The Scalable Startup by Tom Nora - II
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This document provides an overview of a four-part series on launching a scalable startup from an entrepreneur's perspective. The series will cover initial meetings to launch, first funding and funding lifecycles, turning an idea into a product, and fixing revenues. The author, Tom Nora, has over 20 years of experience in tech startups as an executive and consultant. He will draw from his engineering and business background to discuss key topics like seed funding, fundraising cycles, investor goals, and requirements for startups seeking initial capital.
The Scalable Startup by Tom Nora - II
- 1. "AN ENTREPRENEUR’S PERSPECTIVE: LAUNCHING A SCALABLE STARTUP” ------- A FOUR PART SERIES Tom Nora @tomnora | tomnora2020 @ gmail.com | 310-855-2199
- 2. THREE PART SERIES • Part 1 – First Mee)ng to Launch • Part 2 – First Funding, Funding Lifecycle • Part 3 – Idea to Product, Produc)za)on • Part 4 – The Turnaround – Fixing your Revenues
- 3. TABLE OF CONTENTS II -‐ First Funding – Funding Lifecycles 1. Assump9ons & Caveats 2. Funding Cycles > The Seed Cycle 3. Goals Alignment 4. Necessary Ingredients 5. The “Pitch”
- 4. MY BACKGROUND • Educated as an Engineer Ö Electrical, BioMedical, Computer Science Ö USC, Stanford, NASA • Involved in Tech Startups past 20+ years • mostly as a Business Execu@ve – Sales, Marke@ng, CEO • Also some Non-‐Tech • Deep Understanding of SoQware and Systems Architectures Ö Internet, Real-‐@me, Social Graph, Seman@c, Data Mining, AI, Machine Learning Ö App Dev Tools Design -‐ C++/Java/OOP, Simula@on, Network Ö 3D Graphics, Semiconductor, MP
- 5. STARTUP EXECUTIVE MGMT EXPERIENCE • Have led 5 Startups as CEO, 3 as VP Sales/Marke9ng • 2 IPOs, 20+ Acquisi@ons, 2 Liquida@ons • Have worked in… • Silicon Valley -‐ Palo Alto, Mountain View, San Jose, San Francisco, Berkeley, Pleasanton • Other – L.A., Portland, Corvallis, Boulder, New Mexico, Aus@n, Salt Lake City, Cambridge, NYC, Europe • Currently Startup Consultant in Launch, Funding, Organic Growth, M&A, IPO, Board Development
- 6. CURRENT WORK Ö Consul9ng – 1 project, looking for 1 more Ö Non-‐Profit work Ö Get Good Karma Now – plaYorm for NPOs • getgoodkarmanow.com Ö Helping build the So Cal Startup world • This group, Advisor, Incubators, SW Engineer Club • Launch Co-‐Working / Incubator space ? 2013? Ö Stealth Project = future of Job Seeking Ö Looking for partners
- 7. ASSUMPTIONS • Up and Running • Building for Growth • “Investor-‐Ready” Ö Strategy, Presenta@ons, Financials, Early Fans, Demos Ö You’re Ac9vely Looking for Ini9al Funding • The Seed Round, First Money, Post F&F • More Than 1 Person, “2+” is best • You Truly Believe Ö That you have an amazing idea & path to success • L.A. Startup Scene will get more like Silicon Valley Ö More Real Companies! (Tech and Non-‐Tech)
- 8. CAVEATS This Talk is Oversimplified, Idealized My Opinions, Experiences Hopefully Foster Conversa9on, New Cos. Here This Is A Very Small Part of the Whole Puzzle
- 9. SO HERE WE GO…
- 10. HOW FUNDING CYCLES WORK • Usually Mul9ple Rounds Ö Seed -‐ then Round 1 or A … Round 2 or B … Ö Loans, Mezzanine, IPO, Sale, (Liquida@on) Ö The Dream is One Round then Profitable Growth Ö Every One Is Different, Some Ain’t Preey • Forcing Factors = Valua9on vs. Cash on Hand • Can Go Several Years Between Rounds
- 11. WHAT INVESTORS DESIRE • Strong Revenue Growth • Exponen9al Valua9on Growth Valua9on Revenue Seed A B
- 12. MORE TYPICAL • S@ll Fundable Revenue Valua9on
- 13. SEED = THE FIRST MONEY IN… • = Seed Round, Angel Round, Friends & Family, etc. • Usually Pre-‐Revenue • The Cleanest round • Most Expensive Round (Equity) • Anywhere from ~$250K to $5 Million in Tech Ö In L.A. $250K to ~$2 Million Ö many deals currently in L.A. • Some Pre-‐Seed these days -‐ low $$ (not usually good) • Your First Major Milestone Ö We’re a Real Company Now Ö Credibility, In The Club
- 14. PURPOSE OF SEED ROUND • Catalyst -‐ Get Things Started, Accelerate • Get an Office • Travel • Pay Consultants, Contractors • Build Out Prototype, Proof of Concept • Market Launch • (Maybe) Pay Salaries Boiom Line Goal = Get it to Next Level, Next Round
- 15. SOURCES OF SEED FUNDING • Friends & Family, Customer • Ins9tu9onal, Government • Angel • Super Angels Ö Facebook – Peter Thiel + Reid Hoffman -‐ $500K • New! -‐ Crowdfunding • Kickstarter, indiegogo, crowdfunder (L.A. based) The Big Leagues • Venture Funds Ö Wide Range Here – Tier I, II, III Ö “Baby Seed Funds” inside VC Funds
- 16. NECESSARY INGREDIENTS • BIG Market • Convincing Scalability Story Ö VCs and Angels need High Growth Ö 10x ROI Opportunity – very important • Charter, Goals, Objec9ves • Market Understanding Ö Ready to Answer Most Ques@ons • Support System • Experienced Advisors, Fans, Friends, This Group • Most Common Missing Piece • Readiness + Enthusiasm of all Founders Ö Timing Is Everything Ö The “Day” Job(s)?
