Stanford Entrepreneurship Videos Online
When I went to Stanford for their annual entrepreneurship conference, I wished that I could have cloned myself and gone to more sessions. So many of the topics and panelists were relevant to the things I’m interested in right now. I was excited to hear that many of the sessions would be filmed and posted online. The best one I’ve found so far is Jim Goetz, a partner at Sequoia Capital, speaking about writing business plans and pitching VCs. The video isn’t embedable, but is available here.
I watched the video twice, once to listen and once to take notes. My notes are after the break.
Notes on Series A Business Plans
Passion and energy around a very specific pain point for a very specific customer – start small & focus
Long business plans not interesting – process is too iterative
First hour w/ the venture capitalists
1) What’s compelling and unique?
How do you position yourself in the marketplace?
Cisco: They network networks.
- Clarity of purpose
- Very few entrepreneurs understand
- 2-3 sentences: why you’re unique and compelling, why you’re different, why you’ll win, what your unfair advantage is.
Jeffery Moore – Inside the Training Door, Crossing the Chasm
Initial challenge – picking your target customer – start small & focused
Should be able to convey market position in 5 mins or less.
2) What is your unfair advantage?
What’s the market strategy.
The nuance behind the pain point – helps to have first hand experience, especially if you’re attacking a personal painpoint.
VCs Looking To:
Understand the depth and substance of your passion for the painpoint
And your ability to orchestrate a strategy around creating unfair advantage from a market entry and market tactics perspective.
Understanding your detailed expertise in the domain.
Show that you’ve thought about creating a market category & the early beachhead customers.
Be familiar about how to create a market entry strategy that’s appropriate for a startup.
Be credible about the existing incumbents, their advantages and your advantages. Build credibility by knowing your competition. Position yourself in one quadrant and show over time your plan to move to another one (earn a stronger market position over time).
Many VCs are comfortable assuming that the large incumbents will not be able to move fast enough to move into an adjacent market.
Defensible barriers – huge for consumers internet and mobile internet
How are we going to build long term competitive barriers?
Not comforted by startups
Doesn’t have to be technological, but helps
Be able to explain why there’s a barrier
Intimate understanding of the market itself = barrier to entry
Partnerships & UGC for first movers
3) Technology from the shareholder’s perspective
Not as interested in all the raw details
Interested in defensible barriers – huge for consumers internet and mobile internet
How are we going to build long term competitive barriers?
Not comforted by patents.
Doesn’t have to be technological, but helps if there is a technological barrier
Be able to explain why there’s a barrier
Intimate understanding of the market itself = barrier to entry
Partnerships & UGC for first movers = barrier to entry
Simplicity is important – can create new levels of adoption, first mover advantage
4) Founding team – DNA, not titles
Looking for 3-4 individuals with different expertise & lots of dynamic tension
10x programmers, good marketers, in depth knowledge
Executive history not part of the Sequoia requirements
Interested in the doers of the company
Intelligence, ambition, clear understanding of a painpoint
Sequoia likes to back unknown & underdogs
5) Financials
Map sales mechanism to business model – your numbers should match the sales & marketing plan you outline
If you don’t know, say you don’t know – it’s OK
Rarely do people hit their numbers – magnitude of the disparity is important
Look at first couple of years after a company goes public (public filings)
Gain credibility by being balanced on the numbers upfront
Nomenclature around unit economics – know how to contemplate unit economics for your business
SAAS, consumer internet, mobile, advertising, semis
Lots of specialization
Yields for semis
MRR – SAAS – ratable revenue
cost of customer acquisition
churn
lifetime value
Sequoia not big fans of low margin businesses
Gross margin 50% plus = good
Must Read: Sales Learning Curve – Mark Leslie (startups during revenue ramp)
CEO of Veritas
HBS case
Recipe involved in building revenue in a real business
Challenge is in iteration with the recipe to get to a meaningful level of repeatability
Go slow first & get repeatability
Don’t hire talent in the salesforce until you get the recipe right
Sales people should produce 2x their compensation in margin – until they can do that, don’t grow this part of your organization
Business plan should reflect the fact that you’re going to have to iterate over time to get the recipe right
Expecting to get it right the first time and in the first 4-5 quarters is not credible
Hold off on financials if you’re not sure about it – experiment & learn about churn, cost of customer acquisition
Show early sense of unit economics and customer acquisition = higher valuation
As small as 100 users in a controlled beta (100 – 100,000 users)
Show consumer adoption
When are you ready?
Go through the deck w/ advisors first
Bring your team if you’ve started to build it
Be creative
Own the meeting & manage it
Don’t tell them who else you’re talking to.
Warm them up with unique value proposition and your unfair advantage – not the whole deck
Best presentations can get through core elements in 15 mins
