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2020.06.06. Startup lessons - How to start and keep going

Summary of what one must remember about founding and running a startup in 2020.

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2020.06.06. Startup lessons - How to start and keep going

  1. 1. Startup Lessons Hild Imre
  2. 2. I.About Imre 1993-1998 Cornell University, New York, USA 1998-2003 Lehman Brothers, New York, USA 2004-2008 Built HILD & OTP Életjáradék ($120 and $80M market cap) 2009-2010 Entrepreneur in Residence at a Venture Fund 2011-2015 iCatapult - HUF 140M invested into 4 startups 2011 - Mentor for Seedcamp, StartupBootcamp, Pioneers 2011 - Hungarian Venture Capital Association 2013 - 1st Central European Startup Roadshow in New York City 2014 - Hungarian Innovation Federation 2015 - MIT Venture Lab Mentor 2015 - 2016 Digital Factory Contributing Partner - 200+100M into 21 startups 2015 - Global Traction - Business Development for 8 startups/scaleups 2017 - Hungarian section of V4 Startup Ecosystem Survey 2017 - Digital Startup Strategy - International Market Entry 2018 - EU startups (Health, Food, Energy) to Israel to learn Ecosystem Cooperation
  3. 3. SELF TEST 3 + Frequency of ‘in my opinion’ or ‘I’m sure..’ + Frequency of asking follow up questions + Frequency of asking questions + Arguments based on facts versus beliefs + Willingness to talk about project (without asking) + Willingness to communicate proactively (e-mail etc).
  4. 4. Purpose of a startup 5 + NOT to compete in competitions + NOT to convince investors + NOT to be on the cover of magazines + NOT to ‘come up with an idea’ + NOT to create something that no one wants, even for free... A Startup exists to create value for the largest possible group of clients or consumers in a repeatable and profitable business model.
  5. 5. What do you need for a venture? 1. Money - Entrepreneur 2. Company - Market understanding >> Problem + Solution 3. Idea - Co-founder and team 4. Prototype (testing, testing, testing) 5. Product Market Fit 6. Business and Distribution model 7. Capital to grow
  6. 6. Startup development – a word about the co-founder 7 Dissolving dilemmas, doubts Reality check Minimum 1 maximum 2 Reasoning practices Do more if you work together How to keep founders motivated?
  7. 7. Motivation of ecosystem players Investors Accelerators Press Conferences Consultants Government Coworking places STARTU P ? ? ? ? ? ??
  8. 8. Startup Operations – Running a gig Idea Funding SalesProduct development
  9. 9. Startup Operations – Running a gig Idea Funding Product development Sales
  10. 10. Startup Operations – Running a gig 11 Idea Funding Product dev. Sales
  11. 11. VALUE OF AN IDEA….
  12. 12. Startup Pirates Startup Operations – Running a gig – for success 5/2/14 13 Problem or change in a market Prototype a solution Test and iterate Fund Scaling
  13. 13. In the beginning
  14. 14. The Lean Method + Testing your initial Hypotheses – keep them or pivot + Collective Wisdom of your Customers + Get out of the building + A 1 person company is not necessarily a lean startup + A 10 person company may be a lean startup
  15. 15. VALUE PROPOSITION • Value is material, emotional or abstract benefit to user or client 16
  16. 16. Lean canvas
  17. 17. Hypothesis testing is the birth of a value proposition LEARNMEASURE BUILD
  18. 18. There are 3 important activities for an entrepreneur/startup:
  19. 19. ASK LISTEN LEARN
  20. 20. Do you make assumptions?
  21. 21. John and the Mayor The Mayor of the city has a brother called John Doe. The same John Doe says the he has no brother.Who is not telling the truth? John
  22. 22. A note about sales… Sales is not a function Sales is what your startup DOES
  23. 23. A note about sales…
  24. 24. ARE YOU AWAKE? LETS CHECK WHAT YOU REMEMBER
  25. 25. THE SINGLE THING THAT HOLDS YOU BACK FROM SUCCESS Lack of funding Not good enough idea Mixing Assumptions with Facts Few Sales people Not enough customers Too much competition Slow patent registration Customers do not understand
  26. 26. The 4 pillars
