The document discusses the key components that create value in a startup company. It identifies the main components as the team, technology, customers, profitability/growth, branding, and scaling. Each component is then discussed in more detail, highlighting the importance of the team's experience and chemistry, developing breakthrough technology, acquiring high lifetime value customers, achieving profitable growth, building a strong brand, and properly scaling the business. Examples of acquisitions are provided to show how companies are valued based on these different components. The overall message is that company value comes from optimizing all of these elements together, not just the technology or team alone.
How to Create Value in Your Startup by Focusing on Team, Technology, Customers, Profitability, Branding and Scaling
1. Creating Value in your Startup
Dec 5, 2012
R. Paul Singh
Entrepreneur
@rpaulsingh
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2. AGENDA
• Components of Value
• Team
• Technology
• Customers
• Profitability/Growth
• Branding
• Scaling
• Examples
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3. Value lies in the eye of the acquirer
VALUE OF A COMPANY IS IN THE EYE OF THE ACQUIRER
MORE LIKE IN THE HANDS OF YOUR TEAM
4. Components of Company Value
SCALING
SCALING
BRANDING
BRANDING
PROFITABILITY/GROWTH
PROFITABILITY/GROWTH
CUSTOMERS
CUSTOMERS
TECHNOLOGY
TECHNOLOGY
TEAM
TEAM
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5. Components of Company Value TEAM
TEAM
• Team Value
– Composition – Business Vs Technical
– Domain Knowledge & Experience
– Record of team members
– Chemistry of the team
– Location of the team
– Size matters but Quality matters more in a startup
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6. Components of Company Value TECHNOLOGY
TECHNOLOGY
• Technology Value
– Breakthrough Technology Vs
Incremental Technology
– Design is new Technology
– Causing disruption to an existing
Market
– Relevance to trends
– Are you filling in product gap for a large vendor
– Are you tied to an Ecosystem
– Protecting IP
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7. Do companies get acquired just for TEAM
TEAM
• Many large companies buying just for TECHNOLOGY
TECHNOLOGY
getting good teams
• Who has done most team/tech
acquisitions amongst large companies?
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8. Some Examples & Analysis of Acquisitions for TEAM
TEAM
TECHNOLOGY
TECHNOLOGY
• Twitter Acquisitions
– Vine – Video Sharing – 3 Employees
– Posterous – Tumblr like
– Rest Engine – Personalized Email Marketing
– Clutch.io – Mobile IP Testing
• Google Acquisitions
– Bufferbox – Shipping lockbox
– Incentive Targeting – Online marketing coupon
– Nick Software – Snapseed mobile photo editing
– Sparrow – Email for iOS
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9. What you get in Acquisitions for TEAM
TEAM
TECHNOLOGY
TECHNOLOGY
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10. Components of Company Value CUSTOMERS
CUSTOMERS
• Customer Value is the true value
– Consumer Vs Enterprise
– Life time value of customer
– Cost of Acquisition
– How easily can you be replaced?
– Type of customer matters too!
– Size matters but Quality matters more in a startup
– Is customer service just for Enterprise products?
– Why are pure services company valued lower?
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11. Components of Company Value PROFITABILITY
PROFITABILITY
• Profitability gives you Freedom but
– Profitability Vs Cash flow
– Profitability Vs Growth
– Revenue matters more
– Gross Vs Net Revenue
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12. Components of Company Value PROFITABILITY
PROFITABILITY
Which company is more valuable?
Yr 1 Yr 2 Yr 3 Yr 4 Yr 5
Revenue 5 9 15 27 47
Company A
COGS 2 3 5 9 16
GM 3 6 10 18 31
Op. Costs 4 8 12 14 16
Profits (1) (2) (2) 4 15
Revenue 5 6 8 10 12
Company B
COGS 2 2 3 3 4
GM 3 4 5 7 8
Op Costs 3 3 4 5 5
Profits 0 1 1 2 3
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13. Components of Company Value BRANDING
BRANDING
Peter Thiel: Brand is as a classic code word for monopoly.
But getting more specific than that is hard. Whatever a
brand is, it means that people do not see products as
interchangeable and are thus willing to pay more.
A good brand provides a clear and memorable sense of
what your business stands for!
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14. Brand Building 101 – source KissMetrics BRANDING
BRANDING
• Some simple steps in Startup
Marketing
– Market Segmentation
– Keyword Definition
– Defining and Measuring Success
– Marketing Budget – Inbound and
Outbound
– Inbound – PR, Influencers, Social
Networks, Blogging
– Outbound – Ads, Conferences,
Analysts
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15. Components of Company Value BRANDING
BRANDING
• Building Brand is as important
as finding Customers
– Brand is more valuable when others
talk about it
– Brand Building is very similar whether you are
dealing with B2B or B2C Markets
– Brand building costs are always underestimated
– Always seek a healthy balance of Push Vs Pull
Marketing
– Brand building is responsibility of everyone in your
company
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18. Some Recent Examples
Marketing Pilot – Mktg automation
Phone Factor – Multi-factor Auth
StorSimple – Ent. Cloud Storage
Yammer – Social Enterprise
SCALING
SCALING
BRANDING
BRANDING
PROFITABILITY/GROWTH
PROFITABILITY/GROWTH
CUSTOMERS
CUSTOMERS
TECHNOLOGY
TECHNOLOGY
TEAM
TEAM
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19. Summary
Focus on building
long term value
and the rest will
fall in place
Value is not just
technology or
team but a
combination of
these, branding,
profitability and
growth
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