Confessions of a (reformed) Silicon Valley VC

• This keynote will cover: • Founder Stories. • Valley Culture. • Venture Capital Basics

• FAQ most likely: • ‘how do I get funded by Silicon Valley Venture Capital Firm?’

How to make a great presentation:

How to make a great presentation: • Don’t use a lot of bullet points!

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• Aster and TVLP will provide this deck on request for reference.

Silicon Valley Trends; Investment

• Venture Capital: 1. Angels, Family, Sweat.

2. ’Traditional’ Venture

• ’Unicorns’ (over $1Bn Valuation) • Pay the fund back

• Most deals are not unicorns.

• Funds with no unicorns get no follow-on funds.

The Original Unicorn Horn from the Museum of the University of Bologna. (Actually, a Narwal horn).

Silicon Valley Venture: Moving from Local to Global.

• Sequoia ‘half hour’ rule. • Still exists, but dying.

• Insular ‘pockets’ in U.S tech clusters. • Silicon Valley (Intel) • Boston (DEC) • Texas (Texas Instruments) • New York (Ad Tech)

Now, funds hunt globally.

• United Kingdom

• FarFetch

• Funding Circle

• TransferWise

• Shazam

• Powa

• Skrill

• Ve

• Germany:

• Auto1

• Home24,

• HelloFresh

• Delivery Hero

• Netherlands

• Ayded

• France

• BlaBlaCar

• Denmark

• Skype:

• Scotland

• Fanduel

• Finland

• Angry Birds

• Luxembourg (and London)

• Global Fashion Group

Unicorns in

Europe.

Notable Italian

Venture-Funded Startups

(Working to join the Unicorn list.)

• Shopfully • DoveConviene

Digital Store Promotion

• Qurami • Virtual Queues

• D-Orbit • Space Junk

Decommissioned

• Greenrail • Green rail

‘sleepers.’

• MoneyFarm • Streamlined

investment advice.

• Soundreef • Digital Music Rights

Management

• Musement • Book Interesting

Travel

• SatisPay • Low cost payments

by smartphone

• BeMyEye • Uber of Store

Checks

• AthoNet • Emergency/Remote

LTE Coverage

Before I get into the specifics of fund raising:

Valley Stories • Stories to give you the living experience.

• Including: • Silicon Valley

• Silicon Alley (N.Y.C.)

• Silicon Beach (L.A.)

David Scott Carlick • Hippie Woodworker

• Accountant.

• Carlick Advertising • Poppe Tyson • Doubleclick

• Venture Capital • Intermix (MySpace)

• ReachLocal

• Independent Director • INS

• AskJeeves

Bret Waters

• Print Salesman

• MetaGraphics

• ArtMachine

• Tivix.

• Entrepreneur Lecturer Stanford

Donald McKinney • Sold for IBM

• Sold for Chromatics

• VP Sales and Marketing Silicon Graphics

• VP Sales and Marketing EFI

• International Network Services (IPO, Sale)

• Fisherman

• McKinney Ventures

• Aplicor

Jim Clark

• Stanford Professor

• Silicon Graphics

• Netscape

• Shutterfly

• MyCFO

Ariel Poler

• Stanford

• I/Pro.

• Independent Director • Kana, LinkExchange

• Topica

• Top-tier angel

Zorik Gordon • Idea Labs, WorldWinner

• ReachLocal (IPO). ClubLocal

• Serviz

Adam Goldenberg • Gamer’s Alliance (age 16).

• Sold to eUniverse (Intermix, MySpace)

• COO eUniverse

• Alana

• Intelligent Beauty

Howard Lerman • Tech child prodigy.

• COO Datran Media.

• GymTicket

• Yext

The good news,

and the bad news,

and the good news,

about starting a company, and getting funding.

The Good News:

• Funds are competing for the best deals, globally.

• Funds publish what they are doing and why. Sites, blogs, tweets.

• You can research all that and find firms that match your requirements and goals.

• You can get your story heard

• (With some effort, if it is a good story). A16Z Seed Snapshot from Website

The Bad News • Lots of companies want

the same attention.

• The ’bar’ is very high. • Traction • Pedigree

• There is a ‘CEO Filter’ for CEO’s who are:

• Experienced, yet young. • Charismatic, yet

thoughtful. • Inspirational, yet

reliable.

• Team filter, too.

The good news. • It is cheaper than ever

to start a company.

• Startup incubators,

participating corporate

partners, and mentors.

• MVP (Minimum Viable

Product) strategies.

• Hey, you can build a great business that is not a Unicorn.

• So, get very serious about solving real problems.

