Startup 2.0: A Silicon Valley Story (Jan 2010)
Upcoming SlideShare
Loading in...5
×

Like this? Share it with your network

Share

Startup 2.0: A Silicon Valley Story (Jan 2010)

  • 32,344 views
Uploaded on

My talk for China Mobile Internet Exec Reception on Startup / Venture Capital trends in Silicon Valley (Jan 2010).

My talk for China Mobile Internet Exec Reception on Startup / Venture Capital trends in Silicon Valley (Jan 2010).

  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
No Downloads

Views

Total Views
32,344
On Slideshare
32,185
From Embeds
159
Number of Embeds
13

Actions

Shares
Downloads
462
Comments
3
Likes
53

Embeds 159

http://www.slideshare.net 90
http://www.ezebis.com 24
http://www.uniquevisitor.net 23
http://www.mtrout.com 8
http://www.fandrop.com 3
http://www.journal.vineesh.info 2
http://www.konstantin-gurnov.com 2
https://team.theflowr.com 2
http://trepsnation.com 1
http://translate.googleusercontent.com 1
http://sthomps.posterous.com 1
https://sharepoint.global.lmco.com 1
http://localhost 1

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
    No notes for slide

Transcript

  • 1. Startup 2.0:A Silicon Valley StorySourcing, Selecting & Engineering Better Startups via Incubators, Metrics & Iterative Development
    Dave McClure, Founders Fund
    (twitter: @DaveMcClure)
    China Mobile Internet Exec Reception
    January2010
  • 2. Angels &
    Incubators
    ($0-10M)
    “Seed” Funds
    ($10-50M)
    “Small” VC Funds
    ($50-250M)
    “Large” VC Funds
    (>$250M)
    Silicon Valley Startup Funding Ecosystem
    fbFund
    REV
    Y-Combinator
    TechStars
    FF Angel
    SoftTech (Clavier)
    Maples Investments
    Felicis (Senkut)
    SV Angel (Conway)
    FF I
    Union Square Ventures
    First Round Capital
    FF II
    Benchmark
    Sequoia
  • 3. Topics
    Venture Capital 1.0 = *Broken Model* (for Internet Startups)
    M&A Trends: More, but Smaller Acquisitions, Very Few IPOs
    Incubators: Many Experiments (most FAIL, a few winners)
    Metrics: Define “Success”, Measure & Iterate (Fast + Feedback)
    Platforms 2.0: Social, Mobile, Micro, Inbox, SEO
  • 4. [Pardon The Blatant Commercial]
  • 5. Dave McClure
    Blogger, Startup Advisor
    Internet Marketing,
    Angel/VC Investor
    2001-2009:
    • Startup Investor: 500 Hats LLC, Founders Fund
    • 6. Tech Marketing: PayPal, Simply Hired, Mint
    • 7. Advisor, Angel Investor: 40+ Startups
    • 8. Conf. Organizer:Web 2.0, O’Reilly, Startonomics
    • 9. Stanford Visiting Lecturer: Facebook, Startup Metrics
    80’s & 90’s:
    • Entrepreneur: Founder/CEO Aslan Computing (acq.)
    • 10. Developer: Windows Apps / SQL DB Admin
    • 11. User Groups: E-Commerce, Internet, Client-Server
    • 12. Engineer: Johns Hopkins ‘88, BS Eng / Applied Math
    GEEK, CODER, ENTREPRENEUR
  • 13. Personal Investments (16 deals, 2004-2009, ~$25K avg)
  • 14. Professional Investments (40 deals, Dec 2008 – Dec 2009, ~$75K avg)
    fbFund Incubator
    22 deals ($850K)
    ~$15-75K
    FF Angel LLC
    18 deals ($1.8M)
    ~$50-250K
  • 15. Founders Fund (Selected Investments, 2005-2009, range $1M-20M)
  • 16. Venture Capital 1.0 = Too Big To FAILWIN?(at least for *Internet* Startups)
  • 17. Angels &
    Incubators
    ($0-10M)
    “Seed” Funds
    ($10-50M)
    “Small” VC Funds
    ($50-250M)
    “Large” VC Funds
    (>$250M)
    Startup Funding Ecosystem
    fbFund
    REV
    Y-Combinator
    TechStars
    FF Angel
    SoftTech (Clavier)
    Maples Investments
    Felicis (Senkut)
    SV Angel (Conway)
    FF I
    Union Square Ventures
    First Round Capital
    FF II
    Benchmark
    Sequoia
  • 18. Venture Capital: Still Relevant?
    Good 4 big CAPex:
    Hardware
    Enterprise SW
    Clean Tech
    BioScience
    Wineries (?)
    Not So Great 4:
    • Internet Startups
    • 19. Consulting Shops
    • 20. Lifestyle Biz
    • 21. Porn, Gambling
  • More & Smaller Acquisitions
    Big, Mature Internet Platform Co’s:
