funding and growth in silicon valley
DESCRIPTION
Sunil Maulik's presentation on funding and growth in Silicon ValleyTRANSCRIPT
MINISTRY OF FOREIGN AFFAIRS OF DENMARK EKSPORTRÅDET – THE TRADE COUNCIL
”From Idea to IPO” Funding & Growth in Silicon Valley
MINISTRY OF FOREIGN AFFAIRS OF DENMARK EKSPORTRÅDET – THE TRADE COUNCIL
Sunil Maulik, Ph.D. [email protected]
MINISTRY OF FOREIGN AFFAIRS OF DENMARK EKSPORTRÅDET – THE TRADE
COUNCIL
Start Your Motor!
Why start up a company?
• What is the current market Dynamic?
• What are your Long-‐Term goals?
• Investors like Big Ideas – what is yours?
The Silicon Valley mantra “Go big or go
home!”
MINISTRY OF FOREIGN AFFAIRS OF DENMARK EKSPORTRÅDET – THE TRADE
COUNCIL
Taking the leap
TransiRoning from career to startup • Build a prototype and get customer feedback
• Establish a team willing to work for stock
• Get as much done without paying salaries: – First product – First customers – Business plan; markeRng plan
MINISTRY OF FOREIGN AFFAIRS OF DENMARK EKSPORTRÅDET – THE TRADE
COUNCIL
Get the funding you need
Sources of Funding
• Boot-‐Strapping (Customer Funded)
• Angel Investors • Corporate Capital • Venture Capital • Other – Going public (IPO) – Secondary markets
Boot-‐Strapping (Customer Funded)
• Get customers to pre-‐pay for the product
• Create a process for acquiring early customers
• Offer discounts or revenue-‐share • Give the customer a significant up-‐side See KickStarter (www.kickstarter.com)
Angel Investors
• Write small checks ($25K-‐$250K)
• Finds or advises company: – Business development – Engineers
• Can introduce company to VCs
Some Famous Silicon Valley Angels
• Y-‐Combinator • Founders Fund • Angel List • 500StartUps
Danish Example – AppHarbor
• Founded Sept 2010 by Rune Sørensen, Troels Thomsen and Michael Friis.
• Y-‐Combinator Funded • Easy to use development pladorm for .NET developers
• Example of ‘Pladorm as a Service’ (PaaS)
MINISTRY OF FOREIGN AFFAIRS OF DENMARK EKSPORTRÅDET – THE TRADE
COUNCIL
CorporaRons as investors/partners
Corporate Funding
• Strategic investors – not looking to get lots of money back (Return on Capital) • Want early view into technology • Want early view into compeRRon • Expect discount on business partnership • May want exclusivity
Danish Example -‐ MemoLane • Founder: Eric Lagier • A pladorm for collecRng and connecRng thoughts, pictures, messages
• Integrates with your social networks Total: $2.5M Seed Funding: Niklas Zennstrom/Janus Friis (Skype) Series A, 11/09 Digital Garage $500k Series B, 9/10 August Capital, Atomico $2M
MINISTRY OF FOREIGN AFFAIRS OF DENMARK EKSPORTRÅDET – THE TRADE
COUNCIL
Reach for the sky! – Venture Capital
Venture Capitalists • Lots of money • Lots of experRse and help • Expensive money! • Look for scalable companies ($500MM+ valuaRons) • Looking for disrupRve technology in huge markets
Venture Capital • VCs can bring credibility with customers
• VCs can get major partnership deals
• VCs can recruit professional management
• VCs also sit on boards of large public companies, private equity funds, etc.
Disadvantages of Venture Capital • Requires huge amounts of Rme/effort to get
• Puts negaRve pressure on founders
• Requires accountability (must hit milestones)
• Doesn’t allow for early flexibility • VCs may take your company in a direcRon that is not of interest to you
Financing Roadmap -‐Friends & Family
-‐Individual Angels -‐Early Customers -‐Early-‐stage VCs (Series ‘A’) -‐Later-‐stage VCs (Series ‘B’ and ‘C’) -‐Private Equity (If needed-‐Series ‘D’) -‐IPO or Acquisi4on
MINISTRY OF FOREIGN AFFAIRS OF DENMARK EKSPORTRÅDET – THE TRADE
COUNCIL
Raising VC Money – The Pot at the end of the Rainbow
What do VCs look for?
MINISTRY OF FOREIGN AFFAIRS OF DENMARK EKSPORTRÅDET – THE TRADE
COUNCIL
• Big, bold Idea • AuthenRcity, Integrity, MoRvaRon (A.I.M.) • A+ DNA (Ability to hire a winning team) • Rapid IteraRons & Pivot (R.I.P.)
How to raise VC money • Need a track-‐record (if not you, then your team)
• IdenRfy unfair advantages that benefit your company
• Determine if your idea has economic power
Demonstrate unambiguously how you
create value for the customer
How to raise VC money (cont.)
• Show a huge market opportunity
• Demonstrate venture-‐scale returns
• IdenRfy clear milestones to first year revenue
• Provide signed customer/partner relaRonships
What numbers do VCs look at?
• VCs want at least 10x Return on Investment (RoI)
• IRR (Internal Rate of Return) is also important
• VCs invest money for their LPs (Limited Partners) with an expected IRR of 30%
• VCs want to make money for their funds so they can raise new funds
Example -‐ Zendesk • Started in Denmark • First Funding from Boston • Now Headquartered in San Francisco • HelpDesk and Support Infrastructure for sonware companies Total Funding: $25.5M Seed, 6/08 Christoph Janz $500k Series A, 5/09 Charles River Ventures $1M Series B, 8/09 Benchmark Capital, Charles River Ventures $6M Series C, 12/10 Matrix Partners, Benchmark Capital, Charles River Ventures $19M
MINISTRY OF FOREIGN AFFAIRS OF DENMARK EKSPORTRÅDET – THE TRADE
COUNCIL
You’re Off! – Now What?
OK – you’re funded!
• Rapidly expand partnerships: – Customers – Distributors – Channels – Suppliers
• Keep shipping products: – Regular release/update schedule – New funcRonality (get customer feedback!)
How to go from one to one thousand (any units!)
• IdenRfy a big company that must sell your product in order to increase their revenue
• IdenRfy complementary company(s) that you can merge/acquire
• IdenRfy internaRonal partners that have access to large markets
• Change (pivot) your business-‐model to dramaRcally increase revenue
The Start-‐Up Curve
Summary
• To be big – think big! • Investors want to invest in big ideas • Prove that you have a disrupRve technology
• Describe how you will efficiently capture a sliver of a huge market
• Show that you can scale to capture the rest of the market