The Business of Startups
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“The Business of Startups” By: John F. C. Cheong, Ph.D. Feedback and comments to: [email protected]. Rev.2016.0412 “I’m starting a startup that helps other startups start up.”
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Transcript of The Business of Startups
“The Business of Startups”By: John F. C. Cheong, Ph.D.
Feedback and comments to: [email protected]
“I’m starting a startup that helps other startups start up.”
“The Business of Startups”By: John F. C. Cheong, Ph.D.
1. My Journey to Silicon Valley2. My Silicon Valley Adventures + Brief Bio3. The “Big Question”4. “Small” is the New “Big”5. My Approach to New Ventures6. Funding Stats of New Ventures Prior to Exits7. My “Quick Boot” Strategy + Objectives8. A “Step-By-Step” Program for an Accelerator9. How to Lower “Barriers to Exit”10. The “5W” of a Good Exit Plan11. Work Together + Build Teams + Get Along12. Any Questions?
Feedback and comments to: [email protected].
My Journey to Silicon Valley…A 9-year journey, and then some… and here we are now!
KLSingapore(3 years)
Austin, TX(3 years)
Ann Arbor, MI(6 years)Silicon Valley
(20+ years)Tokyo
My Silicon Valley Adventures
1
2
3
4
What comes next?
My Brief BioJohn F.C. Cheong is an angel investor and tech entrepreneur in Silicon Valley; withprofessional experiences spanning: FinTech, EdTech, and GPS car navigation. He writes theblog series: “Trading Wall Street from Silicon Valley” and holds the Series 65 investmentadvisor certification. John created and led the GPS car navigation business as founder andCEO of Space Machine from 1999-2012; co-founded KidSpring Studio to develop children’seducational apps for iPads during 2011-2012; and was a Computer Scientist at U.C. Berkeleyfrom 1995-1998. John was also the author of “Internet Agents” (1995).
John had participated in the early-stage financing of over 30 start-ups in Silicon Valley in thelast 20 years, resulting in 4 successful IPOs and 9 acquisitions:
John received the M.S. (1988) and Ph.D. (1992) degrees in Computer Science from theUniversity of Michigan, and the B.S. degree in Electrical Engineering (high honors) from theUniversity of Texas at Austin in 1986.
Interwoven (Nasdaq: IWOV, 1999);AdKnowledge (acq’d byCMGI, 1999);PurePayment (acq’d by iMall/Excite@Home, 1999);Bluelark Systems (acq’d by Handspring, 2001);Dante Software (acq’d by WebMethods, 2003);BigNetwork (acq’d bye-Universe/Internex, 1999,
then by News Corp as MySpace, 2005);
ZipRealty (Nasdaq: ZIPR, 2005);RedOctane (acq’d by Activision, 2006); Spreadtrum (Nasdaq: SPRD, 2007);Digital Fountain (acq’d by Qualcomm, 2009);CafePress (Nasdaq: PRSS, 2012);A Bit Lucky (acq’d byZynga, 2012);DeCarta (acq’d byUber, 2015).
The “Big Question” for Serial Entrepreneurs and Investors: Do I Have “Skill”? Or Was I Just “Lucky”?
Would it fly or would it not fly, isn’t that the question…?
“Spray & Pray”
vs.
Ansatz (/’ænsæts/): an educated guess that is later verified by its results.
Alternatively: “Was I just unlucky, or did I really screw up?”
“Small” is the New “Big”: How StartupsCo-Evolve with Platforms and Ecosystems.
Suite Platform
Multi-Platform Bus“There is a new breed of “big” on whom the coming age of “small” is built: the platform players (like eBay, Etsy, Amazon, Apple, and Google) on whose platforms smaller businesses blossom.”
— Nicco Mele
My Approach to New Ventures
What I look for when assessing a startup:1. Edge market on the periphery of a given domain:
Where potential for innovation and growth is highest.
