Startup Organizer Summit (Rio, 2013)
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Startup Organizer Summit (Rio, 2013)

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

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

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    Startup Organizer Summit (Rio, 2013) Startup Organizer Summit (Rio, 2013) Presentation Transcript

    • Starting Up Startups. Methods, Magic, Meta of Building Startup Ecosystems Dave McClure 500 Startups Rio, Mar 2013 slideshare.net/dmc500hats
    • 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
    • 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
    • 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
    • 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
    • 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 
    • 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)
    • 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)
    • 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
    • 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• 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!
    • 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, 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
    • Angel* List: It Rocks. • Startups & Investors • Activity & Metrics • Platform & APIs • Customers & Corporates • *ps – not just for Angels, or USA
    • Big Data. Little Bets.
    • 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) 22 *See Peter Sims book: “Little Bets”
    • Bet on Singles, Not HomeRuns. (Look for Ichiros, Not Barry Bonds)
    • 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 27
    • 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) 
    • Questions?• Someone Get Me a Beer.