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US Startup Investment Market (Startonomics Tokyo, June 2009)

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Presentation on US Startup & Seed / Angel Investment Market for Startonomics Tokyo (June, 2009). Speakers Dave McClure, Joyce Kim, Dave Troy, Ryan Pipkin.

Presentation on US Startup & Seed / Angel Investment Market for Startonomics Tokyo (June, 2009). Speakers Dave McClure, Joyce Kim, Dave Troy, Ryan Pipkin.

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    • 1. Startonomics / Tokyo - June 9, 2009 Dave McClure, Founders Fund Joyce Kim, Soompi & Fortis General Counsel David Troy, Baltimore Angels Ryan Pipkin, AngelSoft US Startup Investment Market
    • 2. Startup Investment Trends
      • Venture Capital Turmoil: “ R.I.P. Good Times ”
        • Not so bad for startups (valuation), however..
        • Pretty bad for VCs (fundraising) if poor returns
      • Slowdown Later Stage Deals, Reduced Valuations
      • Legal Trends and Changes?
      • Growth -> Monetization, Revenue -> Profitability
      • Growth of Seed Funds, Incubators
        • Y-Combinator, TechStars, fbFund REV
      • Startonomics / Startup Metrics / Lean Startup
    • 3. Dave McClure PROPRIETARY & CONFIDENTIAL
        • 2001-2008:
        • Startup Investor: 500 Hats LLC, Founders Fund
        • Tech Marketing : PayPal, Simply Hired, Mint
        • Advisor, Angel Investor : 20+ Startups
        • Conf. Organizer : Web 2.0, O’Reilly, Startonomics
        • Stanford Visiting Lecturer : Facebook, Startup Metrics
        • 80’s & 90’s:
        • Entrepreneur : Founder/CEO Aslan Computing (acq.)
        • Developer : Windows Apps / SQL DB Admin
        • User Groups : E-Commerce, Internet, Client-Server
        • Engineer : Johns Hopkins ‘88, BS Eng / Applied Math
    • 4. Personal Investments (2004-2008) PROPRIETARY & CONFIDENTIAL
    • 5. Professional Investments (2009)
      • FF Angel LLC
      • Twilio
      • 1000 Markets
      • UserVoice
      • Bit.ly
      • DailyBurn
    • 6. Changing Focus
    • 7. Startup Funding Ecosystem PROPRIETARY & CONFIDENTIAL Union Square Ventures First Round Capital SoftTech (Clavier) Maples Investments Benchmark Sequoia Y-Combinator TechStars FF Angel FF II fbFund REV FF I Angels & Incubators ($0-10M) Seed Funds ($10-50M) Small VC Funds ($50-250M) Traditional VC Funds (>$250M)
    • 8. Angelsoft.net Data Metrics Angelsoft represents over 80% of the Organized Angel Networks in the United States
    • 9. From Q4 ‘08 - Q1 ‘09
      • Growth by 17.83% in # of companies actively looking for angel capital
      • Decline by 35% in total $ investment amount
      • Decline by 23.42% in valuations
    • 10. From Q4 ‘08 - Q1 ‘09
      • Decreased by 50% in time it took to make an investment
      • Increase by 31.19% in average amount of money entrepreneurs are seeking
      • Increase by 86% in average investment amount per deal that closed
    • 11. Legal Trends
      • Convertible Notes / Caps
      • Priced Rounds
      • Terms are very pro-investor
      • Valuations are down
      • Tip – ask your attorney how to control costs.
    • 12. Investment Stages
      • Micro-Seed: $0-$100K –> Prototype
      • Seed: $100K-$1M –> Market Development
      • Series A: $1-5M+ –> Revenue / Profitability
      • Series B: $2-20M+ -> Profitability / ?
    • 13. Example #1: Micro-Seed (“Prototype / Incubate”)
      • 1-2 person startup
      • Founder / Angel Investors
        • => $25-100K @ $500K-2M pre-money valuation
        • FF&F: Friends, Family, & Fools
        • Credit Cards, 2 nd Mortgage, Customer-Financed, etc