2. Intentionally small, but with potential to grow big:Especially when working with a corporate partner.
3. Unique selling feature, not a product: Easier to build and test, and be one step ahead, so quicker to exit. Many big companies still can’t innovate like startups. But most importantly, that’s about all I have time for!
Feedback and comments to: [email protected].
Let’s Take a Look at YC’s Funding Stats ofNew Ventures Prior to Exits (circa 2014)
Shorter “Time-To-Exit”
Low
er C
ost
Capital-Efficient Sweet Spot!
Feedback and comments to: [email protected].
∴ My “Quick Boot” Strategy
“Odds-Of-Success”
“Time-To-Exit”
Sure
Iffy
Early Forever
Target early wins & sure wins: Forgo “big wins” initially. Goal: Build statistical significance within first 2 years.
My Objectives
What I look for in a new partnership:1. Answer to my Big Question. It’s not 42, but nice try!
Hint: Prioritize precision ahead of accuracy.
2. Just hit the singles. Let others swing for the fences. Why? Build pipeline to test “entry-to-exit” route first.
A “Step-By-Step” Program for an Accelerator
A
B
C
D
E
Acquire: Anchor + Agenda
BootUp: Best-of-Breed Business “Building Blocks”
Connect: @ Cuckoo’s Nest
Develop: Dovetailed Deliverables
Expand or Exit
Pre-Seed or Seed
Post-Seed(12 wks)
Partnerships, JV & Alliances
(~3 mo.)
Follow-On Funding or M&A
Feedback and comments to: [email protected].
How? Use Compatible/Configurable Stacks to Lower “Barriers to Exit” (i.e., Be Exit Ready! )
Every industry player has its own “signature stack”. E.g., 2015 Stackies Award in MarTech:
“5W”: Who is Buying What? Where Does That Fit in the Grand Scheme of Things? Why You? And When?
KP KA VP CR CS
C$ R$
CHKR
Business models are designed and executed in specific environments. So the external environment is like a “design space” for business models. And business models evolve to adapt to changing environments.
MACRO-ECONOMIC
FORCES
MARKET FORCES
INDUSTRY FORCES
KEY TRENDS
Technology TrendsRegulatory Trends Societal & Cultural Trends
Socio-economic Trends
Suppliers & Value Chain Actors
Stakeholders
Competitors (Incumbents)
New Entrants (Insurgents)
Substitute Products & Services
Market Segments
Needs & Demands
Market Issues
Switching Costs
Revenue Attractiveness
Capital MarketsGlobal Market Conditions Economic Infrastructure
Commodities & Other Resources
On Working Together…
It’s about people, their relationships, and their ability to actually work together to create and capture value (and without killing themselves in the process!).
Working Together: A “FinTech” Example
Dining + Catering Head Chef Sous Chefs Cooking Wizards
Culinary Centers + Kitchens + Food Trucks Gourmands + Food Critics
Ingredients Menu + Recipes Delivery Fundraising
Just a little secret sauce
A new fusion cuisine, hmm…
Building “A” Teams…
Technology makes working together easier. But it’s people who ultimately makes the difference. Remember: alone we go fast, together we go far.
... and Getting Along with the World.“When you are studying any matter, or considering any philosophy, ask yourself onlywhat are the facts and what is the truth that the facts bear out. Never let yourself be diverted either by what you wish to believe, or by what you think would have beneficentsocial effects if it were believed. But look only, and solely, at what are the facts. That is the intellectual thing that I should wish to say.” — Bertrand Russell (circa 1959)
“What is elementary, worldly wisdom? Well, the first rule is that you can’t really know anything if you just remember isolated facts and try and bring ‘em back. If the facts don’t hang together on a latticework of theory, you don’t have them in a usable form.You have got to have models in your head. And you’ve got to array your experience—both vicarious and direct—on this latticework of models.”
— Charlie Munger (circa 1994)
“Great Ideas can be Realized from Real Insight into the Way the World Spends Its Money.”
Any Questions?
Not Me…
Intentionally Small
Edge Market Unique Selling Feature
My Goal: Plenty of Small Wins!
Thank You!
