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Silicon Valley: VCs, startups and venture spirit


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The beginner's guide to Silicon Valley, startup world and venture capital - presentation to Tallinn Technical University students on Dec 1, 2011

Published in: Economy & Finance, Business

Silicon Valley: VCs, startups and venture spirit

  1. 1. Silicon ValleyStartups, VCs and venture spirit Allan Martinson MTVP &
  2. 2. My startup (and not so startup) life Baltic
  3. 3. Beginners guide to Known locations of Silicon Valley S.F. Restaurants, gigs, gay s, liberals and the #estonianmafia hippiest startups SFO The gates S.J. Please wake me up Palo Alto when I’m finished „The Capital“ Sand Hill Rd Money lives here No evil here. Seriously Stanford Uni. „The brains“ Apples hereAfter $100m exit you will live here The Zuck Country
  4. 4. Valley of DeathForget Silicon Valley. Lets start fromDeath Valley
  5. 5. A startup is a human institutiondesigned to deliver a new product orservice under conditions of extreme uncertainty Eric Ries Founder, the Lean Startup Methodology
  6. 6. The Art of the Start Six lessons for your stupid little startup
  7. 7. How does a startup start?
  8. 8. Lesson 1: It’s all about people
  9. 9. It does not start from a business ideaIt starts from Skeptic 2 founder rule people Leader Incubation takes years Multi-skilled Team & talents Values
  10. 10. Lesson 2: The birth of an idea
  11. 11. This does not happen
  12. 12. Three origins of great startups• Copycats: Copy existing business model to new markets• Evolutionary: Seek better solution to existing problems• Revolutionary: Seek unknown solution to unknown problems The best ideas come on cross-roads of trends and disciplines
  13. 13. The What • The 30-seconds pitch: tell your granny – Who is your customer – What does your company do for this customer – Why are you better than competition • Do you pass the “Google test”?
  14. 14. Lesson 3: The art of pivot
  15. 15. Pivot, explained„I am not leaving you… I am pivoting to another man“
  16. 16. The life of any startup canbe divided into two parts –before product/market fitand after product/market fit Marc Andreessen Founder, Netscape Partner, Andreessen Horowitz
  17. 17. Why pivot? Not a single great company follows its original business idea Failure is not a problem Slow failure is a problem
  18. 18. The importance of milestones• MVP (Minimum Viable Product): 48 hrs – 3 months• Initial customer validation: 1 week – 6 months• One million something (users, $$$, etc): 1-2 years• You shall pivot if: – Your solution seeks a problem, not vice versa – Nobody wants to use your product – even you – You have ceased to believe into your company for >1 month
  19. 19. Lesson 4: The Need For Speed
  20. 20. Why speed? • Startups, by very definition, are probabilistic • Success seems intentional only in retrospective – impossible to compute
  21. 21. In unpredictable environments speed and focusare the best boosters of success rate And hunger is the best factor contributing to it
  22. 22. The ultimate example of being focused “I was too busy, I didn’t do things like that… I just didn’t go and meet new people who were involved in investments.” Bill Gates Founder, Microsoft on refusing to meet Warren Buffet
  23. 23. Lesson 5: Importance of right signals
  24. 24. Silicon Valley is amental state
  25. 25. Being Estonian is a full-time job
  26. 26. Lesson 6: Where to find smart investors
  27. 27. Raising venture capital is theart of younger men seducingolder men - Anonymous
  28. 28. Typical lifecycle of a high-tech company+0- 18-24 mo 9-18 mo 2-3 Y 3-7 Y 2 10 50 200 500 employees FFF A-round B-round IPO or $10-500K $1-10m $5-50m exit
  29. 29. Typical life cycle in figuresYear 1 2 3 4 5 6Phase Startup Early growth Growth ExitRevenues ($m) 0 1 4 10 20 30Growth % 300% 150% 100% 50%Investment phase Angel A-round B-roundPre-money / exit valuation ($m) 0,5 3 40 150Investment ($m) 0,4 2,5 25Post-money valuation ($m) 0,9 5,5 65 150Post-money ownership of founders 56% 30% 19% 19%Value of founders’ stake ($m) 0,5 1,7 12,1 28,0IRR to angel investors 124% Money-back, angel 56 timesIRR to A-round investors 102% Money-back, A-round 17 timesIRR to B-round investors 52% Money-back, B-round 2,3 times
  30. 30. What shall you know about VCs• Venture capital (LPs) and venture capitalists (GPs) are not the same• VCs are in the business of saying NO and then making money• You can divorce your wife but you cannot divorce a VC• You shall like, but not love each other• If in doubt, pick the smartest
  31. 31. Thank you!