Building Startup Ecosystems (Bahrain, May 2013)
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Building Startup Ecosystems (Bahrain, May 2013)

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Slides from my talk on Changes in Venture Capital + Building Startup Ecosystems, at the MENA Angel Investor Summit (Bahrain, May 2013)

Slides from my talk on Changes in Venture Capital + Building Startup Ecosystems, at the MENA Angel Investor Summit (Bahrain, May 2013)

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  • Hey Dave and 500 Startups, this deck speaks volumes to us and the startup communities we serve. We thought so highly of it, we redesigned it for you and dear old Dave - http://www.slideshare.net/newhaircut/500-startups-changes-in-venture-capital-building-startup-ecosystems

    Hope you like... would be more than happy to send you the source files + assets. Just say the word.
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  • Why not Europe? 500SU would have no problem competing, and the market itself could do with shaking up.

    Over-regulation? Nor entrepreneurial enough?
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    Building Startup Ecosystems (Bahrain, May 2013) Building Startup Ecosystems (Bahrain, May 2013) Presentation Transcript

    • Changes in Venture Capital +
 Building Startup Ecosystems @DaveMcClure Founding Partner @500Startups http://500.co #MENAsummit Bahrain - May 2014
    • This Talk… • What is 500 Startups? • Changes in Tech + VC • “Lean VC” = Quantitative Venture Capital • Building Startup Ecosystems • Global Entrepreneurship • Q & A
    • Dave McClure
 Founding Partner & Chief Troublemaker, 500 Startups 00’s & 10’s: • VC: Founders Fund, Facebook fbFund, 500 Startups • Angel: Mashery, Mint.com, SlideShare, Twilio, Wildfire, SendGrid • Marketing: PayPal, Simply Hired, Mint.com, O’Reilly ! ! 80’s & 90’s: • Entrepreneur: Aslan Computing (acq’d by Servinet/Panurgy) • Developer: Windows / SQL DB consultant (Intel, MSFT) • Engineer: Johns Hopkins‘88, BS Eng / Applied Math
    • 500 Startups
 Global Seed Fund & Startup Accelerator • What is 500? – $100M silicon valley VC fund + startup accelerator – 30+ people / 10 investing partners – Locations: SV, NYC, MEX, BRZ, IND, CHN, SE Asia – 1500+ Founders / 200+ Mentors – Community + Content + Conferences ! • 750+ Portfolio Co’s / 40+ Countries – Wildfire (acq GOOG, $350M) – MakerBot (acq SSYS, $400M) – Viki (acq Rakuten, $200M) – Simple (acq BBVA, $117M) – Twilio – SendGrid – Credit Karma – Udemy
    • 500 Startups: Global Seed Fund
 Over 200+ startups outside US, in 40+ countries
    • This Talk… • What is 500 Startups? • Changes in Tech + VC • “Lean VC” = Quantitative Venture Capital • Building Startup Ecosystems • Global Entrepreneurship • Q & A
    • Industry Changes • Startup Efficiency, Reduced Capital Costs • Growing Market, Distribution Platforms • Financial Market Crises (2000, 2008) • Lean Startups ! • Micro VC: Seed Funds (ex: First Round Capital) • Incubators & Accelerators (ex: Y Combinator, 500) • Funding Platforms (ex: Angel List, Kickstarter) • Growing Global Market of Angel Investors ! more info: http://PreMoney.co (June 27th, San Francisco)
    • Changes in Tech Startups • LESS Capital required to build product, get to market – Dramatically reduced cost for servers, software, bandwidth – Funding Platforms: KickStarter, Angel List, Funders Club, etc – Access to online platforms for 100M-1B+ consumers, smallbiz, etc ! • MORE Customers via ONLINE platforms (100M+ users) – Search (Google) – Social (Facebook, Twitter) – Mobile (Apple, Android) – Media (YouTube, Pinterest, Instagram, Tumblr) – Comm (Email, WeChat/WhatsApp/Line/Kakao, Voice, SMS, etc) ! • LOTS of little bets: Accelerators, Angels, Angel List, Small Exits – Y Combinator, TechStars, 500 Startups – Capital + Co-working + Mentoring -> Design, Data, Distribution – “Fast, Cheap Fail”, network effects, quantitative + iterative investments
    • Before & After 2 Dot-Com Crashes
 Daft Punk Startup: Simpler, Faster, Cheaper, Smarter Before 2000 • Sun Servers • Oracle DB • Exodus Hosting • 12-24mo dev cycle • 6-18mo sales cycle • <100M people online • $1-2M seed round • $3-5M Series A • Sand Hill Road crawl • Big, Fat, Dinosaur Startup After 2008 • AWS, Google, PayPal, FB, TW • Cloud + Open Source SW • Lean Startup / Startup Wknd • 3-90d dev cycle • SaaS / online sales • >3B people online • <$100K incub + <$1M seed • $1-3M Series A • Angel List global visibility • Lean, Little, Cockroach Startup
    • Lean Startup:
 Simpler, Faster, Cheaper, Smarter ! 1. Startup Costs = Lower. 2. # Users, Bandwidth = Bigger. 3. Transaction $$$ = Better.! ! ! ➢ Building Product => Cheaper, Faster, Better ➢ Getting Customers => Easier, More Measurable ! Iterative Product & Marketing Decisions based on Measured User Behavior
    • Platforms 2.0
 Search, Social, Mobile, Video, Messaging
