What is a Startup?“A startup is anentrepreneurial drivenorganization that iscontinually searching for arepeatable and scalablebusiness model” ~ Mark Babbitt
WOW – An Idea!• Guess what? – SO DOES EVERYONE ELSE.
WOW – An Idea!– A real time chat/msgr with 140 char limit (interest graph)– A search engine based upon summing probability distributions over hyperlinks • PR(A) = (1-d) + d(PR(t1)/C(t1) + … + PR(Tn)/ C(Tn)– Affinity Graph that allows you to connect friends based upon network theory: • (if A~ B) then (B~A) and (if A~B and B~C then A~C)
WHY?!• Here are some reasons NOT to do it: – You want to help people - there are a number of worthy charitable organizations out there – You want to be as rich as the Facebook guy or some other rich person.
WHY?! Here are some reasons NOT todo it: – You want a job where you get to hang out with your engineering friends -- form a hackers club
WHY?! Here are some reasons NOT todo it: – You want a small business to support a nice lifestyle for you and your family and you know your buddys IT shop nets $2M a year.
WHY?! Here are some reasons TO doit: – Youve always wanted to build your own company from the ground up -- you were that kid selling lemonade
WHY?! Here are some reasons TO doit: – Youve been working on what you believe to be a great idea that will make money and youve gotten some smart people interested in doing it with you – PASSION.
WHY?! Should You? – Willing to devote 100% for 0-5 years? • Everything you do revolves around moving NewCo forward: – Take Care of you and others – Cut out all extraneous BS – Willing to live on reduced income etc
WHY?! Should You? – Take NO for an answer? • That is basically all that happens – Passionate? • Do you lay in bed thinking about it? • Stay up trying to code the idea? – Are you honest with yourself? • Otherwise you and everyone else will find out – pronto.
Steps– Secure domain name– Familarize yo’sef with corp docs and process– Get a great lawyer– Form company (c-corp)
Steps– Educate yourself on funding– Read Brad Felds book and Founders at Work blog– Start working VC network– Do not form a board of directors– Iterate on everything code/ideas/ money– Raise round while scaling– Close the round and keep raising
Three T’s• A Ranked list: – Talent – Who ? – Tech – How ? – Timing – When ?
Talent• AKA THE CREW• A great team will turn a grade B idea into• a grade A idea and EXIT• (Also companies buy startups for the team)
Talent• AKA THE CREW – At least TWO founders: • One Operational or Business • Other technical – Initial team needs to be a mix: • Nowadays KILLER front end and User Experience • Backend just as important • Some type of DataScience
Talent• Some words on Co-Founders – Get a great co-founder. This is too hard to do alone. – If youre not technical but have good domain knowledge in something youre passionate about, get a technical co-founder.
Talent• Some words on Co-Founders – Spend time up front learning if you can trust this person because you will have to trust them, with everything. – Second only to your spouse or partner, this is one of the most important relationships you will have.
Talent• “The only mistakes I regret are people mistakes.” ~ Brad Feld• “Steve hires the best people.” ~ Bill
Talent• Create Advisory Board – Knowledge of funding process – Domain expertise – Track record of building startups – Able to listen to crying for hours
Tech• We know it We LOVE it… – Sorry we cannot just code we have to THINK – Nowadays no one really cares about the tech – Framework coding has ushered in a new era – Patents are still important – REALLY Novel algorithms and methods
More Than Code• from numpy import *!• from numpy.linalg import norm!• from time import time!• from sys import stdout!• def DoMyStartup (V,Winit,Hinit,tol,timelimit,maxiter):!• """!• (W,H) = DoMyStartup(V,Winit,Hinit,tol,timelimit,maxiter)!• W,H: output solution (exit matrix)!• Winit,Hinit: initial startup state!• tol: tolerance for not being able to take it anymore (tolerance)!• timelimit, maxiter: limit of time and iterations!• #MajikHappens here… (eg rapid gradient descent to exit)!• return (H, grad, iter )
Timing• Everything in life is timing – Time is money ~ Money is Time – Kill bad ideas fast and furious – Apply to all incubators – Apply to all angel venture lists – Start prototyping - yesterday
Process Stuff• Ya gotta do it to make it – C-Corp Filing – NDAs – Offer Letters – One Pager – Convertible Note – CAP Table – Pitch Deck – Biz Plan
C-Corp Filing– Ok for some I can hear the groans Why not an LLC?– I am continually asked by VCs of whom I make intros: • Are they Del Corp C – Just get the 250.00 and do it
CAP Table– This is who has what equity and at what price– Equity is the name of the game in a startup– Must be VERY simple • Allows you and others to put in various amounts of money raised and address dilution • Lists types of stock and outstanding shares
Convertible Note– Standard method for early stage– Angels understand it, good for friends/family– Converts to institutional round stock– Get enough to complete customer validation– Know the market: read blogs books toilet paper rolls - everything
Non Disclosure Agreement– Or NDA: • Have one and attempt to have everyone sign it • VCs wont so don’t • Board members/advisors/janitors • Although I have never seen anyone enforce one
Offer Letters– There are various types • Above all do not make it complicated! • Complicated equals legal crap • Legal crap equals time • Time equals money • You don’t have any of the above
One Pager– This document is your faceplate • Discusses company snapshot • Founders • Industry • Business • Accountants • Current Investors • Market and Product • Board of Directors • Logo and Address
