silicon valley: vcs, startups and venture spirit

Silicon ValleyStartups, VCs and venture spirit

Allan MartinsonMTVP & Kurat.com

My startup (and not so startup) life

Baltic

Beginners guide to Silicon Valley

Palo Alto„The Capital“

Stanford Uni.„The brains“

Sand Hill RdMoney lives here

SFOThe gates

S.F.Restaurants, gigs,

gays, liberals and the hippiest startups

No evil here. Seriously

The Zuck Country

S.J.Please wake me up when I’m finished

After $100m exit you will live here

Apples here

#estonianmafia

Known locations of

Valley of Death

Forget Silicon Valley.Lets start from

Death Valley

A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty

Eric Ries

Founder, the Lean Startup MethodologyTheleanstartup.com

The Art of the StartSix lessons for your stupid little startup

How does a startup start?

Lesson 1: It’s all about people

It does not start from a business idea

Incubation takes years

2 founder ruleLeader

Skeptic

Multi-skilled talentsTeam &

Values

It starts from people

Lesson 2: The birth of an idea

This does not happen

Three origins of great startups

• Copycats: Copy existing business model to new markets

• Evolutionary: Seek better solution to existing problems

• Revolutionary: Seek unknown solution to unknown problemsThe best ideas come on cross-roads

of trends and disciplines

• The 30-seconds pitch: tell your granny– Who is your customer– What does your company

do for this customer– Why are you better than

competition• Do you pass the “Google

test”?

The What

Lesson 3: The art of pivot

Pivot, explained

„I am not leaving you… I am pivoting to another man“

The life of any startup can be divided into two parts – before product/market fit and after product/market fit

Marc Andreessen

Founder, NetscapePartner, Andreessen Horowitz

Why pivot?

Not a single great company follows its original business

idea

Failure is not a problem

Slow failure is a problem

The importance of milestones

• MVP (Minimum Viable Product): 48 hrs – 3 months• Initial customer validation: 1 week – 6 months• One million something (users, $$$, etc): 1-2 years

• You shall pivot if:– Your solution seeks a problem, not vice versa– Nobody wants to use your product – even you– You have ceased to believe into your company for >1

month

Lesson 4: The Need For Speed

Why speed?

• Startups, by very definition, are probabilistic

• Success seems intentional only in retrospective – impossible to compute

In unpredictable environmentsspeed and focus

are the best boosters of success rate

And hunger is the best factor contributing to it

The ultimate example of being focused

“I was too busy, I didn’t do things like that… I just didn’t go and meet new people who were involved in investments.”

Bill GatesFounder, Microsoft on refusing to meet Warren Buffet

Lesson 5: Importance of right signals

Silicon Valley is a

mental state

Being Estonian is a full-time job

Lesson 6: Where to find smart investors

Raising venture capital is the art of younger men seducing older men

- Anonymous

Idea

Prot

otyp

e

“Bet

a” Commercial la

unch

Market s

hare

Breakeven!9-

18 m

o

18-2

4 m

o

2-3

Y

3-7

Y

Users &

traction

Revenues

Profits

0

+

-

Paid CEO

Sales structures

Bureaucracy

2 10 50 200 500 employees

FFF$10-500K

A-round$1-10m

B-round$5-50m

IPO orexit

Typical lifecycle of a high-tech company

Typical life cycle in figures

Year 1 2 3 4 5 6

Phase Startup Early growth Growth Exit

Revenues ($m) 0 1 4 10 20 30

Growth % 300% 150% 100% 50%

Investment phase Angel A-round   B-round    

Pre-money / exit valuation ($m) 0,5 3   40   150Investment ($m) 0,4 2,5   25    

Post-money valuation ($m) 0,9 5,5   65   150

Post-money ownership of founders 56% 30%   19%   19%

Value of founders’ stake ($m) 0,5 1,7   12,1   28,0

IRR to angel investors 124%   Money-back, angel 56 times

IRR to A-round investors 102%   Money-back, A-round 17 times

IRR to B-round investors 52%   Money-back, B-round 2,3 times

What shall you know about VCs

• Venture capital (LPs) and venture capitalists (GPs) are not the same

• VCs are in the business of saying NO and then making money

• You can divorce your wife but you cannot divorce a VC

• You shall like, but not love each other• If in doubt, pick the smartest

Thank you!

allan.martinson@mtvp.eeallan.martinson@kurat.com