    Google, MSFT, Yahoo, Ebay, Amazon, AOL, IAC, Facebook, NewsCorp, Apple, etc
    Lots of Users, $$$
    Outsourcing Innovation
    Lots of M&A (but small)
    Great for Angels & Entrepreneurs
    … Not so Great for VCs
  • 22. Startup Incubators Lots of Hot, Cool, Web 2.0!(+ lots of FAIL, too.)
  • 23. Incubator 2.0 Model
    Method: Invest in startups using incremental investment, iterative development. Start with lots of small experiments, filter out failure, and expand investment upon success.
    Incubator: $0-100K (“Micro-Seed”)
    Angel: $100-$1M (“Seed”)
    VC: $1M-$5M (“Series A, B”)
  • 24. Incubator 2.0: Fast, Cheap, FAIL
    Incubators growing in popularity, acceptance
    Supportive ecosystem for startups (angels, VCs)
    Efficient use of investment capital ($0-100K)
    High fail rate (60-80%) => large initial sample size
  • 25. Incubator 2.0: Education, Collaboration
    Emphasis on education, access to shared resources
    Success based on common platforms, physical proximity, open & collaborative environment
    Success based on fast fail, iteration & feedback
    Incremental investment; high-risk, but high-reward
  • 26. fbFund REV
    fbFund REV: Facebook “Social” Incubator: invest in startups, apps, websites based on Facebook platform, Facebook Connect.
    25 startups (2 non-profits)
    $850K total investment (~$35K each)
    12-week mentorship program in Palo Alto, CA
    ~25 Advisors / Speakers (Entrepreneurs, Geeks, Investors)
  • 27. fbFund REV
    fbFund REV: Facebook “Social” Incubator: invest in startups, apps, websites based on Facebook platform, Facebook Connect.
    Education on Tech, Design, Marketing, Business topics
    Demo Day with >200 VC, Angel Investors
    Target: ~7 seed round investments ($250K-$1M)
    Success: ~8 startups funded >$250K, ~5 @ break-even
  • 28. Investment #1: Micro-Seed(“Incubator”)
    Structure
    1-3 founders
    $25K-$100K investment
    Incubator environment: multiple peers, mentors/advisors
    Build Functional Prototype / “Minimum Viable Product” (MVP):
    Concept->Alpha, ~3-6 months
    Develop Minimal Critical Feature Set => Get to “It Works”
    Instrument Basic Dashboard, Conversion Metrics
    Test Cust. Adoption (10-1000 users) / Cust. Satisfaction (Scale: 1-10)
    Demonstrate Concept, Reduce Product Risk, Test Functional Use
    Develop Metrics & Filter for Follow-on Investment
  • 29. Investment #2: Seed(“Angel”)
    Structure
    2-5 person team
    $100K-$1M investment
    Syndicate of Angel Investors / Small VC Funds
    Improve Product, Expand Market, Test Revenue:
    Alpha->Beta, ~6-12 months
    Customer Sat ≥ 6 => Get to “Doesn’t Suck”
    Setup A/B Testing Framework, Optimize Conversion
    Test Marketing Campaigns, Customer Acquisition Channels
    Prove Solution/Benefit, Assess Market Size
    Test Channel Cost, Revenue Opportunity
    Determine Org Structure, Key Hires
  • 30. Investment #3: Series A(“Venture”)
    Structure
    5-10 person team
    $1M-$5M investment
    VC Investors
    Make Money, Get to Sustainability:
    Beta->Production, 12-18 months
    Customer Sat ≥ 8 => “It Rocks, I’ll Tell My Friends”
    MktgPlan => Predictable Channels / Campaigns + Budget
    Scalability & Infrastructure, Customer Service & Operations
    Connect with Distribution Partners
    Prove/Expand Market, Operationalize Business
    Future Milestones: Profitable/Sustainable, Exit Options
  • 31. Startup Metrics & The Lean StartupMeasure Stuff. Iterate. Rinse & Repeat.
  • 32. The Startup Metrics Religion
    Progress ≠ Features (Less= More)
    Focus on User Experience (& Distribution)
    Measure Conversion; Compare 2+ Options
    Fast, Frequent Iteration (+ Feedback Loop)
    Keep it Simple & Actionable
  • 33. Minimize TOTAL time through the loop
    IDEAS
    LEARN
    BUILD
    DATA
    CODE
    MEASURE
    Source: Eric Ries, The Lean Startup
  • 34. The Startup Pyramid(Sean Ellis, Startup-Marketing.com)
    sean@12in6.com
    Blog: startup-marketing.com
  • 35. AARRR!