- 17. MORE NECESSARY INGREDIENTS • Technology Roadmap • Understanding your Valua9on Ö Need to Research, Discuss, Be Comfortable • Adaptability Ö Funding Sources will have other op@ons Ö Things Change OQen around you Ö They will call you on what you said 6 months ago • Tough Skin Ö VCs and Angels can be Brutal Ö Many Great Startups were Discouraged • Timing, Orchestra9on
- 18. CALCULATING & NEGOTIATING VALUATION (Startups Almost Always undervalued first @me out) • Get Help Here – Support System, Experts • Cover All The Bases • Respect PR, Marke9ng • Leverage SM • Passion • Don’t Lose Control of the Room
- 19. HOW TO MAXIMIZE VALUATION • Always Strive for Uniqueness Unproven You’re Uniqueness, Amazingness - - - > Get Trac9on Soon! Gold (Google, Apple) X Hard To Con9nue Growth, Lifestyle Co. (Zynga, Groupon, Yahoo, LI) Traction, Revenue - - - >
- 20. THE “PITCH” • Control The Environment • Cover The Usual Ö Market Size > Specific Opportunity Ö Product, Service, Other Ö Corporate Growth Plan, Exper9se Ö Specific Funding Needed • Team Ö Sprinkle these people all over the pitch Ö Support System/“Family”
- 21. THE “PITCH” • Keep it Real • Less Slides, More Discussion Ö Move on to Conversa9on Quickly Ö May Never Get to your Slides 1st Mee@ng • Can Take Many Forms Ö Oqen not usually an actual Pitch • Show Intensity/Focus for what you’re doing • Be ready to get “swung at” • Most Important -‐ -‐ Chillax
- 22. WHY INVESTORS SAY NO • The Team Ö Weak Team Members, Incomplete Ö Spooked, Lack Confidence • Lack of Uniqueness, Boring Story Ö Any story can be exci9ng • Start and Stop, lose momentum Ö Not a Real Deal • No Support System, Valida9on
- 23. EXAMPLE - FACEBOOK 1 4 FUNDING ROUNDS ST
- 24. PERSONAL EXAMPLE – ACTUAL REVENUE EXPONENTIAL REVENUE GROWTH
- 25. PERSONAL EXAMPLE – ACTUALS EXPONENTIAL REVENUE GROWTH $8 M Mezz (Debt) $100 M val 4X, 20X $4.2 M A Round $25 M val $1.5 M 5X SEED $5 M val
- 26. CONCLUSIONS • Raising a Seed Round is a Sales Job Ö Respect it as such Ö Don’t Duck from Nega9ve Feedback, but know when not to follow it • Use your Support Structure Ö Validate your story with Experts, Friends, Associates • Make a Schedule and Move Fast • Best of Luck
- 27. SEED MONEY
- 28. THANKS TO OUR SPONSORS & FRIENDS Buchalter Nemer Mai Seror, Judith Gordon, others buchalter.com SignNow Kleverdog SilBeach.com Blue Pecos Consul9ng Trojan Entrepreneur USC Dept of Computer Science
- 29. CONTACT INFO: TOM NORA - - - - Email: tomnora2020@gmail.com Phone: 310.855.2199 Connect with me on: Facebook Linkedin Pinterest Google+ Twitter: @tomnora @cowlow