General Assembly London presentation, outlining the top tips and lessons from our experience building Mixcloud

1. THE ART & SCIENCE
OF BOOTSTRAPPING
Nico Perez
Co-founder, Mixcloud

2. AGENDA 2
‣ PART 1: GETTING STARTED ‣ PART 2: THINKING ABOUT BUSINESS MODELS
‣ 1. Bootstrapping Mixcloud ‣ 8. Revenue
‣ 2. Your founding team ‣ EXERCISE INTERLUDE
‣ 3. User and market research ‣ 9. Costs
‣ 4. Your first office ‣ 10. Profits
‣ 5. The (minimum viable) product
‣ 6. Know when to outsource
‣ 7. (Alternative) Funding
EXERCISE INTERLUDE

3. THE ART & SCIENCE OF BOOTSTRAPPING 3
INTERACTIVE

4. INTRODUCTION 4
NICO PEREZ
CO-FOUNDER, MIXCLOUD
‣ Mentor at The Founder Institute
‣ Young Advisor to EU Vice President on
Digital Agenda
‣ Masters in Engineering from Cambridge
‣ RSA Fellow

5. INTRODUCTION 5
NICO PEREZ
CO-FOUNDER, MIXCLOUD
‣ DJing for +10 years
‣ Radio presenter at University
‣ Music and radio fan

6. 6
WHY?

7. BOOTSTRAPPING MIXCLOUD 7
THE THIRD WAY

8. THE ART & SCIENCE OF BOOTSTRAPPING 8
1.
BOOTSTRAPPING
MIXCLOUD

9. what is Mixcloud?
platform for DJs & radio presenters
= expert, curated content

10. THE ART & SCIENCE OF BOOTSTRAPPING 10
2.
YOUR FOUNDING
TEAM

11. YOUR FOUNDING TEAM 11
START SMALL
+ SKILLSWAP

12. YOUR FOUNDING TEAM 12
HIRE SLOW

13. THE ART & SCIENCE OF BOOTSTRAPPING 13
3.
USER AND
MARKET
RESEARCH

14. USER AND MARKET RESEARCH 14
RESEARCH = MARKETING
ONLINE TOOLS
REAL WORLD

15. USER AND MARKET RESEARCH 15
RESEARCH = MARKETING
ONLINE TOOLS
REAL WORLD

16. THE ART & SCIENCE OF BOOTSTRAPPING 16
4.
YOUR FIRST
OFFICE

18. 18

20. THE ART & SCIENCE OF BOOTSTRAPPING 20
5.
THE MINIMUM
VIABLE PRODUCT

21. THE MINIMUM VIABLE PRODUCT 21
Launch early
Fail fast
Validate assumptions
Analyse - GA, A/B, multivariate

22. THE MINIMUM VIABLE PRODUCT 22
“if you’re not embarrassed when you ship
your first version you waited too long”
- Mat Mullenweg, founder of Wordpress

23. THE ART & SCIENCE OF BOOTSTRAPPING 23
6.
KNOW WHEN TO
OUTSOURCE

24. KNOW WHEN TO OUTSOURCE 24
• outsource the content creation
• outsource the editorial
• outsource the community management
• outsource the ad sales

25. THE ART & SCIENCE OF BOOTSTRAPPING 25
7.
(ALTERNATIVE)
FUNDING

26. FUNDING 26

27. THE ART & SCIENCE OF BOOTSTRAPPING 27
EXERCISE
INTERLUDE

28. EXERCISE INTERLUDE 28
Basic P&L Cash balance
Revenue
- Cost of sales
= Gross profit
- Overheads
= Net profit

29. The simple model
Revenue – Direct costs = Gross profit
Ads Servers
Freemium Licenses
Services Customer acquisition
E-commerce
Gross Profit – Overheads = EBITDA
Salaries
Rent

30. EXERCISE bit.ly/npbootstrappltemplate 30
Basic P&L model calculation
Unique visitors = Start at 10000, grows 20% per month. On average 5 page views per unique visitor
Revenue = Ad based. £7 CPM (per 1000 impressions). But doesn’t kick in till after 12 months on project
Cost of sales = Server costs increase by £10 for every 1000 unique visitors
Overheads = Salaries = 0 until breakeven (ignore rent etc)
Questions:
1. How long till breakeven?
2. How much do you need in the bank?
3. Assuming all net profit divided equally, how long till 3 founders on £24k/year salaries

31. EXERCISE INTERLUDE 31
bit.ly/npbootstrapplanswer

32. LESSON 32
COMPOUND INTEREST IS YOUR FRIEND

33. THE ART & SCIENCE OF BOOTSTRAPPING 33
PART 2
BUSINESS MODELS

34. PART 2: BUSINESS MODELS
Revenue
- Models
- Checking assumptions
- Tips from Mixcloud
- Challenges
- Mix/single streams
- Ad space models
- Transactional models
Costs
- Customer acquisition
- Conversion funnels
- Social + partnerships
- People costs
Profits

