1) Incubators provide efficient startup funding through small initial investments ($25k-100k) and focus on fast iteration and feedback to filter out failures and expand successful startups. 2) Effective startup metrics focus on key conversion points to quickly iterate and improve the product. 3) Immigration is important to technology innovation and entrepreneurship in Silicon Valley as it provides skills, perspectives, and population growth that fuel new ideas and business startups.

1. Incubator 2.0: A Silicon Valley Story Engineering Better High-Tech Startups with Incubators, Investment, & Iterative Development Dave McClure (@DaveMcClure) Founders Fund & GeeksOnaPlane.com Sept-Oct 2009

2. Startup Funding Ecosystem Union Square Ventures First Round Capital SoftTech (Jeff Clavier) SV Angel (Ron Conway) Benchmark Sequoia Y-Combinator TechStars FF Angel FF II fbFund REV (FF, Accel, Facebook) FF I Angels & Incubators ($0-10M) Seed Funds ($10-50M) Small VC Funds ($50-250M) Traditional VC Funds (>$250M)

3. [Pardon The Hype]

4. Dave McClure 2001-2009: Startup Investor: 500 Hats LLC, Founders Fund Tech Marketing : PayPal, Simply Hired, Mint Advisor, Angel Investor : 40+ Startups Conf. Organizer : Web 2.0, O’Reilly, Startonomics Stanford Visiting Lecturer : Facebook, Startup Metrics 80’s & 90’s: Entrepreneur : Founder/CEO Aslan Computing (acq.) Developer : Windows Apps / SQL DB Admin User Groups : E-Commerce, Internet, Client-Server Engineer : Johns Hopkins ‘88, BS Eng / Applied Math GEEK, CODER, ENTREPRENEUR Blogger, Startup Advisor Internet Marketing, Angel/VC Investor

5. Angel Investments (Personal, 2004-2008, 13 deals, avg $25K)

6. Angel Investments (via FF Angel, Q408-Q309, 30+ deals) FF Angel – 12 deals @$50-250K fbFund REV – 22 deals @ ~$15-75K

7. Founders Fund (2005-2009)

8. Startup Incubators (lots of little deals… some of which work :)

9. Incubator: Hatching Startups Idealab (Bill Gross, 1996-2001) Goto.com -> Yahoo Search Marketing CitySearch, PayMyBills, Commission Junction, NetZero Y-Combinator (Paul Graham, 2005-pres.) 9+ “vintages”, 100+ companies Reddit, Scribd, Xobni, Omnisio, DropBox TechStars (CO), SeedCamp (UK), LaunchBox (DC) fbFund REV (Silicon Valley, 2008-2009) Facebook, Founders Fund, Accel

10. Incubator 2.0 Incubators growing in popularity, acceptance Supportive ecosystem for startups (angels, VCs) Efficient use of investment capital ($25-100K) High fail rate (60-80%) => large initial sample size

11. Incubator 2.0 Success based on common platforms, physical proximity, open & collaborative environment Success based on fast fail, iteration & feedback Incremental investment; high-risk, but high-reward

12. fbFund REV fbFund REV : Facebook “Social” Incubator: invest in startups, apps, websites based on Facebook platform, Facebook Connect. 25 startups (2 non-profits) $850K total investment (~$35K each) 12-week mentorship program in Palo Alto, CA ~25 Advisors / Speakers (Entrepreneurs, Geeks, Investors)

13. fbFund REV fbFund REV : Facebook “Social” Incubator: invest in startups, apps, websites based on Facebook platform, Facebook Connect. Education on Tech, Design, Marketing, Business topics Demo Day with >200 VC, Angel Investors Target: ~7-10 seed round investments ($250K-$1M) Success: ~5 startups already funded, ~5 @ break-even

14. Startup Funding 1, 2, 3: Incubator, Angel, VC.

15. Startup Funding Ecosystem Union Square Ventures First Round Capital Benchmark Sequoia FF II FF I Angels & Incubators ($0-10M) Seed Funds ($10-50M) Small VC Funds ($50-250M) Traditional VC Funds (>$250M) Y-Combinator TechStars FF Angel fbFund REV (FF, Accel, Facebook ) SoftTech (Clavier) Maples Investments Felicis (Senkut) SV Angel (Conway)

16. I^3 : Incremental Investment & Iteration Method : Invest in startups using incremental investment, iterative development. Start with lots of small experiments, filter out failure, and expand investment upon success. Incubator : $0-100K (“Micro-Seed”) Angel : $100-$1M (“Seed”) VC : $1M-$5M (“Series A, B”)

17. Investment #1: Micro-Seed (“Incubator”) Structure 1-3 founders $25-100K investment Incubator environment: multiple peers, mentors/advisors Build Functional Prototype / “ Minimum Viable Product ” ( MVP ): Concept->Alpha , ~3-6 months Develop Minimal Critical Feature Set => Get to “ It Works ” Instrument Basic Dashboard, Conversion Metrics Test Cust. Adoption (10-1000 users) / Cust. Satisfaction (Scale: 1-10) Connect with Advisors & Mentors, Angels/VCs Demonstrate Concept , Reduce Product Risk, Test Functional Use Develop Metrics & Filter for Follow-on Investment

