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Hack Osaka: Innovation Strategies for Regional Startup Ecosystems
 

Hack Osaka: Innovation Strategies for Regional Startup Ecosystems

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slides for my talk at Hack Osaka Innovation Conference (Osaka, Feb 2013)

slides for my talk at Hack Osaka Innovation Conference (Osaka, Feb 2013)

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    Hack Osaka: Innovation Strategies for Regional Startup Ecosystems Hack Osaka: Innovation Strategies for Regional Startup Ecosystems Presentation Transcript

    • HACK! Osaka Innovation Strategies forRegional Startup Ecosystems Dave McClure 500 Startups Osaka, Feb 2013 http://slideshare.net/dmc500hats
    • BE. THE. NAIL!1. BE THE NAIL THAT STICKS OUT. 1. MOVE FAST, BREAK THINGS. 1. DON’T BE AFRAID TO FAIL! (and, tell everyone you know about it, Including your parents and your boss)
    • This Talk Will Confuse You.• Innovation Recipes = Creativity + FAILURE + Iteration• Innovation Examples: Tech, Product, Process, etc• Silicon Valley Magic: Geeks + Entrepreneurs + VCs• Kaizen for Entrepreneurs: Little Bets + “Lean Startup”• Kaizen for VCs: Incubators + Accelerators• Innovation for Regional Ecosystems• Innovation for Government & Legal Systems
    • “We Are 500.” #500STRONG
    • Dave McClure Founding Partner & Chief Troublemaker, 500 Startups00’s & 10’s:• VC: Founders Fund, Facebook fbFund, 500 Startups• Angel: Mint.com, SlideShare, Twilio, WildFire, SendGrid• Marketing: PayPal, Simply Hired, Mint.com, O’Reilly80’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? – $60M+ under management – 20 people / 10 investing partners – Locations: SV, NYC, MEX, BRZ, IND, CHN, SEasia – 1000+ Founders / 200+ Mentors – 20+ confs/events per year• 450+ Portfolio Co’s / 30+ Countries – Wildfire (acq GOOG, $350M) – Twilio – SendGrid – TaskRabbit – MakerBot – 9GAG – Viki – Gengo (JPN) – PeaTix (JPN)
    • 500 Startups: Global Seed Fund startup investments in 30+ countries• Q4/12 added: Germany, Korea, Peru; + Russia & Turkey in Q1/13• Priorities In 2013: SE Asia, Middle East, Eastern Europe
    • 500 Corporate Sponsors, Tech Partners, & Investors 8
    • InnovationThink Different.
    • Creativity, Failure, Iteration• Brainstorm new ideas & approaches (crazy!)• Try many experiments (be *fearless*)• MOST OF THEM WILL FAIL• But, a few will succeed• Iteration will improve success rates• Critical Mass, Network effects help• “Dance Like No One Is Watching”
    • FAILURE IS NECESSARY.IT’S A PROCESS, NOT A PROBLEM
    • Failure = CRITICAL to Innovation• Failure not only tolerated, but ENCOURAGED• Success = Continued Iteration of Failure• Japan: Failure = Shame, Silence, Death• US/SV: Failure = Growth, Education, Shared• Celebrity Role Models for Failure• “Fall Down 7 Times, Get Up 8” = Fail Warrior!
    • Types of Innovation + Examples• Tech Innovation: Electricity, Semiconductors, The Internet• Product Innovation: Cars, Planes, The iPad• Process Innovation: Assembly Line, Kaizen, Lean Startup• Finance Innovation: Mortgages, Derivatives, Venture Capital• Cultural Innovation: Civil Rights, Entrepreneurship, K-Pop• Legal Innovation: Corporations, Class Action Lawsuits, Startup Visa• Ecosystem Innovation: Rome, London, NYC, Silicon Valley
    • Silicon Valley Innovation Technology & The Internet Entrepreneurs & Failure Venture Capital & Incubators
    • Silicon Valley (R)Evolution• 40’s: Secret History of Silicon Valley (Steve Blank)• 50’s: Shockley / Semiconductors• 60’s: Fairchild / Traitorous Eight• 70’s/80’s: Intel, Apple, Microsoft• 90’s: Netscape, Yahoo, eBay, Amazon, Cisco• 00’s+: Google, PayPal, LinkedIn, Facebook, Twitter, YouTube, Pinterest… what’s next?
    • Changes in Startup & VC Ecosystem• LESS Capital required to build product, get to market – Low cost servers, software, bandwidth -- <$100K to build product – 20 years Internet infrastructure (Email, Web Services, Payments, etc) – Few big IPOs, LOTS of small acquisitions (<$100M)• MORE Customers via ONLINE platforms (100M+ users) – Search (Google) – Social (Facebook, Twitter, LinkedIn) – Mobile (Apple, Android)• LOTS of little bets: Accelerators, Startups, Small Investment – Y Combinator, TechStars, 500 Startups – Funding + Co-working + Mentoring -> Design, Data, Distribution – “Little Bets” = quantitative, scalable, iterative investment
    • Platform Innovation Search, Social, Mobile
    • Platform ViabilitySuccessful Platformshave 3 Things: Features Features1) Features2) Users3) Money Growth Profit Nirvana .. Profitable Users Users .. Growth Money Money