35. THE ART & SCIENCE OF BOOTSTRAPPING 35
8.
BUSINESS MODEL
REVENUE

36. Revenue Models
• A tool for forecasting
• Built on (realistic?) assumptions
• Verifications help

37. Tip: Check your assumptions
• Market data
• Will it work? What has worked historically?
• Building in sensitivity +/- %

38. Mixcloud assumptions
Traditional radio ad spend moving online (Google, Spotify, TargetSpot)
Ads: Display vs Audio vs Sponsorship
Freemium (Premium Accounts Subscription)
E-commerce (Affiliate sales)

39. Content challenges
• What type of content are consumers willing to pay for and how?
• How do brands fit into the picture?
• You don’t need all the answers

40. Think about: Revenue Stream Mix
• Multiple streams or concentrate on one? B2C vs B2B?
• Who pays (asymmetric vs symmetric)?
• Mixcloud: Ads + freemium plan

41. Mixcloud Example: The Online Radio/Music Space
Consumer
pays
PIRACY!
Specialist Mass market
Mixcloud
Someone
else pays

42. Ad-funded content: Challenges and ideas
• Fragmentation of media -> blog / audio ad networks?
• UGC vs Professional
• Paid search (ROI) vs display. Brand awareness?
• Self serve advertising… for rich media?

43. THE ART & SCIENCE OF BOOTSTRAPPING 43
EXERCISE
INTERLUDE

44. EXERCISE 44
How many revenue sources and example sites
can you come up with in the following categories:
Advertising
Commerce
Subscription
Peer to Peer
Transaction Processing
Licensing
Data
Mobile
Gaming

45. Revenue model ideas
Advertising Commerce Subscription
• Display Ads - ex. Yahoo! • Retailing - ex. Zappos • Software as a Service (SAAS) - ex. Salesforce
• Search Ads - ex. Google • Marketplace - ex. Etsy • Service as a Service - ex. Shopify
• Text Ads - ex. Google • Crowdsourced Marketplace - ex. Threadless • Content as a Service - ex: Spotify, Netflix
• Video Ads - ex. Hulu • Excess Capacity Markets - Uber, AirBnB • Infrastructure/Platform As A Service - ex. AWS
• Audio Ads - ex. Pandora • Vertically Integrated Commerce - ex. Warby Parker • Freemium SAAS - ex. Dropbox
• Promoted Content - ex. Twitter, Tumblr • Aggregator - ex. Lastminute.com • Donations - ex. Wikipedia
• Paid content links - ex. Outbrain • Flash Sales: Gilt Groupe, Vente Privee • Sampling - ex Birchbox
• Recruitment Ads - ex. LinkedIn • Group buying - ex. Groupon • Membership Services - ex Amazon Prime
• Lead Generation - ex. MoneySuperMarket, ZocDoc • Digital goods / downloads - ex. iTunes • Support and Maintenance - ex 10gen, Red Hat
• Affiliate Fees - ex. Amazon Affiliate Program • Virtual goods - ex. Zynga • Paywall - ex. NYTimes
• Classifieds - ex. Craiglist • Training - ex. Cloudera (??), -> Coursera • Voice and video-conferencing - ex. Uberconference
• Featured listings - e.g. Yelp, Super Pages; • Pay what you want - ex. Radiohead
• Email Ads - as done by Yahoo, MSN • Commission - ex. SharesPost Peer to Peer
• Ad Retargeting - ex. Criteo • Commission per order - ex. Seamless, GrubHub • Peer-to-Peer Lending - ex. Lending Club,
• Real-time Intent Ad Delivery • Auction - ex. eBay • Peer-to-Peer Gambling - ex. BetFair
• Location-based offers - ex/ Foursquare • Reverse Auction - ex Priceline • Peer-to-peer buying - ex Etsy
• Sponsorships / Site Takeovers - ex. Pandora • Barter for services ex. SwapRight • Peer-to-peer insurance/home/car - ex (??)
• Peer-to-peer computing (CrasPlan storage, or SETI@home)
• Peer-to-peer service - ex. Mechanical Turk, TaskRabbit
• Peer-to-peer Mobile WiFi/Tethering - ex (??)

