Funding and growth in Silicon Valley

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Sunil Maulik's presentation on funding and growth in Silicon Valley

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Funding and growth in Silicon Valley

  1. 1. MINISTRY  OF  FOREIGN  AFFAIRS  OF  DENMARK   EKSPORTRÅDET  –  THE  TRADE  COUNCIL   ”From  Idea  to  IPO”  Funding  &  Growth  in  Silicon  Valley   Sunil  Maulik,  Ph.D.   sma@innova4oncenterdenmark.com     MINISTRY  OF  FOREIGN  AFFAIRS  OF  DENMARK   EKSPORTRÅDET  –  THE  TRADE  COUNCIL  
  2. 2. Start  Your  Motor!   MINISTRY  OF  FOREIGN  AFFAIRS  OF   DENMARK  EKSPORTRÅDET  –  THE  TRADE   COUNCIL  
  3. 3. Why  start  up  a  company?  •  What  is  the  current   market  Dynamic?  •  What  are  your  Long-­‐ Term  goals?  •  Investors  like  Big  Ideas  –   what  is  yours?     The  Silicon  Valley  mantra  “Go  big  or  go   home!”    
  4. 4. Taking  the  leap   MINISTRY  OF  FOREIGN  AFFAIRS  OF   DENMARK  EKSPORTRÅDET  –  THE  TRADE   COUNCIL  
  5. 5. TransiRoning  from  career  to  startup  •  Build  a  prototype  and  get   customer  feedback    •  Establish  a  team  willing  to   work  for  stock  •  Get  as  much  done  without   paying  salaries:   –  First  product   –  First  customers   –  Business  plan;  markeRng   plan  
  6. 6. Get  the  funding  you   need   MINISTRY  OF  FOREIGN  AFFAIRS  OF   DENMARK  EKSPORTRÅDET  –  THE  TRADE   COUNCIL  
  7. 7. Sources  of  Funding  •  Boot-­‐Strapping  (Customer   Funded)  •  Angel  Investors  •  Corporate  Capital  •  Venture  Capital  •  Other   –  Going  public  (IPO)   –  Secondary  markets  
  8. 8. Boot-­‐Strapping  (Customer  Funded)  •  Get  customers  to  pre-­‐pay  for  the   product  •  Create  a  process  for  acquiring   early  customers  •  Offer  discounts  or  revenue-­‐share    •  Give  the  customer  a  significant   up-­‐side   See  KickStarter  (www.kickstarter.com)  
  9. 9. Angel  Investors  •  Write  small  checks  ($25K-­‐ $250K)  •  Finds  or  advises  company:   – Business  development   – Engineers  •  Can  introduce  company  to   VCs  
  10. 10. Some  Famous  Silicon  Valley  Angels  •  Y-­‐Combinator    •  Founders  Fund    •  Angel  List    •  500StartUps  
  11. 11. Danish  Example  –  AppHarbor  •  Founded  Sept  2010  by  Rune  Sørensen,  Troels   Thomsen  and  Michael  Friis.  •  Y-­‐Combinator  Funded    •  Easy  to  use  development  pladorm  for  .NET   developers  •  Example  of  ‘Pladorm  as  a  Service’  (PaaS)  
  12. 12. CorporaRons  as  investors/partners   MINISTRY  OF  FOREIGN  AFFAIRS  OF   DENMARK  EKSPORTRÅDET  –  THE  TRADE   COUNCIL  
  13. 13. Corporate  Funding  •  Strategic  investors  –  not  looking  to  get   lots  of  money  back  (Return  on  Capital)  •  Want  early  view  into  technology  •  Want  early  view  into  compeRRon  •  Expect  discount  on  business  partnership  •  May  want  exclusivity  
  14. 14. Danish  Example  -­‐  MemoLane  •  Founder:  Eric  Lagier  •  A  pladorm  for  collecRng  and  connecRng  thoughts,   pictures,  messages  •  Integrates  with  your  social  networks    Total:  $2.5M  Seed  Funding:  Niklas  Zennstrom/Janus  Friis  (Skype)  Series  A,  11/09    Digital  Garage  $500k    Series  B,  9/10    August  Capital,  Atomico  $2M  
  15. 15. Reach  for  the  sky!  –   Venture  Capital   MINISTRY  OF  FOREIGN  AFFAIRS  OF   DENMARK  EKSPORTRÅDET  –  THE  TRADE   COUNCIL  
  16. 16. Venture  Capitalists  •  Lots  of  money  •  Lots  of  experRse  and  help  •  Expensive  money!  •  Look  for  scalable   companies  ($500MM+   valuaRons)  •  Looking  for  disrupRve   technology  in  huge  markets  
