2. Ex-Microsoftee Founded Startups
Microsoft Founders of Startups (Acquired, IPOed, or Significant revenue):
Jonathan Sposato @ Picnik: ACQUIRED
Dan Shapiro @ SparkBuy.com (Shell) ACQUIRED Rev, Acquisition or Market Cap
Mike Matthew @ All Stars Directory ACQUIRED Amount:
TA McCann @ Gist.com (Exchange) ACQUIRED
$1+ billion: 3
Joe Giordano @ PayScale Companies
Rich Barton @ Zillow & Expedia IPOed
Mike Slade @ Starwave ACQUIRED $100+ million: 6
Companies
Kevin Merritt @ Socrata
Jordan Schwartz @ Pathable (MSN) $30+ million: Many
Bill Bryant @ Qpass, Visio, Mixxer, etc.
Hadi Partovi @ Tellme Networks & iLike ACQUIRED
IPOed
5
Alex Castro @ Delve Networks (Shell) ACQUIRED
Rob Glaser @ Real Networks IPOed
Gabe Newell @ Valve
Alex St. John @ WildTangent Companies
Bryan Starbuck @ TalentSpring (Shell) ACQUIRED
Numbers are often confidential. Some information came from people in the companies listed BLOG: bryanstarbuck.typepad.com
3. Covered in this Talk
1 2
Business Model
Create the
Validation First Company
3 4
Startup CEO
Engineering Stack
Leadership
BLOG: bryanstarbuck.typepad.com
5. Validate by Pitch-Deck
Force Planning in all Critical Areas
Brief enough for feedback from
Customers, Employees, Advisors, Investors, etc.
BLOG: bryanstarbuck.typepad.com
6. Pitch-Deck PAIN finds your Blind Spots
He says, “This specific Pitch-Deck SLIDE is PAINFUL”
Response, “You found a Blind Spot in your ANALYSIS skills…
… or in your business”
Complete ALL of your Pitch-Deck
BLOG: bryanstarbuck.typepad.com
7. 10x Healthy Business Model
“10-x” refers to the customer have a LARGE problem in their life, not
just another small issue in their life.
1 2
10x 10x
PROBLEM SOLUTION
3 4
Great Single Transactions
Transaction multiply to a Large
Economics Market Size
BLOG: bryanstarbuck.typepad.com
8. Validate by Talking to CUSTOMERS
1 2 Do they want a SOLUTION
Do they have this PROBLEM
9 2 8 3
People People People People
3 Will they PAY THE PRICE 4 Will they BUY with these
FEATURES
10 1 2 9
People Person People People
A real Problem
5 Are they any hidden
found in validation PROBLEMS
9 2
People People
BLOG: bryanstarbuck.typepad.com
9. How to Validate
Do NOT use your friends
And do not use the startup community
Be willing to pay $25 to $50 for 60-minutes for B2C.
$50-$100 for B2B professionals.
PayPal, Amazon, iTunes
lets you record the dial-in conference
call and share the screen. Cheaply
People from The US and your customers
Your Social Group are BAD are more like:
Early Adopters NOT Early Adopters
NOT A-Players or Type-A
White-Collar employees
NOT Advocating change & disruption
College educated Have a budget already fully spent
A-Players or Type-A Blue-Collar employees
Advocate change & disruption High School only, Community College…
BLOG: bryanstarbuck.typepad.com
10. Burn Rate
“Burn Rate” is the speed of spending money
BurnRate = (Expenses – Income)
“Runway” is months until running out of money
Runway = (Cash / BurnRate) = months until closing down
Searching for a great
Burn Rate when Employed
business modal while
employed is Salary: $120k
Living Expenses: $80k
great, because of the Burn Rate $40k (Negative)
NEGATIVE burn rate
BLOG: bryanstarbuck.typepad.com
12. Burn Rate – When Running
Now you are running the company. Manage around
BURN-RATE and RUN-WAY
One Metric for Pre-VC Funding:
Founder: Up to 2 years no salary
Engineer: $80k/year max salary (but not in the valley)
Monthly Burn Rate Monthly Burn Rate
(Low End) (High End)
RECOMMENDATION: CEO / Dev 1: $0k CEO: $7.3k
Microsftee gets a NON- Dev 2: $0k Dev 1: $7.3k
MSFTee co-founder.
