Marco Marinucci and Alberto Onetti, Entrepreneurship 360, Mind the Bridge Job Creator Tour 2014

1. MARCO MARINUCCI
Founder & CEO, Mind the Bridge Foundation
ALBERTO ONETTI
Chairman, Mind the Bridge Foundation
Naples – May 12, 2014
Entrepreneurship 360
@MindTheBridge
#jobcreator

2. What we believe
Investors
Startups
Corporates
Entrepreneurship

3. Startups

4. Base Ingredients for a Startup
4

5. The Entrepreneur profile:
Italy vs. US
5
Entrepreneurs 30 to 49 started businesses at a
higher rate than other age groups did
The Kauffman Foundation and LegalZoom
Startup Environment Index 2012 Mind The Bridge Survey 2012
Age distribution
In Italy 84% are in the 26-45 range. 33 is the
average age
1
2 A third of startup owners were women Female entrepreneurs are only 11%
Gender
19% had master’s degrees while 8%
professionals or doctorate
Education
3 42% have a master degree while 11%a Ph.D. or
MBA
Prior Experience
4 57% have 6+yrs of prior
industry/work experience
and 44% had started
companies in the past
Funding & Incubation period
Almost 80% has 8/9 yrs avg.
prior working experience
and 23% has founded at
least one company before
5 80% of early-stage business
owners in US used personal
funds to finance their
companies.
Bootstrapping rules (58%),
while 38% got also funding
by external investors.
More info here: “Startups - Italy vs US - Onetti IID 2013”, A. Onetti, Italian Innovation Day, Mountain View, 2013

6. Business Idea
6
THE BIG IDEA!!!
… THAT MATTERS A
LOT, BUT IT’S ALL
ABOUT EXECUTION …

7. The Business Plan?
“Business plans and 5 years financial
projections are a waste of time”
7
Dave McClure
“They came to me with no business
plan” Intel 1968
“No one besides venture
capitalists and the late
Soviet Union requires five-
year plans to forecast
complete unknowns”
Steve Blank

8. The Lean Startup Methodology
“The Lean Startup method teaches you
how to drive a startup, how to steer,
when to turn, and when to persevere
and grow a business with maximum
acceleration.”
Eric Ries
Vision Steer Accelerate
TEST the product, collect
FEEDBACK, understand
CUSTOMERS NEEDS
FAIL fast (Pivoting?)
or GROW fast.
MODIFY your MVP, IMPROVE it
SCALE
“Get out of the Building!”

9. Build-Measure-Learn
9
1
3 2
What is the problem we aim at
solving?
MVP: Minimum Viable Product
Metrics, Traction
No plan survives first
contact with customers
Pivoting or scale?
Validated learning

10. Investors

11. Founders’ capital,
Savings, Family,
Friends
Seed Investors,
Crowdfunding,
Angels,
Early stage VC
(Series A)
Venture Debt, Loans,
Working Capital
Lines, Strategic
Partners, Retained
earnings
Later Stage VC
(Series B+),
Corporate VC,
Private placement,
Public markets
The Funding Sources
11
Bootstrapping Equity Financing
Early sources
Later sources

12. Angels: General Investment
Process
 Informal
 Close to Home
 Ancillary
 Individual vs Group Investment
Source:
NVCA Yearbook
Center for Venture Research, University of New
Hampshire
John Backus, 2012
12

13. VC: General Investment Process
13
Limited Partners
VC Firm (General Partners)
Startup Companies
IPO/M&A
Fund Fund Fund
Exit
Distributions Fundraising Commitments
Investment DisbursementsProceeds

14. Valuation is a two side process
 Size of market opportunity
how big is the market segment, what market share can you
gain?
 Comparables
Multiple of Revenue (trailing/forward) or EBITDA
 Terms
Liquidation Preferences/Management Carve-out/Cash vs
Paper/Earn-out/Lock-up
 Time
Better «quick and dirty» than never
 Ultimately
Bid vs. Ask negotiation
14

15. VC Average Investment Portfolio
DEFAULTS
BREAKEVEN
“FIRE SALES”
ZOMBIES
IPO/M&A
GOOD IPO/M&A
WILD ONES (IPO)
TOTAL
60%
12%
10%
8%
6%
4%
0%
100%
Source: ATV

16. Venture Capital Returns follow the
Power Law
16
16
Tumblr-Yahoo Deal

17. Who are The Kings?
17
Just look at the VC firms that are behind the top 100 tech exits

18. The Selection Aptitude?
18

19. Corporates

20. Disruptive innovation
Is yours far behind?

21. Innovators in large organizations...
Kodak invented digital
photography, but could not
shift its focus quickly enough
from film.