18. Investment #2: Seed (“Angel”) Structure 2-5 person team $100-$1M investment Syndicate of Angel Investors / Small VC Funds Improve Product, Expand Market, Test Revenue: Alpha->Beta , ~6-12 months Customer Sat ≥ 6 => Get to “ Doesn’t Suck ” Setup A/B Testing Framework, Optimize Conversion Test Marketing Campaigns, Customer Acquisition Channels Connect with Advisors, Investors, Key Hires Prove Solution/Benefit, Assess Market Size Test Channel Cost, Revenue Opportunity Determine Org Structure, Key Hires

19. Investment #3: Series A (“Venture”) Structure 5-10 person team $1M-$5M investment VC Investors Scale Business, Get to Sustainability: Beta->Production , 12-18 months Rigorous A/B Testing, Optimize Conversion Customer Sat ≥ 8 => “ It Rocks, I’ll Tell My Friends ” MktgPlan => Predictable Channels / Campaigns + Budget Scalability & Infrastructure, Customer Service & Operations Connect with Marketing / Distribution Partners Prove/Expand Market, Operationalize Business Future Milestones: Profitable/Sustainable, Exit Options

20. Startup Metrics Create. Measure. Iterate.

21. Startup Metrics: Lean & Mean Progress ≠ Features ( Less = More ) Focus on User Experience (& Distribution ) Measure Conversion ; Compare 2+ Options Fast, Frequent Iteration (+ Feedback Loop ) Keep it Simple & Actionable

22. Startup Metrics for Pirates: AARRR ! A cquisition : What channels do customers come from? A ctivation : Do they have “happy” 1st experience? R etention : Will they come back? R eferral : Do they tell other people? R evenue : How to make money?

23. Minimize TOTAL time through the loop LEARN BUILD MEASURE IDEAS CODE DATA Source: Eric Ries, The Lean Startup

24. Startup Metrics for Pirates A cquisition: users come to site from various channels A ctivation: users enjoy 1 st visit: " happy ” experience R etention: users come back , visit site multiple times R eferral: users like product enough to refer others R evenue: users conduct some monetization behavior (note: If you’re in a hurry, Google “Startup Metrics” & watch 5m video) AARRR !

25. AARRR!: 5-Step Startup Metrics Model Website.com R evenue $$$ Biz Dev Ads, Lead Gen, Subscriptions, ECommerce A CQUISITION SEO SEM Apps & Widgets Affiliates Email PR Biz Dev Campaigns, Contests Direct, Tel, TV Social Networks Blogs Domains R etention Emails & Alerts System Events & Time-based Features Blogs, RSS, News Feeds

26. Startup Challenges Startups have problems in 3 key areas: Management : Setting Priorities, Defining Key Metrics, Creating Dashboard, Reporting Progress Product : Building the “Right” Features, Getting Product Out Quickly, Testing for User Conversion / Adoption Marketing : Accessing “Web 2.0” Channels (Search, Social, Viral, New Media), Cost-Efficient Distribution

27. Role: Founder/CEO Q: Which Metrics? Why? A: Focus on Critical Few Actionable Metrics (if you don’t use the metric to make a decision, it’s not actionable) Hypothesize Customer Lifecycle Target ~3-5 Conversion Events (tip: Less = More) Test, Measure, Iterate to Improve

28. Role: Product / Engineering Q: What Features to Build? Why? When are you “Done”? A: Easy-to-Find , Fun / Useful , Unique Features that Increase Conversion (stop iterating when increase decelerates) Wireframes = Conversion Steps Measure, A/B Test, Iterate FAST (daily/weekly) Optimize for Conversion Improvement 80% on existing feature optimization 20% on new feature development

29. Role: Marketing / Sales Q: What channels? Which users? Why? A: High Volume (#), Low Cost ($), High Conv (%) Design & Test Multiple Marketing Channels + Campaigns Select & Focus on Best-Performing Channels & Themes Optimize for conversion to target CTAs, not just site/landing page Match/Drive channel cost to/below revenue potential Low-Hanging Fruit: Blogs SEO/SEM Landing Pages Automated Emails

30. Links & Resources Additional References: Influence: The Psychology of Persuasion Robert Cialdini (book) Putting the Fun in Functional Amy Jo Kim (etech 2006 preso) Futuristic Play Andrew Chen (blog) Don’t Make Me Think Steve Krug (book) Designing for the Social Web Joshua Porter (book, website) Startup Lessons Learned Eric Ries (blog) Customer Development Methodology Steve Blank (presentation , blog ) Startup-Marketing.com Sean Ellis (blog) KISSmetrics.com Hiten Shah / Neil Patel (website) How To Pitch a VC Dave McClure (slides, NSFW)

31. Silicon Valley Innovation = Entrepreneurs + Technology + Immigrants Immigration as Critical to American Economic Leadership as Technology Innovation

32. Q: Where are the Startups? Source: TechCrunch.com

33. A: Where Legal Immigrants Reside. Source: TechCrunch.com

34. A: Where Legal Immigrants Reside. Source: TechCrunch.com

35. Summary 1) Incubators are capital efficient method for stimulating tech innovation, job creation 2) Metrics & Iteration, Feedback loop key to startup process and success 3) Immigration = Critical to Entrepreneurship as Technology Innovation & Capital