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VC, Funding & Pitching - Startup Talks June 2015

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VC, Funding & Pitching - Startup Talks June 2015

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AWS works with many leading VC's in the UK. Join AWS as we share our learnings about venture capital, how it works and provide tips and tricks on how to pitch with the goal to successfully get funding for your startup.

AWS works with many leading VC's in the UK. Join AWS as we share our learnings about venture capital, how it works and provide tips and tricks on how to pitch with the goal to successfully get funding for your startup.

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VC, Funding & Pitching - Startup Talks June 2015

  1. 1. Venture  Capital,  Funding   &  Pitching Zubin  Chagpar,  Venture  Capital  Business   Development,  Amazon  Web  Services @phylosopher
  2. 2. 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”
  3. 3. Venture  Capital  Overview Impact  of  Cloud  on  Venture  Capital What  is  a  good  pitch?
  4. 4. Venture  Capital  Overview Impact  of  Cloud  on  Venture  Capital What  is  a  good  pitch?
  5. 5. Venture  Capital Startups!
  6. 6. Venture  Capital VC  Fund General  Partners,   Principals,  VP’s,   Associates,  etc.   Startups   Need  for  Capital   Growth  Potential Limited  Partners Institutional,  Government  &   High  Net  Worth  Individuals  
  7. 7. Two-­sided  Platform  model Startups   With  need  for  capital  and   growth  potential Capital  &  Value  Creation   connections,  biz  dev,  GTM,   mentoring,  etc Risk  &  Return Reduce  Risk  &  deliver   Financial  Returns Limited  Partners Institutional,  Government  &   High  Net  Worth  Individuals  
  8. 8. “2  and  20” So  how  does  a  VC  make   money?
  9. 9. “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%
  10. 10. Venture  Funding
  11. 11. 100% of  nothing 17% of  a  Big  Companyis  a  lot  less  than
  12. 12. AUG-­08 Nathan,  Brian,   and Joe JAN-­09   $20K  Accelerator Y  Combinator NOV-­10 $7.2M  Series  A: Sequoia Greylock SV  Angel &  others JUL-­11 $112M  Series  B Andreessen  Horowitz General  Catalyst &  others APR-­09 $600K  Seed   Round Sequoia   Y  Ventures
  13. 13. 01 04 idea MVP monetizescale Product  Risk Market Risk Financial  Risk 02 03
  14. 14. 01 04 idea MVP monetizescale Seed  Round Series  A,  B,  C,  etc. Incubator  /  Angel Product  Risk Market Risk Financial  Risk 02 03 $0-­250K   $250-­$1M   $1M-­$5M,  or  more  
  15. 15. What  caused  the  evolution   towards  the  “Lean  Investor”?
  16. 16. Venture  Capital  Overview Impact  of  Cloud  on  Venture  Capital What  is  a  good  pitch?
  17. 17. “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
  18. 18. 1995 1996          1997          1998          1999          2000          2001          2002          2003          2004          2005          2006          2007          2008          2009     2010          2011 1995  – .com Technology  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
  19. 19. 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  Source Open  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  
  20. 20. 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  Cloud Pioneered  by  Amazon  drove  total  operating  costs   down  significantly 500K-­ 3M •Staff  – the  battle  for   talent •Customer  Acquisition •Explosion  in   experimentation,   innovation,  and   Startups
  21. 21. 1995          1996          1997          1998          1999          2000          2001          2002          2003          2004          2005          2006          2007 2008          2009          2010          2011 2007:  Micro  VC  /  Seed Public  Cloud  led  to  explosion  in  the  number  of  Startups   and  the  emerging  of  “micro  VCs”   Angels Incubators VC’s Angels  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  
  22. 22. Why  do  VC’s  care? More  deals Shorter  time  to  scale Faster  time  to  revenue Lower  ‘burn  rate’ Higher  valuation  at  exit
  23. 23. Venture  Capital  Overview Impact  of  Cloud  on  Venture  Capital What  is  a  good  pitch?
  24. 24. Why  is  your  pitch   important? Because  it  shows  you  have  a PLAN  
  25. 25. What  is  a  good  pitch?
  26. 26. Intro Team Opportunity Solution Competition Business   Model The  Ask
  27. 27. What’s  always  there? Product Lots  of  product,  product,  product Rosy  Forecast The  infamous  hockey  stick
  28. 28. What’s  always  missing? Business  Model   not  just  WHAT,  also  HOW Metrics not  just  traction,  also  unit  economics Strategy What  will  you  DO?  How  will  you  GROW?   Execution…
  29. 29. 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
  30. 30. 1.  Problem Define  the   problem  clearly Explain  the  impact.   Why  bother? What’s  the  opportunity?   Market  size? Problem Impact Market
  31. 31. 2.  Solution
  32. 32. 3.  Business  Model Business  Model  ≠  Pricing
  33. 33. 4.  Business  Model  Metrics “I  look  for  signs  in  a  pitch  that  the   founders  understand  the  mechanics  of  the   business.”   Phil  Morle,  Pollenizer
  34. 34. ???? 4.  Business  Model  Metrics
  35. 35. ???? 4.  Business  Model  Metrics Avg Time  on  Site Average  Price   Basket Advertising  CTR
  36. 36. 4.  Business  Model  Metrics Metric /  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
  37. 37. 5.  Growth  Strategy Metric /  KPI Now Goal Growth  Strategy  &  Actions 1.  Advertising  CTR   6% 8% 1.  A/B  test  creatives 2.  Continuously   optimize  campaign  settings  for  CTR 3.  Hire  1  marketing  specialist 2.  Website  Conversion   5% 10% 1.  A/B  testing  of  landing  pages 2.  A/B  testing  signup  flows 3.  Run  Marketing  campaigns  (marketing  budget) 3.  Conversion  to  Active Y% 70% 1.  Automate  email  addition  for  known  hosts 2.  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  Paid 2.  Make  it  easier  to  pay/transact 3.  Develop  the  product  to  add  new  features  to  paid  users 4.  Deploy  payment  gateways  &  get  PCI  compliant 5.  Hire  3  developers
  38. 38. 10.  ASK Metric /  KPI Now Goal Growth  Strategy  &  Actions Costs 1.  Advertising  CTR   6% 8% 1.  A/B  test  creatives 2.  Continuously  optimize  campaign  settings  for  CTR 3.  Hire  1  marketing  specialist 75K 2.  Website  Conversion   5% 10% 1.  A/B  testing  of  landing  pages 2.  A/B  testing  signup  flows 3.  Run  Marketing  campaigns  (marketing  budget) 150K 3.  Conversion  to  Active Y% 70% 1.  Automate  email  addition  for  known  hosts 2.  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  Paid 2.  Make  it  easier  to  pay/transact 3.  Develop  the  product  to  add  new  features  to  paid  users 4.  Deploy  payment  gateways  &  get  PCI  compliant 5.  Hire  3  developers 180K My  ASK  for  funding  =  $480K
  39. 39. WHEN   do  you  need  to  have WHAT ?
  40. 40. 01 02 03 04 idea MVP monetizescale Seed  Round Series  APitch  for  Angel  Money Pitch  for  Seed  Round Pitch  for  Series  A Bootstrap  /  Angel
  41. 41. 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
  42. 42. 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
  43. 43. Ash  Fontana,  Founder  of  AngelList
  44. 44. 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
  45. 45. 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?
  46. 46. 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  them Business  partners  (e.g.  AWS),  CEO’s  in  portfolio
  47. 47. Questions?

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