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Vassil MladjovResearch Director

Startups, Incubators & Venture Capital

@VASSKO

Gartner

How to Run, Grow, and Move your Startup to the Silicon Valley

© 2013 Gartner, Inc. and/or its affiliates. All rights reserved.#GartnerSYM

84

Comp Lab

Admin

82

Apple II

BASIC

87

Worked

On Military Computers

88

1st paid

Soft program

88-90

Air Force e-learning

91

Immigrated to USA

High School

Air Force

92

Baby Sitter

94

Network Admin @ PCX

1st Web Site

95

VassTech

96

Autobodyparts.com

Aidellsausage.com my 1st E-commerce

99

Finance

ITN CIO

02

StreamingMarketplace.

com

WiredResidence.com & SUN

Micro

03

ABN AMRO

04

AlwaysOn

05

Startup Mentoring

05

Blogtronix

13

Gartner

Social Software

10

Sharetronix

14

Bulgaria HiTechGartner

Startups & VC Funding

Diabimo

Gartner

3

Why the Silicon Valley?

4

5

6

7

8

9

10

11

12

13

14

15

16

17

19

20

21

22

23

© 2013 Gartner, Inc. and/or its affiliates. All rights reserved.#GartnerSYM

24

We have VC money!

25Gartner

US VC investments for the last 4 quarters

$47,800,000,000

4,729 deals

Total US VC investments

26Gartner

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q2010 2011 2012 2013 2014

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

0

200

400

600

800

1,000

1,200

1,400

1,600

$6.5

$7.8

$6.6

$6.7

$10.6

$9.8

$10.2

$9.1

$9.1

$10.3

$8.7

$8.4

$8.8

$9.3

$9.1

$9.8

$12.5

$16.4

9541,003

938993

1,2771,2021,229

1,175

1,4841,4691,355

1,301

1,4371,383

1,294

1,1621,1551,117

Capital Invested ($B) # of Deals ClosedSource: PitchBook

27Gartner

Median Quarterly Valuations by Series

$0

$5

$10

$15

$20

$25

$30

$35

$40

$3.2

$4.1

$5.9$6.8 $7.5 $6.7

$11.8

$18.6

$23.1

$18.8$21.5

$33.6

Series Seed Series A Series B* As of 6/30/14Source: PitchBook

$0

$50

$100

$150

$200

$250

$38.4

$44.9

$40.8

$77.9

$67.9

$85.5

$66.8

$190.6

Series C * As of 6/30/14Source: PitchBook

28

ente

rpris

e

softw

are

ecom

mer

ce

finan

ce web

mob

ile

clean

tech

med

ical

netw

ork_

host

ing

healt

h

hard

ware

adve

rtisin

g

analy

tics

educ

ation

gam

es_v

ideo

mes

sagin

g

secu

rity

man

ufac

turin

g

hosp

itality

othe

r

sem

icond

ucto

r

trans

porta

tion

socia

l

trave

l $-

$500,000,000

$1,000,000,000

$1,500,000,000

$2,000,000,000

$2,500,000,000

Investments breakdown per sector Q1-2014

Gartner

29

SF Bay

Bosto

n

New Y

ork

Los

Angele

s

Lond

on

Beijing

San D

iego

Austin

Jack

sonv

illeBer

lin

Salt L

ake

City

Shang

hai

Was

hingt

on D

C

Chicag

o

Philad

elphia

Dallas

Seattl

e

New D

elhi

Minn

eapo

lis

Denve

r

Mum

bai

Pittsb

urg

Santa

Bar

bara

Vanco

uver

Banga

lore

$-

$1,000,000,000.00

$2,000,000,000.00

$3,000,000,000.00

$4,000,000,000.00

$5,000,000,000.00

$6,000,000,000.00

Investments breakdown per location Q1 - 2014

Gartner

30Gartner

31

Kickstarter Stats

$1,182,342,895 Total dollars pledged to projects

64,258 Successfully funded projects 6,453,397 Total backers 1,926,208 Repeat backers

16,010,198 Total pledges

Gartner

32

Angel List Stats: 4,421 startups

Gartner

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33

Gartner

© 2013 Gartner, Inc. and/or its affiliates. All rights reserved.#GartnerSYM

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35Gartner

© 2013 Gartner, Inc. and/or its affiliates. All rights reserved.#GartnerSYM

What’s Driving This?