Dev 2: $7.3k
Don’t magnify blind-spots
Law / Accting / G Design: $4k Law / Accting / G Design: $4k
Other: $3k Other: $5k
Target 4 to 8 months to launch
Burn Rate $7k Burn Rate $31k
BLOG: bryanstarbuck.typepad.com
13. Typical Funding
First Funding:
Comes at 5 months to 24-months (or never)
Stages of Funding
First funding is often $50k to $200k from 1) Friends & Families
friends and family Whenever possible
Full Round: 2) Individual Angels
2 or more employees. Demo
Highly conditional on an incredible idea,
team and credible Founder/CEO.
Often at 8 months to 18 months 3) Angel Groups
Launched. Tracking is a Plus
4) VCs
For most first time founders, post-
launch, post-traction
BLOG: bryanstarbuck.typepad.com
14. Two Typical Models
1 2 Developers until Traction. (Part-time CEO type)
The goal is LAUNCHED + TRACTION
Keep burn rate close to $0
Focus on Funding when Traction is starting
PROS: Easier to build team. Less need for funding.
CONS: Some risk of going in the wrong direction. Funding will be
harder to achieve pre-traction
2 1 CEO + 2 Developers. Funding sooner, more focus on Marketing / Biz Dev
The goal is LAUNCHED + TRACTION + Bigger Marketing/BizDev
goals
Funding is needed sooner
CEO needs to ramp to be “Fundable” sooner
PROS: Better business strategy. Better marketing & BizDev.
Funding easier
CONS: Higher burn rate, requiring funding sooner
BLOG: bryanstarbuck.typepad.com
15. Time Spent by Founder/CEO
Founder / CEO Long-Term
Strategy, Marketing, Board, Advisors, Fund Raising
Medium-Term
Launch: Marketing, Sales, Biz Dev, Legal, Finance
UX Designs
Dev #1 Coding
Dev #2 Coding
BLOG: bryanstarbuck.typepad.com
16. Dev Outsourcing
Successes:
Only pay FIXED Projects. oDesk.com
$1.5k to $3k for ~1 month to 2 month projects
Full specs, heavily manage with meetings, reviews & testing
Own Source Control. Code review everything
Tend to only work for technical founders
Always high risk
Failures:
Normally fails with no technical founders
<Hear horror stories>
BLOG: bryanstarbuck.typepad.com
18. Test your Startup CEO Knowledge
Demonstrate understanding of these topics. These are a common metric by
investors to test for a “Fundable CEO”
Finance Marketing
Deferred Recognized Revenue How to improve traffic conversion rates. Rates impact
on business model
GAAP compliance. Typical Pool sizes
Dave McClure model of marketing
Patterns of COGS to Revenue ratios of different
business models Drip email marketing
Impact of Churn How to create a POSITIONING strategy from a
strategic point of view
Post-Money Valuation. Cram downs
Explain behavior of 8+ channels of marketing
Negotiating focal points to secure next two rounds
of capital List 3 companies and their typical Cost-to-Acquire costs
Other
Explain what CHANNELS are for B2C startups. List
them
Explain how to manage to a Sales Pipeline. Describe
each stage
Explain how Business Development deals are secured
BLOG: bryanstarbuck.typepad.com
20. Ramp-up on Knowledge
GEMs
This STACK is NEW Mobile Frameworks
Ajax Frameworks
THIS IS VERY IMPORTANT CSS Frameworks
Cross-Site Integration (Scraping)
The great expansion of the stack is new: Rails
~2008 to 2011 DB Schema Auto-Upgrade
GOAL: Work can be accomplished with Content Management System
HALF the number of devs Cloud WebApp Services
