The Startup Process Dan Gould Startonomics La 2009

the startup process

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dan gouldvp, technologyfox interactive media

startup

change the world

build something

make money

(lots of easier ways)

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need you

about:me

entrepreneur

corridor

failed

social interfacesmachine learning

something

janitorial functions

engineering

marketing

people

$$$

resources

idea

metric: do you know your goal?

(boolean)

matters? yes

> execution? no

100% * 100% = 100% 90% * 90% = 81%100% * 0% = 0%

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people with problems

nichenichenichenicheniche

nichenicheniche

niche

metric: can you show me your ideal user?

mission

dumb

"To scout pro!table growth opportunities in relationships, both internally and externally, in emerging, mission inclusive markets, and explore new paradigms and then !lter and communicate and evangelize the !ndings."

"To serve the world's most engaged community." (AOL 2006)

A Computer on Every Desk and in Every Home

(1975)

The World On Time

Organize All the World’s Information

people

!rst 5-10==

don’t compromise

a -> ab->cc->d

metric: did i hire someone better than myself?

incentivize

options

rough post-Series A

CEO 5-10%

COO 2-5%

VP 1-2%

(Ind) Board .5-1.5%

Director 0.3-1.2%

Lead Eng 0.5-1%

5+ exp Eng .33-.66%

Mgr, Jr Eng 0.1-0.33%

vesting

+ acceleration, etc

founders too

milestones

come up with a series of milestones and

break down tasks to get there

e.g.,product design done!rst customer test

beta ready

prioritize relentlessly

consulting

lifestyle

cash"ow

50% of $1Mor

5% of $20M

venture-backed

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for most:VC==wrong

(but it’s what I’m going to talk about)

fundraising

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self ?3Fs 10-100K

angel 200K-1Mvc (series a) 1-8Mvc (series b) 5-25M

mezz 25+MIPO $lots

(some typical amounts)

friends & family

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angels

successful entrepreneursretired execs

professional angels“trailblazers”angel groups

sophisticated

risk / reward

equity

$500K per engineer -$250K per MBA

Guy Kawasaki’s rule of thumb:

(said for series a in a better market)

convertible

disappearing in this marketdisappeared

75% warrant coverage

50% discount

10% per month warrant coverage

(last deals i saw for conv angel roundsw/1st-time entrepreneurs in this market

before they stopped)

20-30% discount in good market

pensions, endowments

carry

“sure bets”

success:20 investments

13 "op/sideways5 2-3X2 10X

10Xes pay

only 10X potential

1000 plans250 initial pitches12 due dilligence6 investments

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angelportfolio

entrepreneuradvisorlawyer

CS profs

advisors

advice <-> $

practice

1 hour:20 mins - VC late20 mins - pitch20 mins - questions

elevator pitch

revenue model

customer acquisition

competition/barriers

amount

milestones

customer traction

1-page exec sum

Company Value

$2M

Company Value

$2M

Cash in the bank

$1M

Company Value

$2M

Cash in the bank

$1M

}$3M

100%

Your Share

before

= $2M

33%

67%

Your Share VC Share

after

= $2M

(but you did give up a bunch of rights)

eventual sizediscounted for time,

risk, dilution

people riskmarket risk

execution riskcompetition risktechnology riskfinancing risk

competition

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preferred sharesvetoes over sales/stock iss

liquidation preferencesboard seats

protective provisionsratchetsetc.

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!nancing = work

success!=!nancing

success=pro!ts

pro!tsproducts & sales

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The Startup Process Dan Gould Startonomics La 2009

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