DEALING WITH INVESTORS 1. Target the right firm. Match your company type to investments firm’s investment thesis.
2. Individuals make decisions. Not a VC firm. Target the right investor. 3. First meeting is the “most important meeting”. Founders should know more about their business, product than the investor. Do your homework. 4. It is a comparison game. There is a “deal pace” and “risk/reward” profile of the deal. The best deal on the table gets “the money”.
5. Make sure you guys are excited about the investor beyond “money”. It is a 7 year commitment, probably very next to “commitment of marriage”. OCTOBER 19, 2013. Vijay and Shekhar
DEALING WITH INVESTORS 1. Target the right firm. Match your company type to investments firm’s investment thesis.
2. Individuals make decisions. Not a VC firm. Target the right investor. 3. First meeting is the “most important meeting”. Founders should know more about their business, product than the investor. Do your homework. 4. It is a comparison game. There is a “deal pace” and “risk/reward” profile of the deal. The best deal on the table gets “the money”.
5. Make sure you guys are excited about the investor beyond “money”. It is a 7 year commitment, probably very next to “commitment of marriage”. OCTOBER 19, 2013. Vijay and Shekhar
TARGET MARKET SIZE? TO GET
TO $200M+ EXIT COMPANY Size of the Market (India Jewelry) Size of the Market (Transportation) $64B+ $15B+ Addressable Market (Studded Jewelry) Addressable Market (Taxi booking) $8B+ $3B+ Target Market (Organized Jewelry) Target Market (Top 10 cities) $800M+ e.g. OCTOBER 19, 2013. Vijay and Shekhar BlueStone $300M+ e.g. TaxiForSure 4 19
REVENUES FOR GETTING $200M+ EXIT
Margin Gross Margin (65% for GOOG. Operating Margin (25% for GOOG. 1.5% for AMZN) 100M+ Revenue e-commerce. Niche tech service providers. 40M+ Revenue Non-subscription business. Field sales force. Medium margin. OCTOBER 19, 2013. Vijay and Shekhar Massive Usage 20%+ of online India. Weekly Interaction. Growing like weed. e.g. WhatsApp Deep IP/Tech Few Anchor Customers. Protected IP through Patents. Has global appeal. e.g. HealthCare Device Co.. $20M+ Revenue Enterprise SaaS. Online/Offline business. Good operating margin. Growing at 30%+. 5 19
TYPICAL COMPANY EXIT SCENARIO Value
Creation 8x returns on invested $ 4.7x is the 2012 Average $25M CAPITAL Equity Distribution Time Impact 20% to 30% for founders ($60M) Revenue: $0M, $1M, $2.5M, $8M, $20M+… Non-linear growth 6 YEARS OCTOBER 19, 2013. Vijay and Shekhar 5% to 10% for Angels ($20M) $200M+ Exit 55% to 75% among 3 investors ($40M) 3 INVESTORS 6 19
YOUNG ENTREPRENEURS Good in Tech
No business experience 26 Years Individual contributors No product experience Passionate Ideas from their world Minimal G2M experience OCTOBER 19, 2013. Vijay and Shekhar 9 19
WHAT SHOULD YOU DO? YOUNG
ENTREPRENEURS 3 1 2 4 Interact with your customers. Crate your Product. Learn Marketing, Sales, Product, Hiring. Talk to Users, Mentors. Investors. See a Big Opportunity LAUNCH PAY SELF LEARN RAISE $$ • Experiment and learn. Iterate faster. Skill building phase. • Survive. Generate revenues and if possible even “exit”. • Gain domain experience and deeper insights OCTOBER 19, 2013. Vijay and Shekhar 10 19
OUTSTANDING TEAM MEAN WHAT? Ability
to work together Experimenters Decision Makers 2 Co-Founders v/s one Founder Passion & Commitment Street Credibility Deep product experience Operational background Domain Experience Strong G2M experience OCTOBER 19, 2013. Vijay and Shekhar 11 19
FUNDABLE MARKETS Exit Friendly Large
competing players Existing players are slow to react Customer behavior is changing New players can grow fast e.g. Enterprise SaaS, AdTech, Payments, Healthcare Devices Effciency Play Platforms, Tools, Enterprise Apps e.g. Atlassian, SalesForce, Marketo Shifting Money Online version of offline business. First-mover advantage. Convenience and Efficiency. e.g. BookMyShow, RedBus OCTOBER 19, 2013. Vijay and Shekhar Network based Narrow functionality. Applicable to large population. e.g. WhatsApp, Instagram Marketplaces B2C and B2B marketplaces. Fragmented Suppliers. Non-value added Intermediaries. e.g. CommonFloor, 99Design, oDesk New markets in creation Uncovering latent demand. Offline resources are enabled. Technology enabled. e.g. AirBnB, Lyft, Fiver 14 19
PREFERRED BUSINESS CONSTRUCTS WHAT SCALE
COMPANIES WOULD CHOOSE 1 License v/s Subscription OCTOBER 19, 2013. Vijay and Shekhar 2 3 In-Prem v/s Cloud 4 Revenue-side v/s Cost-side Revenue flow Start v/s End 15 19
PREFERRED BUSINESS CONSTRUCTS WHAT SCALE
COMPANIES WOULD CHOOSE 5 Single v/s Multi Tenant OCTOBER 19, 2013. Vijay and Shekhar 6 Inbound Sales v/s Outbound Sales 7 Inside Sales v/s Field Sales 8 India v/s Global 16 19
DEALING WITH INVESTORS 1. Target
the right firm. Match your company type to investments firm’s investment thesis. 2. Individuals make decisions. Not a VC firm. Target the right investor. 3. First meeting is the “most important meeting”. Founders should know more about their business, product than the investor. Do your homework. 4. It is a comparison game. There is a “deal pace” and “risk/reward” profile of the deal. The best deal on the table gets “the money”. 5. Make sure you guys are excited about the investor beyond “money”. It is a 7 year commitment, probably very next to “commitment of marriage”. OCTOBER 19, 2013. Vijay and Shekhar 18 19
Not give you formula or precise advice.This is more of a guideline and discussion. To some extent, current fast-moving flavor of the month topics…. For every thing we say today, there are exceptions, even in our own fund. But, don’t build your company based on “exceptions”.And lastly, Shekhar and Anand’s viewpoint based on what is happening in the industry. Haven’t spoken to other VC or investors. So, take it with a pinch of “salt”.
Why $200M exit? This is based on VC business model. This number varies from one VC firm to other, but, usually it is related to size of the VC fund from which investment happens.Secondly, this also bakes in all the “duds” in the portfolio and the “good” ones must take care of the “bad decisions” made by other company founders in the portfolio…Now, how many $200M+ exits we had so far? Very few/countable. But, I am bullish on the fact that there are companies starting to show-up that can beat this number…
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