The Business of (Tech) Startups - TiETueDC - Oct 2014

@paulsingh #

THE BUSINESS OF (TECH) STARTUPSTHE (GROWING) INTERSECTION OF VC,

HIGH-GROWTH TECH COMPANIES & CITIES

@paulsingh #

500 STARTUPS

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A (R)EVOLUTION IN THINKING

@paulsingh #@paulsingh #TiETuesday

EARLY STAGE STARTUPS

HAVE CHANGED

@paulsingh #@paulsingh #TiETuesday

STARTUP COSTS LOWER THAN EVER

BUT SCALING STILL COSTS MONEY

CLOUD, OPEN SOURCE AND ONLINE DISTRIBUTION DRIVING

@paulsingh #@paulsingh #TiETuesday

WEB GETS BIGGER. WORLD GETS SMALLER.

@paulsingh #@paulsingh #TiETuesday

TRACTION IS THE NEW INTELLECTUAL PROPERTYPLATFORMS (SEARCH, SOCIAL & MOBILE) PRIMARILY DRIVING THE CHANGE.

NO LONGER “GOOD ENOUGH” TO DEPEND ON TECH DIFFERENTIATION.

@paulsingh #@paulsingh #TiETuesday

CAPITAL INCREASINGLY COMMODITIZED

RISE OF THE ANGELS, YO!

@paulsingh #@paulsingh #TiETuesday

NEW REALITY: MONEY FOLLOWS

FOUNDERSRISE OF THE ENTREPRENEURS, YO!

@paulsingh #

SIGNALS ARE EVERYWHERE

BIG DATA + OPEN SOURCE ANALYTICS = NEW TECHNIQUES FOR VC

@paulsingh #

SIGNALS ARE EVERYWHERE

BIG DATA + OPEN SOURCE ANALYTICS = NEW TECHNIQUES FOR VC

@paulsingh #

TRANSPARENCY IS SIGNALS ARE EVERYWHERE

BIG DATA + OPEN SOURCE ANALYTICS = NEW TECHNIQUES FOR VC

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WALL STREET BEAT US TO IT

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UBS PROPRIETARY SATELLITE PARKING LOTFILL RATE POINTS TO AN INTERESTING CADENCE INTRA-QUARTER AND POTENTIAL UPSIDE TO OUR VIEW.

“

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TWICE A WEEK A SMALL HELICOPTER CIRCLES OVER CUSHING’S TANK FARMS ON AN INDUSTRY SPYING MISSION

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WALL STREET ISN’T ALONE

THESE TECHNIQUES ALREADY USED TO UNDERWRITE IN-VITRO FERTILIZATION LENDING, PAYDAY LOANS, SUBPRIME AUTO LENDING, HOME/PERSONAL/AUTO INSURANCE AND MORE.

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WE CAN DO IT, TOOSURPRISE!

IT TURNS OUT,

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+ “GUT” + TRUSTED MENTORS + MUCH, MUCH MORE DATA.

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WE CAN DO IT, TOO.

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WE CAN DO IT, TOO.

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WE’RE DOING IT, TOO.

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VENTURE CAPITAL IS OPEN TO ATTACK BY DISRUPTIVE NEW BUSINESS MODELS AND TECHNOLOGY.

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-- NAVAL RAVIKANT (@naval)

@paulsingh #

Hubble

more details: hubble.disruption.vc

@paulsingh #

EARLY STAGE VC IS CHANGING HAS CHANGED

@paulsingh #

STATE OF THE ART IN EARLY STAGE INVESTING IS NOT

VERY SOPHISTICATED

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UNBUNDLING OF ADVICE, CONTROL

AND MONEY

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USED TO BE ABOUT CAPITAL, DEALFLOW

AND JUDGEMENTTODAY, IT’S ABOUT ACCESS.

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INCREASINGLY ABOUT DEAL SELECTION,

NOT DEAL SOURCING.IT’S 2014, YO.

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Hubble

more details: hubble.disruption.vc

@paulsingh #

(500) CHECKLISTProduct solves a problem for a specific target customer

Capital-efficient businesses - operational @ <$1M funding

Primarily internet-based distribution - search, social, mobile, local

Simple revenue models - transactions, subscriptions or affiliate

Functional prototype before investment (or previous success)

Small but measurable usage - some customers, early revenue

Small but cross-functional team - engineer, design/UX, marketing

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(NEW) FINANCINGS Standardized terms

No fixed amounts, no closings, no leads

Continuous, not discrete rounds

Prices beginning to float

No Board seats at the earliest stage

Herd mentality and oversubscriptions

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THE FIRST CHECK SHOULD BE SMALL AND FAST

DOUBLE DOWN HEAVY IF THE COMPANY SURVIVES INTO THE NEXT ROUND

@paulsingh #@paulsingh #TiETuesday

RISK AND UNCERTAINTY ARE

NOT THE SAME

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THE BUSINESS OF INVESTING IS ABOUT CHOOSING THE

LEAST-WORST OPPORTUNITYNOT TRYING TO PREDICT THE NEXT GOOGLE, FACEBOOK OR LINKEDIN.

