Computer Society Conference 2018 - Startup Studio

JACQUELINE CHONG @GreenTomato | @GTSTUDIO
IS IT POSSIBLE TO HAVE A STARTUP
STUDIO MODEL IN HONG KONG?
2018

CHALLENGES STARTUPS IN HONG KONG FACE
▸ No Startups
▸ No $$$ for Startups
▸ Not the right kind of $$$ or VCs for Startups
▸ Not enough series A or up Startups
▸ Government didn’t provide an optimal ecosystem
for Startups

BUT WHAT DO
STARTUPS NEED?

DIFFERENT STAGES
OF STARTUPS

I HAVE AN IDEA, HOW DO I MAKE IT INTO SOMETHING THAT USERS USE?
HOW DO I BREAK IT INTO MARKET?
HOW DO I BUILD THE INFRASTRUCTURE THAT’S NECESSARY FOR IT TO
UP AND RUNNING?
NOT-EVEN-THERE PHASE

OH SOME PEOPLE ARE ALREADY USING MY PRODUCT BUT NOT ENOUGH
OF THEM. HOW DO I GROW THE FOLLOWING INTO TRACTION?
CHASING-FOR-GROWTH PHASE

OUR FIRST 1MIL IS 10 MONTHS EARLY, DO I CHARGE NOW
BUT MY FREE HOSTING TIER IS RUNNING OUT.
MY MARKETING ENGINE SIMPLY WON’T STOP, USERS KEEP
COMING IN. PRESSURE ON PERFORMANCE AND
SCALABILITY KEEP BUILDING. MORE BUGS TO FIX. AND
NEW FEATURES NEEDED TO FEND OFF COMPETITORS.
SO MANY INVESTORS AND ANGELS ARE CALLING IN,
WHAT SHALL I DO? WHAT IS A TERMS SHEET? WHAT IS
DUE DILIGENCE? THE ONLY BOOKKEEPING I HAVE IS
GOOGLE DOC.! AND I AM NOT ALLOWED TO CHARGE
USERS.
TRACTION & VC-CALLS PHASE

WE NEED TO GROW MY TEAM. WHO
SHOULD WE HIRE? BUT NOT ONE
ANSWERS OUR JOBS AD.
STILL IN LONG TALK WITH VC BUT WE’RE
BURNING MONEY LIKE RUNNING WATER.
TRACTION IS SLOWING DOWN.
COMPETITORS ARE CATCHING UP.
MARKETING IS STUCK AND THERE SEEMS
TO BE A LACKING OF USER GROWTH
TECHNIQUES THAT WE DON’T KNOW
WHAT.
HAPPY PROBLEM ISN’T HAPPY
ANYMORE PHASE

VC MONEY FINALLY IN BUT THE TEAM IS PRETTY
MUCH LEFT WOUNDED, DEFLATED AND DE-
MOTIVATED.
NO ONE REALLY KNEW HOW TO MANAGE THE
TEAM SPIRIT, THE PRODUCT, THE USER GROWTH.
WORSE, WE’RE SUPPOSED TO BE PLANNING FOR
SERIES B, ALREADY.
GROW OR OUT PHASE

THINGS ARE GETTING OUT OF CONTROL.
PRODUCT QUALITY IS DECLINING. THERE ARE
MORE BUGS TO FIX BUT MARKETING IS CHASING
FOR NEW FEATURES TO ACQUIRE NEW USERS.
WE JUST WANT SOMEONE WE CAN TRUST TO
CALL TO.
HEADING TO VALLEY OF DEATH PHASE

DECIDED TO PIVOT INTO AN ENTERPRISE STARTUP.
INSTEAD OF THE VC-TRACTION MODEL, WE OPTED FOR A
SELF-SUSTAINED ENTERPRISE SALES SAAS PRODUCT.
AND WE’RE NEW TO ENTERPRISE-SELLING!
PIVOT

ADMIN, HR, LEGAL,
SALES, PARTNERSHIP, VC
COURTING, OFFICE SPACE
NON-CORE ACTIVITIES
PRODUCT
DEV,
PRODUCT
ROADMAP,
USER,
GROWTH
CORE ACTIVITIES

ADMIN, HR, LEGAL,
SALES, PARTNERSHIP, VC
COURTING, OFFICE SPACE
NON-CORE ACTIVITIES
PRODUCT
DEV,
PRODUCT
ROADMAP,
USER,
GROWTH
CORE ACTIVITIES You will not
succeed if you
don’t know these.