22. “My organization gives new ideas a
fair hearing and implements them
quickly, when they make sense.”

23. Sorry, no ideas are born fully formed

24. Risk averse leadership

25. And what about your employees?

26. David & Goliath Must Dance:
Startups are the fast track to
disruptive innovation

27. Silicon
Valley:
trends

28. What’s shaking?
1. The lean startup movement
 Lean Startups do not require a lot of cash
 The startup no longer needs $5M before
launching
28
LEAN is everywhere

29. 2. The rise of
accelerators and
incubators
 Plenty of
“Archimedes labs”
all over the world
 Typically under
$20,000 money
offered
29
What’s shaking?

30. Source:
Duncan Davidson (Bullpen Capital) cited in No.1 -
The Startup Valley of Death - December 2013
30
3. Accelerators’
Bubble?
 Seed capital and
growth capital is
available
 Only 27% are
funded after 1 year
What’s shaking?

31. 4. The retreat of VCs to
later stage (Series A
Crunch)
 Why not wait to see who
did well and selectively
invest only in the winners?
 Most VCs abandoned early
stage investing
 +90% of startups and 73% of
incubated startups end up
in the Valley of Death
31
What’s shaking?

32. Angel vs Venture Capital Investments
There is a lot of angel
money ($20B), indeed:
 3X the money that goes
in to Early-Stage Venture
($7.4B)
 1.5X the money that
goes in to late stage
venture
Source:
NVCA Yearbook
Center for Venture Research, University of New Hampshire
John Backus, 2012
32

33. 5.Angel Bubble?
 Only 2.5% of angel-
funded companies will
ever raise venture capital.
What happens to the rest?
 Acqui-hiring= nice exits
Source:
NVCA Yearbook
Center for Venture Research,
University of New Hampshire
John Backus, 2012
33
“We are in an angel bubble that will keep inflating
when Crowdfunding meets Main Street in 2013.
The bubble will burst. Not tomorrow. But soon”
(John Backus, NAV)
What’s shaking?

34. 6. The Series B Trap
Source: No.1 - The Startup Valley
of Death - December 2013
34
 Pile of cash for
companies that
get the elusive “traction”
 Raising tens or even
hundreds of millions of
dollars without massive
dilution
What’s shaking?

35. 6. (Equity) Crowdfunding
 Disintermediation
 Transparency
 Lowering the bar: We are all
investors
 Syndicates= VC like $$
35
What’s shaking?

36. 7. Acqui-Hires fuel the Market
36
What’s shaking?
Top 10 Acquirers In Silicon Valley
1 Cisco 160
2 Google 143
3 Microsoft 132
4 IBM 117
5 Yahoo! 107
6 Rent My Vacation Home USA 96
7 Hewlett-Packard 86
8 Oracle Corporation 84
9 AOL 62
10 EMC 58
Font: Crunchbase April 2014

37. Funding
FUNDING TOTAL $1.16B
Acquisitions
# Acquisitions 31
M&A TOTAL: $630M
FUNDING(pre-IPO)/ACQUISITION SPENT ratio: 1.84
MAJOR ACQUISITION: MOPUB ($350M)
ACQUISITIONS (2008-2014)
Mesagraph, 3/2014 1
SecondSync, 3/2014 2
MoPub, 9/2013 3 $350M
Trendrr, 8/2013 4
Marakana, 8/2013 5
Spindle, 6/2013 6
Lucky Sort, 5/2013 7
Ubalo, 5/2013 8
Bluefin Labs, 2/2013 9 $80M
Crashlytics, 1/2013 10 $100M
Cabana, 10/2012 11
Vine, 10/2012 12 $30M
Clutch.io, 8/2012 13
Hotspots.io, 4/2012 14
Posterous, 3/2012 15 $10M
Dasient, 1/2012 16
Summify, 1/2012 17
Whisper Systems, 11/2011 18
Julpan, 9/2011 19
Bagcheck, 8/2011 20
BackType, 7/2011 21
AdGrok, 5/2011 22 $10M
TweetDeck, 5/2011 23 $40M
Fluther, 12/2010 24
Smallthought Systems, 6/2010 25
Dabble DB, 6/2010 26
Cloudhopper, 4/2010 27
Atebits, 4/2010 28
Mixer Labs, 12/2009 29 $5.2M
Values of n, 11/2008 30
Summize, 7/2008 31 $15M
Source: Crunchbase April 2014
Growth Strategy: Twitter
37
Exit
Public NASDAQ:TWTR
Date nov-13
Raised $1.82B
Post IPO Valuation $18.1B

