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...
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.”
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
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
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
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%
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
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
externalserviceAPI
API
DB DB DB
Dynamic Deployment
cloud-native
10x day ++
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
costsCredit: David Skok, http://www.forentrepreneurs.com/saas-metrics/
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,
...
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
