Venture Capital, Funding & Pitching
Jonathon Southam - Business Development – Startup Community, Amazon Web Services @jonathonsoutham
Why do we talk about this? • Work with many startups & EMEA’s leading VC’s • Discuss many startups with VC’s & get feedback on pitches • Not biased, no agenda, helping AWS startup customers succeed
“We win when you win – and only when you win”
Venture Capital Overview
Impact of Cloud on Venture Capital
What is a good pitch?
Venture Capital Overview
Impact of Cloud on Venture Capital
What is a good pitch?
Venture Capital
Startups!
Venture Capital
VC Fund General Partners, Principals, VP’s, Associates, etc.
Startups Need for Capital Growth Poten@al
Limited Partners Ins@tu@onal, Government & High Net Worth Individuals
\
Two-sided platform model
Startups With need for capital and
growth poten@al
Capital & Value Crea@on connec@ons, biz dev, GTM,
mentoring, etc
Risk & Return Reduce Risk & deliver Financial Returns
Limited Partners Ins@tu@onal, Government & High Net Worth Individuals
“2 and 20”
So how does a VC make money?
“2 and 20” Management Fee. VC raises a fund of e.g. $100M and gets $2M per year to operate the fund (staff, expenses, etc.)
2%
Performance Fee. VC returns the profits from the fund to the LP’s but gets to keep 20% of these profits
20%
Venture Funding
How much you get
How you get it
AUG-08 Nathan, Brian,
and Joe
JAN-09 $20K Accelerator
Y Combinator
NOV-10 $7.2M Series A:
Sequoia Greylock SV Angel & others
JUL-11 $112M Series B
Andreessen Horowitz General Catalyst
& others
APR-09 $600K Seed
Round Sequoia
Y Ventures
01 04
idea MVP monetize scale
Product Risk Market Risk Financial Risk 02 03
01 04
idea MVP monetize scale
Seed Round
Series A, B, C, etc.
Incubator / Angel
Product Risk Market Risk Financial Risk 02 03
$0-250K
$250-$1M
$1M-$5M, or more
Venture Capital Overview
Impact of Cloud on Venture Capital
What is a good pitch?
“Amazon changed the VC industry. This is mind boggling. That online book company. Not … or anybody else. Amazon. 100% of the credit.”
Mark Suster, serial entrepreneur and Partner at Upfront Ventures
hOp://www.bothsidesoRhetable.com/2011/06/28/understanding-‐changes-‐in-‐the-‐soRware-‐venture-‐capital-‐industries/
\
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
1995 – .com Technology Startups require physical hardware and
proprietary software to build their business
Typical Series A
Spent on…
Innovation
$5-10M • $2.5: marketing, sales, etc.
• $2.5M on infrastructure
• Not a lot, since experimentation was costly
\
Typical Series A
Spent on…
Innovation
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
2000: Rise of Open Source Open source software drove technology costs down by 90%,
which spurred innovation in technology
$3-5M • Less on Software– LAMP
• More on development
• Still on infrastructure
• A lot more, as experimentation is less costly now
\
Typical Series A
Spent on…
Innovation
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
2005: Enter the Cloud Pioneered by Amazon drove total operating costs
down by up to 90%
$500K-3M
• Staff – the battle for talent
• Customer Acquisition
• Explosion in experimentation, innovation, and Startups
\
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
2007: Micro VC / Seed Public Cloud led to explosion in the number of Startups
and the emerging of “micro VCs”
Angels
Incubators/
Accelerators
VC’s
Angels unite in ‘Super Angels’ for Seed investments thru VC-like setup
Boom in programs, with micro
investments, mentoring, etc.
Venture funds that back early-stage
startups with <$1M
Why do VC’s care? More deals
Shorter time to scale
Faster time to revenue
Lower ‘burn rate’
Higher valuation at exit
Venture Capital Overview
Impact of Cloud on Venture Capital
What is a good pitch?
Why is your pitch important?
Because it shows you have a
PLAN
What’s always there?
Product Lots of product, product, product
Rosy Forecast
The infamous hockey stick
What’s always missing? Business Model
not just WHAT, also HOW
Metrics not just traction, also unit economics*
Strategy What will you DO? How will you GROW?
Execution…
Ash Fontana, Founder of AngelList
Venture Capital, Funding & Pitching
Jonathon Southam - Business Development – Startup Community, Amazon Web Services @jonathonsoutham