The document provides an overview of startups and venture capital, including trade-offs of working for startups compared to large tech companies, guidance on finding reliable startups, and the importance of cultural fit. It discusses various funding stages, sources of investment, and what venture capitalists look for in potential investments. Additionally, it emphasizes the importance of relationships between entrepreneurs and investors in the fundraising process.

1. 1
Intro to Startups and VCs
Jan 2017

2. Objectives
2
What are the tradeoffs in working for a startup?
How do I find startups?
How do I know a startup is a good one?
What is venture capital?

3. A quick bit about HPVP and me
Happy to chat more any time
3
• Twitter: @guyhturner
• Co-founded HPVP with Ira Weiss
• Mgmt Consultant
• Angel
• Engineer
• Cornell University (BS), Chicago
Booth (MBA)
• 2.0 kids
• Twitter: @hydeparkvp
• Early-stage software startups at
$0-3M ARR raising $1-6M rounds
• Midwest focus
• $25M Fund I, $65M Fund II
• Have invested in multiple
university seeded startups (U of I,
U of C, U of M, U of MN)

4. What Facebook, Google and other
BigCos/BigTechs want you to believe
- Secure
- High pay
- Clear career milestones
- Best senior leadership
- Unbelievable benefits
- Risky
- Low pay
- Undefined career path
- No mentorship
Startups BigTech

5. How I see it
Startups BigTech
“Don’t ask what seat,
just get on the rocket ship”

6. Reality is in the middle and about fit
- Secure
- High pay
- Clear career milestones
- More formal training
- Moderate risk
- Moderate pay with upside
- Accelerated learning curve
- It is what you make it
Startups BigTech
?
What’s the best fit for you?

7. Startup paths: Build or sell!
Developer Sales (and marketing)
Computer science
CE, EE
…or whatever…
Marketing
Communications
Economics
…or whatever…
… also analytics, data scientis, customer success

8. Here or there? …the real economics
Source: Angellist, http://money.cnn.com/calculator/pf/cost-of-living/
95
70 70
115
85 90
$0K
$20K
$40K
$60K
$80K
$100K
$120K
$140K
Developer Sales Marketing
Early Career Salaries - Nominal
Chicago SF
143
105 105
115
85 90
$0K
$20K
$40K
$60K
$80K
$100K
$120K
$140K
$160K
Developer Sales Marketing
Early Career Salaries - SF Dollars
Chicago Adjusted SF
Quality of life a major consideration

9. Where do you find startups?
Startup career fairs
VC Portfolios
Midwest Everywhere
Ann Arbor Minneapolis
CincinnatiNebraska
Madison St. Louis
hydeparkvp.recruiterbox.com

10. What should you look for?
• Do you like the people?
• Do you trust leadership?
• Do you like the culture?
• Can you learn from your
direct supervisor/team?
• Do you love the product?
Fit with you The 5 Ms
• Industry experience
• Leadership/scaling/startup experience
• Been there done that
• Size (>$500M?)
• Growth rate (>10%?)
• Level of competitiveness
• Business model fit to market/customer
• Are they selling? More now than before?
• Are they building barriers? Partnerships?
• DO THEY GET STUFF DONE?
• Strength of business model
• Uniqueness and resulting barriers
• IP
• 18 to 24 months of runway
Market
Mgmt
Momentum
Magic
Money

11. Screening shortcut: the VC screen
VCs invest in <1% of deals they see… but they also make lots of mistake!
Sourcing Screening
Due
Diligence
The Deal
Portco
Mgmt
3000
1000
30
10
5
On the radar
300
Initial meeting
Second meeting
Deep dive
Terms/TS
Deal closed
Let the VCs do the work for you.
Look for funded startups!

12. Now it’s time to negotiate:
Meet TransparentCareer.com
• Find what others exactly like you are getting paid
• Find where your peers are going
• Arm yourself with information

13. Startups or BigTech not interesting?
Then start your own and raise $$$!
…but how?

14. Why raise VC? Growth requires $...
14
Startup
$0-10M
Growth
$10-50M
Developed
$50M+
Amount
Type
Purpose
Friends &
Family Angels
Small
VCs
VCs Venture
lenders
Private
equity
PublicBanks
Test
idea
Test
marketing
approach
SCALE!!
Liquidity for founders,
employees and investors
$250K <$1M $2-3M $5-10M Sky is the limit
What does “scale” mean?
• Build products before they’re sold
• Hire people before they “produce”
• Pursue customers before they pay
Rev

15. … from different types of investors
15
Who they are
Hold
period
Why they invest
Friends
& family
Angels
VCs
Venture
Lenders
Private
equity
Obvious
Individuals and groups
$25M - $1B funds with
institutional money
$100M - $1B funds with
institutional money
$250M - $10B funds with
institutional money
They love you!!
For fun and $$
Want 30%+ returns;
Invest on growth
Want 18%+ returns;
Invest in cash flows
Want 20%+ returns;
Invest in cash flows
with equity and debt
???
5-10 yrs
5-10 yrs
5-7 yrs
2-5 yrs

16. Tiered equity structure grows with $
16
Founders
Founders
Angels
Common
Common
Options
F&F
Founders
Options
F&F
Common
Angels
Founders
Options
F&F
Preferred
Preferred
VCs
Common
Debt?
TechS
TechS TechS

17. Mechanics: Pre/post money valuation
17
Pre-money
valuation
Round size
+ =
Post-money
valuation
Ex: $5M $2M $7M

18. Entrepreneurs weigh money/terms and
“value add” when choosing VC
- Strategic and opp advice
- Customer, financing,
acquirer connections
- Brand signal for talent,
other funders, etc
- Valuation
- Size of round
- Other financial terms
- Control terms
Money Value add
In the end, relationship matters the most.
It’s a marriage.

19. So what do VCs look for…
Scalable
- Software
- High fixed cost, low
marginal cost
- Tech dev and customer
acquisition greatest cost
- Invest capital now for
profit at scale later
- >75% gross margin
Not scalable
- Service
- Low to high fixed
cost, high marginal
cost
- Scales with bodies
- <<50% gross margin
- Profitable at small
scale
In between
- Tech enabled service
- Medium fixed and
medium marginal cost
- Scales with bodies
and capital
- 40-60% gross margin

20. … fit and 5Ms (same things you should
look for)
• Stage (seed or A)
• Round size ( $0.75M – $2.5M)
• Industry (any that is “scalable”)
• Geography (Midwest)
Fit with fund strategy The 5 Ms
• Industry experience
• Leadership/scaling/startup experience
• Degrees, etc (eg, signals)
• Size (>$500M?)
• Growth rate (>10%?)
• Level of competitiveness
• Business model fit to market/customer
• Are they selling? More now than before?
• Are they building barriers? Partnerships?
• DO THEY GET STUFF DONE?
• Strength of business model
• Uniqueness and resulting barriers
• IP
• Price and other terms
Market
Mgmt
Momentum
Magic
Money

21. How do I get to VCs?
21
Descendingorderofvalue
1 Current / past portfolio company CEO
Example introduction sources
2 Trusted colleague, partner, friend of investor
3 Another investor in the current round
4 Advisor / mentor from founder’s network
5 An investor who’s not investing
Cold outreach6

22. 22
Thank you!
Please reach out with any questions
guy@hydeparkvp.com
Twitter: @guyhturner