Raising Funds from Silicon Valley

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Raising Funds from Silicon Valley What Silicon Valley investors look for in Polish companies…

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Advantages for Polish Startups & Entrepreneurs? WHY ME? HOW TO PICK AN INVESTOR? FOLLOW UP DISCUSSION: Quick Introduction What I am doing in Poland Ten Factors Silicon Valley VC Investors Look For SILICON VALLEY FUNDING Introduction - From Wroclaw University of Technology, Jun and Oct 2014 - From Warsaw School of Economics, May 2015 Structuring Polish-US investor companies

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Why Me? 14+ Years of Top-Notch Experience

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Why Me? Why is Poland the right place right now? Why Poland?

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Why Me? Polish companies are already being funded Why Poland? Brainly, DocPlanner, UXPin, Estimote, Oort, others MATTERMARK MULTIPLE $M FINANCINGS 527 PL startups listed ANGEL LIST 1,835 PL startups at pre-funding thru growth funding 2,624 PL founder-CEOs (out of 1,560,000 PL professionals on LI) LINKEDIN

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Why Me? Sequoia Capital Famous Question – Why Now? Why Poland? Poland #15 Country for Internet Penetration (25+M people)

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Why Me? Sequoia Capital Famous Question – Why Now? Why Poland? Poland #8 Country for Smart Phone Penetration (22+M people) Poland #5 for mobile % of internet traffic at 52%

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Average investor spends 3m:44s on a pitch deck Pitch Deck Lessons From A Study of 200 Perfect Pitch Decks @kimmaicutler Ave Length = 19 pages Frequency: Team = 100% Product = 96% Problem = 88% Financials = 58% (seed)

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Recommended Deck Ordering Pitch Deck Lessons From A Study of 200 Perfect Pitch Decks @kimmaicutler Fairly standard, start with: Company Purpose Problem Solution End with team @ReidHoffman

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How long does it take; Seed Fund or Angels? Pitch Deck Lessons From A Study of 200 Perfect Pitch Decks @kimmaicutler Ave time to fundraise is 12 weeks, but much variation and usually it takes “way longer” than expected Fundraising with seed funds more efficient than angels:

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Darwinian Survival of Fundraising Pitch Deck Lessons From A Study of 200 Perfect Pitch Decks @kimmaicutler 9 seed rounds exist for every Series A Round (i.e. “Series A Crunch”) But Series A is more efficient (<time, fewer investors & meetings)

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In a great market — a market with lots of real potential customers — the market pulls product out of the startup The Market – Existing, Quantifiable, And Proven Ability To Execute In It Conversely, in a terrible market, you can have the best product in the world and an absolutely killer team, and it doesn't matter — you're going to fail. 10 Factors 1

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Retention is the single most important thing for growth. Rapid Growth – 30% forward revenue/user growth per period (per year for M&A or IPO) or per month/quarter (early stage) Every single user on their 31st day after registration, what percentage of them are monthly active? Thirty-second day, thirty-third day, thirty-fourth day. And that allows you, with only 10,000 customers, to get a real idea of what this curve is going to look like for your product. 2 10 Factors

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Scale – $1Bn+ market cap potential (a “unicorn”), with line of sight to $1Bn+ in revenues The Wall Street Journal and Dow Jones VentureSource are tracking venture-backed private companies valued at $1 billion or more. See how the club has expanded since the project began in January 2014. The Billion Dollar Startup Club 10 Factors 3

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One of the most common types of advice we give at Y Combinator is to do things that don't scale Predictability – Recurring and visible revenue streams / user growth (lifetime return customers) The most common unscalable thing founders have to do at the start is to recruit users manually… founders ignore this path because the absolute numbers seem so small at first. The mistake they make is to underestimate the power of compound growth. We encourage every startup to measure their progress by weekly growth rate. If you have 100 users, you need to get 10 more next week to grow 10% a week.” (that’s 14,000 users in Y1 and 2 million users in Y2) 10 Factors 4

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Pricing before product – plan distribution first; is your pricing scalable? Product and Customer Diversity – Multiple proven products, features, customers, industry distribution channels, find customers Uncontrolled distribution leads to all manner of head-ache and profit-bleeding.”. It’s possible to niche market and mass sell… Whether Apple or Estee Lauder, sustainable high-profit brands usually begin with controlled distribution. Remember that more customers isn’t the goal; more sustained profit is. 5 10 Factors

