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the startup process




dan gould
vp, technology
fox interactive media   (img cc flickr user karlequin)
you
here
startup
change the world
build something
make money
(lots of easier ways)
(img cc flickr user noelleandmike)
(img cc flickr user casasroger)
need you
value
about:me
entrepreneur
corridor
failed
good
social interfaces
machine learning
do
something
janitorial functions
            $$$

                          people
  idea



                  marketing
resources
   ...
why?
metric: do you know
    your goal?
       (boolean)
idea
matters? yes
> execution? no
100% * 100% = 100%
90% * 90% = 81%
100% * 0% = 0%
cc flickr user cayusa
people with
 problems
niche
niche
niche
 niche
 niche
  niche
  niche
   niche
   niche
metric: can you show
me your ideal user?
mission
quot;To serve the world's most engaged community.quot; (AOL 2006)




                         dumb
quot;To scout pro tabl...
A Computer on Every
Desk and in Every Home
         (1975)
The World On Time
Organize All the
World’s Information
people
rst 5-10
  ==
don’t compromise
a -> a
b->c
c->d
metric: did i hire someone
  better than myself?
incentivize
options
CEO           5-10%
     COO             2-5%
       VP            1-2%
  (Ind) Board      .5-1.5%
    Director      0.3-1...
vesting


+ acceleration, etc
founders too
milestones
come up with a series
  of milestones and
 break down tasks to
      get there
              e.g.,
      product design do...
prioritize relentlessly
types
right
consulting
lifestyle
cash ow
50% of $1M
    or
5% of $20M
venture-backed
(img cc flickr user omnidirectional)
(img cc flickr user willie_901)
for most:
     VC==wrong
(but it’s what I’m going to talk about)
fundraising
sex
(img cc flickr user irlandainquieta)
(some typical amounts)


     self         ?
     3Fs      10-100K
    angel     200K-1M
vc (series a)   1-8M
vc (series b...
friends & family
(img cc flickr user martin_hartland)
angels
successful entrepreneurs
      retired execs
  professional angels
      “trailblazers”
     angel groups
sophisticated
risk / reward
equity
Guy Kawasaki’s rule of thumb:


$500K per engineer
-$250K per MBA
 (said for series a in a better market)
convertible


disappearing in this market
disappeared
(last deals i saw for conv angel rounds
    w/1st-time entrepreneurs in this market
              before they stopped)

  ...
vc
pensions,
endowments
    carry
“sure bets”
success:
20 investments

13 op/sideways
    5 2-3X
    2 10X
10Xes pay
only 10X potential
1000   plans
250    initial pitches
12     due dilligence
6      investments
(img cc flickr user protoflux)
(img cc flickr user bargas)
angel
  portfolio
entrepreneur
   advisor
   lawyer
  CS profs
advisors
advice <-> $
pitch
practice
10
1 hour:
20 mins - VC late
20 mins - pitch
20 mins - questions
team
elevator pitch
revenue model
customer acquisition
competition/barriers
amount
milestones
customer traction
1-page exec sum
deal
Company Value


$2M
Cash in the bank


$1M

Company Value


$2M
Cash in the bank


$1M
                   }
                   $3M
Company Value


$2M
before




           = $2M
100%




             Your Share
after



     33%


                             = $2M
                    67%




                           Your Share  ...
eventual size
discounted for time,
    risk, dilution
people risk
   market risk
  execution risk
competition risk
 technology risk
  financing risk
competition
(img cc flickr user ohadby)
preferred shares
vetoes over sales/stock iss
 liquidation preferences
        board seats
   protective provisions
       ...
(img cc flickr user millzero)
nancing = work
success!= nancing
success=pro ts
pro ts
products & sales
cc flickr user davestfu
The Startup Process   Dan Gould   Startonomics La 2009
The Startup Process   Dan Gould   Startonomics La 2009
The Startup Process   Dan Gould   Startonomics La 2009
The Startup Process   Dan Gould   Startonomics La 2009
The Startup Process   Dan Gould   Startonomics La 2009
The Startup Process   Dan Gould   Startonomics La 2009
The Startup Process   Dan Gould   Startonomics La 2009
The Startup Process   Dan Gould   Startonomics La 2009
The Startup Process   Dan Gould   Startonomics La 2009
The Startup Process   Dan Gould   Startonomics La 2009
The Startup Process   Dan Gould   Startonomics La 2009
The Startup Process   Dan Gould   Startonomics La 2009
The Startup Process   Dan Gould   Startonomics La 2009
The Startup Process   Dan Gould   Startonomics La 2009
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The Startup Process Dan Gould Startonomics La 2009

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Transcript of "The Startup Process Dan Gould Startonomics La 2009"