TERMS SHEET, ADMIN, HR,
LEGAL, SALES, PARTNERSHIP,
VC COURTING, OFFICE SPACE
NON-CORE ACTIVITIES
PRODUCT
DEV,
PRODUCT
ROADMAP,
USER,
GROWTH
CORE ACTIVITIES
But these kill
even more
startups.

ISN’T THAT THE REASON
WHY WE HAVE TO RAISE
FUND?

USE OF PROCEEDS WILL ONLY BE USEFUL
IF YOU KNOW HOW TO USE THEM. DOWN
TO A GANTT CHART LEVEL.

MONEY DOESN’T GROW A STARTUP.
THE TEAMSWHO KNOW HOW TO
USE THE MONEY DO.
CAN MONEY SOLVE THEM ALL?

SO EVEN IF YOU HAVE THE MONEY,
▸ Do you know who you need to hire and where can you
find them, and can you snatch them up fast enough?
▸ Can it fund you time?
▸ Can it fund you connections?
▸ Can it fund you experience?
CAN MONEY SOLVE THEM ALL?

HOW MANY TIMES HAVE
YOUR MET THOSE FRIENDS
OF YOUR ANGELS?
▸ Time?
▸ Commitment?
▸ Incentives?
▸ Follow-up?
CAN YOUR ANGELS SOLVE THEM ALL?

STARTUP STUDIO

WHAT IS STARTUP STUDIOS?
▸ Startup studios are organizations that build startups in a sustainable and
repeatable way. You can also call them venture builders or startup factories.
▸ Studio founders are often successful entrepreneurs often with exits and
some angel investor experience. They want to continue building ventures,
but in a more efficient way.
▸ Many studios finance their operation with venture capital. There are also
some bootstrapped studios. They do agency work, build up cash flow, and
use this to build their own startups.
▸ A common vision of studios is to create their own platform or network, like
large accelerators.
▸ The main metric that matters is usually the total valuation of studio’s
portfolio companies.
▸ Studios need team members who have a special blend of entrepreneurial
and employee mindset. Their compensation often includes salary and
equity option.

WHAT IS STARTUP STUDIOS?
▸ Studios use similar methodologies like startups. This includes Lean Startup,
Design Thinking and agile software development methods.
▸ In some studios only a few people are dedicated to a startup and all other
resources are shared. Others work with fully dedicated startup teams.
▸ The most common daily challenge of studios is to balance the central
resources between the different startups.
▸ Getting initial investment into a studio, or first investment for the portfolio
companies is a challenge. The main reason is that they have to educate the
investors about this model.
▸ The biggest red flag from the investors’ point of view is usually the cap
table of portfolio companies. Studios keep a significant equity part. So
investors need assurances that the startup team is sufficiently motivated.
▸ More and more corporations are adopting the studio model to boost their
innovation potential. Recently even Harvard Business School started one.

THE TRENDS AND BENEFITS
▸ The result is a more efficient way of building startups. According to The Anatomy
of Startup Studios, a 2015 research by Attila Szigeti, in which he looked at
publicly available data for 51 studios and 212 of their portfolio companies:
▸ Funding into portfolio companies has been increasing 48% year-over year since
2010.
▸ Since 2008, studio companies have raised more than $4B venture capital.
▸ Startup studios create more and more companies, +15% year-over year.
▸ There have been 14 portfolio companies acquired, on average three years after
their launch. 
 
full report here: https://gumroad.com/l/sssp1

14YRS
As a mobile
solution provider
and internet product
company
WHY WE HAVE
OUR OWN
STARTUP STUDIO?

OUR PORTFOLIO

7 STEPS WE USE
TO OPERATE OUR
STARTUP STUDIO
AND BUILD OUR
STARTUPS.

WE FIND AN
ADDRESSABLE MARKET
AND A WAY TO SMARTLY
ADDRESS IT. THEN WE
TEST IT OVER, AND OVER,
AND OVER AGAIN. UNTIL
ONE IDEA STICKS.
#1
BRING THE ESSENCE
OF THE IDEA

WE RECRUIT INCREDIBLE
TALENTS, CEO- AND
CTO- MATERIAL, HAVE
THEM MEET THE
PRODUCT, AND LET THE
MAGIC HAPPEN. WE ACT
AS THE 3RD CO-
FOUNDER.
#2
FIND THE PERFECT
CO-FOUNDER

