"AN ENTREPRENEUR’S PERSPECTIVE: LAUNCHING A SCALABLE STARTUP”

- - - - - - - A FOUR PART SERIES

Tom Nora

@tomnora | tomnora2020 @ gmail.com | 310-855-2199  

THREE PART SERIES

•  Part  1  –  First  Mee)ng  to  Launch  

• Part  2  –  First  Funding,  Funding  Lifecycle  

•  Part  3  –  Idea  to  Product,  Produc)za)on  

•  Part  4  –  The  Turnaround  –  Fixing  your  Revenues  

TABLE OF CONTENTS

II  -­‐  First  Funding  –  Funding  Lifecycles  

1.   Assump9ons  &  Caveats  

2.   Funding  Cycles  >  The  Seed  Cycle  3.   Goals  Alignment  

4.   Necessary  Ingredients  5.   The  “Pitch”  

MY BACKGROUND

•  Educated  as  an  Engineer  Ö  Electrical,  BioMedical,  Computer  Science  Ö  USC,  Stanford,  NASA  

•  Involved  in  Tech  Startups  past  20+  years  •  mostly  as  a  Business  Execu@ve  –  Sales,  Marke@ng,  CEO  

•  Also  some  Non-­‐Tech  

•  Deep  Understanding  of  SoQware  and  Systems  Architectures  

Ö  Internet,  Real-­‐@me,  Social  Graph,  Seman@c,  Data  Mining,  AI,  Machine  Learning  

Ö  App  Dev  Tools  Design  -­‐  C++/Java/OOP,  Simula@on,  Network  

Ö  3D  Graphics,  Semiconductor,  MP  

STARTUP EXECUTIVE MGMT EXPERIENCE

•  Have  led  5  Startups  as  CEO,  3  as  VP  Sales/Marke9ng  

•  2  IPOs,  20+  Acquisi@ons,  2  Liquida@ons  

•  Have  worked  in…  •  Silicon  Valley  -­‐  Palo  Alto,  Mountain  View,  San  Jose,  San  Francisco,  

Berkeley,  Pleasanton  

•  Other  –  L.A.,  Portland,  Corvallis,  Boulder,  New  Mexico,  Aus@n,  Salt  Lake  City,  Cambridge,  NYC,  Europe  

•  Currently  Startup  Consultant  in  Launch,  Funding,  Organic  Growth,  M&A,  IPO,  Board  Development  

CURRENT WORK

Ö  Consul9ng  –  1  project,  looking  for  1  more  

Ö  Non-­‐Profit  work  Ö  Get  Good  Karma  Now  –  plaYorm  for  NPOs  •  getgoodkarmanow.com  

Ö  Helping  build  the  So  Cal  Startup  world  •  This  group,  Advisor,  Incubators,  SW  Engineer  Club  

•  Launch  Co-­‐Working  /  Incubator  space  ?    2013?  

Ö  Stealth  Project  =  future  of  Job  Seeking  Ö  Looking  for  partners  

ASSUMPTIONS • Up  and  Running  • Building  for  Growth  •  “Investor-­‐Ready”  

Ö  Strategy,  Presenta@ons,  Financials,  Early  Fans,  Demos  

Ö  You’re  Ac9vely  Looking  for  Ini9al  Funding  •  The  Seed  Round,  First  Money,  Post  F&F  

•  More  Than  1  Person,  “2+”  is  best  •  You  Truly  Believe  

Ö  That  you  have  an  amazing  idea  &  path  to  success  

•  L.A.  Startup  Scene  will  get  more  like  Silicon  Valley  Ö  More  Real  Companies!  (Tech  and  Non-­‐Tech)  

CAVEATS

This  Talk  is  Oversimplified,  Idealized  

My  Opinions,  Experiences  

Hopefully  Foster  Conversa9on,  New  Cos.  Here  

This  Is  A  Very  Small  Part  of  the  Whole  Puzzle  

SO HERE WE GO…

HOW FUNDING CYCLES WORK

• Usually  Mul9ple  Rounds  Ö Seed  -­‐  then  Round  1  or  A  …  Round  2  or  B  …  Ö Loans,  Mezzanine,  IPO,  Sale,  (Liquida@on)  Ö The  Dream  is  One  Round  then  Profitable  Growth  Ö Every  One  Is  Different,  Some  Ain’t  Preey  

•  Forcing  Factors  =  Valua9on  vs.  Cash  on  Hand  • Can  Go  Several  Years  Between  Rounds  

•  Strong  Revenue  Growth  • Exponen9al  Valua9on  Growth  

WHAT INVESTORS DESIRE

Valua9on  

Seed   A   B  

Revenue  

MORE TYPICAL

•  S@ll  Fundable  

Valua9on  Revenue  

SEED = THE FIRST MONEY IN…

•  =  Seed  Round,  Angel  Round,  Friends  &  Family,  etc.  •  Usually  Pre-­‐Revenue  •  The  Cleanest  round  •  Most  Expensive  Round  (Equity)  •  Anywhere  from  ~$250K  to  $5  Million  in  Tech  

Ö  In  L.A.  $250K  to  ~$2  Million  Ö  many  deals  currently  in  L.A.  

