Global Trends in Startup Ecosystem

March 2014

Agenda

• What is a Thriving Community?

• Baseline Market Factors

• Trends

• In Early Stage Investing

• In Markets

• Q&A

About Dave

• Serial Entrepreneur - Five Startups, 2 sold, 1 closed, 2 Active.

• Board Member - Mid Market Companies, six exits

• Former VC - $250M Intl Fund

• VP Programs & People at UP Global

• Husband & Dad @DaveParkerSEA www.UP.co

About UP Global

• Founded Merger of Startup Weekend and Startup America

• Non Profit team of 50 people in Sao Paulo, Mexico City, Delhi, London and HQ in Seattle

• Committed to the right programming at the right time to increase your odds of success and speed your process

2013 Facts815

102

467

74k

3,50

EVENTS

COUNTRIES

CITIES

ATTENDEES

ORGANIZERS

815

102

467

47k

3.5k

2016 CITY GOAL1000

What is a Thriving Community?

• Startup Density & Community Driven

• <1 Year Old Companies

• 1-5 Year Old

• Tech and Information and Communications Technology (ICT)

• Community Metrics will predict Macro Economic Metrics - but over time

Thriving = Startup Density

• For cities over 1MM population (greater metropolitan area), good “thriving” startup density is ~225 startups (1-49 employees) per 100,000 people.

• For cities btw 500k - 1MM, ~175 startups (1-49 employees) per 100,000

• For cities btw 250k - 500k, ~150 startups per 100,000 Prior to 2013 there was no widespread data on startups, all publications are within the last year. US City data only as provided by Kauffman & Konscal

Linking Young Firms & Job Creation

• Young High Tech and ICT businesses, as opposed to small business play an outsized roll in job creation

• Differentiating growth oriented startups from other young and/or small business is critical

• High tech start lean - but grow so rapidly that it offsets job losses from early stage business failures

• Majority of growth is <1 year and 1-5 year old companies

Watching Your Numbers

• Census Data for Self Employment ≠ Entrepreneurship

• # of Incorporations vs. High Growth

• Employment #s

• Investment/Exits

• Tax Rev

• Startups are mobile - they will find a way, even if it means moving, once they move, they aren’t likely to return

• Policies may be Causation or Correlation

• Factors in our control

• Factors out of our control

Challenges to Thriving Communities

How Corporations Help

• Engage with new companies - yes there is a risk, but they could provide innovation

• Pay <15 days

• Be a subject matter expert

• Be a connector

You don’t get to start as Silicon Valley today

unless you started in 1971

Timeframe to Thriving Community?

• Average time from Venture Investment to Exit is 4.7-7 Years (Venture Source)

• Angel Investment to Exit is 7 Years (Angel Capital Association)

• All Major Venture funds have a 10 Year LLP agreement

Regardless of the data - it’s going to take a while

Is the Investment Worth It?

• Top 10 Metro (MSA) US Areas in 1990 were still in the top 20 in 2010

• Once you built it, you should be able to keep it

• Successful entrepreneurs re-invest in the market

• “Paypal Mafia”

Factors in Our Control

• Creating Startup Density

• Encouraging programming lead by the community, e.g. Meetup, Startup Weekend, Startup Weekend NEXT,

• Accelerators - 165 worldwide, massive growth

• Angel investments

• Standard term sheets, open source legal documents

Factors Out of Our Control

• Culture - need to embrace failure as part of success

• Ex: not viewing failure as an outcast - UK

• Legal - Incorporation laws that don’t punish risk takers

• Ex: “piercing the corporate veil” - Singapore

• Tax - that encourage investor to get of the sidelines

• Ex: Convertible Debt - Hungary

Event Density

Low

High

Boulder

SJCNYC

Common Y Axis Factors1. Leadership 2. Engagement & Diversity 3. Talent 4. Network Density 5. Entrepreneur Culture 6. Mentors & Coaches 7. Capital 8. Corporate Engagement 9. Support Services 10. Government Support

Trends in Early Stage Investment

• Growth of Accelerators - vs. Incubators

• 165+ WW that provide investment

• Women Entrepreneurs

• Early Investment

• Crowd Funding

• Simple Term Sheets/docs

Trends in Markets

• Knock offs - with large markets - Easy Taxi

• Consumerization of IT - DropBox

• Break up of Marketplaces - Craigslist to Gazelle

• Open Source - Github

• Wearables - Fitbit

• Over the Horizon - Big data (for Startups), Internet of things

Note to Startups!

• Office Hours tomorrow!

• Please read, http://dkparker.com/2013/02/19/buy-you-coffee/

• Come prepared

• Know what your next biggest challenge is before tomorrow

What if?

Every miss cost $1M?

What if we changed the game?

Join us at StartupWeekend Favela - http://riofavela.startupweekend.org/

Thanks!

Sources

• Brad Feld, Startup Communities • THE MOST ENTREPRENEURIAL METROPOLITAN AREA? Jared Konczal,Senior Analyst, Kauffman Foundation • PATH-DEPENDENT STARTUP HUBS - Dane Stangler, Ewing Marion Kauffman Foundation • Tech Starts: High-Technology Business Formation and Job Creation in the United States - Ian Hathaway, Kauffman

Foundation • What makes city entrepreneurial - HBS

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