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Changing Rules for Startups: Charles Hudson, Precursor

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Charles Hudson, Partner, Precusor Ventures. AWS San Francisco Startup Day 9/7/17

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Changing Rules for Startups: Charles Hudson, Precursor

  1. 1. © 2017, Amazon Web Services, Inc. or its Affiliates. All rights reserved. September 7 AWS Startup Day Charles Hudson, Precursor Ventures #AWSstartupday
  2. 2. © 2017, Amazon Web Services, Inc. or its Affiliates. All rights reserved. Charles Hudson, Precursor Ventures Changing Rules for Startups
  3. 3. The Old Model for Ambitious Startups • Buy hardware, set up infrastructure (Thanks, Amazon!) • Build a team in a central location • Make that central location the Bay Area • Build a product, find customers • Raise capital from VCs • IPO or M&A
  4. 4. Times Have Changed, Advice Hasn’t Kept Up
  5. 5. Why the Change The cost equation for startups has changed: • Most startup costs are now variable, not fixed • Less capital required to get started, test your idea • Operating costs in some major metros are very high • San Francisco and New York are very expensive locations • Better collaboration tools = more distributed teams • The tools are finally living up to the promise
  6. 6. Decline of Centralized Teams
  7. 7. Old Logic Teams must be in one central place to be effective • Necessary to build culture • Aids in communication • Poor tools to enable remote collaboration Changing Narrative on Team Distribution Today’s Reality Teams can be distributed and still be effective • Good software for teamwork • Broad access to LTE + Wi-Fi enables work anywhere • Improving understanding of building culture for distributed teams
  8. 8. The Coasts Are Expensive Places to Start Starting a brand new company in SF or NYC is expensive • Talent is abundant, but hiring is very competitive • Dense markets attract talent, but also attract competition • SF and NYC are very expensive places to operate • Office space, housing, salaries and benefits all impact the capital requirements for startups • Increased company formation outside of the coasts • Easier to start, but harder to grow?
  9. 9. Collaboration Tools (Finally) Work • Video conferencing is reliable and cheap • Videoconferencing generally works and is fairly cheap • Group chat allows for inclusive conversations • Team-based chat allows for continuous conversations across locations and across teams • Better support for cloud development and deployment • Developing and deploying complex applications is much easier with the latest cloud-based tools
  10. 10. Challenges Still Abound • Centralized, Remote or Distributed? • Should you go without a central office altogether? • Hiring and Retaining in a Decentralized Model • Having an office, hiring locally allows for office culture • Management Requirements Differ • Managing a team across space and time zones creates new challenges for managers and teams
  11. 11. Startup Fundraising Has Changed
  12. 12. Old Model Fewer rounds of fundraising, simpler process: • Angel / F&F round • Series A • Series B • Growth Round • IPO Startup Fundraising Has Changed The New World of Fundraising More options and ways to raise capital. Is this better? • Angel / F&F • Pre-Seed • Seed • Seed Extension • Series A
  13. 13. More Fundraising Options = More Confusion? More fundraising options mean more decisions to consider: • What is a “seed round” today? • How do I figure out which firms are right for me? • How do I manage dilution across more rounds? • More fundraising rounds = more time spent fundraising • What are the right milestones for each round today? • What do I do if I have an in-between round?
  14. 14. New Ways to Fundraise Entrepreneurs have more options on how to raise money: • ICOs, tokens and cryptocurrency • Pre-orders, Kickstarter and crowdfunding • Patreon and direct support by fans and customers
  15. 15. Staying Private Longer is the New Norm Startups are staying private longer, creating new issues: • Employee retention and options grants • Does the 4-year option vesting period make sense? • Secondary sale shares • When should founders, employees and investors sell? • Public market expectations for IPOs and M&A • Does staying private longer pay off for companies?
  16. 16. Final Thoughts
  17. 17. Things to Consider Most of the playbooks are stale, which is a good for you: • There is not necessarily a ton of good “how to” material for many of these new challenges • Not all venture investors and pundits believe that the world has changed and these things are true • Change gives you license and opportunity to experiment with how and where you set up your company
  18. 18. Most of the benefits go to the companies that dive in and figure this out before it’s well understood and documented.
  19. 19. charles@precursorvc.com

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