      • Examples: Y-Combinator, TechStars, fbFund REV
      • Goal: Build Functional Prototype
        • Concept->Alpha , ≤ 3-6 mo’s
        • Develop Minimal Critical Feature Set => Get to “ It Works ”
        • Instrument Basic Dashboard, Conversion Metrics
        • Setup Build/Release/Test Cycle
        • Test Cust. Adoption (10-1000 users) / Cust. Satisfaction (Scale: 1-10)
        • Connect with Advisors & Mentors, Angels/VCs
      • Demonstrate Concept , Reduce Product Risk, Vet Team
      • Develop Metrics & Filter for Follow-on Investment
      PROPRIETARY & CONFIDENTIAL
    • 14. Example #2: Seed (“Angel / Syndicate”)
      • 2-5 person startup
      • Angel Investor / Syndicate
        • => $100K-$1M @ $1-3M pre-money valuation
      • Examples: First Round, True Ventures, Union Square, FF Angel
      • Goal: Develop/Expand Prototype -> Functional, Growing Beta
        • Alpha->Beta , ≤ 3-6 mo’s
        • Test Cust. Sat ≥ 6 / 10 => Get to “ Doesn’t Suck ”
        • Setup A/B Testing Framework, Optimize Conversion
        • Test Mktg Campaigns, Cust. Acq. Channels: Volume, Cost
        • IF/WHEN Cust. Sat ≥ 8 (“ It’s Good! ”), THEN Grow User Base
        • Connect with Advisors, Series A Investors, Key Hires
        • Test/Develop Revenue Model
      • Prove Solution/Benefit, Assess Market Size, Initial Lines of Revenue
      • Test Channel Cost, Revenue Opportunity
      • Determine Org Structure, Key Hires
      PROPRIETARY & CONFIDENTIAL
    • 15. Example #3: Series A (“Venture”)
      • 3-10 person team; bring in key CXO/VP roles
      • Large Seed / Small Series A
        • => $500K-$5M @ $2-20M pre
      • Examples: Founders Fund , Sequoia Capital, Benchmark Capital
      • Goal: Market Expansion:
        • Beta->Production , ≤ 6-12 mo’s
        • Rigorous A/B Testing, Optimize Conversion
        • Get Cust. Sat ≥ 8 / 10 => “ It Rocks, I’ll Tell My Friends ”
        • Marketing Plan => Predictable Channels / Campaigns + Budget
        • Vet Scalability & Infrastructure, Customer Service & Ops
        • IF/WHEN Predictable, Scalable Growth THEN Step On Gas
        • Connect with Marketing / Distribution Partners
        • Revenue / Profit focus
      • Prove/Expand Market, Operationalize Business
      • Future Milestones: Expansion, Sustainable, Exit Options
      PROPRIETARY & CONFIDENTIAL
    • 16. Startup Metrics PROPRIETARY & CONFIDENTIAL
        • A cquisition : What channels do customers come from?
        • A ctivation : Do they have “happy” 1st experience?
        • R etention : Will they come back?
        • R eferral : Do they tell other people?
        • R evenue : How to make money?
    • 17. STARTonomics 2008 Conference 300+ Startup Entrepreneurs & Investors Startup Metrics Education for Product, Marketing, Tech
      • Startup Metrics
      • Product Development
      • Scalability
      • Game Mechanics
      • Design 101
      • Activation & Retention
      • Marketing
      PROPRIETARY & CONFIDENTIAL
      • SEO
      • Social Media
      • Viral Marketing
      • Social Platforms
      • Revenue Optimization
      • Customer Service
      • Funding & Financing
    • 18. Links & Resources
      • FoundersFund.com , follow @DaveMcClure
      • Fortis General Counsel , follow @JoyceKim
      • AngelSoft.net , follow @ripkin
      • follow @BaltimoreAngels, @DaveTroy
      • Yokum Taku, StartupCompanyLawyer.com
      • Eric Ries, Startup Lessons Learned
      • Dave McClure, Startup Metrics for Pirates
      • Finance4Founders.com
      • Startonomics SF (2008)

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