S TA R T U P | S T R AT E G Y & G A M E T E O R Y I N F I N A N C I N G !

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YOU CAN PROACTIVELY FIND YOUR OWN MENTORS !!

Good mentors don't need to be imposed. You should find your own mentor.

FUNDRAISING VS BOOTSTRAPPING

FUNDRAISING CAN BE A DANGEROUS WASTE OF TIME !!Every minute you spend talking to investors is a minute that could be used to improve your product. Many startups lose focus on their product and customers, spending too time with meeting investors.

FUNDRAISING VS BOOTSTRAPPING

YOU BECAME AN ENTREPRENEUR TO BE YOUR OWN BOSS !

!

Exchanging equity for cash is not a one-time transaction. Funded startups have to keep investors in the loop about progress and constantly justify any business decision.

FUNDRAISING VS BOOTSTRAPPING

YOU DON'T NEED AN ACCELERATOR TO GET A CASH INJECTION OF 30000 USD FOR 20% EQUITY !

Good accelerators are less than you imagine. In my opinion many accelerators are just startups (like yours) whose customer is the startup founder.

FUNDRAISING VS BOOTSTRAPPING

BOOTSTRAPPING FORCES YOU TO LEARN WHAT REALLY MATTERS !!

You are running a business because you love the problems you are facing and the solutions you are building. There is no time to experiment with things that don't deliver increases in customer value.

FUNDRAISING VS BOOTSTRAPPING

THE BEST CONDITIONS TO RAISE FUNDING ARE WHEN YOU DON'T NEED IT !!!

You can raise funding in the future. If investors want to invest in your bootstrapped startup when you are profitable, you can negotiate your terms, walking away from deals that you don't like or that don't work for you.

FUNDRAISING VS BOOTSTRAPPING

ABOUT 600.000 NEW BUSINESSES ARE STARTED IN THE US EACH YEAR. THE NUMBER OF STARTUPS FUNDED BY VCS IS ABOUT 300. !This means that the probability of an average new business getting VC is about 0.0005 (300/600,000), and it also means that 99.95 percent of entrepreneurs will not get VC at startup.

WILL YOU GET VC?

MOST VCS LIKE TO INVEST IN VENTURES AFTER THE POTENTIAL HAS BEEN PROVEN AND THE RISK REDUCED !

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!In the first quarter of 2012, only 3% of VC funding went to start-ups. So about 97% goes to ventures on a post-startup basis. The number of ventures funded increases to about 3.250.

ARE YOUR ODDS BETTER IF YOU ARE AN EXISTING VENTURE?

THE AVERAGE AGE OF A VENTURE AT VC FUNDING WAS ABOUT FOUR YEARS !!!!!!If you assume that the range was about 0-8 years, this means that there are about 4.800.000 ventures started in the eight year period. So the probability that you will get VC funding at a later date is about 0.000068 (3.250/4.800.000), which means that 99.93 percent of you will never get VC.

WHAT ARE YOUR ODDS OF GETTING VC AT A LATER STAGE?

NOT ALL VENTURE CAPITALIST ARE THE SAME! AND, ABOVE ALL, THEY ARE NOT ALL EQUALLY GOOD. INVESTORS JUDGE STARTUPS. WHY DO NOT JUDGE INVESTORS?

!!!!!!!!!!!!!Understanding venture capital performance is a broken process! What makes a good venture capitalist? 1) Performance persistence: in venture capital, past performance does indicate future performance [Marc Andreessen once said that only 30-40 firms generate returns, while the vast majority of VCs is stuck with write offs and fire sales] . 2) Venture capital returns: simplistically, the best investment returns more money than the rest of the investments combined (venture capital power law). 3) The selection aptitude: of course, simply “getting in” does not guarantee strong investment returns as the nature of VC is such that those investors who jumped in earliest are most richly rewarded. So to assess a venture capital’s investment selection aptitude, it is important to look at what stage they made their first investment in a company.

THE GOOD VENTURE CAPITALIST

85% OF YOUR FINANCIAL SUCCESS IS DUE TO YOUR PERSONALITY AND ABILITY TO COMMUNICATE, NEGOTIATE AND LEAD. SHOCKINGLY, ONLY 15% IS DUE TO TECHNICAL KNOWLEDGE. CARNEGIE INSTITUTE OF TECHNOLOGY

> goods and services (in transactions with Governments, suppliers, customers and colleagues); > working conditions (holidays, leaves, time, procedures, salary raises); > people (employees, job interviews); > feelings (how much do you care about me?); > affections (can you do this for me?); > ideas (political, philosophical, etc).

EACH OF US NEGOTIATES WITH EVERYONE A BIT OF EVERYTHING:

WHO STARTS FROM A POSITION OF DISADVANTAGE IN A NEGOTIATION BETWEEN STARTUPS AND VENTURE CAPITALISTS ?

QUESTION

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1 IS WHAT WELLY COULD GET SEPARATELY WALKING AWAY FROM THE TABLE

WELLY PARKER | FOUNDER WARBY PARKER

!

