founding tech co talk
DESCRIPTION
This is a talk by Raj Kapoor (Founder & Managing Partner of www.cofounder.co and Venture Partner, Mayfield Fund) that he presented at MIT and Harvard. It's best accompanied by voice over but you can get the gist of it from the slideshow. The talk is about: 1) The Snapfish story - lessons learned 2) What VCs look for from internet/mobile entrepreneurs 3) Should you base your company in Silicon Valley 4) How the new cofounder.co model will workTRANSCRIPT
Founding A Tech Startup
by Raj KapoorFounder & Managing Partner, cofounder.co
Venture Partner, Mayfield Fund
Trending Topics : )
• Lessons from Snapfish
• What Investors Look For
• Silicon Valley or Not?
• cofounder.co
The Snapfish StoryRole Models Are Critical – especially early on…
The Snapfish StoryBuild Networks first…sometimes by chance…
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5
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1998 1999 2000 2001 2002
Cable ADSL Total Broadband
Household Internet Connections (M)
The Snapfish Story
Know when to cut the cord…timing does matter
1999
The Snapfish Story
Cofounders are recommended – fill the gaps
Product/Ops
BD/Schmoozing Tech w/ Business
Leadership/Product
The Snapfish StoryEarly – Its 100% Funding, Product, and Recruiting
The Snapfish StoryRaise Money (yes $36M) Whenever You Can….
The Snapfish Solution: Free
Processing
The Snapfish StoryThe Harsh Reality of the Marketplace…
4/23/2000 4/30/2000 5/7/2000 5/14/2000 5/21/2000 5/28/20000
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Projected Snapfish New Customers
New
Cu
sto
mer
s X
The Snapfish StoryDealing With Failure….
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11/1/1999 2/1/2000 5/1/2000 8/1/2000 11/1/2000
iVillage
The Street.Com
The Globe
Marketwatch
Priceline
Etoys
Drugstore
Egghead
Ashford
The Snapfish StoryHunker Down, Pivot…and Hope to Catch A Wave
The Snapfish StoryWhen Its Working…Step On It
0
5,000,000
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50,000,000
2Q00
4Q00
2Q01
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The Snapfish StoryAnother Tough But Fortunate Choice…
The Snapfish StoryCapitalize on Luck and Timing…
10 Takeaways from Snapfish1. Don’t Wait for Inspiration – Position So It Falls on Your Head
2. Data Changes and Its Never Enough – Invest In Your Gut
3. Passion is Infectious – You Gotta Really Have It
4. Be Crisp and Confident When Selling
5. Sell What They Want, Not What You Want
6. Hire People Better Than You
7. You’re Always Raising Money
8. Hypothesize, Get To Market Quick, Iterate Often
9. Plan, But Be Open to Change
10. Balance IS Possible (well, sometimes)
What Investors Look For
Waves of Disruption Create Opportunity
Search
UGC
Social Networking
Video
PortalsEcommerce
Mobile
• Connected TVs– Similar to mobile disruption in 2007 with the iPhone
• Professionals Platforms– Individuals become the brands vs organizations
• Services Marketplaces
• E-Commerce as mainline commerce in BRIC
• New Relationship Graphs
• Education Disrupted
Other Big Trends
Disruptive New Media• “Youthful” Founders• Product Driven• Network effects• Viral loops for customer
acquisition• Broad based adoption - 100M+
user scale• Momentum vs Black Swan
Vertical Destinations• Experienced Founders• Execution driven• Marketplace Model• Organic Traffic Advantage • Highly Monetizable Vertical
Two Types of Consumer Businesses
B2B/Infrastructure Criteria• Experienced Internet-focused Team• Pain Killer vs Vitamin• Frictionless deployment
– SaaS, few lines of javascript, widgets, ad tags
• Grass Roots Sales Model– open source, social media, sell to employees– Avoid the CIO
• Provides immediate benefit or cost reduction• Leverages new features of internet
– Data targeting, social, video, RTB, mobile
• Future Platform opportunity vs. “Feature/Tool”• Recurring revenue business
Looking for Great Founders• They know them or know of them WELL via network
• Product/user obsession
• Founders who can code and move quickly
• Deep understanding of business, metrics, and product
• Big vision AND solid execution
• Well connected to get talent, advice, etc
• Demonstrate they know what an A+ Player Looks Like
• Don’t need perfect CEO – but need to be “self aware”
General Tips Pitching VCs• Know your Real TAM – Bottoms Up
– Is $100M revs realistic? – Is VC or Angel funding better?
• Proof Team is Product and Business Savvy• Is there a true competitive advantage vs execution?
– Show network effect or why model is disruptive vs incremental to incumbents
• Map out Serial Risk Reduction• Raise at least 18 months of capital if its early stage• Control The Process and Timing
– Create relationships with VCs well in advance of fundraise– Try to get everyone on same timetable
Silicon Valley Or Not?
The Good
46% of VC dollars in Q2 went to Silicon Valley
(Only 12% went to the second place – here)
The Good
75% of ALL returns in venture are in Silicon Valley
The GoodMindset vs Location
• Change the World vs make a buck
• Pay It Forward vs look out for yourself
• Massive information advantage
• People-driven transactions
• Talent has DNA to Go Big and Scale
• Competition to Push You Hardest
• Product Rules
The Ugly
• Cost of Living
• Talent War
• Relationship-driven*
* unless you have amazing momentum
• Weather….NOT!
The Bottom LineSilicon Valley if….
• You are thinking BIG
• You Like Swimming with SHARKS
• Product/Service Excellence matters
• You Have the Relationships – or – momentum
• You like good weather and wine : )
What’s cofounder.co?
What’s Missing?• Entrepreneurs Looking for help – not just money
• Accelerators, incubators, angels, mentors advisors, VCs
• Time is more precious than capital for the best
• Where do they get time, experience, and deep help?
• 100+ key decisions every year!
Time is Right for a New Model…..
The Solution• Standardize part-time cofounder role
• time and experience for the critical decisions
• Day A Week cadence – 4-5 co’s max• Experienced founder/CEO/investors only• Deep relationships
• capital, talent, partnerships & exits
• Alignment as cofounder vs investor• Minority vesting equity - skin in the game• Join at point of cofounder decision
Long Term Vision
• Build Network of top notch operators/investors
• Some full time, some part-time
• Pool equity to give fund economics
• Take it Global
Angel.co for money - for a partner
Founders I’m Looking For• Awesome in all ways except experience/network
• Evidence of Excellence in your life
• Ambition to create a massive disruptive company
• Strong Desire to be CEO but self-aware
• Product obsessed builders fit best
• Passion for a sector, not wed to a solution
• Started anywhere but move to build co in SV
• Open to spending quality time together first