36

Analogue Web E-Business D-Marketing D-Business Autonomous

FocusBuild

relationships that drive business or lower cost

Extend relationships into

new markets/ geographies

Transform sales channel into a global medium to drive efficiencies

Exploit "Nexus" to drive greater efficiency

Extend potential customers from

people to things

Smart, semi-autonomous things become the

primary "customer"

Outcomes Optimize relationships

Extend relationships

Optimize channels

Optimize interactions

Build new business models

Maximize retention of and relationships

with things

Entities

Disruptions Emerging technologiesInternet

and digital technologies

Automationof business operations

Deeper customer relationships, analytics

Creation of new value and new nonhuman customers

Smart machines and things

as customers

Technologies CRMCRMWeb

EDIMobile

BIBig dataSocial

Sensors3D printing

Smart machines

RoboticsSmarter machines

Automation

The Road to Digital Business (and Beyond)

Business

People

Business

People

Business

People

Business

People

Things

Business

People

Things

Change of Kind Change of Degree

People

Driver: Digital Business is a Strategic Imperative for all Organizations to…

Compete GloballyA source of competitive differentiation and

advantage

Attain Operational Excellence

Improve the Efficiency and Effectiveness of Business Operations

Implement Business Diversification

Allows to embrace new business opportunities, reach new targets

The creation of new business designs by blurring the digital and physical worlds

DigitalPhysical

Gartner

…and CEOs are ready to invest on IT, Digital and R&D!

• 2014 Gartner CEO and Senior Executive Survey reveal:

- Top three investment areas to be:

• 1ST IT up from 3rd place in 2012, 2013

• 2ND Digital Capabilities (New Entry)

• 3RD R&D ranks 3rd up from 7th

- Topmost Technology-Enabled Capability Investments Over the Next Five Years:

• 38% Digital Marketing;

• 34% e-Commerce; Customer experience management;

• 32% Business Analytics

- CEOs See Digital as a Team Game, and the CIO Still Has the Highest Visibility

39

Digital

Gartner

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Wish (IT dominant)

• One Suite

• One Instance

• One Vendor/Contract

• One Architecture

Vendor Promise

• Buy into my Vision

• Suite Centric

• Solves the Integration Issue

The MegaSuite Vendors Cannot Keep Up

Wish (Business Dominant)

• Business Agility Dominates

• Happy Users Consuming

• Speed to Use: SeeITBuyITUseIT

• Architectures is IT’s issue

Vendor Promise

• Buy into my Brand & Ecosystem

• Multi Product/Service Centric

• Provide Integration Tools

Yesterday Today/Tomorrow

Enterprises Looking for Innovation Beyond The Usual Suspects

• “Other” - the most influential vendor in 10 years for +30% of enterprises (more than Google, any other named vendor, more than Microsoft / SAP/ Oracle combined*

•

• Corporate VC investments grown 100%+ YOY to Q1 2014 and to 30% of total VC investment (up from 20%)

•

• “Rethink and extend supplier, vendor, and partner and service provider relationships, including the use of smaller, faster, more innovative partners, and working with partners in new domains such as mobile, design, etc” *

41

*Gartner 2014 CIO Survey Gartner

Much lower costs of production and distribution mean lower barriers to entry

• Innovative technologies coupled with convenient mass consumption models favor cheaper, faster and easier web app development

- Examples of client-side development technologies: HTML 5; CSS ; JavaScript; Ajax (Asynchronous JavaScript and XML); jQuery ; MooTools ; Dojo Toolkit …

