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VC from the inside - a techie's perspective

Adrian Colyer
October 13, 2015

VC from the inside - a techie's perspective

Evening keynote from JAX London.

Adrian Colyer

October 13, 2015


  1. VC from the inside a techie’s perspective @adriancolyer, [email protected]

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  3. Idealized Startup Lifecycle

  4. Remember the Waterfall Model? Requirements Design Implementation Verification Maintenance •

    Doesn’t work well in the face of changing requirements and uncertainty. • What’s true for software projects is also true for building companies...
  5. Launch Customer Validation vision founding team problem/ solution fit Scale

    product/ market fit exit event Customer Discovery decreasing risk / increasing confidence increasing valuation TEAM MARKET METRICS $ seed $$ A $$$ B Customer Creation $$$ C, D,... repeatable, scalable sales & growth model
  6. It all starts with the Team...

  7. The 10x team 10x programmer? 200x shorter lead times ???x

    founding team
  8. Supercell

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  10. “We used this simple sentence to describe our idea of

    a new kind of games company that would put people front and center. We thought to ourselves: “What if you put together a games company the way you’d put together a professional sports team?” In that type of model, the sole mission of the founders and management would be to acquire the best talent FOR EVERY SINGLE POSITION, create the best possible environment for them, and then get out of the way. It would be an environment with zero bureaucracy. A place where the best people could make the biggest possible impact and nothing would stand in their way. Everything else, including financial goals, would be secondary.”
  11. PillPack

  12. Bus Factor! "Arriva London bus LT2 (LT61 BHT) 2011 New

    Bus for London, Victoria bus station, route 38, 27 February 2012 (1)" by Tom Page from London, UK (original), cropped by User:Ultra7 - Crop of File:Arriva London bus LT2 (LT61 BHT) 2011 New Bus for London, Victoria bus station, route 38, 27 February 2012 (1) uncropped.jpg. Licensed under CC BY-SA 2.0 via Commons - https://commons.wikimedia.org/wiki/File:Arriva_London_bus_LT2_(LT61_BHT)_2011_New_Bus_for_London, _Victoria_bus_station,_route_38,_27_February_2012_(1).jpg#/media/File:Arriva_London_bus_LT2_(LT61_BHT)_2011_New_Bus_for_London,_Victoria_bus_station,_route_38,_27_February_2012_(1).jpg
  13. The Limiting Factor isn’t Money

  14. A ~7-8 year journey

  15. It's a marriage...

  16. Relationships matter • You’ll most likely go through some tough

    times together • Often end up becoming lifelong friends • Significant investment of time to nurture companies • Portfolio companies act as local ambassadors and subject- matter experts • Repeat entrepreneurs, and referrals from previous entrepreneurs, are a great source of new investments too!
  17. Partner Time is the limiting factor General Partners Venture Partners

    Associate Partners Your Board
  18. The Opportunity: Go Big or Don’t Go VC

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  20. Law of Thirds ⅓ ⅓ ⅓

  21. Actual "Long tail" by User:Husky - Own work. Licensed under

    Public Domain via Commons - https://commons.wikimedia.org/wiki/File:Long_tail.svg#/media/File:Long_tail.svg Unicorn: http://discoverie.deviantart.com/art/Winged-Unicorn-400901130
  22. Behind the curtain Limited Partners (LPs) $$$ 11 yr Partnership

    Fund, e.g. $500M 3-4 years to make new investments Reserved funds for follow-on investment + GPs
  23. 3-5x return over 10 years Winners need to win Big!

    $500M -> $1.5-2.5B
  24. Market Potential Invest $1M, best possible return $50M? 50x! Rule

    of thumb: potential to be worth at least $500M. TAM...
  25. Ownership Implications • When the company wins big, the fund

    needs to win big too • Prefer to invest more money in return for meaningful ownership stake Reminder: competing for GPs time... 20%
  26. Worked Example Market cap/ownership $500M $750M $1.5B $3B 10% $50M

    (3.3x) $75M (5x) $150M (10x) $300M (20x) 20% $100M (6.7x) $150M (10x) $300M (20x) $600M (40x) 30% $150M (10x) $225M (15x) $450M (30x) $900M (60x) 40% $200M (13.3x) $300M (20x) $600M (40x) $1.2B (80x) Consider an average investment of $15M
  27. Recap: • What an investment team looks for varies by

    company stage • Team and market opportunity always matter ◦ The team is the most important thing ◦ The market opportunity has to be big enough ◦ There must be an opportunity to invest enough to end up with a meaningful ownership percentage • At later stages, metrics increasingly come into play
  28. IKIWISI Two things investors fear: • IDSI • IDKIWISI Combat

    both with a Prepared Mind...
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  30. ILC credit: Simon Wardley ILD

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  34. Dumb Client (web browser) Monolithic App Logic + Presentation DB

    presentation (HTML) Static Deployment on-prem 6-12 month cycle Rise of the Apps Native app Web app data (json) API embedded library Monolithic App Logic Only DB Static Deployment cloud- hosted? 1-3 month cycle Time to market Native app Web app data (json) embedded library external service API API DB DB DB Dynamic Deployment cloud-native 10x day ++
  35. Infrastructure Prepared Mind

  36. There are 2 sides to every (successful) story

  37. How do you get a #1 hit single?

  38. Think of the business as a machine Initial contact with

    a human being Profit
  39. Metrics for Pirates Machine (Dave McClure)

  40. Making a profit! Customer Profitability ARPU Avg. Cust Lifetime Cost

    to Serve No of Deals Closed Total cost of Sales & Mktg LTV CAC % Churn Rate Level of touch required Marketing program costs Sales Funnel Conversion Metrics Personnel costs Credit: David Skok, http://www.forentrepreneurs.com/saas-metrics/
  41. Remember.... We’re investing in your business, Not buying your product!

  42. Raising Money!

  43. Some advice shamelessly stolen from a true pro...

  44. The Process First call or meeting In-depth meeting Partnership presentation

    30 Engaged process 125 250 1000 Term-sheet presented & deal done 15 25% 75% 50% 50% 25% 75% 50% 50% Track...
  45. Catawiki

  46. Fundraising is a campaign...

  47. Getting attention Get Noticed! Do Your Research Get the Intro

    Make the most of the intro...
  48. The Pitch... • Be memorable, confident, honest, and well-prepared! •

    Pitch your business… not the market or the competition • State clearly what you do and how your business works • Demonstrate what investors are looking for • Know your metrics and unit economics • Know your risks and be open about them • Understand where you are in the process and your objectives: ◦ get funded, get to the next meeting, create a relationship, detect whether likely to be a good match, ...
  49. Congratulations to Doctolib...

  50. Everyone starts small!

  51. Raising is only the very beginning...

  52. A ~7-8 year journey

  53. There for the big things, and the little things...

  54. The last word... “I am sure you knew this already,

    but from the CEO’s perspective you are the perfect board member - insightful, strategic, supportive, and responsive. I am very lucky to have you on our board.” - Ilka Paananen, Supercell
  55. Lesson Summary • The Team and the Market Opportunity always

    matter • The limiting factor isn't money • Think of bringing in an investor like entering a marriage • Winners need to win big (and generate big returns) • There are two sides to every successful story • Getting a meeting is just the beginning... • Not now doesn't have to mean never • It’s a journey, not a transaction