1

Creating Value in your StartupDec 5, 2012

R. Paul SinghEntrepreneur@rpaulsingh

AGENDA• Components of Value• Team• Technology• Customers• Profitability/Growth• Branding• Scaling• Examples

2

Value lies in the eye of the acquirer

VALUE OF A COMPANY IS IN THE EYE OF THE ACQUIRERMORE LIKE IN THE HANDS OF YOUR TEAM

Components of Company Value

4

TEAMTEAM

TECHNOLOGYTECHNOLOGY

CUSTOMERSCUSTOMERS

PROFITABILITY/GROWTHPROFITABILITY/GROWTH

BRANDINGBRANDING

SCALINGSCALING

Components of Company Value

• 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

TEAMTEAM

Components of Company Value

• 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

TECHNOLOGYTECHNOLOGY

Do companies get acquired just for

• Many large companies buying just for getting good teams

• Who has done most team/tech acquisitions amongst large companies?

7

TEAMTEAM

TECHNOLOGYTECHNOLOGY

Some Examples & Analysis of Acquisitions for

• 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

TEAMTEAM

TECHNOLOGYTECHNOLOGY

What you get in Acquisitions for

9

TEAMTEAM

TECHNOLOGYTECHNOLOGY

Components of Company Value

• 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

CUSTOMERSCUSTOMERS

Components of Company Value

• Profitability gives you Freedom but– Profitability Vs Cash flow– Profitability Vs Growth– Revenue matters more– Gross Vs Net Revenue

11

PROFITABILITYPROFITABILITY

Components of Company Value

12

PROFITABILITYPROFITABILITY

Yr 1 Yr 2 Yr 3 Yr 4 Yr 5

Revenue 5 9 15 27 47

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

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

Company A

Company B

Which company is more valuable?

Components of Company Value

13

BRANDINGBRANDING

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!

Brand Building 101 – source KissMetrics

• 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,

Analysts14

BRANDINGBRANDING

Components of Company Value

• 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

company15

BRANDINGBRANDING

Scaling gone wrong

http://www.youtube.com/watch?v=gpy5tR3UOaQ

SCALINGSCALING

Some Recent Examples

17

TEAMTEAM

TECHNOLOGYTECHNOLOGY

CUSTOMERSCUSTOMERS

PROFITABILITY/GROWTHPROFITABILITY/GROWTH

BRANDINGBRANDING

SCALINGSCALING

Cariden – Optical Nw & Tools - $141MMeraki – Wifi + Cloud = $1.2B

Some Recent Examples

18

TEAMTEAM

TECHNOLOGYTECHNOLOGY

CUSTOMERSCUSTOMERS

PROFITABILITY/GROWTHPROFITABILITY/GROWTH

BRANDINGBRANDING

SCALINGSCALING

Marketing Pilot – Mktg automationPhone Factor – Multi-factor AuthStorSimple – Ent. Cloud StorageYammer – Social Enterprise

SummarySummary

19 19

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

20

Thank You

Questions?