The Evolution of the Private Market - 10Xdemoday

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THE EVOLUTION OF THE PRIVATE MARKET

THE RISE OF THE ANGELS (AND THE ENTREPRENEURS)

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500 STARTUPS

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A (R)EVOLUTION IN THINKING

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EARLY STAGE STARTUPS

HAVE CHANGED


STARTUP COSTS LOWER THAN EVER

BUT SCALING STILL COSTS MONEY

CLOUD, OPEN SOURCE AND ONLINE DISTRIBUTION DRIVING


WEB GETS BIGGER. WORLD GETS SMALLER.


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

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


CAPITAL INCREASINGLY COMMODITIZED

RISE OF THE ANGELS, YO!


NEW REALITY: MONEY FOLLOWS

FOUNDERSRISE OF THE ENTREPRENEURS, YO!

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SIGNALS ARE EVERYWHERE

BIG DATA + OPEN SOURCE ANALYTICS = NEW TECHNIQUES FOR VC

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SIGNALS ARE EVERYWHERE


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TRANSPARENCY IS SIGNALS ARE EVERYWHERE


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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.

“

-- NAVAL RAVIKANT (@naval)

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indicate.io

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indicate.io

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EARLY STAGE VC IS CHANGING HAS CHANGED

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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 2013, YO.

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indicate.io

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(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

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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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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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PROXIMITY IS VALUABLE

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MODERN ECONOMIC DEV !

PEOPLE > STRUCTURES

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INVESTORS: INVEST OUTSIDE YOUR

REGION, BRING THE BEST FOUNDERS TO YOUR CITY

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HUGE OPPORTUNITY AT THE POST-SEED,

PRE-A LEVEL

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

“

-- MICHAEL LEWIS

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THE PRIVATE MARKET IS BECOMING MORE

ACCESSIBLE.

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THE PRIVATE MARKET IS BECOMING MORE TRANSPARENT.

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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

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YOUR KEY TAKEAWAYS

Focus on Traction.

Learn to Communicate and Inspire.

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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: indicate.io

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bit.ly/dashboard-weekly

THE EVOLUTION OF THE PRIVATE MARKET

THE RISE OF THE ANGELS (AND THE ENTREPRENEURS)

Economy & Finance

The Evolution of the Private Market - 10Xdemoday