Silicon Valley 2.0 Lean Startup, Lean VC

Arya MirΔιαχείριση

7 Μαϊ 2012 (πριν από 4 χρόνια και 11 μήνες)

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Silicon Valley
2.0

Lean Startup, Lean VC


Dave McClure

http://500.co


(
@DaveMcClure
)

May 2012

http://slideshare.net/dmc500hats


Re
-
Inventing Venture Capital through

Innovation, Incubation, & Iteration

Changes in Tech Startups


LESS Capital

required to build product, get to market


Dramatically reduced $$$ on servers, software, bandwidth


Cheap access to online platforms for 100M+ consumers, smallbiz, etc


A few big IPOs @ $1B+, but LOTS of small acquisitions (<$100M)



MORE Customers

via ONLINE platforms (100M+ users)


Search
(Google)


Social
(Facebook, Twitter, LinkedIn)


Mobile
(Apple, Android)


Local

(Groupon, Living Social, Yelp)


Media

(YouTube, Pinterest, Tumblr)


Communications

(Email, IM/Chat, Voice, SMS, etc)



LOTS of little bets
:
Accelerators, Angels, Angel List


Y Combinator, TechStars,
500 Startups
, AngelPad


Funding + Co
-
working + Mentoring
-
> Design, Data, Distribution



Fast Cheap Fail

, network effects, quantitative + iterative investments





Web 2.0 +
Lean Startup


1.
Startup Costs =
Lower
.

2.
# Users, Bandwidth =
Bigger
.

3.
Transaction $$$ =
Better
.





Building
Product

=> Cheaper, Faster, Better


Getting
Customers

=> Easier, More Measurable


Iterative Product & Marketing Decisions


based on
Measured User Behavior

Dave McClure

00

s & 10

s:


Investor
: Founders Fund, Facebook fbFund, 500 Startups


Companies
: Mint.com, SlideShare, Twilio, WildFire, SendGrid


Marketing
: PayPal, Simply Hired, Mint.com, O

Reilly Media


Speaker
: Lean Startup, Web 2.0, Stanford/Facebook




80

s & 90’s:


Entrepreneur
: Founder/CEO Aslan Computing (acq

d)


Developer
: Windows / SQL DB consultant (Intel, MSFT)


Engineer
: Johns Hopkins

88, BS Eng / Applied Math

500 Startups:


Super
-
Angel / Micro
-
VC” Fund


Seed Fund & Startup Accelerator


250+ Companies (Fund I, $29M)


9
-
person team, 4 partners


10,000 sq ft, HQ in Silicon Valley


100+ Mentors in 10+ Countries



Fund I Portfolio: 250


Twilio

(Union Square, Bessemer)


Wildfire

(Summit)


SendGrid

(Foundry, Bessemer)


TaskRabbit

(First Round)


MakerBot

(Foundry)


Viki

(Greylock, Andreessen)


Smule

(Bessemer, Granite)


70 %

Fund

Capital

6

Quantitative Investing
before

Traction

250+ companies @ $50K avg.
(1
st

check)

-

Assume high failure rate (up to 80%)


Double
-
Down
after

Traction

50+ ‘winners’ @ $100K
-
$1M

(2
nd
+ 3
rd

check)

-

-

Target 10+ exits @ $100M+




500 Strategy: Lots of Little Bets

1. Start with large,
well
-
screened
funnel of early
-
stage companies.

30%

Fund

Capital

2. After first 6
-
12 months,
identify best performers
double
-
down on top 20%

3.
Build conservative model assuming
5
-
10% larger exits @ > $100M, 10
-
20% smaller exits @ <$100M

Tech Investor Ecosystem



Angels &

Incubators

($0
-
10M)



Micro
-
VC


Funds

($10
-
100M)

Smaller VC Funds

($100
-
500M)

Larger VC Funds

(>$500M)

True Ventures

First Round

Andreessen
-

Horowitz

Accel

Partners

Y
-
Combinator

TechStars

SoftTech (Clavier)

Felicis (Senkut)

SV Angel (Conway)

Sequoia

Greylock

Union Square

Floodgate (Maples)

Foundry Group

Incubation

Seed

Series A

Series B

Series C+

Platforms 2.0

Search, Social, Mobile

Platform Viability

Users

.

.
Money

Features








Growth

Profit

Profitable

Growth

Nirvana

Successful Platforms

have 3 Things:

1)
Features

2)
Users

3)
Money

Distribution Platforms

Customer Reach: 100M+



Search
: Google



Social
: Facebook, Twitter, Zynga, LinkedIn



Mobile
: Apple (iOS), Android



Local
: Groupon, LivingSocial, Yelp



Media
: Video (YouTube), Blogs (Tumblr), Photos (Pinterest)



Comm
: Email, IM/Chat, Skype, Phone/Voice





Web 2.0 Business Model:

KISS

(

Keep It Simple, Stupid

)


1)
Re
-
invent Web 1.0
Businesses


Make a Website, a Widget, an App


Sell Stuff

(Transactions, Subscriptions, Affiliate)



2)
add Web 2.0 Tech
nology


Search, Social, Mobile, Local, Media, Comm


Google, Facebook/Twitter, Apple/Android


Email, SMS, Ecommerce / Payments



3) Get
Customers
, Make
Money


Distribution, Distribution, Distribution


(Customer Acq

stn Cost) vs. ($Rev. Per Customer)


Low CapX +
Profitable

Web Businesses



More Acquirers
(
tech + non
-
tech
);


More & Smaller Acquisitions

1.
Mature Internet Platform Co




GOOG, MSFT, YHOO, EBAY, AOL, AMZN,
AAPL, INTU, ADBE, FB, TW, LNKD, GRPN


2.
Non
-
Tech

BigCo


/ Consumer Verticals

buying tech startups (for distribution)



BigCo = Lots of Customers, $$$


BigCo = Bureaucracy, Innovator Dilemma


Outsource Innovation; Buy Talent / Products


Acquiring LOTS (Small) Startups


Great for Founders, Investors



* Mint acquired by Intuit in
Sept 2009 for $170M

Lean Startup, Lean VC


Customers
, Metrics, Iteration.