  1. 1. the startup process dan gould vp, technology fox interactive media (img cc flickr user karlequin)
  2. 2. you
  3. 3. here
  4. 4. startup
  5. 5. change the world
  6. 6. build something
  7. 7. make money
  8. 8. (lots of easier ways)
  9. 9. (img cc flickr user noelleandmike)
  10. 10. (img cc flickr user casasroger)
  11. 11. need you
  12. 12. value
  13. 13. about:me
  14. 14. entrepreneur
  15. 15. corridor
  16. 16. failed
  17. 17. good
  18. 18. social interfaces machine learning
  19. 19. do
  20. 20. something
  21. 21. janitorial functions $$$ people idea marketing resources engineering
  22. 22. why?
  23. 23. metric: do you know your goal? (boolean)
  24. 24. idea
  25. 25. matters? yes
  26. 26. > execution? no
  27. 27. 100% * 100% = 100% 90% * 90% = 81% 100% * 0% = 0%
  28. 28. cc flickr user cayusa
  29. 29. people with problems
  30. 30. niche niche niche niche niche niche niche niche niche
  31. 31. metric: can you show me your ideal user?
  32. 32. mission
  33. 33. quot;To serve the world's most engaged community.quot; (AOL 2006) dumb quot;To scout pro table growth opportunities in relationships, both internally and externally, in emerging, mission inclusive markets, and explore new paradigms and then lter and communicate and evangelize the ndings.quot;
  34. 34. A Computer on Every Desk and in Every Home (1975)
  35. 35. The World On Time
  36. 36. Organize All the World’s Information
  37. 37. people
  38. 38. rst 5-10 ==
  39. 39. don’t compromise
  40. 40. a -> a b->c c->d
  41. 41. metric: did i hire someone better than myself?
  42. 42. incentivize
  43. 43. options
  44. 44. CEO 5-10% COO 2-5% VP 1-2% (Ind) Board .5-1.5% Director 0.3-1.2% Lead Eng 0.5-1% 5+ exp Eng .33-.66% Mgr, Jr Eng 0.1-0.33% rough post-Series A
  45. 45. vesting + acceleration, etc
  46. 46. founders too
  47. 47. milestones
  48. 48. come up with a series of milestones and break down tasks to get there e.g., product design done rst customer test beta ready
  49. 49. prioritize relentlessly
  50. 50. types
  51. 51. right
  52. 52. consulting
  53. 53. lifestyle
  54. 54. cash ow
  55. 55. 50% of $1M or 5% of $20M
  56. 56. venture-backed
  57. 57. (img cc flickr user omnidirectional)
  58. 58. (img cc flickr user willie_901)
  59. 59. for most: VC==wrong (but it’s what I’m going to talk about)
  60. 60. fundraising
  61. 61. sex
  62. 62. (img cc flickr user irlandainquieta)
  63. 63. (some typical amounts) self ? 3Fs 10-100K angel 200K-1M vc (series a) 1-8M vc (series b) 5-25M mezz 25+M IPO $lots
  64. 64. friends & family
  65. 65. (img cc flickr user martin_hartland)
  66. 66. angels
  67. 67. successful entrepreneurs retired execs professional angels “trailblazers” angel groups
  68. 68. sophisticated
  69. 69. risk / reward
  70. 70. equity
  71. 71. Guy Kawasaki’s rule of thumb: $500K per engineer -$250K per MBA (said for series a in a better market)
  72. 72. convertible disappearing in this market disappeared
  73. 73. (last deals i saw for conv angel rounds w/1st-time entrepreneurs in this market before they stopped) 75% warrant coverage 50% discount 10% per month warrant coverage 20-30% discount in good market
  74. 74. vc
  75. 75. pensions, endowments carry
  76. 76. “sure bets”
  77. 77. success: 20 investments 13 op/sideways 5 2-3X 2 10X
  78. 78. 10Xes pay
  79. 79. only 10X potential
  80. 80. 1000 plans 250 initial pitches 12 due dilligence 6 investments
  81. 81. (img cc flickr user protoflux)
  82. 82. (img cc flickr user bargas)
  83. 83. angel portfolio entrepreneur advisor lawyer CS profs
  84. 84. advisors
  85. 85. advice <-> $
  86. 86. pitch
  87. 87. practice
  88. 88. 10
  89. 89. 1 hour: 20 mins - VC late 20 mins - pitch 20 mins - questions
  90. 90. team
  91. 91. elevator pitch
  92. 92. revenue model
  93. 93. customer acquisition
  94. 94. competition/barriers
  95. 95. amount
  96. 96. milestones
  97. 97. customer traction
  98. 98. 1-page exec sum
  99. 99. deal
  100. 100. Company Value $2M
  101. 101. Cash in the bank $1M Company Value $2M
  102. 102. Cash in the bank $1M } $3M Company Value $2M
  103. 103. before = $2M 100% Your Share
  104. 104. after 33% = $2M 67% Your Share VC Share (but you did give up a bunch of rights)
  105. 105. eventual size discounted for time, risk, dilution
  106. 106. people risk market risk execution risk competition risk technology risk financing risk
  107. 107. competition
  108. 108. (img cc flickr user ohadby)
  109. 109. preferred shares vetoes over sales/stock iss liquidation preferences board seats protective provisions ratchets etc.
  110. 110. (img cc flickr user millzero)
  111. 111. nancing = work
  112. 112. success!= nancing
  113. 113. success=pro ts
  114. 114. pro ts products & sales
  115. 115. cc flickr user davestfu
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