First Time Startup CEO
Boot camp

Ex-Microsoftee Founded Startups
Microsoft Founders of Startups (Acquired, IPOed, or Significant revenue):
Jonathan Sposato @ Picnik: ACQUIRED
Dan Shapiro @ SparkBuy.com (Shell) ACQUIRED Rev, Acquisition or Market Cap

Mike Matthew @ All Stars Directory ACQUIRED Amount:

TA McCann @ Gist.com (Exchange) ACQUIRED
$1+ billion: 3
Joe Giordano @ PayScale Companies
Rich Barton @ Zillow & Expedia IPOed
Mike Slade @ Starwave ACQUIRED $100+ million: 6
Companies
Kevin Merritt @ Socrata
Jordan Schwartz @ Pathable (MSN) $30+ million: Many
Bill Bryant @ Qpass, Visio, Mixxer, etc.
Hadi Partovi @ Tellme Networks & iLike ACQUIRED
IPOed

5
Alex Castro @ Delve Networks (Shell) ACQUIRED
Rob Glaser @ Real Networks IPOed
Gabe Newell @ Valve
Alex St. John @ WildTangent Companies
Bryan Starbuck @ TalentSpring (Shell) ACQUIRED
Numbers are often confidential. Some information came from people in the companies listed BLOG: bryanstarbuck.typepad.com

Covered in this Talk
1 2
Business Model
Create the
Validation First Company

3 4
Startup CEO
Engineering Stack
Leadership

BLOG: bryanstarbuck.typepad.com

Business Model

Validation First

Validate by Pitch-Deck
Force Planning in all Critical Areas
Brief enough for feedback from
Customers, Employees, Advisors, Investors, etc.


Pitch-Deck PAIN finds your Blind Spots
He says, “This specific Pitch-Deck SLIDE is PAINFUL”
Response, “You found a Blind Spot in your ANALYSIS skills…
… or in your business”

Complete ALL of your Pitch-Deck

10x Healthy Business Model
“10-x” refers to the customer have a LARGE problem in their life, not
just another small issue in their life.

1 2
10x 10x
PROBLEM SOLUTION

3 4
Great Single Transactions
Transaction multiply to a Large
Economics Market Size

Validate by Talking to CUSTOMERS
1 2 Do they want a SOLUTION
Do they have this PROBLEM

9 2 8 3
People People People People

3 Will they PAY THE PRICE 4 Will they BUY with these
FEATURES
10 1 2 9
People Person People People

A real Problem
5 Are they any hidden
found in validation PROBLEMS
9 2
People People


How to Validate
Do NOT use your friends
And do not use the startup community
Be willing to pay $25 to $50 for 60-minutes for B2C.
$50-$100 for B2B professionals.
PayPal, Amazon, iTunes
lets you record the dial-in conference
call and share the screen. Cheaply

People from The US and your customers
Your Social Group are BAD are more like:
Early Adopters NOT Early Adopters
NOT A-Players or Type-A
White-Collar employees
NOT Advocating change & disruption
College educated Have a budget already fully spent
A-Players or Type-A Blue-Collar employees
Advocate change & disruption High School only, Community College…


Burn Rate
“Burn Rate” is the speed of spending money
BurnRate = (Expenses – Income)

“Runway” is months until running out of money
Runway = (Cash / BurnRate) = months until closing down

Searching for a great
Burn Rate when Employed
business modal while
employed is Salary: $120k
Living Expenses: $80k
great, because of the Burn Rate $40k (Negative)
NEGATIVE burn rate

Burn Rate – When Running
Now you are running the company. Manage around
BURN-RATE and RUN-WAY

One Metric for Pre-VC Funding:
Founder: Up to 2 years no salary
Engineer: $80k/year max salary (but not in the valley)
Monthly Burn Rate Monthly Burn Rate
(Low End) (High End)
RECOMMENDATION: CEO / Dev 1: $0k CEO: $7.3k
Microsftee gets a NON- Dev 2: $0k Dev 1: $7.3k
MSFTee co-founder.
Dev 2: $7.3k
Don’t magnify blind-spots
Law / Accting / G Design: $4k Law / Accting / G Design: $4k
Other: $3k Other: $5k
Target 4 to 8 months to launch
Burn Rate $7k Burn Rate $31k


Typical Funding
First Funding:
Comes at 5 months to 24-months (or never)
Stages of Funding
First funding is often $50k to $200k from 1) Friends & Families
friends and family Whenever possible

Full Round: 2) Individual Angels
2 or more employees. Demo
Highly conditional on an incredible idea,
team and credible Founder/CEO.
Often at 8 months to 18 months 3) Angel Groups
Launched. Tracking is a Plus

4) VCs
For most first time founders, post-
launch, post-traction


Two Typical Models
1 2 Developers until Traction. (Part-time CEO type)
The goal is LAUNCHED + TRACTION
Keep burn rate close to $0
Focus on Funding when Traction is starting
PROS: Easier to build team. Less need for funding.
CONS: Some risk of going in the wrong direction. Funding will be
harder to achieve pre-traction

2 1 CEO + 2 Developers. Funding sooner, more focus on Marketing / Biz Dev

The goal is LAUNCHED + TRACTION + Bigger Marketing/BizDev
goals
Funding is needed sooner
CEO needs to ramp to be “Fundable” sooner
PROS: Better business strategy. Better marketing & BizDev.
Funding easier
CONS: Higher burn rate, requiring funding sooner

Time Spent by Founder/CEO
Founder / CEO Long-Term
Strategy, Marketing, Board, Advisors, Fund Raising

