Architecting successful startups

Copyright © K Consulting All Rights Reserved.
(18th September 2019)

#SerialEntrepreneur #Professor #Consultant
#Investor #Athlete #Mathematics #KeynoteSpeaker,,
-K Consulting Co., Ltd (CEO)
-Nagoya University (Visiting Professor)
-SLOGAN Inc.（Co-Founder & Executive Fellow） *IPO(2021)
-IIT Kharagpur, IISc, Indian Institutes of Management,
IIT Hyderabad, National University of Singapore,
Institut Teknologi Bandung, University of Indonesia,,,
（Guest Lecturer）
Kazuaki ODA (織田一彰)

Copyright© K Consulting All Rights Reserved.
Today’s keyword
Always talk with “Number”

(Question)
The odds of winning a lottery is 10%
You draw 10% lotteries 10 times.
Then what is the probability
that you win at least once till the end?
(1) 25%
(2) 45%
(3) 65%
(4) 85%

(1) 25%
(2) 45%
(3) 65%
(4) 85%
(Question)
You draw the lotteries 10 times.
Then what is the probability
that you win at least once till the end?

Mathematics tells us…
0
20
40
60
80
100
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Probability(%) of winning in
1/10 lottery with N times trial
Trial(N) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Probability(%) 10 19 27 34 41 47 52 57 61 65 69 72 75 77 79 81 83 85 86 88

T-hub India
=India’s startup community@Hyderabad

Why do so many startups fail?

8
Why do so many startups fail?
Basically failures are more often than successes.
CEO’s are beginners with no experiences.
They do know how to do that.
NO money, NO names, NO members, NO credit,,,

Why did they succeed?

What Factors Are Important to Succeed?
Strategic ???, Innovative???,
Technology???, Good Team???
Culture/Values???, Leadership???
Marketing???, Salesforce???
????????????????????????????

They were lucky!
Why did they succeed?

What made them "LUCKY”?

What make them LUCKY?
Their positions were
in good PLACE in good TIME.

We Need “New Systems”!

There are so still many issues in the world
poverty, rising inequalities, disparities of opportunity, wealth
and power, gender inequality, unemployment, global health
threats, natural disasters, spiraling conflict, violent
extremism, terrorism, humanitarian crises, natural resource
depletion, environmental degradation, desertification,
drought, land degradation, freshwater scarcity and loss of
biodiversity, climate change,,,

Why has it NOT been sustainable?
Greedy capitalism/Short-term goals/
No social objective/No government…

Capital market
(資本経済)
Why SDG’s?
The gap of two systems is too big to coexist!
Real economy
(実体経済)
-SDG’s
(Sustainable development goals)
-ESG investment
（Environment/Social/Governance）
-NPO
(Non-profit organization)
-NGO
(Non-government organization)

(1) End poverty in all its forms everywhere
(2) End hunger, achieve food security and improved nutrition and promote sustainable agriculture
(3) Ensure healthy lives and promote well-being for all at all ages
(4) Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all
(5) Achieve gender equality and empower all women and girls
(6) Ensure availability and sustainable management of water and sanitation for all
(7) Ensure access to affordable, reliable, sustainable and modern energy for all
(8) Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for
all
(9) Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation
(10) Reduce inequality within and among countries
(11) Make cities and human settlements inclusive, safe, resilient and sustainable
(12) Ensure sustainable consumption and production patterns
(13) Take urgent action to combat climate change and its impacts*
(14) Conserve and sustainably use the oceans, seas and marine resources for sustainable development
(15) Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat
desertification, and halt and reverse land degradation and halt biodiversity loss
(16) Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build
effective, accountable and inclusive institutions at all levels
(17) Strengthen the means of implementation and revitalize the Global Partnership for Sustainable Development
17 Sustainable Development Goals

“Business Opportunity Principle”
Pain >>> Want
Social issues
(natural disasters,
poverty, inequality,,,)

“Business Opportunity Principle”
Pain >>> Want
Social issues
(natural disasters,
poverty, inequality,,,)
Business Opportunity

“A problem is always an opportunity”
(Tips by Prof ODA)

Technology and innovations can save our world!

