Startup Organizer Summit (Rio, 2013)


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slides from my talk @ Startup Organizer Summit (March 2013, Rio de Janeiro) #sosummit cc @500startups

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  • I'm a startup from Malaysia. When you guys coming? Q3 2013 (SE Asia)
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  • Hey startups! We are launching our book on kickstarter. We interviewed over 150 founders from around the world talking about their experiences going through accelerator programmes.
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Startup Organizer Summit (Rio, 2013)

  1. Starting Up Startups. Methods, Magic, Meta of Building Startup Ecosystems Dave McClure 500 Startups Rio, Mar 2013
  2. 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• 475+ Portfolio Co’s / 30+ Countries – Wildfire (acq GOOG, $350M) – Twilio – SendGrid – TaskRabbit – MakerBot – 9GAG – Viki – Gengo – VivaReal
  3. 500 Startups: Global Seed Fund 100+ startup investments in 30+ countries• Q4/12 added: Germany, Korea, Peru; + Russia, Israel, Turkey in Q1/13• Priorities in 2012: Brazil, Mexico, India• Priorities In 2013: China, SE Asia, MENA, Eastern Europe
  4. This Talk...• Startup Weekend: WTF? ⇒ “Simulation Exercises 4 Startups” ⇒ 4 Geeks, Designers, Founders, Startup Teams ⇒ 4 Organizers, Partners, Investors, etc What does it do well? What doesn’t it do so well? What can be improved? How? Who? When?• 3Ms: Metrics, Money, Mentorship
  5. Startup Weekend: #WINNING• Test Drive an Idea -> Prototype• Test Drive a Co-Founder / Team -> Startup• Test Drive Customers, Workflow, Design, etc• Recruiting (for Startups, for Corps, for VCs)• Getaway from Ur Normal Boring Fucking Life
  6. Startup Weekend: #FAIL• Not Enough Time.… • Not Enough Structure.… – 2 Build a “Real” Product/Biz – 2 Come Up With “Good” Idea – 2 Get 2 Know Co-Founder/Team – 2 Find Skilled Devs, Design – 2 Find/Scale Customers – 2 Find/Scale Customers – 2 Get Funded  – 2 Get Funded 
  7. Startup Weekend: #MO.BETTAH?• Mo’ Structure / Organizers• Mo’ MO-nay $$$ (Sponsors, Investors)• Mo’ Experienced Entrepreneurs (WIN, FAIL)• Mo’ Skilled Devs, Design/UX, Marketing• Mo’ Customers / Specific Segments?• Mo’ Platforms for Distribution / Monetization• Mo’ Specific Outcomes, Metrics, Results: – Problems not Products (see: Customer Needs) – Teams not Individuals (see: FounderDating, other?) – Funding not “Winners” (see: Investors / Corp Sponsors)
  8. The Rest of This Talk…• Too Many Boring Fucking Slides• Leave Now, Hit The Beach, Start Drinking• (we’re in Fucking Rio, for Christ’s Sake)
  9. 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)
  10. 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
  11. 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
  12. 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
  14. Failure = CRITICAL to Innovation• Failure not only tolerated, but ENCOURAGED• Success = Continued Iteration of Failure• US/SV: Failure = Growth, Education, Shared• Elsewhere: Failure = Shame, Silence, Death• Celebrity Role Models for Failure• “Fall Down 7 Times, Get Up 8” = Fail Warrior!
  15. Platform Innovation Search, Social, Mobile
  16. Platform ViabilitySuccessful Platformshave 3 Things: Features Features1) Features2) Users3) Money Growth Profit Nirvana .. Profitable Users Users .. Growth Money Money
  17. 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
  18. Startup Investor Ecosystem Bootstrap, KickStarter, Crowdfunding, Startup Wknd 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
  19. Angel* List: It Rocks. • Startups & Investors • Activity & Metrics • Platform & APIs • Customers & Corporates • *ps – not just for Angels, or USA
  20. Big Data. Little Bets.
  21. MoneyBall 4 Startups 1. Make Lots Of Little Bets 2. Count Cards (Metrics) 3. Double Down on Winners
  22. “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) 22 *See Peter Sims book: “Little Bets”
  23. Bet on Singles, Not HomeRuns. (Look for Ichiros, Not Barry Bonds)
  24. Startup Incubators Lots of Little Bets. Most FAIL. (but a few succeed :)
  25. 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
  26. 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
  27. Resources Accelerators Can Provideglobal networks,mentors and stafftraining and spaceportfolio companiesconferences & events 27
  28. 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
  29. 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) 
  30. Questions?• Someone Get Me a Beer.
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