Building a fundable startup

191OCTOBER 19, 2013. Vijay and Shekhar

BUILDING A FUNDABLE STARTUP

Vijay AnandShekhar Kirani


STRUCTURE OF THIS TALK

HOW TO BUILD COMPANIES THAT HAVE GREAT….

TEAM MARKET BUSINESS MODELEXIT VALUE


$ 2 0 0 M

Exit Value


Size of the Market(India Jewelry)

$64B+

Addressable Market(Studded Jewelry)

$8B+

Target Market(Organized Jewelry)

$800M+

TARGET MARKET SIZE?TO GET TO $200M+ EXIT COMPANY

Size of the Market(Transportation)

$15B+

Addressable Market(Taxi booking)

$3B+

Target Market(Top 10 cities)

$300M+

e.g.BlueStonee.g.TaxiForSure


MarginGross Margin (65% for GOOG.

Operating Margin (25% for GOOG.

1.5% for AMZN)

100M+ Revenuee-commerce.

Niche tech service providers.

40M+ RevenueNon-subscription business.

Field sales force.Medium margin.

Massive Usage20%+ of online India.Weekly Interaction.Growing like weed.e.g. WhatsApp

Deep IP/TechFew Anchor Customers.Protected IP through Patents.Has global appeal.e.g. HealthCare Device Co..

$20M+ RevenueEnterprise SaaS.Online/Offline business.Good operating margin.Growing at 30%+.

REVENUES FOR GETTING $200M+ EXIT


$25MCAPITAL

3INVESTORS

6 YEARS

$200M+Exit

TYPICAL COMPANY EXIT SCENARIO

Value Creation

8x returns on invested $

4.7x is the 2012 Average

Equity Distribution

20% to 30% for founders ($60M)

5% to 10% for Angels ($20M)

55% to 75% among 3 investors ($40M)

Time Impact

Revenue: $0M, $1M, $2.5M, $8M, $20M+…

Non-linear growth


WHAT-IF QUESTIONS


FUNDABLE TEAMS


Good inTech

No businessexperience

Ideas fromtheir world

26 Years

Minimal G2Mexperience

YOUNG ENTREPRENEURS

Individualcontributors

PassionateNo productexperience


WHAT SHOULD YOU DO?YOUNG ENTREPRENEURS

Interact withyour customers.

Crate yourProduct.

LAUNCH

LearnMarketing,

Sales, Product,Hiring.

PAY SELF

Talk toUsers,

Mentors.Investors.

LEARN

See aBig

Opportunity

RAISE $$

1 2 3 4

• Experiment and learn. Iterate faster. Skill building phase.

• Survive. Generate revenues and if possible even “exit”.

• Gain domain experience and deeper insights


ExperimentersDecision Makers

Passion &Commitment

Domain Experience

2 Co-Foundersv/s one Founder

Street Credibility

Ability to work together

OUTSTANDING TEAM MEAN WHAT?

Operationalbackground

Deep productexperience

Strong G2Mexperience


WHAT-IF QUESTIONS


TARGET MARKETS


Exit FriendlyLarge competing players

Existing players are slow to react

Customer behavior is changingNew players can grow fast

e.g. Enterprise SaaS, AdTech, Payments, Healthcare Devices

Effciency PlayPlatforms, Tools, Enterprise

Appse.g. Atlassian, SalesForce,

Marketo

Shifting MoneyOnline version of offline

business.First-mover advantage.

Convenience and Efficiency.e.g. BookMyShow, RedBus

Network basedNarrow functionality.Applicable to large population.e.g. WhatsApp, Instagram

MarketplacesB2C and B2B marketplaces.Fragmented Suppliers.Non-value added Intermediaries.e.g. CommonFloor, 99Design, oDesk

New markets in creationUncovering latent demand.Offline resources are enabled.Technology enabled.e.g. AirBnB, Lyft, Fiver

FUNDABLE MARKETS


PREFERRED BUSINESS CONSTRUCTSWHAT SCALE COMPANIES WOULD CHOOSE

Licensev/s

Subscription

In-Premv/s

Cloud

Revenue-sidev/s

Cost-side

Revenue flowStartv/sEnd

1 2 3 4


PREFERRED BUSINESS CONSTRUCTSWHAT SCALE COMPANIES WOULD CHOOSE

Singlev/s

Multi Tenant

Inbound Salesv/s

Outbound Sales

Inside Salesv/s

Field Sales

India v/s

Global

5 6 7 8


WHAT-IF QUESTIONS


DEALING WITH INVESTORS1. Target the right firm. Match your company type to

investments firm’s investment thesis.

2. Individuals make decisions. Not a VC firm. Target the right investor.

3. First meeting is the “most important meeting”. Founders should know more about their business, product than the investor. Do your homework.

4. It is a comparison game. There is a “deal pace” and “risk/reward” profile of the deal. The best deal on the table gets “the money”.

5. Make sure you guys are excited about the investor beyond “money”. It is a 7 year commitment, probably very next to “commitment of marriage”.


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@skirani

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Q&A

facebook.com/thestartupguy

@vijayanands

[email protected]

Building a fundable startup

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