The Inventions of The Human
-Language
-Fire
-Agriculture
-Currency
-Electricity
-Telephone
-Car/Train/Plane
-Medicine
-Metal(Iron/Copper/Aluminum,,,)
-Paper/Book
-Music/Art
・・・

＜What technology solved＞
Rescue from starvation
A large increase in human population
Increase in travel distance
Health and lifespan of people
Rise of civilization and culture
Stable livelihood
＜Tragedy caused by technology＞
Development of war weapons
Increase in the economic disparity
Increasing competition
Destruction of nature and environment
Waste of resources
Loss of mental calmness

29
-Artificial Intelligence (AI)
-5G
-Cloud Computing
-Blockchain
-Quantum Computers
-RPA(Robot Process Automation)
-IoT(Internet of Things)
-AR(Augmented Reality)
-VR(Virtual Reality)
-Clean energies
-FinTech(Financial Tech)
-Space development
-Nanotechnology
-Drones
-Autonomous driving
-Regenerative medicine
-Electric/ fuel(hydrogen)
vehicles
-Clean/artificial meat
<The keywords of “Technology”>

The world is changing dramatically and fast!

India’s IT Center, Bangalore

India’s Startup Event and Incubation at Hyderabad

China’s Startup Ecosystem at Shenzhen

EV-bus and EV-taxi in Shenzhen

GoJek Headquarter at Jakarta, Indonesia

Beautiful International City, Singapore

New IT city of Vietnam, DaNang

Center of startups in Japan, Tokyo

Company’s Business Life Cycle
Company
Value
Time
（Ⅰ）（Ⅱ）（Ⅲ）（Ⅳ）

（Ⅱ）（Ⅲ）（Ⅳ）
創業期
Creation
成長期
Growth
成熟期
maturity
衰退期
Declining
（Ⅰ）
Market size
(マーケット
サイズ)
Time(時間)
企業は人間と同じく年齢がありそれに伴った成長をする
Every company has its own age and grows with age like a human

Time（時間）
(10-20 years)
$50M
$10M
$1B
$300M
Series A
Series C、D、、
IPO (Initial Public Offering )
（新規上場）
Secondary Public Offering
（市場での調達）
Series B
Road to IPO(Initial Public Offering) and after
（企業のIPO前後の道のり）
Company
Value（企業価値）

事業の成長と資金調達＆IPOのタイミングをリンクさせる
Business development is followed with fundraising and IPO schedule
$300M
Time（時間）
(10-20 years)
$50M
$10M
$1B
Series A
Series C、D、、
（新規上場）
Series B
CompanyValue
（企業価値）
（Ⅱ）（Ⅲ）（Ⅳ）
創業期
Creation
成長期
Growth
成熟期
maturity
衰退期
Declining
（Ⅰ）
Market size
(マーケットサイズ)
Time(時間)

What is your TARGET market?

・Can You See the Market?
－Size Is Big Enough?
－Know How to Win?
－Qualified to Be A Winner?
・You Have A Good Team?
* Impossible to Have All Functions in YOU
Points!

・Can You See the Market?
－Size Is Big Enough?
－Know How to Win?
－Qualified to Be A Winner?
・You Have A Good Team?
* Impossible to Have All Functions in YOU
Important Points of STRATEGY

＜Work1＞
How Many McDonald's Are in India?
And How Much Is the Annual Revenue?

＜Work2＞
How Many “CHAI POINT’s” Are in India now?
And How Many “CHAI POINT’s” and
Its Revenue in 2030?

