silicon valley: vcs, startups and venture spirit
DESCRIPTION
The beginner's guide to Silicon Valley, startup world and venture capital - presentation to Tallinn Technical University students on Dec 1, 2011TRANSCRIPT
Silicon ValleyStartups, VCs and venture spirit
Allan MartinsonMTVP & Kurat.com
My startup (and not so startup) life
Baltic
Beginners guide to Silicon Valley
Palo Alto„The Capital“
Stanford Uni.„The brains“
Sand Hill RdMoney lives here
SFOThe gates
S.F.Restaurants, gigs,
gays, liberals and the hippiest startups
No evil here. Seriously
The Zuck Country
S.J.Please wake me up when I’m finished
After $100m exit you will live here
Apples here
#estonianmafia
Known locations of
Valley of Death
Forget Silicon Valley.Lets start from
Death Valley
A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty
Eric Ries
Founder, the Lean Startup MethodologyTheleanstartup.com
The Art of the StartSix lessons for your stupid little startup
How does a startup start?
Lesson 1: It’s all about people
It does not start from a business idea
Incubation takes years
2 founder ruleLeader
Skeptic
Multi-skilled talentsTeam &
Values
It starts from people
Lesson 2: The birth of an idea
This does not happen
Three origins of great startups
• Copycats: Copy existing business model to new markets
• Evolutionary: Seek better solution to existing problems
• Revolutionary: Seek unknown solution to unknown problemsThe best ideas come on cross-roads
of trends and disciplines
• The 30-seconds pitch: tell your granny– Who is your customer– What does your company
do for this customer– Why are you better than
competition• Do you pass the “Google
test”?
The What
Lesson 3: The art of pivot
Pivot, explained
„I am not leaving you… I am pivoting to another man“
The life of any startup can be divided into two parts – before product/market fit and after product/market fit
Marc Andreessen
Founder, NetscapePartner, Andreessen Horowitz
Why pivot?
Not a single great company follows its original business
idea
Failure is not a problem
Slow failure is a problem
The importance of milestones
• MVP (Minimum Viable Product): 48 hrs – 3 months• Initial customer validation: 1 week – 6 months• One million something (users, $$$, etc): 1-2 years
• You shall pivot if:– Your solution seeks a problem, not vice versa– Nobody wants to use your product – even you– You have ceased to believe into your company for >1
month
Lesson 4: The Need For Speed
Why speed?
• Startups, by very definition, are probabilistic
• Success seems intentional only in retrospective – impossible to compute
In unpredictable environmentsspeed and focus
are the best boosters of success rate
And hunger is the best factor contributing to it
The ultimate example of being focused
“I was too busy, I didn’t do things like that… I just didn’t go and meet new people who were involved in investments.”
Bill GatesFounder, Microsoft on refusing to meet Warren Buffet
Lesson 5: Importance of right signals
Silicon Valley is a
mental state
Being Estonian is a full-time job
Lesson 6: Where to find smart investors
Raising venture capital is the art of younger men seducing older men
- Anonymous
Idea
Prot
otyp
e
“Bet
a” Commercial la
unch
Market s
hare
Breakeven!9-
18 m
o
18-2
4 m
o
2-3
Y
3-7
Y
Users &
traction
Revenues
Profits
0
+
-
Paid CEO
Sales structures
Bureaucracy
2 10 50 200 500 employees
FFF$10-500K
A-round$1-10m
B-round$5-50m
IPO orexit
Typical lifecycle of a high-tech company
Typical life cycle in figures
Year 1 2 3 4 5 6
Phase Startup Early growth Growth Exit
Revenues ($m) 0 1 4 10 20 30
Growth % 300% 150% 100% 50%
Investment phase Angel A-round B-round
Pre-money / exit valuation ($m) 0,5 3 40 150Investment ($m) 0,4 2,5 25
Post-money valuation ($m) 0,9 5,5 65 150
Post-money ownership of founders 56% 30% 19% 19%
Value of founders’ stake ($m) 0,5 1,7 12,1 28,0
IRR to angel investors 124% Money-back, angel 56 times
IRR to A-round investors 102% Money-back, A-round 17 times
IRR to B-round investors 52% Money-back, B-round 2,3 times
What shall you know about VCs
• Venture capital (LPs) and venture capitalists (GPs) are not the same
• VCs are in the business of saying NO and then making money
• You can divorce your wife but you cannot divorce a VC
• You shall like, but not love each other• If in doubt, pick the smartest