Published on February 5, 2009
the startup process dan gould vp, technology fox interactive media (img cc ﬂickr user karlequin)
change the world
(lots of easier ways)
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social interfaces machine learning
janitorial functions $$$ people idea marketing resources engineering
metric: do you know your goal? (boolean)
> execution? no
100% * 100% = 100% 90% * 90% = 81% 100% * 0% = 0%
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people with problems
niche niche niche niche niche niche niche niche niche
metric: can you show me your ideal user?
quot;To serve the world's most engaged community.quot; (AOL 2006) dumb quot;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.quot;
A Computer on Every Desk and in Every Home (1975)
The World On Time
Organize All the World’s Information
rst 5-10 ==
a -> a b->c c->d
metric: did i hire someone better than myself?
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% rough post-Series A
vesting + acceleration, etc
come up with a series of milestones and break down tasks to get there e.g., product design done rst customer test beta ready
50% of $1M or 5% of $20M
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for most: VC==wrong (but it’s what I’m going to talk about)
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(some typical amounts) self ? 3Fs 10-100K angel 200K-1M vc (series a) 1-8M vc (series b) 5-25M mezz 25+M IPO $lots
friends & family
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successful entrepreneurs retired execs professional angels “trailblazers” angel groups
risk / reward
Guy Kawasaki’s rule of thumb: $500K per engineer -$250K per MBA (said for series a in a better market)
convertible disappearing in this market disappeared
(last deals i saw for conv angel rounds w/1st-time entrepreneurs in this market before they stopped) 75% warrant coverage 50% discount 10% per month warrant coverage 20-30% discount in good market
pensions, endowments carry
success: 20 investments 13 op/sideways 5 2-3X 2 10X
only 10X potential
1000 plans 250 initial pitches 12 due dilligence 6 investments
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angel portfolio entrepreneur advisor lawyer CS profs
advice <-> $
1 hour: 20 mins - VC late 20 mins - pitch 20 mins - questions
1-page exec sum
Company Value $2M
Cash in the bank $1M Company Value $2M
Cash in the bank $1M } $3M Company Value $2M
before = $2M 100% Your Share
after 33% = $2M 67% Your Share VC Share (but you did give up a bunch of rights)
eventual size discounted for time, risk, dilution
people risk market risk execution risk competition risk technology risk ﬁnancing risk
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preferred shares vetoes over sales/stock iss liquidation preferences board seats protective provisions ratchets etc.
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nancing = work
pro ts products & sales
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