•  Some  Pre-­‐Seed  these  days  -­‐  low  $$  (not  usually  good)  

•  Your  First  Major  Milestone  Ö  We’re  a  Real  Company  Now  Ö  Credibility,  In  The  Club  

PURPOSE OF SEED ROUND

•  Catalyst  -­‐  Get  Things  Started,  Accelerate  •  Get  an  Office  •  Travel  •  Pay  Consultants,  Contractors  •  Build  Out  Prototype,  Proof  of  Concept  • Market  Launch  •  (Maybe)  Pay  Salaries          

Boiom  Line  Goal  =              Get  it  to  Next  Level,  Next  Round  

SOURCES OF SEED FUNDING •  Friends  &  Family,  Customer  

•  Ins9tu9onal,  Government  •  Angel  •  Super  Angels  

Ö  Facebook  –  Peter  Thiel  +  Reid  Hoffman  -­‐  $500K  

•  New!  -­‐  Crowdfunding  •  Kickstarter,  indiegogo,  crowdfunder  (L.A.  based)  

The  Big  Leagues  

•  Venture  Funds    Ö  Wide  Range  Here  –  Tier  I,  II,  III  Ö  “Baby  Seed  Funds”  inside  VC  Funds  

NECESSARY INGREDIENTS •  BIG  Market  •  Convincing  Scalability  Story  

Ö  VCs  and  Angels  need  High  Growth  Ö  10x  ROI  Opportunity  –  very  important  

•  Charter,  Goals,  Objec9ves  •  Market  Understanding  

Ö  Ready  to  Answer  Most  Ques@ons  •  Support  System  •  Experienced  Advisors,  Fans,  Friends,  This  Group  •  Most  Common  Missing  Piece  

•  Readiness  +  Enthusiasm  of  all  Founders  Ö  Timing  Is  Everything  Ö  The  “Day”  Job(s)?  

MORE NECESSARY INGREDIENTS

•  Technology  Roadmap  •  Understanding  your  Valua9on    Ö  Need  to  Research,  Discuss,  Be  Comfortable  

•  Adaptability  Ö  Funding  Sources  will  have  other  op@ons  Ö  Things  Change  OQen  around  you  Ö  They  will  call  you  on  what  you  said  6  months  ago  

•  Tough  Skin  Ö  VCs  and  Angels  can  be  Brutal  Ö Many  Great  Startups  were  Discouraged  

•  Timing,  Orchestra9on  

CALCULATING & NEGOTIATING VALUATION

(Startups  Almost  Always  undervalued  first  @me  out)  

• Get  Help  Here  –  Support  System,  Experts  

• Cover  All  The  Bases  • Respect  PR,  Marke9ng  

•  Leverage  SM  

• Passion  • Don’t  Lose  Control  of  the  Room  

• Always  Strive  for  Uniqueness  HOW TO MAXIMIZE VALUATION

Uniq

uene

ss, A

maz

ingn

ess

- - -

> Unproven  

Get  Trac9on  Soon!  

Hard  To  Con9nue  Growth,    

Lifestyle  Co.  (Zynga,  Groupon,  Yahoo,  LI)  

You’re  Gold  

(Google,  Apple)  

X Traction, Revenue - - - >

THE “PITCH”

• Control  The  Environment  • Cover  The  Usual  Ö Market  Size  >  Specific  Opportunity  

Ö  Product,  Service,  Other  Ö  Corporate  Growth  Plan,  Exper9se  Ö  Specific  Funding  Needed  

• Team  Ö  Sprinkle  these  people  all  over  the  pitch  Ö  Support  System/“Family”  

THE “PITCH”

•  Keep  it  Real  •  Less  Slides,  More  Discussion  Ö Move  on  to  Conversa9on  Quickly  

Ö May  Never  Get  to  your  Slides  1st  Mee@ng  •  Can  Take  Many  Forms  

Ö  Oqen  not  usually  an  actual  Pitch  •  Show  Intensity/Focus  for  what  you’re  doing  •  Be  ready  to  get  “swung  at”  

•  Most  Important  -­‐  -­‐  Chillax  

WHY INVESTORS SAY NO

• The  Team  Ö Weak  Team  Members,  Incomplete  

Ö Spooked,  Lack  Confidence  •  Lack  of  Uniqueness,  Boring  Story  Ö Any  story  can  be  exci9ng  

•  Start  and  Stop,  lose  momentum  Ö Not  a  Real  Deal  

• No  Support  System,  Valida9on  

EXAMPLE - FACEBOOK 1ST 4 FUNDING ROUNDS

PERSONAL EXAMPLE – ACTUAL REVENUE EXPONENTIAL REVENUE GROWTH

PERSONAL EXAMPLE – ACTUALS EXPONENTIAL REVENUE GROWTH

$1.5  M  SEED  

$5  M  val    

$4.2  M    A  Round  $25  M  val  

5X    

$8  M  Mezz  (Debt)  

$100  M  val  

4X,  20X    

CONCLUSIONS

• Raising  a  Seed  Round  is  a  Sales  Job  Ö Respect  it  as  such  Ö Don’t  Duck  from  Nega9ve  Feedback,  but  know  when  not  to  follow  it  

• Use  your  Support  Structure  Ö Validate  your  story  with  Experts,  Friends,  Associates  

• Make  a  Schedule  and  Move  Fast  

• Best  of  Luck  

SEED MONEY

THANKS TO OUR SPONSORS & FRIENDS

Buchalter  Nemer  Mai  Seror,  Judith  Gordon,  others  

buchalter.com  

SignNow                Kleverdog              SilBeach.com  

Blue  Pecos  Consul9ng            Trojan  Entrepreneur  

USC  Dept  of  Computer  Science  

CONTACT INFO:

TOM NORA

-  - - -

Email: tomnora2020@gmail.com Phone: 310.855.2199

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Twitter: @tomnora @cowlow