An overview explanation of the changing nature of venture funds by Super Angel funds with the use of small bets. And the use of Startup Accelerator Programs in developing startup businesses. Finding the perfect People, Products and Market matching them with Mentoring and Money to develop a killer lean startup culture.
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Super Angel Funds:Lots of Little Bets & Accelerators
Early-Stage Startups: “Due Diligence” Is An Illusion(Better approach = write a quick, small check then wait ~6 mo’s)
• Problems in Early-Stage Due Diligence:• You Might Be Able to Detect Idiots & Liars, but…• Not much history, product, customers, or revenue (yet), so…• You probably can’t figure out Winners (yet).
• The New Due Diligence = Incremental Achievements• “Due Diligence” = Trusted Referrals + History (Ideation)• “Great Team” = Functional Prototype + Usage (Acceleration)• “Size of Market” Evidence = Customers, Revenue (Incubation)
• The Odds Are: We’re Wrong, They Sink, • We’ll Be Wrong 4x out of 5x. (If We Don’t Suck).• In 6 Months, You’ll Know If They Don’t Stink.• In 1-2 Years, You’ll Know If They’re Awesome.
Think Different.
Changes in Tech Startups• LESS Capital required to build product, get to market
• Dramatically reduced $$$ on servers, software, bandwidth• Crowdfunding, KickStarter, Angel List, Funders Club, etc• Cheap access to online platforms for 100M+ consumers, smallbiz, etc • A few big IPOs @ $1B+, but LOTS of small acquisitions (<$100M)
• MORE Customers via ONLINE platforms (100M+ users)• Search (Google)• Social (Facebook, Twitter, LinkedIn)• Mobile (Apple, Android)• Local (Yelp, Groupon, Living Social)• Media (YouTube, Pinterest, Instagram, Tumblr)• Comm (Email, IM/Chat, Voice, SMS, etc)
• LOTS of little bets: Accelerators, Super Angels, Small Exits• Y Combinator, TechStars, 500 Startups, GAN• Funding + Co-working + Mentoring -> Design, Data, Distribution• “Fast, Cheap Fail”, network effects, quantitative + iterative investments
Web 2.0 + Lean Startup
1. Startup Costs = Lower.
2. # Users, Bandwidth = Bigger.
3. Transaction $$$ = Better.
Building Product => Cheaper, Faster, Better Getting Customers => Easier, More Measurable
Iterative Product & Marketing Decisions
based on Measured User Behavior
Early-Stage Risk Reduction
• 1st Mtg: Crazy, Idiots, Liars or Crooks? • Product: does it work? (crappy, not perfect)• Market: are people using it? (not their mom)• Revenue: will people pay for it? (just a few)• Growth: how will it/they scale? (online? offline?)• Finance: what will it cost?
• Q1: cost to get a customer? • Q2: how & when do you make money?
Accelerator Criteria:
70% Capital
Quantitative Investing before Traction
100+ companies @ $15K avg. (1st check) - Assume high failure rate (up to 80%)
Double-Down after Traction20+ ‘winners’ @ $100K-$1M (2nd + 3rd check)
- - Target 2+ exits @ $100M+
Strategy: “Lots of Little Bets”*
1) Make lots of little bets pre-traction, early-stage startups
30% Capital
2) after 6-12 months, identify top 20% performers and double-down higher $$$
3) conservative model assumes- 5-10% large exits @20X ($50-100M+)- 10-20% small exits @5X ($5-50M)
Startup Accelerators & Metrics Lots of Little Bets. Most FAIL.(but a few succeed :)
Startup Investor Ecosystem
Angels & Incubators($0-10M)
“Micro-VC” Funds ($10-100M)
Smaller VC Funds ($100-500M)
Larger VC Funds (>$500M)
TrueFirst Round
AndreessenAtomico
Y-Combinator
TechStars
SoftTech (Clavier)
Felicis (Senkut)
SV Angel (Conway)
SequoiaGreylock
Union Square
Floodgate (Maples)
Foundry Group
Accelerator
Seed
Series A
Series B
Series C+
Bootstrap, KickStarter, Crowdfunding
500 Startups
Local Accelerator Opportunity (GAN)
Accelerator: Fast, Cheap, FAIL
• Accelerator = supportive startup ecosystem (+ angels, VCs)• Efficient use of investment capital ($0-100K)• High fail rate (60-80%) => large initial sample size
Accelerator: Education, Collaboration, Iteration
• Success based on:• MANY, small experiments• common platforms, customers, problems & solutions• physical proximity, open/collaborative environment• Domain-specific mentors & expertise• fast fail, iteration, metrics & feedback loop
• Incremental investment; high-risk, but high-reward
design/UX = (Ideation)• Market: test usage, distribution channels =
(Acceleration)• Revenue: test cust acq cost, revenue, *timing* =
(Incubation)
• Work on Pitch, Help Find Co-Investors, etc
The Super Angel Fund:Lots of Little Bets, Incremental Investment
Method: Invest in lots of startups using incremental investment, iterative development. Start with many small experiments, filter out failures, and expand investment in successes… (Rinse & Repeat).
• Make Money (or Go Big), Get to Sustainability:• Beta->Production, 12-24 months• Revenue / Growth => “We Can Make (a lot of) Money!”• Mktg Plan => Predictable Channels / Campaigns + Budget• Scalability & Infrastructure, Customer Service & Operations• Connect with Distribution Partners, Expand Growth