Medium-Term
Launch: Marketing, Sales, Biz Dev, Legal, Finance
UX Designs

Dev #1 Coding

Dev #2 Coding


Dev Outsourcing
Successes:
Only pay FIXED Projects. oDesk.com
$1.5k to $3k for ~1 month to 2 month projects
Full specs, heavily manage with meetings, reviews & testing
Own Source Control. Code review everything
Tend to only work for technical founders
Always high risk

Failures:
Normally fails with no technical founders
<Hear horror stories>


Test your Startup CEO Knowledge
Demonstrate understanding of these topics. These are a common metric by
investors to test for a “Fundable CEO”
Finance Marketing
Deferred Recognized Revenue How to improve traffic conversion rates. Rates impact
on business model
GAAP compliance. Typical Pool sizes
Dave McClure model of marketing
Patterns of COGS to Revenue ratios of different
business models Drip email marketing
Impact of Churn How to create a POSITIONING strategy from a
strategic point of view
Post-Money Valuation. Cram downs
Explain behavior of 8+ channels of marketing
Negotiating focal points to secure next two rounds
of capital List 3 companies and their typical Cost-to-Acquire costs

Other
Explain what CHANNELS are for B2C startups. List
them
Explain how to manage to a Sales Pipeline. Describe
each stage
Explain how Business Development deals are secured


Engineering Stack

(For .NET programmers to Understand the
OPEN SOURCE STACK)

Ramp-up on Knowledge
GEMs
This STACK is NEW  Mobile Frameworks
Ajax Frameworks
THIS IS VERY IMPORTANT CSS Frameworks
Cross-Site Integration (Scraping)
The great expansion of the stack is new: Rails
~2008 to 2011 DB Schema Auto-Upgrade
GOAL: Work can be accomplished with Content Management System
HALF the number of devs Cloud WebApp Services
And with little or no TEST or IT Cloud Hosting
head count Enterprise BUS / Queuing
Microsoft people think, “It is just another BI & Reporting
language” Database Debugger
The stack is beyond the language Source Control Innovations
and new
Linux Servers
Automatic IT
Testing (Blackbox & Whitebox)
Utility Helpers Utility Helpers
Language Language

Stack is Critical for Burn Rate
Old Model: 10 Employees New Model: 4 Employees
CEO or Leader CEO or Leader

Dev #1 Dev #1

Dev #2 Dev #2

Dev #3 Dev #3

Dev #4 Tester #1

Dev #5 Tester #2

Example:
Dev #6 IT / OPs
$1m per WEEK
In customer transactions
With 12 Employees

Next Steps for Learning (1 of 3)
People often ask how to learn more. Here is the best way:
ABSOLUTE Must Read Strategic Thinking or Execution
Venture Deals On Amazon Innovator’s Dilemma On Amazon
By: Brad Feld By: Clayton Christensen

Crossing the Chasm On Amazon
Art of the Start On Amazon By: Geoffrey Moore
By: Guy Kawasaki
Blue Ocean Strategy On Amazon
By: W. Kim

The Lean Startup On Amazon
By: Eric Ries Good to Great On Amazon
By: Jim Collins

Maverick On Amazon
Other By: Ricardo Semier

The Ten-Day MBA On Amazon The Four Steps to the Epiphany On Amazon
By: Steven Silbiger By: Steven Blank

Founders at Work On Amazon Inspiring Excellence On Amazon
By: Jessica Livingston By: Michael Schutzler

ABSOLUTE Must Read

Next Steps for Learning (2 of 3)
People often ask how to learn more. Here is the best way:
Marketing Other
The 22 Immutable Laws of Branding On Amazon Founders at Work On Amazon
By: Al Ries By: Jessica Livingston

Full Frontal PR On Amazon
Startup Weekend On Amazon
By: Richard Laermer
By: Marc Nager

Positioning: The Battle for your Mind On Amazon Don’t Make Me Think On Amazon
By: Jack Trout By: Steve Krug

The Strategy and Tactics of Pricing On Amazon
By: John Hogan

Purple Cow On Amazon
By: Seth Godin

ABSOLUTE Must Read

More Learning (3 of 3)
(My) Bryan Starbuck’s Blog on Company Building:
http://bit.ly/StarbuckBlog
Dave McClure – Marketing Model for Startups:
http://500hats.typepad.com/500blogs/2007/06/internet-market.html
http://vimeo.com/26277733
http://www.slideshare.net/dmc500hats/startup-metrics-for-pirates-long-version
http://www.slideshare.net/dmc500hats/startup-metrics-101-367863
More from Dave McClure:
http://www.slideshare.net/dmc500hats/why-not-to-do-a-startup
http://www.slideshare.net/dmc500hats/do-marketing-its-not-evil
Presenting to Investors:
http://www.slideshare.net/dmc500hats/how-to-pitch-a-vc-aka-startup-viagra-how-to-give-a-vc-a-hardon
Strategic economics of SaaS https://salesforce.adobeconnect.com/_a13852757/buildingasuccessfulsaasco/
Startup Marketing: http://howtolaunchastartup.com/2011/06/20/21-must-read-resources-for-start-up-marketing/
57 Things I’ve Learned Founding 3 Tech Startups: http://betashop.com/post/1417413108/57-things-ive-learned-
founding-3-tech-companies

ABSOLUTE Must Read

The END

Next Steps:
Create your company and have a BLAST
Join the “MicrosoftStartup Learning” mailing list
Join here: http://groups.google.com/group/Knowledge-Startup-to-Microsoft
Bryan Starbuck’s Blog: bryanstarbuck.typepad.com

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