38. In total, the startups acquired raised $73M in
funding across 42 transactions prior to being
acquired by Twitter.
Of the acquired startups that raised funding, only 6
ever reached the Series B stage.
9 startups were acquired by Twitter after receiving
just seed or angel funding.
On average, Twitter startups with funding raised 2.4
rounds prior to acquisition.
The average time between first funding and
acquisition was 2.1 years.
18/31 acquisitions have come since 2012
highlighting the company’s accelerated pace of
acquisition.
Twitter Acquisition Strategy
38

39. 58% of Twitter’s
acquired firms were
based in California.
10% of acquisitions
each were for New
York or Massachusetts-
based companies.
Twitter Acquisitions: Locations
39

40. Funding
FUNDING TOTAL $2.33B
FUNDING IPO $113.8B
Exit
Public NASDAQ:FB
Date may-12
Raised $18.4B
Post IPO Valuation $104B
Acquisitions
# Acquisitions 45
Total $22.5B
ACQUISITIONS (2007-2014)
Oculus VR, 3/20141 $2B
WhatsApp, 2/2014 2 $19B
Branch, 1/2014 3 $15M
Little Eye Labs, 1/2014 4
SportStream, 12/2013 5
Onavo, 10/2013 6 $150M
Jibbigo, 8/2013 7
Monoidics, 7/2013 8
Parse, 4/2013 9 $90M
Spaceport.io, 4/2013 10
Osmeta, 4/2013 11
Storylane, 3/2013 12
Atlas Advertiser Suite, 2/2013 13
threadsy, 8/2012 14
Spool, 7/2012 15
Bolt | Peters, 6/2012 16 $50M
Face.com, 6/2012 17 $60M
Karma, 5/2012 18
Lightbox, 5/2012 19
Glancee, 5/2012 20
Tagtile, 4/2012 21
Instagram, 4/2012 22 $1.01B
GazeHawk, 3/2012 23
Friend.ly, 3/2012 24
Sendoid, 3/2012 25
Gowalla, 12/2011 26
WhoGlue, 11/2011 27
Strobe, 11/2011 28
Digital Staircase, 11/2011 29
Snaptu, 9/2011 30 $60M
Push Pop Press, 8/2011 31
Sofa, 6/2011 32
Beluga, 3/201133
Rel8tion, 1/2011 34
Pursuit, 2011 35
Zenbe, 11/2010 36
drop.io, 10/2010 37
Nextstop, 9/2010 38 $2.5M
Chai Labs, 8/2010 39 $10M
Hot Potato, 7/2010 40 $10M
ShareGrove, 5/2010 41
Divvyshot, 4/2010 42
Octazen Solutions, 2/2010 43
FriendFeed, 8/2009 44 $47.5M
Parakey, 7/2007 45
MAJOR ACQUISITION:
WHATSAPP ($19B)
• $4B Cash
• $12B FB shares
• $3B Stock options
Source: Crunchbase, April 2014
Growth Strategy: Facebook
40

41. VIDEO: WHY FB BUYS STARTUPS
http://www.youtube.com/watch?v=OlBDyItD0Ak
”My company acquires other, smaller startups to hire great people.
The fact that so many of the people who are leading products
within Facebook are coming from a
startup just creates an incredibly
entrepreneurial environment at scale.”
Mark Zuckerberg, CEO Facebook
“We think about either acquiring
talent or actually looking at
technologies that we can bring
in and build products on.”
“We don’t usually acquire products.”
Christian Hernandez, Facebook’s head of
international business development
Facebook Acquisition Strategy
41

42.  Before getting acquired, Glancee had only been
downloaded 30k times and 20k users using it in the
background on their iPhone
 Instagram had 35 million users and was growing fast.
INSTAGRAM vs GLANCEE
Facebook -> Glancee
42
Deal Glancee was last acquisition
before IPO (after Instagram), mainly
undisclosed terms
Acquihired: Talent & Technology acquisition

43. Facebook -> WhatsApp
43
Regarding the size it is equal to 25 Instagram ones
WHATSAPP vs INSTAGRAM
 Instagram had 13 employees before the deal.
 WhatsApp and its 55 employees were gaining
one million new users every day.
Deal WhatsApp will operate
independently retaining its brand, $3B
stock options for founders and
empoyees if they work at least 4years
@ Facebook

44. 1. Let’s build Entrepreneural Ecosystems thinking at
long term economical impact
2. Startups cannot prosper in a vacuum: smart
money + exit strategies needed + link to large
corporates
3. Education is key at startup/investor/corporate
levels
.
Conclusions
44

45. THANK YOU FOR YOUR
ATTENTION
Questions & Answers
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