Mittelstand and Silicon Valley

Mittelstand Silicon Valley

Culture Family ownership or family-like culture Founder led, venture backed, early on 'family.' Lifetime Generational continuity March to an exit (IPO, Acquisition) Viewpoint Long-term focus Race to deliver liquidity

Corporate Ownership Independence Strategic and Financial, ultimately Public ownership

Speed Nimbleness Nimbleness

Attitude Emotional attachment Ruthless shareholder value

Workforce Investment into the workforce At-will employment. Modifications to plan Flexibility Pivot Corporate Structure Lean hierarchies Lean until proven otherwise. Innovation Innovativeness Innovativeness

Customer Customer focus Shareholders, then customers. Social Social responsibility Shareholders, then social. Loyalty to Region Strong regional ties Shareholders, then the region. Outsourcing. Education Partner with universities Fund university teams. Government Industrie 4.0 Aversion to 'picking winners.'

90-95% of Venture Backed Deals have Liquidity via Acquisitions. • Here are Google’s

But what areas are getting investment?

What are the trends I should focus on?

Segments and Active Companies Segment Active Companies and Investments

•Analytics/Big Data. Segment, Looker, Databricks, Vizier, Windward, Samsara, Textio, Thousand Eyes, Incorta, Tamr, Everstring, Palantir

•App Tools Apple Store, Android Store, Datadog, Invision, Mapbox, UserTesting, Branch Metrics

•Artificial Intelligence / Machine Learning. Google,DeepMind, Amazon

•CleanTech enVerid, Tesla, SunPower, Solar City

•Cloud computing. AWS, Google, Plangrid, Procore, Thinking Phones, Cliqr

•Crowdsourcing/wisdom of crowds. 99 Designs, Uber, AirBnB, Shiftgig, Gigster, KickStarter, HackerOne, Thumbtack, Serviz, Lyft, Seamless, Grubhub, Freelancer

•eCommerce Amazon, Jet, Gilt, Birchbox, Combatent Gentleman, LootCrate, Thread, JustFab,

*EdTech Udemy, Khan Academy,

•Enterprise Automation. Salesforce.com, Oracle, SAP, Namely, Xero, Slack, Intercom, Zenefits,

•Fin-Tech Wealthfront, Quicken, PayPal, Digit, Credit Karma

•Food Blue Apron, Juicero, Soylent, Amazon Grocery

•Gaming and Fantasy Sports Microsoft, Sony, FanDuel, Vulcun

•Internet of Things. Samsung, Intel, Ring, Notion, Tile,

•Marketing Technology. Salesforce, Oracle, Adobe, Google, Everstring, Placester, Everstring, Thumbtack, Social Nature, Tubular

*Media Medium, Twitter, The Skimm,

•Med-Tech Mobile ODT, Surgical Theater, Johnson & Johnson

•Open Source Software Confluent, MongoDB, Apache

•Robotics/Drones iRobot, Google, GM, Toyota

*Security. McAfee, Intel, Dtex, Invotas

•Social Networking. VarageSail, Facebook, Twitter, Snapchat

•Virtual and Augmented Reality. Samsung, Oculus

•Wearables Sensoria, Apple, Fitbit,

Moon trajectory photo

Silicon Valley Trends: Technology

• All sectors have activity. So if you have something transformative, differentiated, exciting, go for it.

• Crowdsourcing (Uber of Everything) is infecting all businesses.

• “Software is eating the world.” • Marc Andreessen

• “Machine Learning will eat software.” • David Carlick

• “Everything will compute, and be connected.” • Internet of Things.

• “Infrastructure (big data, cloud services, crowdsourcing, communications, collaboration platforms) is redefining the business of starting, and running, a business.”

• Everyone.

• “Ad-tech is brutal; winners have taken all. • Everyone.

The best funding is customer funding.

BaseCamp

• Then in 2006, it suddenly happened from one day to the next. Jeff Bezos had taken an interest in Basecamp, and Jason and I each sold him a minority, no-control stake of our share of the company for a few million dollars each (Basecamp had been self-funded and profitable from the start, so didn’t need any capital for the venture). I was a millionaire!

SnapChat Financing

• Snapchat was a company first, a product first, and then got pitched for an investment. Lightspeed Ventures went to Evan Spiegel and asked if they could invest. Not vice versa. Growing organically is underrated by lay people.

The VC ‘no brainer:’

• Great team that covers ‘all the positions,’ with proof of ability.

• CEO who is compelling, believable, has vision and can execute.

• Differentiated, compelling technology.

• A large, untapped market with real pain.

• Unique; no competitors.

• Traction; proof of market need and acceptance and sales viability.

• Virality.

• A rational financial plan to reach key milestones with the raise.