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ECONOMIC DEVELOPMENT HAS CHANGED

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THE AGE OF THE INDUSTRIAL CITY

IS OVER

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NOW POSSIBLE TO BUILD BILLION DOLLAR

COMPANIES IN T-SHIRTS FROM A COUCH

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FROM ANYWHERE*

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MORE THAN TRADITIONAL INDUSTRIES, KNOWLEDGE ECONOMY HAS AN INHERENT TENDENCY TOWARDS GEOGRAPHIC AGGLOMERATIONADVANTAGES MATTER, AND THE FUTURE DEPENDS HEAVILY ON THE PAST.

THE SUCCESS OF A CITY FOSTERS MORE SUCCESS, AS COMMUNITIES THAT CAN ATTRACT SKILLED WORKERS AND GOOD JOBS TEND TO ATTRACT EVEN MORE.

“

-- ENRICO MORETTI

@paulsingh #

NEAR PERFECT CORRELATION BETWEEN

URBANIZATION AND PROSPERITY

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NEAR PERFECT CORRELATION BETWEEN PRESENCE OF SMALL

FIRMS AND THE LATER GROWTH OF A REGION*

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TECH COMPANIES WILL NEVER CREATE THE MAJORITY OF JOBS

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TECH COMPANIES HAVE A DISPROPORTIONATELY

POSITIVE EFFECT ON THE ECONOMY

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WHAT HAPPENS IN THE TECH SECTOR DETERMINES THE SALARY OF MOST PEOPLE, WHETHER THEY WORK IN

TECH OR NOT

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ALTHOUGH JOBS IN LOCAL SERVICES CONSTITUTE THE VAST MAJORITY OF JOBS, THEY ARE THE ECONOMIC GROWTH.

“-- ENRICO MORETTI

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PROXIMITY IS VALUABLE

@paulsingh #

MODERN ECONOMIC DEV

PEOPLE > STRUCTURES

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INVESTORS: INVEST OUTSIDE YOUR

REGION, BRING THE BEST FOUNDERS TO YOUR CITY

@paulsingh #

HUGE OPPORTUNITY AT THE POST-SEED,

PRE-A LEVEL

@paulsingh #@paulsingh #TiETuesday

INVESTORS: INVEST OUTSIDE YOUR

REGION, BRING THE BEST FOUNDERS TO YOUR CITY

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BY ITS NATURE, THE INTERNET UNDERMINES ANYONE WHOSE STATUS DEPENDS ON PRIVILEGED ACCESS TO INFORMATION.

“

-- MICHAEL LEWIS

@paulsingh #

THE PRIVATE MARKET IS BECOMING MORE

ACCESSIBLE.

@paulsingh #

THE PRIVATE MARKET IS BECOMING MORE TRANSPARENT.

@paulsingh #

Demo Day Videos ⟹ livestream.com/500startups

Sample Pitch Decks ⟹ slideshare.net/500startups

Venture Capital 101 ⟹ venturehacks.com/archives

Investor Thoughts:

Brad Feld ⟹ feld.com

Fred Wilson ⟹ avc.com

Chris Dixon ⟹ cdixon.org

Mark Suster ⟹ bothsidesofthetable.com

angel.co/valuations and angel.co/salaries

@paulsingh #

THE PRIVATE MARKET IS BECOMING MORE

EFFICIENT.

@paulsingh #

YOUR KEY TAKEAWAYS

Focus on Traction.

Learn to Communicate and Inspire.

@paulsingh #

ALSO... Distribution > Product

Tactics > Strategy

Notability > Credibility

Get on AngelList

Raise 12-18+ months of funding

Learn the basics of VC economics

Don’t confuse due diligence with progress & probability...

Shameless plug: hubble.disruption.vc

@paulsingh #

TECHNOLOGY IS THE FUNDAMENTAL DRIVER OF

GROWTH IN THE INDUSTRIALIZED WORLD

@paulsingh #

LEARN MORE: disruption.vc

THE BUSINESS OF (TECH) STARTUPSTHE (GROWING) INTERSECTION OF VC,

HIGH-GROWTH TECH COMPANIES & CITIES