jonathon southam: venture capital, funding & pitching

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