46. And many more bit.ly/npbootstrapmodels
Transaction processing Data
• Merchant Acquiring - ex. PayPal (Online / Offline), Stripe (Online), Square (Offline) • User data - ex. BlueKai
• Intermediary - ex. IP Commerce (POS 2.0), CardSpring • Business data - ex. Duedil
• Acquiring Processing - ex. Paymentech • User intelligence - ex. Yougov
• Bank Transfer - ex. Dwolla • Search Data - ex. Chango
• Bank Depository Offering - ex. Simple, Movenbank (spread on average deposits) • Real-time Consumer Intent Data - ex. Yieldbot
• Bank Card Issuance - ex. Simple (interchange fee per transaction) • Benchmarking services - ex. Comscore
• Fullfilment - ex. Amazon • Market research - ex. GLG
• Messaging - ex. Peer-to-Peer SMS, IM, Group Messaging
• Telephony - ex. termination/origination in public telephony networks (skype out/in) Mobile
• Telephony - ex. termination/origination within private telephony cloud (e.g. native skype) • Paid App Downloads - ex. WhatsApp
• Payment Gateways: Mobile -ex. Braintree • In-app purchases - ex. Zynga Poker
• Platform Monetization ("Tax") - Facebook Credits; iO6 30% cut. • In-app subscriptions - ex. NY Times app
• Advertising - ex. Flurry, AdMob
Licensing • Digital-to-physical - ex. Red Stamp, Postagram
• Per Seat License - ex. Sencha
• Per Device/Server License - ex. QlikView Gaming
• Per Application instance - ex. Adobe Photoshop • Freemium - Free to play w/ virtual currency - ex. Zynga
• Per Site License - ex. Private cloud on internal infrastructure • Subscription- ex. World of Warcraft
• Patent Licensing - ex. Qualcomm • Premium - ex. xBox games
• Brand Licensing - ex. Sesame Street • DLC - (Downloadable Content) - ex. Call of Duty
• Indirect Licensing - ex. Apple Volume Purchasing • Ad Supported - ex - addictinggames.com

47. But 4 main categories
1. Ad funded
2. Freemium
3. Services/Licensing
4. E-commerce

48. Freemium/Transactional Models
“We believe the future business model for social games will be primarily
transactions… consumers play for free supported by advertising but have the
option to pay for virtual items and premium features”
Kristian @ Playfish, July 2008

49. Freemium Model Learnings and Tips
Distribution platforms
Don’t force them to pay
Access not ownership
Gaming as a service, not product
“Virtual goods have a value that’s very tangible… maximised
around social emotion and social expression” - Sebastian,
COO
Quality control on ads

50. THE ART & SCIENCE OF BOOTSTRAPPING 50
9.
BUSINESS MODEL
COSTS

51. What you can control
Revenue – Direct costs = Gross profit
Ads Servers
Freemium Licenses
Services Customer acquisition
E-commerce
Gross Profit – Overheads = EBITDA
Salaries
Rent

52. What you can control
Revenue – Direct costs = Gross profit
Ads Servers
Freemium Licenses
Services Customer acquisition
Gross Profit – Overheads = EBITDA
Salaries
Rent

53. Customer
acquisition costs:
• SEO
• Affiliates
• Advertising / PPC
• PR
• Viral

54. Make it more Social
Destination -> Distribution
Sharing what you love (via Facebook, Twitter, blogs, etc)
Mixcloud helps tell friends what you are listening to
25

55. Conversion funnel + Viral loop
(see also Dave McClure on metrics bit.ly/npbootstrapmetrics)
! ! ! ! ! ! ! ! Visitor
! ! ! ! Registered user 18%
Integrate with FB + Twitter <20%
Invite friends 10%

56. Social lessons & tips from Mixcloud
• Do you have a “social object”?
• Convert users -> marketers
• Build features and processes to help them do this
• Reduce cost per acquisition

57. Mixcloud <3 partnerships

59. Biggest cost = Biggest Asset
• Headcount -> burn rate
• Equity/Debt financing vs self funding
• Short term revenue vs long term potential

60. THE ART & SCIENCE OF BOOTSTRAPPING 60
9.
BUSINESS MODEL
PROFITS

61. Profits
• Offset past losses against profits (get good accountant)
• Re-invest to help scale
• Reward contributors -> Fred Wilson equity blog post: bit.ly/npbootstrapequity

62. What we covered
Revenue
- Models
- Checking assumptions
- Tips from Mixcloud
- Challenges
- Mix/single streams
- Ad space models
- Transactional models
Costs
- Customer acquisition
- Conversion funnels
- Social + partnerships
- People costs
Profits

63. 5 Questions to
think about
- What type of model(s)?
- Trust assumptions?
- Who pays?
- Social object?
- How long till breakeven?

64. In business:
“If it doesn’t make dollars it doesn’t make sense”
But passion/love drives Bootstrappers

65. LAST THOUGHT 65
QUESTION

67. nico@mixcloud.com
@nicoperez

68. THE ART & SCIENCE OF BOOTSTRAPPING 68
Q&A

69. PHOTO CREDITS 69
http://www.flickr.com/photos/T/1540007749/
http://www.flickr.com/photos/thomashawk/228228018/
http://www.flickr.com/photos/8078381@N03/3279725831/
http://www.flickr.com/photos/9948354@N08/763399258/
http://www.flickr.com/photos/emry/369409914
http://www.flickr.com/photos/rietje/3719904189