    • Distribution PlatformsCustomer Reach: 100M+ • Search: Google, Baidu, Yahoo/Bing, Yandex • Social/Games: Facebook, Twitter, LinkedIn, TenCent/QQ • Mobile: Apple (iOS), Android • Local: Yelp, Groupon, LivingSocial, FourSquare • Media: Video (YouTube), Blogs (Tumblr), Photos (Pinterest) • Comm: SMS, IM, Skype, Phone/Voice, etc
    • Startup Investor Ecosystem Bootstrap, KickStarter, Crowdfunding Y-Combinator Angels & TechStars Incubators ($0-10M) SV Angel (Conway) SoftTech (Clavier) “Micro-VC” Funds Floodgate (Maples) ($10-100M) Felicis (Senkut) First Round True Smaller VC Funds Union Square ($100-300M) Foundry Group Atomico Andreessen Larger VC Funds (>$300M)Greylock Sequoia
    • Angel* List: It Rocks. • Startups & Investors • Activity & Metrics • Platform & APIs • Customers & Corporates • *ps – not just for Angels, or USA
    • Little Bets + Lean Startup Kaizen for Tech Entrepreneurship
    • Big Data. Little Bets.
    • Entrepreneurship Innovation• The Lean Startup (Kaizen!)• Customer Development• “MVP” = Minimum Viable Product• Little Bets + Continuous Iteration• Internet Marketing & Distribution Platforms• Revenue-focused Businesses• Incubators & Accelerators• Angel List = http://Angel.co
    • The Lean StartupCustomers, Metrics, Iteration.
    • The Lean Startup• Progress ≠ Features; Measure Conversion• Talk to Customers; Discover Problems• Focus on “Product/Market Fit” (good solution)• Fast, Frequent Iteration (+ Feedback Loop)• Keep it Simple & Actionable
    • MoneyBall 4 Startups http://slideshare.net/paulsingh/moneyball-a-quantitative-approach-to-angel-investing-austin-tx-aug-2012 1. Make Lots Of Little Bets 2. Count Cards (Metrics) 3. Double Down on Winners
    • “Lots of Little Bets”*1) Make lots of little 30% bets pre-traction, Capital early-stage startups2) after 6-12 months, identify 70% top 20% performers and Capital double-down higher $$$3) conservative model assumes-5-10% large exits @20X ($50-100M+)-10-20% small exits @5X ($5-50M) 28 *See Peter Sims book: “Little Bets”
    • Bet on Singles, Not HomeRuns. (Look for Ichiros, Not Barry Bonds)
    • The Lean VC: Lots of Little Bets, Incremental InvestmentMethod: Invest in lots of startups using incremental investment, iterative development. Start with many small experiments, filter out failures, and expand investment in successes… (Rinse & Repeat).• Incubator: $0-100K (“Build & Validate Product”)• Seed: $100K-$1M (“Test & Grow Marketing Channels””)• Venture: $1M-$10M (“Maximize Growth & Revenue”) • VC Evolution: Physician, Scale Thyself (Aug 2012) • MoneyBall for Startups, 500 Startups Investment Thesis (Jul 2010)
    • 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
    • Startup Incubators Lots of Little Bets. Most FAIL. (but a few succeed :)
    • Incubator 2.0: Fast, Cheap, FAIL• Incubators = supportive startup ecosystem (+ angels, VCs)• Efficient use of investment capital ($0-100K)• High fail rate (60-80%) => large initial sample size
    • Incubator 2.0: Education, Collaboration, Iteration• Success based on: – MANY, small experiments – common platforms, customers, problems & solutions – physical proximity, open/collaborative environment – Domain-specific mentors & expertise – fast fail, iteration, metrics & feedback loop• Incremental investment; high-risk, but high-reward
    • Resources Accelerators Can Provideglobal networks,mentors and stafftraining and spaceportfolio companiesconferences & events 37
    • Incubator Innovation• Vertically-Focused Incubators: – Facebook: fbFund – Nike: Sensors / Wearables – Rock Health: Digital Healthcare – Digital Media: Turner Media, NY Times• Investing & Partnering with Incubators – Startup Communities, Conferences, Events – Entrepreneurs, Hackers, Mentors – Hackathons, Contests, Demo Days
    • fbFund REVfbFund REV: Facebook “Social” Incubator: invest in startups, apps, websites based on Facebook platform & Facebook Connect.• 22 startups @ ~$35K each (< $1M total)• 3 month program: Technology, Design, Marketing, Business topics• Success: 8 startups raised $500K –> 5 Series A -> 3 Series B (+ 3 small exits)• Wildfire Interactive acquired by GOOG for $350M (>50X) 
    • Regional Innovation Rome London Silicon Valley
    • Regional Innovation• Silicon Valley in 50s: The Secret History• NYC (after 2008 Financial Crisis)• Boulder, CO• Startup Chile• Singapore• …• Osaka?
    • Government & Legal InnovationBreak DOWN Legal Barriers! Break THRU Bureacracy! Open UP Immigration! Breakthrough Innovation!
    • Govt / Legal Innovation• Government Incentives for Innovation• Immigration Incentives• Personal Bankruptcy / Public Guarantors?• Startup Visa for Japan?• Tax & Research Credits• Ecosystems & Infrastructure
    • Thanks • For more info visit: – http://500.co (our company) – http://500hats.com (my blog) – https://angel.co/500-startups-fund-ii (our fund)