（Ⅰ）（Ⅱ）（Ⅲ）（Ⅳ）
Where Is It in Market Growth Curve?
（市場の成長曲線の意味すること）
Time（時間）
MarketSize
(市場規模)

MarketSize
(市場規模)
（Ⅰ）（Ⅱ）（Ⅲ）（Ⅳ）
Time（時間）
Potential Market Size
(潜在市場規模)
Present Market Size
(現在の市場規模)
Present Stage
（現在の位置）
Matured Point
(成熟期)

MarketSize
(市場規模)
（Ⅰ）（Ⅱ）（Ⅲ）（Ⅳ）
Time（時間）
Potential Market Size
(潜在市場規模)
Present Market Size
(現在の市場規模)
Present Stage
（現在の位置）
Matured Point
(成熟期)
<=Market Size * Company’s Share
市場規模×シェア

<=Market Size * Company’s Share
Potential (Company) Size
The important number is this!

Pre IPO Growth
Time（時間）
Company
$50M
$10M
$1B
$300M
Series A
Series C、D、、
（新規上場）
Series B
Fund Raising ( by Issuing Stocks)
（新株発行による資金調達）
Post IPO Growth

$50M
$10M
$1B
$300M
Series A
Series C、D、、
Series B
IRR(Internal Rate of Return, 内部収益率)>30-40%
Company
Time（時間）
（新規上場）

$50M
$10M
$1B
$300M
Series A
Series C、D、、
Series B
Pre IPO Growth Post IPO Growth
Company
Time（時間）
（新規上場）

Nobody knows the future markets!
(誰も未来の市場については知らない)

<Extreme Simple “Marketing” Questions>
マーケティング究極の3つの問い
(1)”Who” pays(誰が)
(2) for “What”(何に対して)
(3)”How much”(いくら払う)

A market size <=> “SCALABILITY”!
(Tips by Prof ODA)

Finance
資金調達

Why Do Many Startups Fail?
The FACT is
ONLY Some Startups Can Succeed

Finance is most important
to survive for startups.
初期のスタートアップにとって
資金調達は死活問題！

Do NOT die!
（死ぬな！）

Only one KPI to survive is
(たった一つの生きているか知る指標は)
“CASH POSITION”(現預金残高)
≠Current Floating Asset(流動資産)

Time(時間)
Cash Position
(現預金残高)
“Cash Flow Management” is important!
(キャッシュフロー管理が大切！)
＜Key!(重要)＞
* Burn Rate(現金の減る速度)
Fundraising

Typical “Cash Position” of Growing Company
(典型的な成長企業の現預金残高)
Series A
Series B
Series C
Fundraising
Cash Position
(現預金残高)
Time(時間)

Institut Technologi Bandung, ITB
(Indonesia)

Loan
(Indirect
finance)
Equity
(Direct
finance)
Bond
(Direct
finance)
Repayment with
interest for some
years
Exit in IPO/M&A
Interest and
redemption
(convertible to
stock)
-Mostly banks
-Once repaid, no relation
-Personal debt
-VC, corporation, individuals
-IPO or exit scenario
-Some variations of stock
-Only interest in short-term
-Company credit is needed
-Convertible bond
-Low risk
-Facility investment
-Bridge finance
-High risk
-Venture investment
-R&D
-Big facility investment
-Project finance
-For public or big companies
Various Ways of Fund Raising
（資金調達の方法）
variation terms Advantage/disadvantage usage

Institutional
Investor
(機関投資家)
Angel Investor
（個人投資家）
Strategic
Investor
（提携企業）
VC, CVC
Individuals
（Biz owner,
Banker,,)
Corporation
(Trading company,
Big companies)
-New stock
-Management outsider
-IPO scenario
-Join in an early stage
-Management
insider/outsider
-IPO scenario
-Join in an early stage
-Management insider
-Joint venture
-IPO no obligation
-Abundant money
-Many VC’s
-Term sheet, contract period
-Accountability
-Flexible
-Min. documentation/report
-Depend on the person
-Accountability
-Strategic investors
(joint venture style)
-Big share for them
Variation Organization Content Points
Types of Investors
（投資家の種類）

Who are good investors for you?
-Socially trustful person?
-Fund size is big enough?
-When is the maturity of the fund?（duration 10 years）
-How is the investment contract?
-Matching to the target market
-Chemistry to a management team
-How much do they collaborate?