  27. 27. The building blocks of a successful startup PRODUCT (P) Set of sustainable well- differentiated value propositions
  28. 28. The building blocks of a successful startup PRODUCT (P) Set of sustainable well- differentiated value propositions CLV - CAC Customer lifetime value - Customer Acquisition cost Per person benefit of aquiring one new customer
  29. 29. Customer Lifetime Value (CLV) Should be calculated per segment Sum of average total benefit of a customer Calculation: Average transaction value of a customer * 1/Churn
  30. 30. Customer Acquisition Cost (CAC) The cost of getting another new customer Calculation: Total cost of advertising, PR, marketing + cost of closing / No. of paying customers.
  31. 31. The building blocks of a successful startup PRODUCT (P) Set of sustainable well- differentiated value propositions DISTRIBUTION (D) How your product reaches your customer in a sustainable manner CLV - CAC Customer lifetime value - Customer Acquisition cost Per person benefit of aquiring one new customer
  32. 32. The building blocks of a successful startup PRODUCT (P) Set of sustainable well- differentiated value propositions BUSINESS MODEL Reaching your goal by providing value to customers and key partners CLV - CAC Customer lifetime value - Customer Acquisition cost Per person benefit of aquiring one new customer DISTRIBUTION (D) How your product reaches your customer in a sustainable manner
  33. 33. Funding
  34. 34. ANGEL LIST - angel.co
  35. 35. Valuation of an ICT startup – The 6 criteria that matter most 4/13/15 43 College Incubator Business Plan Market Timing Current funding Burn Rate B2B City of operation Current investor Revenue forecasts Internal rate of return Number of patents Grant money No. of founders B2C Former Employer Competitions Won
  36. 36. Chances of success – lets do the math The Forward labs experiment 20% Great, 35% Zombie, 45% dead 18 months, 14 projects After pivot and optimization? = ± 0 Even good team’s good ideas do not guarantee success
  37. 37. Lifespan of a startup 3 founders, great idea - 33% each Do we have everyone? ESOP formation, 15% Angel funding, 20% for 100K Series A! First real investor comes in, 25% for 1M 2 years later - Series B investor comes in at another 20% for 2M Founders are left with 20%, 6.6% each Year 4: Strategic buyer offer: 13M! 850K for each founder
  38. 38. By the way….what is needed for such valuation? Value in Year 4 = 13M Annual revenue is = 2M Industry comparable multiple = 6x Monthly revenue = 170k Average cart size 50 euro = 3,400 sales or 160 per day.
  39. 39. What will REALLY happen 3 founders, great idea - 33% each Do we have everyone? ESOP formation, 15% Angel funding, 20% for 100K Series A! First real investor comes in, 25% for 1M 2 years later - Series B investor comes in at another 20% for 2M Founders are left with 20%, 6.6% each Year 4: Strategic buyer offer: 13M! You are lucky if you stay together Hopefully smart money… Wise, mostly overlooked step, costs a lot later Did you read liquidation terms carefully? Do you really need it? Did you remain in pos? Still would not be a bad payday…or? Wanna sell? Good luck. 13M - 1M (1x pref) - 3M (1,5x pref)= 9M - agent fees (6-8%, or 1M) - closing expenses (300K) 7,7M each founder would get about 500K or annual 120K …
  40. 40. ANGEL LIST JOB BOARD
  41. 41. So happy exit? ….and it will not happen, actually :(
  42. 42. …so where are all the successful startups…?
  43. 43. An experiment on 200 startups
  44. 44. High Mobile adoption Carriers could support it Software (app) protection Fast Technology Need for Information PERFECT TIMING
  45. 45. IN SUMMARY
  46. 46. DNA of Success • Lose your assumptions • Operating in English only • Have deep understanding of market • Be obsessed with customer • Validate - early and often • Diverse, open team • Be discoverable • Globally adoptable technology • Tactics to build on others’ success
  47. 47. Contact and more info 60 www.imrehild.com LinkedIn: hu.linkedin.com/in/hildimre/ hildimre@gmail.com This presentation available at: http://www.slideshare.net/hildimre

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