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Startup probabilities of success where cofounders don't have a long history are bad; when things go wrong, there is no history to bind… A bad early hire can kill a company; in the early days the goal is to not hire and stay small as long as possible… Be proud of how much can be done with fewer employees; more equals high burn rate, complexity & slower decisions… Founders underestimate how hard it is to recruit; the best employees have options; mission belief is the differentiator. Proven Management Team – Track record managing growth increases investor confidence in execution 10 Factors 6

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Globalization means copying things that work… There is no innovation; you go from building 1 to n typewriters (…) Weak Competitive Landscape – Emerging leader taking share from legacy vendors unable to respond (new and disruptive) Technologization / technology, by contrast, involves doing new things… True technology companies—Palantir, SpaceX—involve going from 0 to 1. This means going from typewriters to word processors. 10 Factors 7

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When you are starting a startup you need revenue. You need validation. You need users. You need commitment. Free trials get you none of those things… You think you've made progress but at the end of the free trial you’re going to have to sell them all over again. Strong Economic Model – Quantifiable and proven inputs for unit cost of customer acquisition, revenues, margins and contributions over time Two things you should be doing when you're starting your company: talking to your users (selling) or building your product. As a founder, you have some unique advantages that make it possible for you to be really, really good at sales: passion for the product and your knowledge of the industry and the problem that you're solving. 10 Factors 8

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If you’re going to spend the best years of your life working on something, you better make it something you care about. The mission is not the exact problem you’re going to solve, but it’s the North Star. It’s telling you the direction in which you should go. The Elevator Pitch – One Summary that Describes it All 10 Factors Frequency, Density, and Pain are three variables to analyze almost any problem. Frequency: Does the problem you’re solving occur often? Density: Do a lot of people face this problem? Pain: Is the problem just an annoyance, or something you absolutely must resolve? 9

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Passion versus Pain = Consumer versus Enterprise 10 Factors 10 Mary Meeker

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How to Pick Investors?

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How to Pick Investors? One of the really cool things that's happening right now is this massive proliferation of ways to start a company and ways to get your company funded MORE OPTIONS THAN EVER TO GET A NEW COMPANY FUNDED: — Aaron Harris, a partner at Y Combinator

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HOW DOES A POLISH COMPANY RAISE MONEY IN THE USA? VC Funding not only route… Set up a US affiliate which accepts US funding (for legal reasons). When there is a liquidation (sale, IPO), the flow of funds need to be established to pass to the international owners (either directly via shares in US entity or flow of funds). Because of some commoditization of basic entity set-up services in US, this can be done for small amounts of money The US company is the economic and voting entity. The Polish affiliate is the R&D and operations entity. $1,000 to set up entity $25,000 to $50,000 to close financing deal. Angel Funding, Syndicate Funding, Crowdfunding viable How to Pick Investors?

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Team Leadership skills, operating knowhow and industry knowledge are all tremendously important. However, most entrepreneurs seem to make their decisions more on perceived brand, past successes and ability to intro. How to Pick Investors?

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Look at their portfolio list … Subtract out the extremely successful companies. a) they have no time for you & b) everybody who has a super successful out-of-the-gate company loves their VC because there was no conflict Call the companies that are doing well but not yet household names. Ask about the criteria above More importantly, call the companies that struggled. You’ll learn most about VCs when you find out how they handled themselves in tough situations. Make sure to call 3-4 members of the management team to avoid one person’s bias Past successes aren’t always relevant to future ones (web vs. mobile, Traditional software vs. SaaS, SEO marketing vs. social marketing) REFERENCE CHECK IS BEST WAY TO CHOOSE A VC: How to Pick Investors?

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Never been easier to start a technology company… In the USA or anywhere else… Why?... Decreasing costs, market factors… On the other hand… Silicon Valley is very expensive… Global Trends

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What about the Silicon Valley funding bubble? Global Trends Maybe in the future… Today we are in a boom!