- Examples of server-side development technologies: PHP; Zend Framework; ASP ; ASP.NET; ColdFusion; Ruby on Rails; Perl; Python…

- Examples of Mass Consumption Models: Freemium, OSS, Subscription-Based, Free Redistribution, Developer Communities …

Gartner

© 2013 Gartner, Inc. and/or its affiliates. All rights reserved.#GartnerSYM

The Road to Digital Business Starts With

Ubiquitous Smart Things

Horizon: 2020

Ten billion connected Things shipped in one year

Excluding smartphones, tablets, PCs

Gartner

The Virtuous Circle Driving Smart Things

The "Virtuous Circle" of

Smart Things

Increasing Connectivity

Falling Costs

GreaterFunctionality

Growing Diversity

RisingUbiquity

Gartner

Wearable, Injested and Embedded Things

Gartner

Locally-Designed-and-Made Things

Gartner

"Industrial" Things

Source: General Electric

Expect Many Types of Things; Highly Fragmented Market

Connected LED Lamps

Smart meters

Smoke alarmsPoint of sale terminals

Security cameras

Smart household appliances

Toys

Digital signage

Consumer door and window locks

Vending machines

Parking meters

Smart weighing scales

Hotel door locks

Digital set top box

The Internet of (Very Different) Things

Bluetooth peripherals

Anti-theft tags

Wearables

Selected items for illustration

By 2017, 50% of Internet of Things solutions will originate in startups less than three years old.

Gartner

Market Opportunities Extend Well Beyond "Things"

Consumers Enterprises

Level 1:"Things"

Baby monitor, homeautomation devices

Level 4:Apps and services

Baby monitoring service orapp; home security service

Vending machine refillingand maintenance service

Level 5:Analytics

Level 3:Computing

and storage

Level 2:Comms &

networking

Revenue (2020)$ Billions*

31

17

18

262

Vending machine refillingand maintenance service

Big data, user analytics

Data centers, servers, storage

M2M Communications: cellular, mesh, WiFi, ZigBee, TV White Space, …

Gateways, data compression, aggregation and security

Gartner

Mobile Devices + IOT = Smart Home

51

Security

Sports & fitness Smart clothingLighting

e-cigarette

Plant care Pet feeding Cooking

Media & entertainment

Garden irrigation

Environmental control

Smart assistants and avatars

Gartner

Mobile Devices + IOT = Smart Office

52

Security & access control

LightingEnvironmental control

Refreshments

Media and display

Window blinds

Smartfurniture

Proximity services

Find equipment & resources

Industrial automation &

monitoring

Gartner

53

My Startup Graph

Gartner

55Gartner

Your Startup needs Smart Money!

• Find the right VC’s

• Know the VC’s you are talking to and their portfolio

• Do a due diligentce on the VC, they will be your boss!

• Strategic money is now more important than ever before.

• Create Custom VC decks for different VC’s

• Talk to Corporate VC’s and your customers

56Gartner

What does your VC deck needs to cover?!

