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Beating The Series A Crunch (thru clean living & growth hacking :)
1. Beating The
Series A Crunch
+ Why Growth Hacking / Online Marketing Matters (a lot)
Dave McClure
http://500.co
(@DaveMcClure)
Intl Startup Festival 2013
Montreal, July 2013
http://slideshare.net/dmc500hats
2. This Talk
⢠Youâre a Geek (or traditional marketing flack)
⢠You SUCK at online marketing / growth hacking
⢠You spend WAY TOO MUCH TIME on product
⢠You canât scale customer acquisition (profitably)
⢠You wonât get funding / Series A,B / break-even
Therefore: YOU WILL DIE.
⢠Want to Fix This? Listen Up.
3. Dave McClure
Founding Partner & Chief Troublemaker, 500 Startups
00âs & 10âs:
⢠VC: Founders Fund, Facebook fbFund, 500 Startups
⢠Angel: Mashery, Mint.com, SlideShare, Twilio, WildFire, SendGrid
⢠Marketing: PayPal, Simply Hired, Mint.com, oDesk, OâReilly
80âs & 90âs:
⢠Entrepreneur: Aslan Computing (acqâd by Servinet/Panurgy)
⢠Developer: Windows / SQL DB consultant (Intel, MSFT)
⢠Engineer: Johns Hopkinsâ88, BS Eng / Applied Math
4. 500 Startups
Global Seed Fund & Startup Accelerator
⢠What is 500?
â ~$70M under management
â 26 people / 12 investing partners
â Locations: SV, NYC, MEX, BRZ, IND, CHN, SE Asia
â 1000+ Founders / 200+ Mentors
â 22 positive exits in <3 years
⢠500+ Portfolio Coâs / 30+ Countries
â Wildfire (acq GOOG, $350M)
â MakerBot (acq SSYS, $400M)
â Twilio
â SendGrid
â TaskRabbit
â Viki
â Smule
â AppStack
â 9GAG
â MediaLets
â PicCollage
5. 500 Startups: Global Seed Fund
Over 100+ startups outside US, in 35+ countries
⢠Q4/12 added: Germany, Korea, Peru; + Russia, Turkey, Ghana in Q2/13
⢠Priorities in 2012: Brazil, Mexico, India
⢠Priorities In 2013: China, SE Asia, MENA, Eastern Europe
6. Changes in Tech Startups
⢠LESS Capital required to build product, get to market
â Dramatically reduced $$$ on servers, software, bandwidth
â Crowdfunding, KickStarter, Angel List, Funders Club, etc
â Cheap access to online platforms for 100M+ consumers, smallbiz, etc
⢠MORE Customers via ONLINE platforms (100M+ users)
â Search (Google)
â Social (Facebook, Twitter)
â Mobile (Apple, Android)
â Local (Yelp, Groupon, Living Social)
â Media (YouTube, Pinterest, Instagram, Tumblr)
â Comm (Email, IM/Chat, Voice, SMS, etc)
⢠LOTS of little bets: Accelerators, Angels, Angel List, Small Exits
â Y Combinator, TechStars, 500 Startups
â Funding + Co-working + Mentoring -> Design, Data, Distribution
â âFast, Cheap Failâ, network effects, quantitative + iterative investments
7. Daft Punk Lean Startup:
Simpler, Faster, Cheaper, Smarter
1. Startup Costs = Lower.
2. # Users, Bandwidth = Bigger.
3. Transaction $$$ = Better.
ď Building Product => Cheaper, Faster, Better
ď Getting Customers => Easier, More Measurable
Iterative Product & Marketing Decisions
based on Measured User Behavior
9. Lean Startup, Lean VC
Customers, Metrics, Iteration.
Invest BEFORE Traction;
Double Down AFTER.
10. The Lean VC:
Lots of Little Bets, Incremental Investment
Method: Invest in lots of startups using incremental
investment, iterative development. Start with many
small experiments, filter out failures, and expand
investment in successes⌠(Rinse & Repeat).