Invest
BEFORE
Traction;

Double Down
AFTER
.

The Lean Startup


Progress

≠ Features; Measure
Conversion


Talk to
Customers
; Discover
Problems


Focus on

Product/Market Fit


(good solution)


Fast, Frequent
Iteration

(+
Feedback Loop
)


Keep it
Simple

&
Actionable

Startup Metrics for Pirates


A
cquisition:

users come to site from various
channels


A
ctivation:

users enjoy 1
st

visit: "
happy


experience


R
etention:

users
come back
, visit site multiple times


R
eferral:

users like product enough to
refer others


R
evenue:

users conduct some
monetization

behavior

AARRR
!

(note: If you

re in a hurry, Google

Startup Metrics


& watch 5m video)

AARRR!
: 5
-
Step Startup Metrics Model










Website.com

Biz Dev

Ads, Lead Gen,
Subscriptions,
ECommerce

Homepage / Landing
Page

Product
Features

A
CQUISITION

SEO

SEM

Apps &
Widgets

Affiliates

Email

PR

Biz
Dev

Campaigns,
Contests

Direct, Tel,
TV

Social
Networks

Blogs

Domains

Emails & Alerts

System Events &
Time
-
based Features

Blogs, RSS,
News Feeds

Emails &
widgets

Affiliates,
Contests

Viral
Loops

Startup Incubators & Metrics

Lots of Little Bets. Most
FAIL
.

(but a few succeed :)

Incubator 2.0: Fast, Cheap, FAIL


Incubators = supportive startup ecosystem (+ angels, VCs)


Efficient use of investment capital ($0
-
100K)


High fail rate (60
-
80%)

=> large initial sample size



Incubator 2.0:

Education, Collaboration, Iteration



Success based on:


MANY
,
small

experiments


common
platforms
,
customers
, problems & solutions


physical proximity
, open/collaborative environment


Domain
-
specific mentors

& expertise


fast fail,
iteration
,
metrics
& feedback loop


Incremental investment; high
-
risk, but high
-
reward


fbFund REV

fbFund REV
: Facebook

Social


Incubator: invest in startups, apps,
websites based on Facebook platform & Facebook Connect.



22 startups
@ ~$35K each ($850K total)


3 month program: Technology, Design, Marketing, Business topics


Success
: 8 startups raised $500K

> 5 raised Series A
-
> 2 raised Series B


Wildfire Interactive now 300+ people



The
Lean VC:

Lots of Little Bets, Incremental Investment

Method
: Invest in
lots

of startups using incremental
investment, iterative development. Start with many
small experiments, filter out failures, and expand
investment in successes… (
Rinse & Repeat)
.



Incubator
: $0
-
100K (

Build & Validate
Product

)


Seed
: $100K
-
$1M (

Test & Grow
Market
ing Channels


)


Venture
: $1M
-
$10M (

Maximize Growth &
Revenue

)

Investment Stage #1:

Product

Validation + Customer Usage


Structure


1
-
3 founders


$25
-
$100K investment


Incubator environment: multiple peers, mentors/advisors



Test Functional Prototype /

Minimum Viable Product


(
MVP
):


Prototype
-
>Alpha, ~3
-
6 months


Develop Minimal Critical Feature Set => Get to

It Works! Someone Uses It.



Improve Design & Usability, Setup Conversion Metrics


Test Small
-
Scale Customer Adoption (10
-
1000 users)



Demonstrate Concept,
Reduce Product Risk, Test Functional Use


Develop Metrics & Filter for Possible Future Investment

Investment Stage #2:

Market

Validation + Revenue Testing


Structure


2
-
10 person team


$100K
-
$1M investment


Syndicate of Angel Investors / Small VC Funds



Improve Product,
Expand Customers
, Test Revenue:


Alpha
-
>Beta, ~6
-
12 months


Scale Customer Adoption =>

Many People Use It, & They Pay.



Test Marketing Campaigns, Customer Acquisition Channels + Cost


Test Revenue Generation, Find Profitable Customer Segments



Prove Solution/Benefit,
Assess Market Size


Test Channel Cost, Revenue Opportunity


Determine Org Structure, Key Hires

Investment Stage #3:

Revenue

Validation + Growth


Structure


5
-
25 person team


$1M
-
$10M investment


Seed & Venture Investors



Make Money (or Go Big)
, Get to Sustainability:


Beta
-
>Production, 12
-
24 months


Revenue / Growth =>

We Can Make (a lot of) Money!



Mktg Plan => Predictable Channels / Campaigns + Budget


Scalability & Infrastructure, Customer Service & Operations


Connect with Distribution Partners, Expand Growth



Prove/Expand Market, Operationalize Business


Future Milestones: Profitable/Sustainable, Exit Options

Underpants
2.0

1.
Make a Good Product
: Activation & Retention

2.
Market the Product
: Acquisition & Referral

3.
Make Money
: Revenue & Profitability