The 2% - From Entrepreneurship to CEO@DavidRaskinoMicrosoft Ventures, June 2014

2% Startups who get seed financing globally*.

* Global Entrepreneurship Monitor, 2013 and EVCA, NVCA, Pitchbook

98% Entrepreneurship

98% or 2%?Who do you want to be

Europe’s 2% (2013)

Analysis was conducted based on data from Pitchbook, EVCA, CBInsights and Angel.co

• 330 prominent Angel/VC backed startups

• Median $0.66MM

SeedSeries A (54%)

• 178 raised a series-A.

• Median $3.7MM

Series B (36%)

• 118 raised a series-B.

• Median $8MM

Series C (19%)

• 62 raised a series-C.

• Median $14MM

Series D (7%)

• 23raised a series-D.

• Median $26MM

9% acquired (29) 7% acquired (23) 5% acquired (16) 3% acquired (9)29% acquired (95)

18 months to utilize

seed

24 months to utilize Series-A

24 months to utilize Series-B

18-24 months to utilize Series-C

330 Startups backed by prominent angel or VC at seed

Median financing was $0.66MM

8-12 months to raise seed in Europe

1/3 of all startups get acquired at seed stage for under $5M

Joining the 2% Club

Venture & M&A

Business ModelProduct

First, some basics• Friends & Family (and Fools): Pre-seed, designed to get you to a basic prototype. Avoid it if you can. Typically

$25 - $100k.

Early

-sta

geG

row

thEx

it

* 2013 Global Tech Exits Report, CBInsights

• Seed: Build fully functional product based on deep customer validation. Focus on building sales pipeline to prove out your business model in a few key cities. Typically $500k - $1.5MM (in the US). Take it from smart investors who do follow-on. Get as far as you can before your round. Find an anchor.

• Series-A: Your first “institutional round”. Focus on scaling your business model (e.g. national, cross-sector etc.). Typically $2MM - $8MM.

• Series-B, C, D+ & PE: Growth capital designed to help companies expand nationally/internationally and cross-sector.

• IPO: Initial Public Offering, in which your company goes public and is listed on a stock exchange.

• Acquisition: your company merges or is acquired by another company. ~67% of tech acquisitions last year were <$5M “acquihires” *

Venture & M&A

Series A Crunch“Venture” is now at Seed stage. Not Series-A• Greater need to perform exceptionally well• Strong product and market differentiation• Exceptional execution

Increase in SupplyExplosion of early stage startups (via accelerators, incubators etc.)

Decrease in DemandVCs doing fewer seed deals and more conservative Series-A deals.

=

Startups

VCs

Account for ~30% of all tech venture investment and 67% of acquisitions.

Corporate VCsCorporate VCs are changing the game, motivated by lost-cost:• Business model exploration• market insight• access to talent.

Get one to participate in your round

Get a commercial partnership going

Demonstrate the knowledge & execution of your team

Know your Potential Buyer(s)• Know where you fit

• Companies get bought, not sold. People buy companies from people they know. Get a BD deal or commercial partnership.

• It shouldn’t, but PR matters. If you aren’t getting good press coverage, you’re not known.

• Use VC/strategic relationships. Corporations prefer trusted referrals vs cold calls. You need to know someone who knows someone.

• Build the right relationships.Generally, Corp Dev does the transaction. The Business buys your company. Not always the case – know your potential buyer.

Follow-on financing varies greatly depending on tech category*.

* 2013 Seed Investment Report, CBInsights

Metrics Matter More Than Ever

Business Model

Building a Business (e-Commerce Example)

• Unique Visits, Bounce, Campaign

• Sign-ups, Drop-offs / Incomplete, Campaign

• CAC: Customer Acquisition Costs• DAU: Daily Active Users• MAU: Monthly Active Users• CMRR: Committed Monthly

Recurring Revenue

• DAU, MAU, CMRR, Gross Churn, Net Churn, CAC Ratio, Cash Flow

• CLTV: Customer Life Time ValueNet Conversion Rate

CMRR Pipeline

Customer Acquisition Costs (CAC) Ratio, A Practical Example (How to calculate it and why it matters)

• You are an e-Commerce mobile app, selling retail/shopping goods• Its summer time and you have a range of promotions (i.e. marketing expenses)• You brought on an excellent content marketing person• You want to calculate the efficiency (profitability) of your overall Sales & Marketing

expenses (i.e. CAC Ratio)

CAC Ratio = Latest CMRR (Q2 FY14) x 12 x Gross Margin %

Total Sales & Marketing Expense (Q2 FY14)

Sales & Marketing Spend for the summer Quarter

ROI in 12 month period

Product

Prove you can Go-to-Market

Loveable Product

Exceptional Content Marketing

NewCustomer Demand

Retention & Growth(Strong Fan Base)

• Simplest or most complex• Lickable. Aspirational or

habitual• Ex: Paper, Taasky, Yummly

• Original content• Unique channels• Ex: Thrillist

• Pre-launch customers expected

• Ex: Birchbox, Coin

• Crazy customer support (pre-emptive engagement)

• Community• Ex: LINE

You can’t manage what you don’t measure.

• Web: Google Analytics

• Product: New Relic, Flurry, Buddy, Appsee

• Business: MixPanel, Localytics

• Interpret your metrics. Tie them back to your Business Model & Funnel, otherwise its just data.

Avoid building your own. Please.

Measure Everything

Thanks!@davidraskino

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