What any entrepreneur will say:

“OK, so I don’t have most of those, but

how do I get funded?”

Ariel Poler

• Miss: Focusing on the pitch rather than the investor

• It is all about investor fit

• Think about dating… Who cares about the restaurant choice if there is no chemistry

• Don’t chase the metrics or the checkboxes

• And, don’t get greedy

• Miss: trying to solve investors excuses

• Most investors do deals when they get excited. But they don’t like to say “I am not excited”, so instead they use an easy excuses, such as:

• - You are too early

• - The deal is too small

• - I want to see more customers/revenues/technology

• Be careful about trying to “solve” their excuses, because once you do, they are likely to find others. Instead, figure out how to get them excited. Or, better yet, focus on the business.

Poler on finding investors.

• Angel investing has changed, and Poler knows that better than most people. Nowadays – thanks to resources like AngelList and CrunchBase – there’s greater transparency with regards to which investors have funded which startups. Because of this transparency, entrepreneurs now have more leverage and are able to seek out investors from whom they can receive more than mere money (in the form of advice and guidance).

Pitching Tips:

1. Know your

competition

• “I am impressed when someone really understands what their competition is doing. Too often people say they’re ‘the first, or the only,’ and then I do a quick Google search in front of them and turn up 10 others.”

2. Know your key metrics

• “Know your levers. Effective entrepreneurs understand what their top priorities are and manage their companies by focusing their teams around a handful of critical metrics that reflect those priorities. I’m always interested when a founder can articulate her goals, talk intellectually about her team executing to improve them, and has a clear sense of where those metrics can be in a year or two.”

3. A compelling founder/CEO.

• “A CEO’s leadership and marketability can’t be understated either. Sometimes a company looks terrific on paper, but if the CEO doesn’t inspire confidence in the first meeting, this shortcoming will doom the investor’s appetite.”

4. Prepare.

• “Success is no coincidence—it is 90% preparation. Do your homework on the firm and the individual you are meeting: who they are, what they know, and what they care about.”

5. Show some

passion!

• “Yes, you need to appear professional if you are going to be starting a serious business, but you need to show some passion and enthusiasm. Start-ups are hard, and they take a long time, and you will need to show that you have the inner drive to get through the highs and lows. This doesn’t mean you have to jump up and down and wave your arms. Perhaps it’s a story about what is driving you to get into your business, why it’s personal, or why there is nothing else you would rather do than spend the next 5 to 10 years living and breathing this idea of yours.”

6. Know your

financials

• “Know exactly what you want to spend your money on. Don’t tell me how long it will last; tell me what you want to prove. The most impressive entrepreneurs communicate the value of their businesses through numbers. A conversation centered on a company’s revenue growth, sales funnel, and customer churn causes an immediate connection with investors because when entrepreneurs position themselves as metrics-driven, it’s as though they’ve entered an investor’s mind.

7. Show me the big

opportunity

• “Make me believe—that the opportunity is there, that it’s a big one, that you’re the person to make it happen. Really listen to questions and don’t pretend you have all the answers but that you’re going to find them. Sell yourself and your team and make me want to come on the journey with you. Understand the fit with me and my firm and tell me how we could help.”

8. Think big and

bold

• “What impresses me most is when a team—and I mean a team—comes to visit and they have a complete and inclusive presentation that defines the opportunity, clearly and concisely explains how their company solves that problem, and exactly how they will change the course of history. Thinking big and bold with authority, we love that!”

9.Be honest

and open

• “To impress a venture capitalist, it’s important to be honest and open. Venture investors want to back intellectually honest entrepreneurs that can openly discuss both the strengths and weaknesses of their business. No business is perfect, so hiding a weakness is a losing proposition, while openly discussing the weakness and how you plan to address it will score points and impress a venture capitalist.”

10. Show me you are determined

• “We have a saying at Bullpen that we like ‘blue collar’ CEOs. That means that we like to see nuts-and-bolts operators, not pie-in-the sky dreamers. Demonstrate that you’ve spent time looking up our background and investment portfolio finding mutual interests. When sharing materials, keep them brief so I can gather context for a phone call or in-person meeting. In person, I like founders who (1) know their metrics cold; (2) have a clear idea of the business they’re in; and (3) know how to grow it. What gets my attention is a hard-nosed, determined founder who, with a few operational pointers combined with a solid, already existing plan, can get to an even bigger outcome. That’s the kind of ride I want to take.”

In conclusion, raising money is

a milestone.

Building a business is a life.

• Build something that is exciting to you.

• Recruit, or join, a team that is doing something that excites you.

• Solve something meaningful and real, with a solution that is fun and exciting.

• Pay close attention to the Golden Keys.