  17. 17. Venture  Capital  •  VCs  can  bring  credibility  with   customers    •  VCs  can  get  major  partnership   deals  •  VCs  can  recruit  professional   management  •  VCs  also  sit  on  boards  of  large   public  companies,  private  equity   funds,  etc.    
  18. 18. Disadvantages  of  Venture  Capital  •  Requires  huge  amounts  of  Rme/ effort  to  get    •  Puts  negaRve  pressure  on   founders  •  Requires  accountability  (must  hit   milestones)  •  Doesn’t  allow  for  early  flexibility  •  VCs  may  take  your  company  in  a   direcRon  that  is  not  of  interest  to   you    
  19. 19. Financing  Roadmap  -­‐Friends  &  Family      -­‐Individual  Angels      -­‐Early  Customers        -­‐Early-­‐stage  VCs  (Series  ‘A’)          -­‐Later-­‐stage  VCs  (Series  ‘B’  and  ‘C’)            -­‐Private  Equity  (If  needed-­‐Series  ‘D’)              -­‐IPO  or  Acquisi4on  
  20. 20. Raising  VC  Money  –  The  Pot  at   the  end  of  the  Rainbow   MINISTRY  OF  FOREIGN  AFFAIRS  OF   DENMARK  EKSPORTRÅDET  –  THE  TRADE   COUNCIL  
  21. 21. What  do  VCs  look  for?  •  Big,  bold  Idea  •  AuthenRcity,  Integrity,  MoRvaRon  (A.I.M.)  •  A+  DNA  (Ability  to  hire  a  winning  team)  •  Rapid  IteraRons  &  Pivot  (R.I.P.)     MINISTRY  OF  FOREIGN  AFFAIRS  OF   DENMARK  EKSPORTRÅDET  –  THE  TRADE   COUNCIL  
  22. 22. How  to  raise  VC  money  •  Need  a  track-­‐record  (if  not  you,   then  your  team)  •  IdenRfy  unfair  advantages  that   benefit  your  company  •  Determine  if  your  idea  has   economic  power     Demonstrate  unambiguously  how  you   create  value  for  the  customer  
  23. 23. How  to  raise  VC  money  (cont.)  •  Show  a  huge  market   opportunity  •  Demonstrate  venture-­‐scale   returns  •  IdenRfy  clear  milestones  to  first   year  revenue  •  Provide  signed  customer/ partner  relaRonships  
  24. 24. What  numbers  do  VCs  look  at?  •  VCs  want  at  least  10x  Return  on   Investment  (RoI)  •  IRR  (Internal  Rate  of  Return)  is   also  important    •  VCs  invest  money  for  their  LPs   (Limited  Partners)  with  an   expected  IRR  of  30%  •  VCs  want  to  make  money  for  their   funds  so  they  can  raise  new  funds  
  25. 25. Example  -­‐  Zendesk  •  Started  in  Denmark  •  First  Funding  from  Boston  •  Now  Headquartered  in  San  Francisco  •  HelpDesk  and  Support  Infrastructure  for  sonware  companies    Total  Funding:  $25.5M    Seed,  6/08    Christoph  Janz  $500k  Series  A,  5/09    Charles  River  Ventures  $1M  Series  B,  8/09    Benchmark  Capital,  Charles  River  Ventures  $6M  Series  C,  12/10    Matrix  Partners,  Benchmark  Capital,  Charles  River  Ventures  $19M  
  26. 26. You’re  Off!  –  Now  What?   MINISTRY  OF  FOREIGN  AFFAIRS  OF   DENMARK  EKSPORTRÅDET  –  THE  TRADE   COUNCIL  
  27. 27. OK  –  you’re  funded!  •  Rapidly  expand  partnerships:   – Customers   – Distributors   – Channels   – Suppliers  •  Keep  shipping  products:   – Regular  release/update  schedule   – New  funcRonality  (get  customer   feedback!)  
  28. 28. How  to  go  from  one  to  one  thousand   (any  units!)  •  IdenRfy  a  big  company  that  must  sell   your  product  in  order  to  increase  their   revenue  •  IdenRfy  complementary  company(s)   that  you  can  merge/acquire  •  IdenRfy  internaRonal  partners  that  have   access  to  large  markets    •  Change  (pivot)  your  business-­‐model  to   dramaRcally  increase  revenue  
  29. 29. The  Start-­‐Up  Curve  
  30. 30. Summary  •  To  be  big  –  think  big!  •  Investors  want  to  invest  in  big  ideas  •  Prove  that  you  have  a  disrupRve   technology  •  Describe  how  you  will  efficiently   capture  a  sliver  of  a  huge  market  •  Show  that  you  can  scale  to  capture   the  rest  of  the  market    

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