⢠Incubator: $0-100K (âBuild & Validate Productâ)
⢠Seed: $100K-$1M (âTest & Grow Marketing Channelsââ)
⢠Venture: $1M-$10M (âMaximize Growth & Revenueâ)
12. 12
500 Strategy: âLots of Little Betsâ*
1) Make lots of little
bets pre-traction,
early-stage startups
2) after 6-12 months, identify
top 20% performers and
double-down higher $$$
3) conservative model assumes
-5-10% large exits @20X ($50-100M+)
-10-20% small exits @5X ($5-50M)
*See Peter Sims book: âLittle Betsâ
13. Investment Stage #1:
Product Validation + Customer Usage
⢠Structure
â 1-3 founders
â $25-$100K investment
â Incubator environment: multiple peers, mentors/advisors
⢠Test Functional Prototype / âMinimum Viable Productâ (MVP):
â Prototype->Alpha, ~3-6 months
â Develop Minimal Critical Feature Set => Get to âIt Works! Someone Uses It.â
â Improve Design & Usability, Setup Conversion Metrics
â Test Small-Scale Customer Adoption (10-1000 users)
⢠Demonstrate Concept, Reduce Product Risk, Test Functional Use
⢠Develop Metrics & Filter for Possible Future Investment
14. Investment Stage #2:
Market Validation + Revenue Testing
⢠Structure
â 2-10 person team
â $100K-$1M investment
â Syndicate of Angel Investors / Small VC Funds
⢠Improve Product, Expand Customers, Test Revenue:
â Alpha->Beta, ~6-12 months
â Scale Customer Adoption => âMany People Use It, & They Pay.â
â Test Marketing Campaigns, Customer Acquisition Channels + Cost
â Test Revenue Generation, Find Profitable Customer Segments
⢠Prove Solution/Benefit, Assess Market Size
⢠Test Channel Cost, Revenue Opportunity
⢠Determine Org Structure, Key Hires
15. Investment Stage #3:
Revenue Validation + Growth
⢠Structure
â 5-25 person team
â $1M-$10M investment
â Seed & Venture Investors
⢠Make Money (or Go Big), Get to Sustainability:
â Beta->Production, 12-24 months
â Revenue / Growth => âWe Can Make (a lot of) Money!â
â Mktg Plan => Predictable Channels / Campaigns + Budget
â Scalability & Infrastructure, Customer Service & Operations
â Connect with Distribution Partners, Expand Growth
⢠Prove/Expand Market, Operationalize Business
⢠Future Milestones: Profitable/Sustainable, Exit Options
18. Before & After 2 Dot-Com Crashes
Daft Punk Startup: Simpler, Faster, Cheaper, Smarter
Before 2000
â˘Sun Servers
â˘Oracle DB
â˘Exodus Hosting
â˘12-24mo dev cycle
â˘6-18mo sales cycle
â˘<100M people online
â˘$1-2M seed round
â˘$3-5M Series A
â˘Sand Hill Road crawl
â˘Big, Fat, Dinosaur Startup
After 2008
â˘AWS, Google, PayPal, FB, TW
â˘Cloud + Open Source SW
â˘Lean Startup / Startup Wknd
â˘3-90d dev cycle
â˘SaaS / online sales
â˘>3B people online
â˘<$100K incub + <$1M seed
â˘$1-3M Series A
â˘Angel List global visibility
â˘Lean, Little, Cockroach Startup
19. Crunch Good? Crunch Bad?
⢠Series A bar higher: $1M revenue, 1M active users,
10M downloads, 100% YoY growth
⢠Lots of Incubation / Seed startups will âfailâ
⢠BUT: Fail Budget = $50-$500K, not $5M+
⢠Many âfailedâ startups = ramen-profitable, small
acquisition, or MBA alternative (<$100K)
⢠Series A/B VCs have lots to choose from
⢠Overall, founders / market getting smarter
⢠More focus on customers, problems, revenue
⢠Many die, some survive (1-5x), a few thrive (20x+).
20.
21. Online Customer Acquisition
(aka âMarketing & Salesâ)
Search (Google)
Social (Facebook, Twitter)
Mobile (Apple, Android)
Video (YouTube)
Messaging (Email, SMS, Chat, Voice)
24. Minimum Viable Team:
Hacker, Hipster, Hustler
⢠Hacker: engineers & developers
⢠Hipster: design & user experience (UX)
⢠Hustler: marketing & business, âgrowth hackerâ
1.Build functional prototypes
2.Improve UX so people convert
3.Scale customer acquisition & distribution
25. Marketing Strategy
(aka Growth Hacking Strategy)
⢠PR
⢠Contests
⢠Biz Dev
⢠Direct Marketing
⢠Radio / TV / Print
⢠Telemarketing
⢠Email
⢠SEO / SEM
⢠Social (Paid, Organic)
⢠Blogs / Bloggers
⢠Mobile Apps
⢠Affiliate / CPA
⌠how do you get customers & distribution?
lots of old, new channels & decisions:
3 Things That Matter / To Measure :
1. Volume
2. Cost
3. Conversion
26. Unit Economics
for Customer Acquisition
⢠What does product cost to build/deliver?
⢠What do customers cost to acquire?
â by channel? by campaign?
⢠What are customers worth?
â 1st
visit / transaction? In a year? Lifetime?
⢠When do expenses get incurred?
⢠When is revenue generated?
⢠Is customer acquisition break-even or better?
â For which distribution channels / methods?
â For what kind of campaigns?
â Does the channel / campaign scale?
â Do the #âs change?
⢠When does a customer become profitable?
⢠unit economics @ scale -> marketing strategy / campaigns
27. Marketing Strategy
& Financial Modeling
⢠Volume, Cost, Conversion
⢠Est. volume of available leads / customers
⢠Est. cust acq costs by channel / campaign
⢠Est. customer value / revenue generated
⢠Build financial model for scalable, profitable growth
⢠Hack, Tweak to scale up
⢠Hack, Tweak to break-even
⢠If itâs not working: donât scale up / keep testing
⢠If itâs working: stop building / go raise $$$ ď
28. Silicon Valley 2.0:
Lots of Little Bets
aka âMoneyBall for Startupsâ
⢠VC Evolution: Physician, Scale Thyself (Aug 2012)
⢠MoneyBall for Startups, 500 Startups Investment Thesis (Jul 2010)
29. Angel* List: It Rocks.
⢠Startups & Investors
⢠Activity & Metrics
⢠Platform & APIs
⢠*ps â not just for Angels, or USA