And with little or no TEST or IT Cloud Hosting
head count Enterprise BUS / Queuing
Microsoft people think, “It is just another BI & Reporting
language” Database Debugger
The stack is beyond the language Source Control Innovations
and new
Linux Servers
Automatic IT
Testing (Blackbox & Whitebox)
Utility Helpers Utility Helpers
Language Language
BLOG: bryanstarbuck.typepad.com
21. Stack is Critical for Burn Rate
Old Model: 10 Employees New Model: 4 Employees
CEO or Leader CEO or Leader
Dev #1 Dev #1
Dev #2 Dev #2
Dev #3 Dev #3
Dev #4 Tester #1
Dev #5 Tester #2
Example:
Dev #6 IT / OPs
$1m per WEEK
In customer transactions
With 12 Employees
BLOG: bryanstarbuck.typepad.com
22. Next Steps for Learning (1 of 3)
People often ask how to learn more. Here is the best way:
ABSOLUTE Must Read Strategic Thinking or Execution
Venture Deals On Amazon Innovator’s Dilemma On Amazon
By: Brad Feld By: Clayton Christensen
Crossing the Chasm On Amazon
Art of the Start On Amazon By: Geoffrey Moore
By: Guy Kawasaki
Blue Ocean Strategy On Amazon
By: W. Kim
The Lean Startup On Amazon
By: Eric Ries Good to Great On Amazon
By: Jim Collins
Maverick On Amazon
Other By: Ricardo Semier
The Ten-Day MBA On Amazon The Four Steps to the Epiphany On Amazon
By: Steven Silbiger By: Steven Blank
Founders at Work On Amazon Inspiring Excellence On Amazon
By: Jessica Livingston By: Michael Schutzler
ABSOLUTE Must Read
BLOG: bryanstarbuck.typepad.com
23. Next Steps for Learning (2 of 3)
People often ask how to learn more. Here is the best way:
Marketing Other
The 22 Immutable Laws of Branding On Amazon Founders at Work On Amazon
By: Al Ries By: Jessica Livingston
Full Frontal PR On Amazon
Startup Weekend On Amazon
By: Richard Laermer
By: Marc Nager
Positioning: The Battle for your Mind On Amazon Don’t Make Me Think On Amazon
By: Jack Trout By: Steve Krug
The Strategy and Tactics of Pricing On Amazon
By: John Hogan
Purple Cow On Amazon
By: Seth Godin
ABSOLUTE Must Read
BLOG: bryanstarbuck.typepad.com
24. More Learning (3 of 3)
(My) Bryan Starbuck’s Blog on Company Building:
http://bit.ly/StarbuckBlog
Dave McClure – Marketing Model for Startups:
http://500hats.typepad.com/500blogs/2007/06/internet-market.html
http://vimeo.com/26277733
http://www.slideshare.net/dmc500hats/startup-metrics-for-pirates-long-version
http://www.slideshare.net/dmc500hats/startup-metrics-101-367863
More from Dave McClure:
http://www.slideshare.net/dmc500hats/why-not-to-do-a-startup
http://www.slideshare.net/dmc500hats/do-marketing-its-not-evil
Presenting to Investors:
http://www.slideshare.net/dmc500hats/how-to-pitch-a-vc-aka-startup-viagra-how-to-give-a-vc-a-hardon
Strategic economics of SaaS https://salesforce.adobeconnect.com/_a13852757/buildingasuccessfulsaasco/
Startup Marketing: http://howtolaunchastartup.com/2011/06/20/21-must-read-resources-for-start-up-marketing/
57 Things I’ve Learned Founding 3 Tech Startups: http://betashop.com/post/1417413108/57-things-ive-learned-
founding-3-tech-companies
ABSOLUTE Must Read
BLOG: bryanstarbuck.typepad.com
25. The END
Next Steps:
Create your company and have a BLAST
Join the “MicrosoftStartup Learning” mailing list
Join here: http://groups.google.com/group/Knowledge-Startup-to-Microsoft
Bryan Starbuck’s Blog: bryanstarbuck.typepad.com