    • Angel List: Platform for Investors + Startups • Startups + Metrics • Founders + Bios • Investors + Syndicates • Accelerators + Online Applications • Jobs + Talent 12
    • This Talk… • What is 500 Startups? • Changes in Tech + VC • “Lean VC” = Quantitative Venture Capital • Building Startup Ecosystems • Global Entrepreneurship • Q & A
    • Silicon Valley 2.0: 
 Lots of Little Bets aka “MoneyBall for Startups” • VC Evolution: Physician, Scale Thyself (Aug 2012) • MoneyBall for Startups, 500 Startups Investment Thesis (Jul 2010)
    • 15 500 Strategy: “Lots of Little Bets”
    • The Lean VC:
 Lots of Little Bets, Incremental Investment Method: Make little bets in lots of startups using incremental investment, iterative development. Start with many small experiments, filter out failures, and expand investment in successes. ! • Incubator: $0-100K (“Build & Validate Product”) • Seed: $100K-$1M (“Test & Grow Marketing Channels””) • Venture: $1M-$10M (“Maximize Growth & Revenue”)
    • Investment Stage #1: 
 Product Validation + Customer Usage • Structure – 1-3 founders – $25-$100K investment – Incubator environment: multiple peers, mentors/advisors ! • Test Functional Prototype / “Minimum Viable Product” (MVP): – Prototype->Alpha, ~3-6 months – Develop Minimal Critical Feature Set => Get to “It Works! Someone Uses It.” – Improve Design & Usability, Setup Conversion Metrics – Test Small-Scale Customer Adoption (10-1000 users) ! • Demonstrate Concept, Reduce Product Risk, Test Functional Use • Develop Metrics & Filter for Possible Future Investment
    • Investment Stage #2: 
 Market Validation + Revenue Testing • Structure – 2-10 person team – $100K-$1M investment – Syndicate of Angel Investors / Small VC Funds ! • Improve Product, Expand Customers, Test Revenue: – Alpha->Beta, ~6-12 months – Scale Customer Adoption => “Many People Use It, & They Pay.” – Test Marketing Campaigns, Customer Acquisition Channels + Cost – Test Revenue Generation, Find Profitable Customer Segments ! • Prove Solution/Benefit, Assess Market Size • Test Channel Cost, Revenue Opportunity • Determine Org Structure, Key Hires
    • Investment Stage #3: 
 Revenue Validation + Growth • Structure – 5-25 person team – $1M-$10M investment – Seed & Venture Investors ! • Make Money (or Go Big), Get to Sustainability: – Beta->Production, 12-24 months – Revenue / Growth => “We Can Make (a lot of) Money!” – Mktg Plan => Predictable Channels / Campaigns + Budget – Scalability & Infrastructure, Customer Service & Operations – Connect with Distribution Partners, Expand Growth ! • Prove/Expand Market, Operationalize Business • Future Milestones: Profitable/Sustainable, Exit Options
    • This Talk… • What is 500 Startups? • Changes in Tech + VC • “Lean VC” = Quantitative Venture Capital • Building Startup Ecosystems • Global Entrepreneurship • Q & A
    • Critical Ecosystem Factors • Optimism & Belief (“Silicon Valley”) • Mentorship + Education (Knowledge) • Universities + Companies (People) • Capital, Legal, Finance (Infrastructure) • Engineering + Design / UX (Product) • Platforms + Distribution (Customers) • Online Payments (Monetization) • IPO / M&A Market (Exits) 21
    • Startup Investor Ecosystem ! !Angels & Incubators ($0-10M) ! “Micro-VC” Funds ($10-100M) “Big” VC Funds ($100-500M) “Mega” VC Funds (>$500M) TrueFirst Round A16ZAtomico Y-Combinator TechStars SoftTech (Clavier) Felicis (Senkut) SV Angel (Conway) SequoiaGreylock Union Square Floodgate (Maples) Foundry Incubation Seed Series A Series B Series C+ Bootstrap, KickStarter, Crowdfunding
    • Example Startup Ecosystem • 1,000 Bootstrap Startups ($0-10K) • 300 Accelerator Startups ($10-100K) • 100 Seed-Stage Startups ($100K-$1M) • 30 Series A/B Startups ($1-10M) • 10 Later-Stage Companies ($10-100M) • 1-3 Mature Company IPOs ($100M+) 23
    • Entrepreneur Education • Business Plans • Functional Prototypes • Lean Startup • Software Engineering / Design & UX • Online Marketing / Unit Economics • Monetization & Payments • Customer Service + Support • Fundraising & Pitch 24
    • Investor Education • Startups are NOT Real Estate • Most Startups Fail / Power Law Returns • Portfolio Approach (10-20+ investments) • Legal Structure, Financial Structure • Syndication + Co-Investment • Access to Downstream Capital • Exits & Liquidity 25
    • This Talk… • What is 500 Startups? • Changes in Tech + VC • “Lean VC” = Quantitative Venture Capital • Building Startup Ecosystems • Global Entrepreneurship • Q & A
    • Local vs Global? • Emerging / Developing Markets • Global Languages: English, Chinese, Spanish, Arabic • Critical Factors: Education, Mentorship, Capital • Capital Availability: Incubation, Seed, Series A • Positive Macro: SmartPhones, Tablets, Payments, Logistics, Growing Middle Class, Distribution Platforms • Wealthy Global Users, Shoppers, Travelers
    • Questions? Comments? • More Info? – http://500.co (our company) – http://500hats.com (my blog) – https://angel.co/500startups (our fund) – Dave McClure, @DaveMcClure