3 IS WHAT CHRIS COULD GET SEPARATELY WALKING AWAY FROM THE TABLE

CHRIS DIXON | VENTURE CAPITALIST

1212 is what Welly + Chris can create together (total value) that is much more than what the parties can get individually (1 and 3)

DIVIDING THE PIE WHAT IS THE PIE? THE PIE IS WHAT THE PARTICIPANTS ARE REALLY NEGOTIATING OVER. IN THE PREVIOUS EXAMPLE EVERY PARTY MAY ASK 100% OF 12, BUT 100% OF 12 IS NOT REALLY QUESTIONING. ARGUMENTS SHOULD BE USED IN NEGOTIATION. CO-OPETITION | ADAM M. BRANDENBURGER, BARRY J. NALEBUFF

N E G O T I A T I O N

12 - 3 + 1 = 8 IF WALLY WALKS AWAY FROM THE TABLE HE WILL STILL HAVE 1. IF CHRIS WALKS AWAY FROM THE TABLE HE WILL STILL HAVE 3. ADDED VALUE EQUALS TOTAL VALUE CREATED WITH YOU IN THE GAME, MINUS TOTAL VALUE CREATED WITHOUT YOU IN THE GAME. THE ADDED VALUE OF 8 IS POSSIBLE ONLY IF PARTIES ARE COMPLEMENTORS. A COMPLEMENTOR IS THE OPPOSITE OF A COMPETITOR. IF THIS IS TRUE THE PIE (8) SHUOLD BE DIVIDED 50/50: WALLY SHOULD HAVE 1 + 4 (50% OF 8) = 5, CHRIS 3 + 4 (50% OF 8) = 7.

THE PIE IS WHAT THE PARTIES COULD GET SEPARATELY VERSUS WHAT THEY CAN GET TOGETHER!

STARTUPPERS ARE ESSENTIAL TO HAVE A PIE, AS ESSENTIAL IS THE VENTURE CAPITALIST

WITHOUT STARTUPPERS THERE IS NO PIE

AFTER ALL, ENTREPRENEURS CAN BE SUCCESSFUL WITHOUT VENTURE CAPITALISTS, BUT THE REVERSE IS OBVIOUSLY NOT POSSIBLE.

If we look at the relationship between startup and venture capitalists is clear that

THE MOST SUCCESSFUL VENTURE-BACKED COMPANIES ARE THOSE WITH GREAT ENTREPRENEURS, DISRUPTING A MARKET AT JUST THE RIGHT TIME. CLEARLY THE CAPITAL AND CLAIMED EXPERTISE OF VCS DO NOT ON THEIR OWN CREATE A WINNING COMPANY.

You are Nothing Without My Inefficiencies!

I N A W O R L D D O M I N A T E D B Y N U M B E R S A N D M A T H , C H A R T S A N D G R A P H S , A C R O N Y M S A N D S H O R T H A N D , W E F O R G E T T H A T I T I S R U N B Y P E O P L E . M O N E Y I S F U N G I B L E . P E O P L E A N D I D E A S N O T !

The negotiating party that has more alternatives in terms of fundraising and from which depends the return on investment of the venture capitalist is the startupper.

HE IS, THEN, IN A REAL POSITION OF STRENGTH …

HOWEVER, UNDERSTANDING IF A STARTUPPER IS IN THIS POSITION REQUIRES GREAT SELF-CRITICISM AND REALISM: BOTH SELF-CRITICISM AND REALISM LACK IN MANY STARTUPPERS.

… AND THE POSITION OF STRENGTH INCREASES WHEN THE STARTUPPER IS IN THE SITUATION BELOW

(i) Shaking hands: one of the most common ways to get into a legal wrangle is not putting agreements in writing; (ii) Not incorporating at the right time (and when incorporating, not selecting the right type of entity); (iii) Not Developing Solid Template Agreements; (iv) Not Protecting Your Valuable Intellectual Property; (v) Not considering seriously the tax implications;

+ (vi) (it is not necessary, but when/if you decide to get it) get a lawyer who doesn’t have the right experience.

10 5 + 1 COMMON STARTUP LEGAL MISTAKES

— > Many startups companies are bearers of new commercial schemes, some even revolutionary. Inevitably many rules and regulations will have to adapt to these changes.

!> The right lawyer can mean the difference between pushing the envelope and breaking the law. The right lawyer is additional value outside of legal documents and one the best sources of deal flow.

!> Startup companies have a company culture that celebrates and demands risk-taking – a quality not typically associated with lawyers. So the right startup lawyer is the one that replace “no, because,” with “yes, if.” At a startup company speed counts, so the mostly right answer today is better than the perfect answer tomorrow. !… SO, THE ANSWER TO THE RECURRING QUESTION “WHO IS THE RIGHT LEGAL COUNSEL FOR MY STARTUP?” IS MUCH SIMPLER THAN IT SEEMS …

AIRBNB CHALLENGED LOCAL HOTEL ZONING LAWS UBER TOOK ON TAXI LICENSING REQUIREMENTS PINTEREST BUILT A BUSINESS AROUND POSTING COPYRIGHTED IMAGES

Corporate And Ip Attorney, Startup & Venture Capitalist Legal Counsel !Founder, partner and head of the Business, Corporate, International Trade and IP departments of SINGULANCE !Author of: (i) Il contratto in generale nell’attività negoziale. Casi questioni e tecniche argomentative tra diritto nazionale ed internazionale (ii) L’impresa globale. Internazionalizzazione e mercati internazionali: il diritto degli affari e del commercio nel mondo (iii) L’impresa innovativa. Startup e Venture Capital tra diritto e finanza: questioni di diritto dei contratti, commerciale, societario, della proprietà intellettuale applicate alle Startup ed al Venture Capital !linkedin.com/in/massimilianocaruso | singulance.com

MASSIMILIANO CARUSO

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