independence & Freedom • You call your own shots • You can exit whenever you want, at the price you want O U T S M A R T I N G E V I L S PA M

The joys of bootstrapping • Independence & Freedom • You call your own shots • You can exit whenever you want, at the price you want • VCs are looking for the next Google. Chances are, it won’t be you. O U T S M A R T I N G E V I L S PA M

How many millions do you need to be happy? O U T S M A R T I N G E V I L S PA M

Example:VC Funded O U T S M A R T I N G E V I L S PA M

Example:VC Funded • Early stage funding, series A. O U T S M A R T I N G E V I L S PA M

Example:VC Funded • Early stage funding, series A. • $1.5M investment at $1.5M pre-money valuation. O U T S M A R T I N G E V I L S PA M

Example:VC Funded • Early stage funding, series A. • $1.5M investment at $1.5M pre-money valuation. • $3M post-money valuation. O U T S M A R T I N G E V I L S PA M

Example:VC Funded • Early stage funding, series A. • $1.5M investment at $1.5M pre-money valuation. • $3M post-money valuation. • 1.5/3 = 50% That’s the equity you have to give up. O U T S M A R T I N G E V I L S PA M

Example:VC Funded O U T S M A R T I N G E V I L S PA M

Example:VC Funded • VCs will want at least 10x return O U T S M A R T I N G E V I L S PA M

Example:VC Funded • VCs will want at least 10x return • $1.5M * 10 = $15M (for 50% of the company) O U T S M A R T I N G E V I L S PA M

Example:VC Funded • VCs will want at least 10x return • $1.5M * 10 = $15M (for 50% of the company) • The minimum exit is therefore $30M. O U T S M A R T I N G E V I L S PA M

Example:VC Funded • VCs will want at least 10x return • $1.5M * 10 = $15M (for 50% of the company) • The minimum exit is therefore $30M. • Founders & VC each make $15M. O U T S M A R T I N G E V I L S PA M

Example: Bootstrapping O U T S M A R T I N G E V I L S PA M

Example: Bootstrapping • Build a great product that matters O U T S M A R T I N G E V I L S PA M

Example: Bootstrapping • Build a great product that matters • Market it properly O U T S M A R T I N G E V I L S PA M

Example: Bootstrapping • Build a great product that matters • Market it properly • Have a price, generate real revenues O U T S M A R T I N G E V I L S PA M

Example: Bootstrapping • Build a great product that matters • Market it properly • Have a price, generate real revenues • Gain traction O U T S M A R T I N G E V I L S PA M

Example: Bootstrapping • Build a great product that matters • Market it properly • Have a price, generate real revenues • Gain traction • Get on people’s radar O U T S M A R T I N G E V I L S PA M

Example: Bootstrapping • Build a great product that matters • Market it properly • Have a price, generate real revenues • Gain traction • Get on people’s radar • Optional: Sell for 7-8 ﬁgures. O U T S M A R T I N G E V I L S PA M

The odds are not created equal! O U T S M A R T I N G E V I L S PA M

Exiting for $30M is 100 times less likely than exiting for $3M O U T S M A R T I N G E V I L S PA M

But if you really need to raise money... O U T S M A R T I N G E V I L S PA M

But if you really need to raise money... • Launch & get some buzz O U T S M A R T I N G E V I L S PA M

But if you really need to raise money... • Launch & get some buzz • Show traction O U T S M A R T I N G E V I L S PA M

But if you really need to raise money... • Launch & get some buzz • Show traction • Let THEM approach you O U T S M A R T I N G E V I L S PA M

But if you really need to raise money... • Launch & get some buzz • Show traction • Let THEM approach you • Wait as long as you can O U T S M A R T I N G E V I L S PA M

Delaware Inc. O U T S M A R T I N G E V I L S PA M

850,000 business entities have their legal Over home in Delaware More than 50% of all U.S. publicly-traded companies 63% of the Fortune 500 Delaware population: 865,000. Toronto (GTA) is 5.5M. O U T S M A R T I N G E V I L S PA M

Probably the way to go if... O U T S M A R T I N G E V I L S PA M

Probably the way to go if... • You want/need/expect to raise money O U T S M A R T I N G E V I L S PA M

Probably the way to go if... • You want/need/expect to raise money • Your company might be acquired by a US entity O U T S M A R T I N G E V I L S PA M

Probably the way to go if... • You want/need/expect to raise money • Your company might be acquired by a US entity • You want to partner with other US corporations O U T S M A R T I N G E V I L S PA M

But why? O U T S M A R T I N G E V I L S PA M

But why? • Most companies you’ll deal with are in DE O U T S M A R T I N G E V I L S PA M

But why? • Most companies you’ll deal with are in DE • Nobody wants to deal with a Canadian corporation O U T S M A R T I N G E V I L S PA M