• The Problem

• The Market Opportunity

• Your Solution/Technology

• Biz Model

• The Competition

• Your Team/Advisors

• Traction/Case Studies

• Financial Projections

• Why Should the VC invest

• Funding Needs and Use 57

Gartner

Top Rules for successful VC Pitch Deck• Tell a story

• Show, don’t tell

• 10-15 slides max

• 5 Sec Rule

• 5-7 Bullets max, Font 22+, 25-30 words max per page

• One Picture per page

• Your Title is a message

• Don’t make things up

• Know the Ricks

• Explain the Funding needs and the deliverables 58

Gartner

Avoid Common Mistakes

59

No Experienced

Advisors

Wrong Business

Wrong Investor

Weak Business

Plan

Top-down Market

Estimate

Weak Competitive Knowledge

Selling the Product

Unrealistic Valuation

Control Issues

Gartner

“Unfair” Competitive Advantages

• Functionality

• Patents

• References

• Sales Channels

• Business Model

• Community

• Network

• Scale

60

Versus CurrentCompetitors

Versus BigCompanies

VersusCommoditizers

VCs don’t invest in fair

races

Gartner

61

62

A “Good Enough” Management Team

• Done it before (successfully)- This stage of company

- This team

- This market

- Generated returns for VCs

• Trustworthy

• Passionate

• Realistic

• Think like an investor

63

Prove it out

Scale it

Take it public

Your investment is bigger than any

investor’s

Gartner

Real Traction

Product Customers Channels Financials

Seed Prototypes Pre-sold customers

Channel pre-commitments

Contained expenses

Early Production releases

Lighthouse customers

First sales and channel agreements

Fast revenue growth

Mid Products at scale

Customer growth

Deal size and channel growth

Fast, break-even growth

Late Successful expansion products

New market segments

Whole market sales success

Fast, profitable growth

64

Gartner

Key Takeaways

1. Make sure VC is right for you and your company- Think like an investor

2. Sell the investment; not the producta) $1 billion market

b) Unfair competitive advantages

c) Good enough management team

d) Traction

65

Gartner

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Silicon Valley is all about Tech…

66

67Gartner

68Gartner

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The Gartner Startup Curve – Assessing & Managing Startups

73

The Startup Curve

Gartner

75

Startup

Sales

Product &

TechnologyPeople

Capital Market

Timing

Startup forces affecting the Curve:

Gartner

76

The Startup Forces: People

• VCs invest in People

• The founding team makes or break a company

• Team:- Founders, developers, marketing, sales, support, finance

• Compensation and equity, titles and ego management

• Experience and networking connections

• How to hire and attract the right people

• Team players, Ex-athletes, Ex-Military, MBAs, out of school…

Gartner

77

The Startup Forces: Capital

• How much money do I need?

• Do I need smart money, corporate funding, or a load?

• How should I used the money to get the most out of it?

• How can I get a better evaluation and when should I get funding?

• Why do companies care about my funding?

• What is your go –to- VC strategy

• Is my pitch deck telling the right story

• What mistakes should I avoid?

• How to find the right VC? What should I ask them?

Gartner

78

The Startup Forces: Market

• What is the rate of customer or user growth?

• Who is the target customer and how big is that market?

• Where are the customers (EU, US, verticals…)?

• What is the forecast for this market?

• What is the best pricing model for the solution?

• What do CIO’s demand and what is their budget?

• How do they compare with their competition growth?

• What is your GTM strategy?

• Competitive Landscape

Gartner

79

The Startup Forces: Product &Technology

• Is the startup using the right technology for their target customers?

• What are the implications of the NEXUS of forces?

• Startups know best their technology, but many CIO’s many not be ready for them yet.

• What are the best practices for delivering the solutions from business point of view, lowest cost, highest revenue.

• Where is the startup solution on the Hype Cycle?

Gartner

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Secondary Startup Forces: Timing, Sales, location

• Where should I setup my startup: San Francisco, NYC, London?

• Where can I find qualified developers?

• Where will my developers cost less, but will be happy too?

• Is the market ready for my technology yet?

• What is my marketing strategy?

• What is my Social Media strategy?

Gartner

81

Key Takeaways:

• Think Big, Global, Scale, Cloud, Mobile, IOT, Future

• Stay Focused

• Build a Great Team and Advisors

• Get Smart VC money

• Find a Mentor

• Move to Silicon Valley when ready.

• Don’t worry about valuations.

• Just do it!

• Learn from the mistakes of others!

Gartner

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What do you need to do next?!

82

© 2013 Gartner, Inc. and/or its affiliates. All rights reserved.#GartnerSYM

84

KEEP

CALM

AND

CREATE YOUR

STARTUP

85

Vassil Mladjov

twitter: @vassko

Linkedin, Facebook, G+, Yahoo, Flickr… :vassko