Startup 2.0: A Silicon Valley Story (July 2010)

Startup 2.0: A Silicon Valley Story Engineering Better Startups with Incubators, Metrics & Iterative Development Dave McClure ( @DaveMcClure ) US Tech Delegation July 2010 - Medellin, Colombia

Overview
Venture Capital = Fewer, Smaller Funds (<$100M)
Platforms = Distribution + Monetization (not Technology)
Search (Google)
Social (Facebook, Twitter)
Mobile (Apple, Android)
Incubators = Many Small Experiments (most FAIL)

Silicon Valley Investor Ecosystem True Ventures First Round Capital Benchmark Sequoia Angels & Incubators ($0-10M) “ Seed” Funds ($10-50M) “ Small” VC Funds ($50-250M) “ Large” VC Funds (>$250M) Y-Combinator TechStars SoftTech (Clavier) FloodGate (Maples) Felicis (Senkut) SV Angel (Conway)

More & Smaller Acquisitions
Mature Internet Platform Co’s:
GOOG, MSFT, YHOO, EBAY, AOL, AMZN, AAPL, INTU, ADBE, Fbook
Lots of Users, $$$
Outsourcing Innovation
Lots of M&A (but small)
Great for Angels & Entrepreneurs
Not so Great for (big) VCs

Platforms 2.0 Search, Social, Mobile, Inbox, Media

Web 2.0: Good Times.
# Users, Bandwidth = Bigger .
Startup Costs = Lower .
Transaction $ Growing = Better .
Building Product => Cheaper, Faster, Measurable
Getting Customers => Easier, More Predictable
Product & Market Decisions Based on Measured User Behavior
R.I.P. *BAD* TIMES

Platform Viability Successful Platforms have 3 Things: 1) Features 2) Users 3) Money Users . . Money Features Growth Profit Profitable Growth Nirvana

Distribution Platforms
Customer Reach: 100M+
Search : Google (SEO/SEM)
Social : Facebook, Twitter, LinkedIn
Mobile : Apple (iPhone, iPad), Android
Media : YouTube/Video, Blogs, Photos
Email/IM : Google, Yahoo, Microsoft

Web 2.0 Business Model
1) Existing Business Ideas
2) Web 2.0 Technology
Facebook (Connect), Twitter
SEO/SEM, Blogs, Email
E-Commerce & Payments
3) Get Customers, Make Money

Startup Incubators Lots of Hot, Cool, Web 2.0! (+ lots of FAIL, too.)

Startup 2.0: “Lean Investor” Model
Method : Invest in many startups using incremental investment, iterative development. Start with lots of small experiments, filter out failure, and expand investment upon success… ( Rinse & Repeat) .
Incubator : $0-100K (“ Build & Validate Product ”)
Seed : $100K-$1M (“ Test & Grow Market ing Channels” ”)
Venture : $1M-$10M (“ Maximize Growth & Revenue ”)

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

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

fbFund REV
fbFund REV : Facebook “Social” Incubator: invest in startups, apps, websites based on Facebook platform & Facebook Connect.
22 startups @ ~$35K each ($850K total)
3 month program: Technology, Design, Marketing, Business topics
Success: ~8 startups funded >$500K

Startup 2.0: A Silicon Valley Story (July 2010)

by Dave McClure on Jul 15, 2010

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Startup 2.0: A Silicon Valley Story (July 2010) — Presentation Transcript