But why? • Most companies you’ll deal with are in DE • Nobody wants to deal with a Canadian corporation • Even less with a provincial company O U T S M A R T I N G E V I L S PA M

But why? • Most companies you’ll deal with are in DE • Nobody wants to deal with a Canadian corporation • Even less with a provincial company • Delaware has great business laws O U T S M A R T I N G E V I L S PA M

But why? • Most companies you’ll deal with are in DE • Nobody wants to deal with a Canadian corporation • Even less with a provincial company • Delaware has great business laws • Merging a foreign entity with a DE Inc. is impossible O U T S M A R T I N G E V I L S PA M

But why? • Most companies you’ll deal with are in DE • Nobody wants to deal with a Canadian corporation • Even less with a provincial company • Delaware has great business laws • Merging a foreign entity with a DE Inc. is impossible • Cheap, fast and easy O U T S M A R T I N G E V I L S PA M

Karabunga Inc. Structure ME Karabunga Inc. CM Enterprise owns Defensio.com (no employee) Consulting company (all employees) Delaware C corp Quebec Inc. Employees Karabunga outsources to CM (stock options) O U T S M A R T I N G E V I L S PA M

Advantages O U T S M A R T I N G E V I L S PA M

Advantages • Simple (and 100% legal) structure O U T S M A R T I N G E V I L S PA M

Advantages • Simple (and 100% legal) structure • No day-to-day stuff in Delaware O U T S M A R T I N G E V I L S PA M

Advantages • Simple (and 100% legal) structure • No day-to-day stuff in Delaware • Canadian employees in a US corporation is a pain O U T S M A R T I N G E V I L S PA M

Advantages • Simple (and 100% legal) structure • No day-to-day stuff in Delaware • Canadian employees in a US corporation is a pain • All IP is in Delaware O U T S M A R T I N G E V I L S PA M

Advantages • Simple (and 100% legal) structure • No day-to-day stuff in Delaware • Canadian employees in a US corporation is a pain • All IP is in Delaware • The “real” company is in Delaware O U T S M A R T I N G E V I L S PA M

Advantages • Simple (and 100% legal) structure • No day-to-day stuff in Delaware • Canadian employees in a US corporation is a pain • All IP is in Delaware • The “real” company is in Delaware • Easy to do business with or get acquired by Americans O U T S M A R T I N G E V I L S PA M

Advantages • Simple (and 100% legal) structure • No day-to-day stuff in Delaware • Canadian employees in a US corporation is a pain • All IP is in Delaware • The “real” company is in Delaware • Easy to do business with or get acquired by Americans • R&D tax credits O U T S M A R T I N G E V I L S PA M

Advantages • Simple (and 100% legal) structure • No day-to-day stuff in Delaware • Canadian employees in a US corporation is a pain • All IP is in Delaware • The “real” company is in Delaware • Easy to do business with or get acquired by Americans • R&D tax credits • Makes you feel warm inside. O U T S M A R T I N G E V I L S PA M

Drawbacks O U T S M A R T I N G E V I L S PA M

Drawbacks • 2 companies to manage O U T S M A R T I N G E V I L S PA M

Drawbacks • 2 companies to manage • You have to do things right or you might get in trouble O U T S M A R T I N G E V I L S PA M

Drawbacks • 2 companies to manage • You have to do things right or you might get in trouble • No capital gain exemption in Canada (750k) O U T S M A R T I N G E V I L S PA M

Drawbacks • 2 companies to manage • You have to do things right or you might get in trouble • No capital gain exemption in Canada (750k) • Getting a bank account is a mess (tip: RBC Centura) O U T S M A R T I N G E V I L S PA M

Important! Talk to a US-Canadian tax specialist! I know a great one, just ask me. I cannot be held responsible, bla bla bla. O U T S M A R T I N G E V I L S PA M

Remember... O U T S M A R T I N G E V I L S PA M

Remember... • Stop fooling around and GET GOING O U T S M A R T I N G E V I L S PA M

Remember... • Stop fooling around and GET GOING Evolve. • Never give up. O U T S M A R T I N G E V I L S PA M

MUST WATCH! David Heinemeier Hanson aka DHH, the Rails guy The Secret to Making Money Online http://tinyurl.com/dhh4president O U T S M A R T I N G E V I L S PA M

echo $QUESTION > mic echo $COMPLAINTS > /dev/null ;-) Carl Mercier (@cmercier) cmercier@websense.com O U T S M A R T I N G E V I L S PA M

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How I founded, bootstrapped, grew and sold my web startup(s) - MeshU 2009

by Carl Mercier

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How I founded, bootstrapped, grew and sold my web startup(s) - MeshU 2009 Presentation Transcript