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  OverviewImpact  of  Cloud  on  Venture  Capital

What  is  a  good  pitch?

Venture  Capital  OverviewImpact  of  Cloud  on  Venture  Capital

What  is  a  good  pitch?

Venture  Capital

Startups!

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”

So  how  does  a  VC  make  money?

“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%

Venture  Funding

100%of  nothing

17%of  a  Big  Companyis  a  lot  less  than

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

Product  Risk Market Risk Financial  Risk02 03

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  

What  caused  the  evolution  towards  the  “Lean  Investor”?

Venture  Capital  OverviewImpact  of  Cloud  on  Venture  Capital

What  is  a  good  pitch?

“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

Venture  Capital  OverviewImpact  of  Cloud  on  Venture  Capital

What  is  a  good  pitch?

Why  is  your  pitch  important?

Because  it  shows  you  have  a

PLAN  

What  is  a  good  pitch?

Intro Team Opportunity Solution Competition Business  Model The  Ask

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

2.  Solution

\

3.  Business  Model

Business  Model  ≠  Pricing

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  Metrics

\

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4.  Business  Model  Metrics

Avg Time  on  Site

Average  Price  Basket

Advertising   CTR

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

WHEN  do  you  need  to  have

WHAT?

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

Ash  Fontana,  Founder  of  AngelList

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

Questions?