Startup Essentials: Pitching, Idea Validation and First Steps in Business
VC, Funding & Pitching - Startup Talks June 2015
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Transcript of VC, Funding & Pitching - Startup Talks June 2015
Venture Capital, Funding & Pitching
Zubin Chagpar, Venture Capital Business Development, Amazon Web Services@phylosopher
Why do we talk about this?• Work with many startups & EMEA’s leading VC’s
• Discuss many startups with VC’s & get feedback on pitches
• Not biased, no agenda, helping AWS startup customers succeed
“We win when you win – and only when you win”
Venture Capital
VC FundGeneral Partners, Principals, VP’s, Associates, etc.
Startups Need for Capital Growth Potential
Limited PartnersInstitutional, Government & High Net Worth Individuals
\
Two-sided Platform model
Startups With need for capital and
growth potential
Capital & Value Creation connections, biz dev, GTM,
mentoring, etc
Risk & ReturnReduce Risk & deliver Financial Returns
Limited PartnersInstitutional, Government & High Net Worth Individuals
“2 and 20”Management Fee. VC raises a fund of e.g. $100M and gets $2M per year to operate the fund (staff, expenses, etc.)
2% Performance Fee. VC returns the profits from the fund to the LP’s but gets to keep 20% of these profits
20%
AUG-08Nathan, Brian, and Joe
JAN-09 $20K AcceleratorY Combinator
NOV-10$7.2M Series A:
SequoiaGreylockSV Angel& others
JUL-11$112M Series B
Andreessen HorowitzGeneral Catalyst
& others
APR-09$600K Seed RoundSequoia Y Ventures
01 04
idea MVP monetizescale
Seed Round
Series A, B, C, etc.
Incubator / Angel
Product Risk Market Risk Financial Risk02 03
$0-250K
$250-$1M
$1M-$5M, or more
“Amazon changed the VC industry. This is mind boggling. That online book company. Not … or anybody else. Amazon. 100% of the credit.”
Mark Suster, serial entrepreneur and MD at GRP Partners
\1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
1995 – .comTechnology Startups require physical hardware and
proprietary software to build their business
Typical Series A Spent on… Innovation
5-10M•$2.5: marketing, sales, etc.
•$2.5M on infrastructure
•Not a lot, since experimentation was costly
\
Typical Series A Spent on… Innovation
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
2000: Rise of Open SourceOpen source software drove technology costs down by 90%,
which spurred innovation in technology
3-5M•Less on Software–LAMP
•More on development
•Still on infrastructure
•A lot more, as experimentation is less costly now
\
Typical Series A Spent on… Innovation
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
2005: Enter the CloudPioneered by Amazon drove total operating costs
down significantly
500K-3M
•Staff – the battle for talent
•Customer Acquisition
•Explosion in experimentation, innovation, and Startups
\
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
2007: Micro VC / SeedPublic Cloud led to explosion in the number of Startups
and the emerging of “micro VCs”
Angels Incubators VC’sAngels unite in ‘Super Angels’ for Seed investments thru VC-like setup
Boom in incubator programs, with micro
investments, mentoring, etc.
Venture funds that back early-stage startups with <$1M
Why do VC’s care?More deals
Shorter time to scale
Faster time to revenue
Lower ‘burn rate’
Higher valuation at exit
What’s always there?Product
Lots of product, product, product
Rosy ForecastThe infamous hockey stick
What’s always missing?Business Model
not just WHAT, also HOW
Metricsnot just traction, also unit economics
StrategyWhat will you DO? How will you GROW?
Execution…
1.Problem
2.Solution
3.Business Model
4.Business Model Metrics
5.Growth Strategy
6.Status / Traction
7.Team
8.Competition
9.Roadmap / Forecast
10.ASK
10 / 20 / 30 Rule
Pitch Outline
1. Problem
Define the problem clearly
Explain the impact. Why bother?
What’s the opportunity? Market size?
Problem Impact Market
4. Business Model Metrics
“I look for signs in a pitch that the founders understand the mechanics of the
business.” Phil Morle, Pollenizer
4. Business Model MetricsMetric / KPI Now Comp A Comp B Comp C Goal
Advertising CTR 1.5% 3% 6% 2.5% 5%
Average time on site 4 9 6 5 10
Average Basket Price $18 $75 $118 $45 $73
Metric 4
Metric N
5. Growth StrategyMetric / KPI Now Goal Growth Strategy & Actions
1. Advertising CTR 6% 8% 1. A/B test creatives2. Continuously optimize campaign settings for CTR3. Hire 1 marketing specialist
2. Website Conversion 5% 10% 1. A/B testing of landing pages2. A/B testing signup flows3. Run Marketing campaigns (marketing budget)
3. Conversion to Active Y% 70% 1. Automate email addition for known hosts2. A/B testing of email account addition UX (UI and flow)3. Hire UX/UI Designer
4. Conversion to Paid Z% 25% 1. Optimize the product package of Free and Paid2. Make it easier to pay/transact3. Develop the product to add new features to paid users4. Deploy payment gateways & get PCI compliant5. Hire 3 developers
10. ASKMetric / KPI Now Goal Growth Strategy & Actions Costs
1. Advertising CTR 6% 8% 1. A/B test creatives2. Continuously optimize campaign settings for CTR3. Hire 1 marketing specialist
75K
2. Website Conversion 5% 10% 1. A/B testing of landing pages2. A/B testing signup flows3. Run Marketing campaigns (marketing budget)
150K
3. Conversion to Active Y% 70% 1. Automate email addition for known hosts2. A/B testing of email account addition UX (UI and flow)3. Hire UX/UI Designer
75K
4. Conversion to Paid Z% 25% 1. Optimize the product package of Free and Paid2. Make it easier to pay/transact3. Develop the product to add new features to paid users4. Deploy payment gateways & get PCI compliant5. Hire 3 developers
180K
My ASK for funding = $480K
01 02 03 04
idea MVP monetizescale
Seed Round
Series APitch for Angel Money
Pitch for Seed Round
Pitch for Series A
Bootstrap / Angel
Angel Pitch
Show me a great idea!
1.Problem
2.Solution
3.Business Model
4.Business Model Metrics
5.Growth Strategy
6.Status / Traction
7.Team
8.Competition
9.Roadmap / Forecast
10.ASK
Seed Round Pitch
Show me traction!
1.Problem
2.Solution
3.Business Model
4.Business Model Metrics
5.Growth Strategy
6.Status / Traction
7.Team
8.Competition
9.Roadmap / Forecast
10.ASK
Series A Pitch
Show me a business
&show me returns!
1.Problem
2.Solution
3.Business Model
4.Business Model Metrics
5.Growth Strategy
6.Status / Traction
7.Team
8.Competition
9.Roadmap / Forecast
10.ASK
So before you pitch…Ask some important questions
Where is my startup in its lifecycle?
Do I understand my business model, metrics?
Can I explain my growth strategy and justify my ask?
Which TYPE of investor should I target?
So before you pitch…And do your homework…Decide what you look for in an investor
Easy vs Hard, Dumb vs Smart
Investigate who you want to ‘marry’Which firm? Which Partner?
Speak with people that know themBusiness partners (e.g. AWS), CEO’s in portfolio