Lean and Venture

David BinettiLean Startup Circle19 June 2013

Thursday, June 20, 13

@dbinetti

About Me

• Most recently, Votizen (acq. Jan 2013)• Longtime contributor to Lean movement• Raised equity for five startups

Thursday, June 20, 13

@dbinetti

When Raising Money, One Word:

TractionXThursday, June 20, 13

@dbinetti

When Raising Money, One Word:

Leverage

Thursday, June 20, 13

@dbinetti

Leverage

• Financings are just deals.• Seed deals, Series A/B/C Deals, Loan Deals, Acquisition/IPO Deals.

• The most important factor in any deal is leverage.

• VCs generally start from a position of high leverage; your goal must be to shift that balance.

Thursday, June 20, 13

@dbinetti

Leverage

• What is leverage?• Ability to influence the terms of a deal

• Leverage Factors• Necessity• Desire• Competition• Time

Thursday, June 20, 13

@dbinetti

Necessity

• Generally weak starting position.• You need money, but they don’t need to give it to you.

• Increase by:• Not needing (bootstrap/cash flow).• Market timing.• Being young! (Gee, thanks.)

Thursday, June 20, 13

@dbinetti

Desire

• Neutral to good starting position.• VCs fall in love with shiny objects (as do we all)

• Increase by:• Anchor Investor• Buzz• Team/technology/other unique asset• The usual: traction, scale, market, traction,

revenue, traction, partnerships, patents, traction, product, traction and traction.

Thursday, June 20, 13

@dbinetti

Competition

• You have the most control here.• Venture is a very small, close-knit market.• Facts are scarce; opinions are generally the only real information.

• Missed opportunities are remembered.• Increase by:

• Sequence your pitches closely together.• Show momentum, but never name names.

Thursday, June 20, 13

@dbinetti

Time

• Critical, and rarely on your side.• Works against desire

• Increase by: • If you’re on a clock, extend it• Speed iteration cycle time. • When raising, start early.

Thursday, June 20, 13

@dbinetti

Real-world example: Votizen

• Bootstrapped (necessity) ->• Got good engagement (desire) ->• Anchor Investor (desire) ->• Brand name Co-Founder (desire) ->• 20 VCs in ten days (competition) ->• Upcoming election (competition) ->• In no rush (time) ->• ....Funding on great terms!

Thursday, June 20, 13

@dbinetti

Lean Traps

• Lean can constrain thinking. Act lean, but dream big!

• Failure is failure. Tolerate it, don’t celebrate it.

• Don’t be religious. Vanity metrics can be your friend.

• Lean is not a deterministic path to success.

Thursday, June 20, 13

@dbinetti

VC Speak Glossary

Statement Translation

“We’ll fund this when you get more traction.” No

“We think this is going somewhere but can’t act now. We want to stay in touch.” No

“We love the product but need to talk to the partnership.” No

“We would love to continue the discussion; can you come back in two weeks?” No

“We want to invest but can’t find room in our portfolio.” No

“Here is a signed term sheet.” Maybe

“Hello, this is Silicon Valley Bank; the wire just came in.” Yes

Thursday, June 20, 13

@dbinetti

Final Advice

• Financings are a series of deals; think about the second deal before considering the first.

• Related: Once you raise, you lose leverage instantly. Be wary of seed deals.

• Getting funding only proves you can raise money. Nothing more.

Thursday, June 20, 13

@dbinetti

Further Reading

• Bargaining for Advantage, Richard Shell• Recent post by Steve Blank• Pitch Deck (David Cowan, Dave McClure)• Venture Deals (Feld/Mendelson)• Venture Hacks• Cap Table App (ask me)• Feedback Wanted!!!!

Thursday, June 20, 13

Thank You!/QA

Thursday, June 20, 13

@dbinetti

Thursday, June 20, 13