WE PROVIDE COMFORT
TO OUR FOUNDERS BUT
SPEND MONEY VERY,
VERY CAREFULLY AND
IMPLEMENT
ACCOUNTING TOOLS
FROM DAY 1.
#3
CONTROL THE
BUDGET

WE HAVE IN-HOUSE A
TEAM OF EXPERTS IN
MARKETING, DESIGN
AND DEVELOPMENT THAT
INVEST ITS WORK AND
EXPERIENCE IN THE
STARTUP’ DEVELOPMENT.
#4
BRING THE THE
BEST RESSOURCES

PITFALLS AND GREAT
ACHIEVEMENTS ARE A
DAILY MATTER. AS A
CO-FOUNDER, WE
SUPPORT OUR
STARTUPS, NO MATTER
WHAT.
#5
BE A PERMANENT
SUPPORT

OUR EXPERIENCE,
STRUCTURE AND
PROCESSES HELP
STARTUPS FIND THE
RIGHT PACE. BUILDING A
STARTUP BOTH REQUIRES
SPEED AND STAMINA.
#6
MASTER
TIME MANAGEMENT

WE BUILD STARTUPS IN
THE SAME OR RELATED
VERTICAL (LIFESTYLE
PRODUCTS), WHICH
PROVIDES A TRUE,
STRONG AND BROAD
NETWORK.
#7
PROVIDE A (REAL)
DYNAMIC NETWORK

IS IT FOR
HONG KONG?

9 FACTORS TO CONSIDER
FOUNDERS ?
▸ Successful entrepreneurs who already made their fortune, and
wanted to continue building ventures.
▸ Development agencies that use their free capital and resources to
build their own startups.
▸ Corporations that want to create a separate organization for
innovation.
▸ Some VCs, for example Andreessen Horowitz are also building more
and more services for their startups. They are essentially building
their startup studio from the top down.
▸ Recently Harvard Business School announced that they will create
their own studio for alumni ventures.

FUNDING ?
▸ Founder-funded studios, where the founder is an entrepreneur
who finances the studio from his earlier successful exit.
▸ Venture-backed studios, where the studio raised a larger round
and is investing it into multiple startups.
▸ Bootstrapped studios, where the agency work provides enough
cashflow to enable startup building.
FOCUS ?
▸ Usually the industry focus of a studio is determined by the
founders’ previous success, industry network and the biggest
opportunity this person sees considering his experience.

IDEA GENERATION ?
▸ Internal ideation is the most common.
▸ Some studios accept external teams at a very early, pre-seed
stage.
▸ But all of them act as cofounders, providing financial and human
capital.

TEAM SETUP ?
▸ There are studios where startups only have a CEO (and maybe a
CTO) as a dedicated resource, and all other competencies are
provided by centralized, shared teams.
▸ In some cases the studio puts together fully dedicated startup
teams. Often from pre-screened entrepreneurs and developers
who are on stand-by.
▸ A key point is the leadership team, which are often the founders
themselves. These are the people who decide on ideas, on
spinoff or go/no-go, centralized investor relations and so on.

OPERATIONS ?
▸ Lean Startup, Design Thinking and Agile are all the similar
methodologies that regular startups use.
▸ One notable difference is that studios need to have expertise in
portfolio management.
▸ Studios also need to figure out how they judge their own
startups, what signals they take into consideration when
deciding about go/nogo. And how much autonomy they want to
give to their startups.

STUDIO RESOURCES ?
▸ Some studios “only” provide initial funding, network and hands-
on guidance from studio founders.
▸ Others provide a wide range of competencies. These include
technical development, design, analytics and market research,
sales and back office.
EQUITY ?
▸ A few studios only take a minority stake. Let’s call this the “Xth
cofounder” model.
▸ Most studios take 45-85% equity depending on how much
money and resources they provide to each startup. In such cases
the studio typically also provides the initial idea.

EXIT STRATEGY ?
▸ Startup studios aiming for low-hanging fruits, quick wins and
positioning their startups so that it will be an ideal acquisition target.
Then use the money from their exits to build even more startups.
▸ Some studios plan for the long run, build startups that have
synergies, build unicorns and take over a whole market.

JACQUELINE.CHONG@GTOMATO.COM
TWITTER @JACQUEJAC
Jacqueline Chong
Chief Strategy Officer
Facebook:
GreenTomatoMobile

Computer Society Conference 2018 - Startup Studio

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Computer Society Conference 2018 - Startup Studio