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It’s become 2x more expensive to scale a startup in Silicon Valley in 2015 versus 2009 The combined inflation of real estate and wage costs in Silicon Valley have a dramatic impact of the operating expenses of startups. This chart compares the op-ex (excluding marketing spend) of a hypothetical 20 person Series A startup and a hypothetical 80 person Series B startup over the past five years in Silicon Valley. In both cases, the op-ex figures double from $2.5M to $5.0M and from $7.9M to $15.6M respectively. Global Trends

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More powerful phones = More potential for powerful apps Global Trends Smartphone costs declining… 5% annually from 2008-2013…

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Global Trends Bandwidth costs declining… 27% annually from 1999-2013… Declining cost / Performance of bandwidth enables faster collection & transfer of data to facilitate richer connections / interactions

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Global Trends Compute costs declining 33% annually (1990-2013) Decreasing cost / performance curve enables computational power at core of digital infrastructure….

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Each new computing cycle typically generates 10x the installed base of previous cycle… Global Trends Mobile internet has potential to be 10x bigger than desktop internet…

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Global Trends Mobile traffic as % of Internet Traffic = Mega Trend 25% in 2015, rising fast! Remember Poland is #5 globally at 52%

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Global Trends Smart phones have lots of upside remaining Only 30% of Global 5.2B unit Phone Market are Smart Phones, More Shipments Each Year

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Global Trends Mobile is constantly changing Global smartphone Operating System is 97% Different Than 10 Years Ago

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Global Trends Tablets Growing +50% Per Year Faster than PC Ever Did

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Global Trends Mobile + Tablets Shipment = 5x of TV + PC Just 10 Years Since Inception Creates Opportunity…

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How big will Streaming Mobile Video be in 5 years? Global Trends

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How big will Streaming Mobile Video be in 5 years? Global Trends 2.8 hours per day spent on mobile screens… 29% on vertical video = Wow!

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Global Trends Cloud Technology/Apps Challenging Physical Products Pain Points

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Global Trends Sensors Growing >30% Per Year, Where in 5 Years? Beacon Valley Poland has strong Position in sensors

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Global Trends User Generated Content = 2/3 of All Content Sharing Content Not Slowing Down Where Does It All Go? How to organize?

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Global Trends User Generated Content = 2/3 of All Content 1.8 B Photos Uploaded Daily Are your Photos And Messages Organized?

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Global Trends Which Way Are Mobile Apps Moving? Sharing with Friends And Finding New Friends… Not Researching Information…

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Global Trends What about the Blockchain / Crypto Currency? Too Many Smart People Believe It’s Here to Stay Who will find the 1st Mainstream App / Use Case?

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Global Trends Online Education is Global, Brainly.PL $9M Funding

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Global Trends Changing Global Workforce Brings Tides of Change

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Global Trends Changing Workforce Brings Tides of Change Entrepreneurs and Freelancers have more independence than ever, that’s attractive but requires discipline and tools! Freelancers and Entrepreneurs say…

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Global Trends Evolution of Communications Smaller Groups Small Messages More Frequent Communication What’s Next? An Encyclopedia of Tweetable Premises?

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Global Trends What is Growth Hacking = Leveraging a Platform to identify a segment of users Product-Market Fit 2,000 legitimate entrepreneurs added per month on Twitter 500 legitimate entrepreneurs added per month on Linkedin Finding users = Not a Problem Sales and Marketing / Distribution @500Startups

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Global Trends www.SiliconValleyCounsel.com Network Effects / Lean Ops /Founder Fit / Pricing / Sales and Distribution Execution Expensive law firms / consultants = incomplete 200 page books / 1,000 Blog posts… who has time, pieces of a puzzle! Product Hunt = 1M upvotes Mattermark = 1M startups Linkedin = 3Mentrepreneurs

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Global Trends Technology Has Changed Communications Facebook, Twitter, Linkedin, Instagram, Pinterest, and Tinder… Change how people Interact / Communicate UI Simplicity makes their virality

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Global Trends For Apps, User Interface Needs to Be Super Simple Hypothesis/Assumptions: The Ultimate App = Press 1 Button To Get Instant Gratification Entrepreneurs love Short form bullet Points

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Let’s Connect Find the info you need for your startup questions right now! Linkedin: Peter Szymanski Twitter: @szymap and @SiliconVCounsel www.SiliconValleyCounsel.com

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Raising Funds from Silicon Valley What Silicon Valley investors look for in Polish companies…