How to-build-value-tie
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The document discusses the key components that create value in a startup company. It identifies the main components as the team, technology, customers, profitability/growth, branding, and scaling. Each component is then discussed in more detail, highlighting the importance of the team's experience and chemistry, developing breakthrough technology, acquiring high lifetime value customers, achieving profitable growth, building a strong brand, and properly scaling the business. Examples of acquisitions are provided to show how companies are valued based on these different components. The overall message is that company value comes from optimizing all of these elements together, not just the technology or team alone.
How to-build-value-tie
- 1. Creating Value in your Startup Dec 5, 2012 R. Paul Singh Entrepreneur @rpaulsingh 1
- 2. AGENDA • Components of Value • Team • Technology • Customers • Profitability/Growth • Branding • Scaling • Examples 2
- 3. Value lies in the eye of the acquirer VALUE OF A COMPANY IS IN THE EYE OF THE ACQUIRER MORE LIKE IN THE HANDS OF YOUR TEAM
- 4. Components of Company Value SCALING SCALING BRANDING BRANDING PROFITABILITY/GROWTH PROFITABILITY/GROWTH CUSTOMERS CUSTOMERS TECHNOLOGY TECHNOLOGY TEAM TEAM 4
- 5. Components of Company Value TEAM TEAM • Team Value – Composition – Business Vs Technical – Domain Knowledge & Experience – Record of team members – Chemistry of the team – Location of the team – Size matters but Quality matters more in a startup 5
- 6. Components of Company Value TECHNOLOGY TECHNOLOGY • Technology Value – Breakthrough Technology Vs Incremental Technology – Design is new Technology – Causing disruption to an existing Market – Relevance to trends – Are you filling in product gap for a large vendor – Are you tied to an Ecosystem – Protecting IP 6
- 7. Do companies get acquired just for TEAM TEAM • Many large companies buying just for TECHNOLOGY TECHNOLOGY getting good teams • Who has done most team/tech acquisitions amongst large companies? 7
- 8. Some Examples & Analysis of Acquisitions for TEAM TEAM TECHNOLOGY TECHNOLOGY • Twitter Acquisitions – Vine – Video Sharing – 3 Employees – Posterous – Tumblr like – Rest Engine – Personalized Email Marketing – Clutch.io – Mobile IP Testing • Google Acquisitions – Bufferbox – Shipping lockbox – Incentive Targeting – Online marketing coupon – Nick Software – Snapseed mobile photo editing – Sparrow – Email for iOS 8
- 9. What you get in Acquisitions for TEAM TEAM TECHNOLOGY TECHNOLOGY 9
- 10. Components of Company Value CUSTOMERS CUSTOMERS • Customer Value is the true value – Consumer Vs Enterprise – Life time value of customer – Cost of Acquisition – How easily can you be replaced? – Type of customer matters too! – Size matters but Quality matters more in a startup – Is customer service just for Enterprise products? – Why are pure services company valued lower? 10
- 11. Components of Company Value PROFITABILITY PROFITABILITY • Profitability gives you Freedom but – Profitability Vs Cash flow – Profitability Vs Growth – Revenue matters more – Gross Vs Net Revenue 11
- 12. Components of Company Value PROFITABILITY PROFITABILITY Which company is more valuable? Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Revenue 5 9 15 27 47 Company A COGS 2 3 5 9 16 GM 3 6 10 18 31 Op. Costs 4 8 12 14 16 Profits (1) (2) (2) 4 15 Revenue 5 6 8 10 12 Company B COGS 2 2 3 3 4 GM 3 4 5 7 8 Op Costs 3 3 4 5 5 Profits 0 1 1 2 3 12
- 13. Components of Company Value BRANDING BRANDING Peter Thiel: Brand is as a classic code word for monopoly. But getting more specific than that is hard. Whatever a brand is, it means that people do not see products as interchangeable and are thus willing to pay more. A good brand provides a clear and memorable sense of what your business stands for! 13
- 14. Brand Building 101 – source KissMetrics BRANDING BRANDING • Some simple steps in Startup Marketing – Market Segmentation – Keyword Definition – Defining and Measuring Success – Marketing Budget – Inbound and Outbound – Inbound – PR, Influencers, Social Networks, Blogging – Outbound – Ads, Conferences, Analysts 14
- 15. Components of Company Value BRANDING BRANDING • Building Brand is as important as finding Customers – Brand is more valuable when others talk about it – Brand Building is very similar whether you are dealing with B2B or B2C Markets – Brand building costs are always underestimated – Always seek a healthy balance of Push Vs Pull Marketing – Brand building is responsibility of everyone in your company 15
- 16. Scaling gone wrong SCALING SCALING http://www.youtube.com/watch?v=gpy5tR3UOaQ
- 17. Some Recent Examples Cariden – Optical Nw & Tools - $141M Meraki – Wifi + Cloud = $1.2B SCALING SCALING BRANDING BRANDING PROFITABILITY/GROWTH PROFITABILITY/GROWTH CUSTOMERS CUSTOMERS TECHNOLOGY TECHNOLOGY TEAM TEAM 17
- 18. Some Recent Examples Marketing Pilot – Mktg automation Phone Factor – Multi-factor Auth StorSimple – Ent. Cloud Storage Yammer – Social Enterprise SCALING SCALING BRANDING BRANDING PROFITABILITY/GROWTH PROFITABILITY/GROWTH CUSTOMERS CUSTOMERS TECHNOLOGY TECHNOLOGY TEAM TEAM 18
- 19. Summary Focus on building long term value and the rest will fall in place Value is not just technology or team but a combination of these, branding, profitability and growth 19 19
- 20. Questions? Thank You 20