Gamblers not bankers 090711 finland
 

Gamblers not bankers 090711 finland

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Gamblers not bankers 090711 finland Gamblers not bankers 090711 finland Presentation Transcript

  • Bankers Versus GamblersThe Rise of Private RiskCapital
    Steve Blank
    www.steveblank.com
    Twitter: sgblank
    Slides: www.slideshare.net/sblank
  • The Rise of Risk CapitalFamily Money 1940’s - 1960’s
    J.H. Whitney
    1st family office 1946
    Laurance Rockefeller
    Draper Gaither & Anderson (1st limited Partnership) 1958
    Spun out as Venrock in 1969
    Bessemer
    East Coast focus
    Wide variety of industries
  • The Rise of Risk CapitalEast Coast VC Experiments
    1946 American Research & Development
    George Doriot
    Right idea, wrong model (public VC firm)
    1963 Boston Capital
  • The Valley Attracts Financial AttentionThe 1st West Coast IPO’s
    1956 Varian
    1957 Hewlett Packard
    1958 Ampex
  • 1950’s – 1968
    Stanford Engineering School sets up a secret 800-person military weapons lab
  • 1950’s – 1968
    Stanford Engineering School sets up a secret 800-person military weapons lab
    The Valley’s Entrepreneurial Culture comes from this lab
  • Entrepreneurs
    WeaponsFinance
    Crisis
    Profit
    Motivation
    Customer
    Development
    Mgmt Tools
    Agile
    Development
    Business ModelDesign
    Design Thinking
    Stanford and the Cold War Silicon Valley’s 1st Wave
    Risk Taking
    Culture
    Entrepreneurial
    Outward-Facing
    Tech Universities
    Free flow of
    People/Info
    Infrastructure
    24/7 Utilities
    Predictable
    Economic System
    Stable
    Legal System
    Research
    Universities
  • Soviet Union Launches Sputnik and the U.S. Venture Capital Industry
    Soviet satellite shocked the U.S.
    Galvanized congress
    New agencies/programs
    NASA
    ARPA
    National Defense Education Act
    SBA SBIC Act
  • The Rise of Risk CapitalSBIC Act of 1958
    Gov’t match of private investments 3:1
    700 SBIC funds by 1965
    75% of all VC funding in 1968, 7% in 1988
    Corporate
    Bank of America - George Quist, Tom Clauson
    Firemans Fund/American Express - Reid Dennis
    Private
    1959 Continental Capital - Frank Chambers
    The Group; Bryan Edwards, McGanney
    1962 Pitch Johnson & Bill Draper
    1962 Sutter Hill
  • The Rise of Risk CapitalSBIC Act of 1958
    700 SBIC funds by 1965
    75% of all VC funding in 1968, 7% in 1988
    Corporate
    Bank of America - George Quist, Tom Clauson
    Firemans Fund/American Express - Reid Dennis
    Private
    1959 Continental Capital - Frank Chambers
    The Group; Bryan Edwards, McGanney
    1962 Pitch Johnson & Bill Draper
    1962 Sutter Hill
  • The Rise of Risk Capital“The Group” – the first Angels 1950’s
    First Bay Area “Angels”
    Reid Dennis
    William Bryan
    William Edwards
    William K. Bowes
    Daniel McGanney
    ~ 10 deals $75 -$300K
  • Reid Dennis Remembers
    “The first 25 electronics companies required total capital of $300k each and private individuals formed the basis of the early syndicates”
    “….in 1975, prior to the relaxation of ERISA laws, the entire VC industry raised $10m”
  • The Rise of Venture CapitalThe Limited Partnership
    Raise money from pension funds, private universities, wealthy individuals – the limited partners
    Investment professionals manage the fund – the general partners i.e. the VC’s
    Compensate the general partners via the “2 and 20”
    2% management fee, 20% carried interest (i.e. of the profits)
    • Draper Gaither & Anderson 1958
    • Rock and Davis 1961
    • Sutter Hill 1964
    • Patricof & Co. 1969
    • Kleiner Perkins 1972
    • Sequoia Capital 1972
  • The Rise of Risk Capital1978/1979 - A Watershed
    Capital gains slashed (1978)
    49.5% to 28%
    Employee Retirement Income Security Act (1979)
    Pension funds can invest
  • Electron-Based VC’s
  • Entrepreneurs
    VentureFinance
    Crisis
    Profit
    Motivation
    Customer
    Development
    Mgmt Tools
    Agile
    Development
    Business ModelDesign
    Design Thinking
    Venture CapitalSilicon Valley’s 2nd Wave
    Risk Taking
    Culture
    Entrepreneurial
    Outward-Facing
    Tech Universities
    Free flow of
    People/Info
    Infrastructure
    24/7 Utilities
    Predictable
    Economic System
    Stable
    Legal System
    Research
    Universities
  • Life Science-Based VC’s
  • Lean Angels
  • Venture CapitalSilicon Valley Today
    VentureFinance
    Entrepreneurs
    AngelFinance
    Crisis
    Profit
    Motivation
    Customer
    Development
    Mgmt Tools
    Agile
    Development
    Business ModelDesign
    Design Thinking
    Risk Taking
    Culture
    Entrepreneurial
    Outward-Facing
    Tech Universities
    Free flow of
    People/Info
    Infrastructure
    24/7 Utilities
    Predictable
    Economic System
    Stable
    Legal System
    Research
    Universities
  • Finally
    Observations From Abroad
  • #1
    Startups are Smaller Versions of Large Companies
  • #1
    ×
    Startups are Smaller Versions of Large Companies
    oops
  • #2
    A startup is all about focus and execution of the business plan
  • #2
    A startup is all about focus and execution of the business plan
    No business plan survivesfirst contact with customers

  • #3
    A startup is all about a great idea
  • #3
    A startup is all about a great idea
    An A-teamwith a B-product always beats a B-team with an A-product

  • #4
    Companies execute business plansStartups search for business models
  • #3
    Companies execute business plansStartups search for business models
  • #4
    Companies execute business plansStartups search for business models

  • #5
    A startup is a temporary organization designed to search for a scalable and repeatable business model
  • #6
    Startups need their own tools, different from those used in existing companies
  • #6
    Startups need their own tools, different from those used in existing companies
  • #7
    Customer Development = process to searchBusiness Model Canvas is the ScorecardAgile Engineering is How We Build Startups
  • #8
    Customer Development =process to searchBusiness Model Canvas =the ScorecardAgile Engineering is How We Build Startups
    • Farming conventions.
    • Demo, demo, and demo!!
    • Proximity is paramount
    • Technology Design
    • Marketing
    • Demo and customer feedback
    • Research Labs
    • Equipment Manufacturers
    • Distribution Network
    • Service Providers
    • Cost Reduction
    • Remove labor force pains
    • Eliminate bio-waste hazards
    • Organic Farmers
    • Weeding Service Providers
    • Conventional Farmers
    • IP – Patents
    • Video Classifier Files
    • Robust Technology
    • Dealers
    • Direct Service
    • Indirect Service
    • … then Dealers
    • Asset Sale
    • Direct Service with equipment rental
    • … then Asset Sale
    Value-Driven
  • #9
    Valuations are Inflating at a Rapid PaceEarly and Late Stage
  • #9
    Valuations are Inflating at a Rapid PaceEarly and Late StageThe Game is On AgainGet In It!
  • Summary
    Cold War started Silicon Valley entrepreneurial culture
    Military was the key customer for Valley technologies
    Semiconductors, computers, Internet
    Venture Capital enabled by government funded VC’s
    SBIC Program
    Limited partnerships and Pension Funds made it scale