www.relocality.comIdea Overviewrelocality® is a “eHarmony for real estate”, matching consumers with Founded in 2010, relocality is a privately held C-Corporation,neighborhoods, houses, service providers and REALTORS® with whom incorporated in the State of Delaware with ofﬁces in Charleston, SC.they are most compatible.Product IP Revenue Hyper-local targeted advertising - survey results feed directed leadThrough our innovative user experience and web-based survey, relocality’s advertising and sponsorships with local and national advertisers.recommendation engine maps key attributes of communities andneighborhoods with a user’s social graph and taste proﬁle through a series of Leads/subscriptions - enhanced leads that provide not only theproprietary algorithms. where but the why.relocality is focused on a “consumer centric” lifestyle approach to ﬁnding a Premium Services - additional opportunities exist to partner withplace to live - rather than a house ﬁrst approach, and is creating a “human local service providers (mortgage lenders, moving companies, tourcentered” property search that allows users to ﬁnd neighborhoods and and relocation companies) as incremental revenue streams.homes that other people with “my interests”, and “social mapping” arelooking at. Projected Revenue Streams ($000’s)Funding $3,000Raising $500,000 for early initial product development and product launch. $2,000Our projections show we will be cash-ﬂow positive in 12 months. $1,000 $0Team Q3 Q4 Q1 Q2 Q3 Q4relocality is managed by a diverse group of technology, real estate, software and Advertising Subscriptions Leadsmarketing experts who have worked at Blackbaud, Beneﬁtfocus, Symantec, Iomega,Keller Williams, and Interbrand Wood. MarketDiane Szoke Founder/Realtor® email@example.com Consumers - 12% of population (37 million) move every year. It’s a life-changing event that forces individuals and families toBoard of Directors create new personal and business relationships. New movers spend $170 billion every year.Ted Tanner Beneﬁtfocus, BeliefNetworks, Microsoft, Apple, Mongo Music, Real Estate Agents / Brokerage - 165 companies with aLisa Maki Beneﬁtfocus, BeliefNetworks, Microsoft combined annual revenue of $170 billion. While home sales have remained depressed, Realtor® interest in lead generation and exposure has risen. relocality plans to raise the industry average for web-based leads from 1 closed transaction for every 100 webBoard of Advisors leads to 2, effectively doubling revenues for Realtor subscribers. HR / Relocation Companies - $25 billion annual spend onRob Hahn Founder, 7DS Associates, OnBoard Informatics, Realogy corporate relocation in the US, with an annual average of 794,000Jason Rentfrow Ph.D Faculty of Social & Political Science, Cambridge University employee transfers.Andy Gowder General Counsel, Pratt-Thomas WalkerRobert Bradham CPA, Dixon Hughes PLLC # of Unique Website Visitors Last Month of Qtr (000’s)Bert Young CFO, Beneﬁtfocus, LanDesk, Whittman-Hart 1500 1,308 1125 874Exit Strategy 750 600 403 250While we are laser focused on building relocality to be the eHarmony of real 375 61estate, we are positioned and open to all successful exit options. 0 Q3 Q4 Q1 Q2 Q3 Q4relocality® is a trademark of relocality inc. Inquiries should be directed to: Diane Szoke 843-991-0729
The Pitch Deck– This is the focus– Know it love it sleep with it– Important items: • Team up front • Opportunity – Why your doing it • Market • What makes you novel • Competition • Amount of ask • 8-10 slides
Business Plan– While not that important in a seed/angel round– Will come in handy to help you figure out what the hell your making and how to make money.– Nowadays no one really reads them.
Last words on Docs– Please do not get fancy or make them overly complicated.– You don’t have time. • Most who have done this before are not going to screw you • They are in it to make money with a team as well as change the world • If you run into someone who grinds on these items – Drop them. They are not focused on the correct items.
Now what?– Test your idea • If its consumer then talk to “regular” people about it • If they don’t get it in two sentences or less refine the idea or explanation
Now what?– Test your idea • Prototype – liquid code • Backend or heavy laden systems take deeper research • Kill it early if its not working
Now what?Test your idea– Test early and often– Do not fall in love with tech– Fall in love with company– Do Customer validation through prototype
Now what?Test your idea– Make some mockups (iMocks is killer)– Also wireframes via a great Ux person– Get feedback fast and hard
Someone Loves Me!• OK so lets say you raised 50k:• Get incorporated• Set up a HQ in an Epicenter• Buy a domain if you haven’t• Get a lawyer• Get a team hopefully for equity• Think simple.• Go Big.
Someone Loves Me!• When speaking with other angels VCs: Two sentences or less Be prepared to give pitch• (e) subject: email from ted tanner (no canned emails)• If you are getting traction be choosy• Your lead investor is important
GO BIG OR GO HOME• You are what you build• Think BIG – bigger seperates the average from cutting edge• Watch pennies except for talent• Iterate Iterate Iterate• Love to hear NO• .
GO BIG OR GO HOME• FOCUS FOCUS FOCUS FOCUS• Listen to your customer• Market your company and products• Simplicity is key: everything you do must reduce friction• Sell something legal
GO BIG OR GO HOME• Fail Once Fail Many – WTF? – Yea guess what - Everyone fails – As a matter of fact if you haven’t failed and tried again you’re not trying hard enough – In The Valley its expected• .