-Only two numbers should be decided,
“valuation” and “number of new stock(=share)”
-Timing and investors
-Plan the “Series of fundraising”
Points of Fundraising

-”Bad” shareholders are insiders
-No experience, no knowledge of fundraising
-In early stages, outsiders have big shares
-Targeting markets are too small
-Limited business partners
Typical Pitfalls(Creation)
（Ⅱ）（Ⅲ）（Ⅳ）
創業期
Creation
成長期
Growth
成熟期
maturity
衰退期
Declining
（Ⅰ）
Market size
(マーケット
サイズ)
Time(時間)

$300
M
Time（時間）
(10-20 years)
$50M
$10M
$1B
Series A
Series C、D、、
（新規上場）
Series
B
CompanyValue
（企業価値）
Tips(No. 1)
Select new share holders
very carefully!

$300
M
Time（時間）
(10-20 years)
$50M
$10M
$1B
Series A
Series C、D、、
（新規上場）
Series
B
CompanyValue
（企業価値）
Tips(No. 2)
Even in the worst scenario,
cash position must be positive.

$300
M
Time（時間）
(10-20 years)
$50M
$10M
$1B
Series A
Series C、D、、
（新規上場）
Series
B
CompanyValue
（企業価値）
Tips(No. 3)
Company valuation will depend on
stock market and new investors.

$300
M
Time（時間）
(10-20 years)
$50M
$10M
$1B
Series A
Series C、D、、
（新規上場）
Series
B
CompanyValue
（企業価値）
Tips(No. 4)
Do not overrate big company’s names.

$300
M
Time（時間）
(10-20 years)
$50M
$10M
$1B
Series A
Series C、D、、
（新規上場）
Series
B
CompanyValue
（企業価値）
Tips(No. 5)
Create a “Big picture”
for the long future!(after IPO)

-Difficulties from bad condition of stock market
-Shortage of money to accelerate business
-Owner’s share is too small
-Complicated variation of stocks
-Growth is not enough
-Preparation for IPO
-No growth after IPO
-IR activities are too heavy
（Ⅱ）（Ⅲ）（Ⅳ）
創業期
Creation
成長期
Growth
成熟期
maturity
衰退期
Declining
（Ⅰ）
Market size
(マーケット
サイズ)
Time(時間)
Typical Pitfalls(Growth)

$300
M
Time（時間）
(10-20 years)
$50M
$10M
$1B
Series A
Series C、D、、
（新規上場）
Series
B
CompanyValue
（企業価値）
Tips(No. 1)
Create a good plan to
Before “AND” after IPO!

$300
M
Time（時間）
(10-20 years)
$50M
$10M
$1B
Series A
Series C、D、、
（新規上場）
Series
B
CompanyValue
（企業価値）
Tips(No. 2)
Have a good CFO!

$300
M
Time（時間）
(10-20 years)
$50M
$10M
$1B
Series A
Series C、D、、
（新規上場）
Series
B
CompanyValue
（企業価値）
Tips(No. 3)
Raise money for next 2 years!

$300
M
Time（時間）
(10-20 years)
$50M
$10M
$1B
Series A
Series C、D、、
（新規上場）
Series
B
CompanyValue
（企業価値）
Tips(No. 4)
After raising fund,
concentrate on business and operation!

Tips(No. 5)
Stock option must be considered
in a series of fundraising.
$300
M
Time（時間）
(10-20 years)
$50M
$10M
$1B
Series A
Series C、D、、
（新規上場）
Series
B
CompanyValue
（企業価値）

Thank you!

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