Startups

Transcript

1. Startups at MIT
2. Rules 1. No note-taking (http://tinyurl.com/startupsatmit) 2. Speak up! 3. Be honest with yourself. 4. What I say is not a universal truth; learn to think for yourself. 5. Understand that you are fundamentally different than me, your parents, your professors.
6. Definitions •  Equity o  ownership in the company in % or shares •  Venture Capitalist o  Invests other people’s money and takes a fee + % of winnings •  Angel Investor o  Rich person who can invest (> $1M) •  Super Angel o  Really rich person who invests a lot (>$50M) •  Seed Round o  First round of official financing •  Series A/B/C o  subsequent “big” rounds of financing •  IPO o  Going public on the stock market •  Incubator/Accelerator o  program to help your early- stage company
7. Definitions •  Common Stock o  founder stock (what employees and founders get) •  Preferred Stock o  investor stock (what VCs/Angels get) o  gives them the right to their money back before founders •  Vesting o  gradual grant of funding/equity over time rather than all-at-once o  designed to get you to commit long-term •  Convertible Debt o  investment financing technique that gets you money now with a promise for the % equity calculation when a formal big round is raised (at that same rate)
8. People You Need to Know - Investors/Mentors Reid Hoffman LinkedIn Facebook Silicon Valley Peter Thiel Paypal Palantir Facebook Katie Rae TechStars Project 11 Boston Ecosystem Vinod Khosla Khosla Ventures Sun/JAVA/NFS Brad Feld TechStars MIT FeldThoughts Fred Wilson Union Square VC Flatiron Partners Marc Andreessen Netscape A16Z FB, Ebay, HP Sam Altman YCombinator Loopt Power fundraiser Paul Graham YCombinator Father of Startups Essays
9. Organizations You Need to Know
10. Why NOT start a startup? 1. High probability of failure 2. Big ups and downs (at high frequency) 3. Low on cash 4. Family stress 5. Rejection from many investors/incubators/ skeptics 6. Very long hours 7. Average exit time ranges from 6-8 years!
11. Why start a startup? 1. You are the boss! 2. Flexibility and following your passion 3. Fame/fortune/impact 4. Learn life’s lessons in a much shorter period of time 5. Age and risk 6. Personal branding (“developer from _____”)
12. Examples $26B net worth Oculus AR $3B valuation $10M in pocket EMG Gesture Controller 450,000,000 users Vaccine for HIV (1 in 300) Soylent Food/meal replacement Credit Card replacement
13. The Idea “Make something people want!” “Solve a real problem!” “Find the customer first!” “Move fast and validate!” “What’s your unfair advantage?” “What do you understand that others don’t?” “What’s new and what do people resort to because it doesn’t exist?”
14. Building a Founding Team •  2-3 Founders; Ideally 2 •  CEO & CTO (no COO or CMO) •  Someone you know well & work well •  Done things outside expertise and “hack the system” •  Rarely family or close friends •  Roommate bad signaling •  Someone you an be honest with and fight
15. Going Full-time •  Part-time o  A bad signal for everyone involved o  Hard to be flexible o  Moves slower •  Full-time o  usually self-financed (or FFF) o  flexible with opportunities and travel o  powerful signaling for yourself
16. Incubators & Accelerators •  Standard o  5-7% Common Stock for $15-18K + Conv. Note o  3 months of incubation time §  meetings with mentors, investors, community events, entrepreneurs, techies o  In-house or Out-House o  Demo Day event (good and bad) o  Free legal or finance help •  New Standard? o  5-7% Common Stock for $120K
17. Fundraising
19. Equity •  Conversations early •  Usually a bad idea 50/50 split •  Founders (first 3 people) o  5-50% •  Early Employees (first 2 or 3 hires) o  1-2% (different for non-tech) •  Regular Employees (beyond first 5 or 10 hires) o  <1%
20. Exits Acquisition •  ~7years •  $29.4M raised •  Sold for $155.5M •  Less dilution •  Assets retained (IP/ growth) or dissolved (anti-competitive) Acqui-hire •  Same as acquisition but for people not assets/tech •  Much lower sale price •  assets dissolved •  some employees are not hired/paid IPO •  ~8.5 yrs •  $162M raised •  more potential dilution •  big range in offering and market cap •  shares go public!
21. When?
22. Questions to ask •  A prototype is NOT enough •  Do you have a paying customer NOW? •  How will this make money NOW? •  Is this the right team? •  Is this the right time personally? •  Is this something you could see yourself doing for 10 years? •  Are you resilient enough? (competition)
23. Identifying Good Opportunities 1. Is there a paying customer NOW? 2. Have the founders already done everything they can to make a business out of it? 3. Will it scale to something much bigger eventually? 4. Does the founding team have a track record for success and do they work well together? 5. Do they make you feel like you will miss out?
24. Common Mistakes & Flags 1. Just to do a startup 2. No interest in the field/space, just want to do a business 3. Can’t jump in full-time unless you have $X or win Y or have a “Z Co-founder”
25. Websites You Need to Know Paul Graham’s Essays Hacker News r/Startups r/ Entrepreneurship
26. https://www.youtube.com/watch? v=T3JzcCviNDk
27. Don’t Settle.