    Startup Metrics for Pirates
    Acquisition:users come to site from various channels
    Activation: users enjoy 1st visit: "happy” experience
    Retention: users come back, visit site multiple times
    Referral:users like product enough to refer others
    Revenue: users conduct some monetization behavior
    (note: If you’re in a hurry, Google “Startup Metrics” & watch 5m video)
  • 36. SEO
    Campaigns, Contests
    SEM
    PR
    Biz Dev
    Social Networks
    Affiliates
    Blogs
    Acquisition
    Apps & Widgets
    Direct, Tel, TV
    Referral
    Email
    Viral Loops
    Domains
    Activation
    Homepage / Landing Page
    Retention
    Emails & widgets
    Emails & Alerts
    Product Features
    Affiliates, Contests
    Blogs, RSS, News Feeds
    Biz Dev
    Revenue $$$
    Ads, Lead Gen, Subscriptions, ECommerce
    System Events & Time-based Features
    AARRR!: 5-Step Startup Metrics Model
    Website.com
  • 37. Startup Challenges
    Startups have problems in 3 key areas:
    • Management: Setting Priorities, Defining Key Metrics, Creating Dashboard, Reporting Progress
    • 38. Product: Building the “Right” Features, Getting Product Out Quickly, Testing for User Conversion / Adoption
    • 39. Marketing: Accessing “Web 2.0” Channels (Search, Social, Viral, New Media), Cost-Efficient Distribution
  • Role: Founder/CEO
    Q: Which Metrics? Why?
    A: Focus on Critical Few Actionable Metrics
    (if you don’t use the metric to make a decision, it’s not actionable)
    Hypothesize Customer Lifecycle
    Target ~3-5 Conversion Events (tip: Less = More)
    Test, Measure, Iterate to Improve
  • 40. Role: Product / Engineering
    Q: What Features to Build? Why? When are you “Done”?
    A: Easy-to-Find, Fun/Useful, Unique Features that
    Increase Conversion(stop iterating when increase decelerates)
    Wireframes = Conversion Steps
    Measure, A/B Test, Iterate FAST (daily/weekly)
    Optimize for Conversion Improvement
    80% on existing feature optimization
    20% on new feature development
  • 41. Role: Marketing / Sales
    Q: What channels? Which users? Why?
    A: High Volume (#), Low Cost ($), High Conv (%)
    Design & Test Multiple Marketing Channels + Campaigns
    Select & Focus on Best-Performing Channels & Themes
    Optimize for conversion to target CTAs, not just site/landing page
    Match/Drive channel cost to/below revenue potential
    Low-Hanging Fruit:
    Blogs
    SEO/SEM
    Landing Pages
    Automated Emails
  • 42. Platforms 2.0Social, Mobile,Comm, Inbox, Search
  • 43. Web 2.0 = Good Business
    1) Take Existing Good Business Ideas
    2) Add [a little] Technology
    Blogs, Twitter, Facebook Connect
    Email & SEO
    Social Networks & Friend/Follower lists
    Online Payments
    3) Increase Distribution, Lower Customer Acquisition Cost with Internet
    PROFIT!
  • 44. Platform Viability
    Features
    Successful Platforms have 3 Things:
    1) Features
    2) Users
    3) Money
    Users.
    . Money
    Profit
    Growth
    Nirvana
    Profitable
    Growth
  • 45. Platforms: HOT or NOT?
    Social: Facebook, Twitter, LinkedIn, MySpace?
    Mobile: iPhone, Android?, Palm?
    Comm: Twitter, IM/Chat, Skype, Meebo
    Inbox: Gmail, YahooMail, Hotmail?, AOL?
    Search: Google, Bing/Yahoo
    Payments: Amazon (1-Click), eBay (PayPal), Apple (iTunes), Facebook?, Google?
    Dev: Amazon (AWS), Google AppEngine, Ruby/Rails, Python/Django, etc
    Gaming: Zynga, Playdom, Playfish, RockYou, Slide,
    Other: SalesForce, Craigslist, Wikipedia, YouTube
  • 46. Summary
    VC 2.0 = Fewer, Smaller Funds (<$100M)
    Liquidity = More, Smaller Acquisitions (<$100M)
    Model = Singles (Ichiro), not Home Runs (Barry Bonds)
    Diligence = Lots of Little Checks (+ Metrics + Time)
    Incubators = Many Small Experiments (most FAIL), Education + Shared Resources, Incremental Investment
    Startup Metrics = Define, Measure, Iterate
    Platforms = Distribution + Monetization, not Technology