Wave Theory of Startups

@guyhturner

Why “wave theory”? Get ready for abstraction

2

Waves are repeatableand predictable …

… so are startups!!!(at least the valuable ones)

Universal startup truth: Time is oxygen

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Innovate, test, sell………. QUICKLY!!!!

Law 1: 18 month runway cycles in three acts with your fluctuating excitement

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Act 1Execute Plan A

Act 2Execute Plan B

Act 3Raise more $

Sign TS 18 MosSign TS for next round

Hire!!!

Fire!!!

6 Mos 12 Mos

Figure it out

You

r Ex

cite

men

t

Kind of like dramatic arc…!!!

Law 2: hype = f’(your excitement)

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Seed Series A Series B

Hype maximized when your excitement is changing the most

– in upswing because others see you talk, hire, talk, hire…

Max hype

Law 3: sales is a cycle too

6

Qualify RFP, Proposal Document

Co

ntr

act

Val

ue

(AC

V)

Time(sales cycle)

Win!

Sales repeatability and

predictability drive outsized

value in startups

Customer size and software type drive sales cycle ACV and length

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EnterpriseSB MB

Infrastructure(database, stack)

Systems (ERP, Acctg)

Revenue(CRM, marketing)

Software that generates revenue is twice as easy to

sell and often stickier than cost reducing software

This is why we focus on revenue creating SW… speed matters

Core Seed

Marketing

Technology

8

Sales

Enablement

Law 4: runway must be >> than sales cycle

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FAILURE

SUCCESS!!!

Thelma & Louise

What’s an entrepreneur to do?

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11

De

sign

, lif

e a

nd

sal

es

cycl

es

Compression of adoption and sales cycle

Pick your vertical carefully

Very hard to compete as a startup

in long design cycle, life cycle

and/or sales cycle industries.

Example: Ford is going to integrate

your product into their next

model… 2 years from now. How do

you survive in the mean time ?!?!

Raise a longer runway!

18 months 30 months

Find patient investors or hug a

strategic investor

You must raise enough runway to have time for a Plan A and a Plan B.

This doubles your chances of success for only 5-10% more dilution!

Underprice and sell SMBs first á la A

CV

Small Biz Medium Biz EnterpriseThen Then

Over time, seek larger fish

Raise money when hype > performance

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Seed Series A Series BStory telling

Bad early evidence

Plan “B” works

Better evidence

Plan “A” fails

ReplaceVP

Sales

Scalingworks

Hype is more volatile than performance. Investors like

performance, but hype creates scarcity and investor action.

Thank You

@guyhturner

@hydeparkvp

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A quick bit about HPVP and meHappy to chat any time16

•Twitter: @guyhturner

•Blog: vcwithme.co

•Mgmt Consultant

•Angel

•Engineer

•Twitter: @hydeparkvp

•Seed or Series A, $1-4M rounds

•Early-stage SW at $0-2M rev rate

•Midwest focus