Seeking Disruptive Leaders in Fly-over Land

Click on W Wonka for the golden ‘growth hacker’ ticket.

Not growing fast enough!? Better add Growth Hacking to the DNA of your SENIOR team (that’s right, you boss-man). It may only be the difference between getting funded, or not, or creating an interesting enterprise value at liquidity-event time, or not.

More great Growth Hacking content; just google sean ellis and andrew chen and ‘growth hacker’.

We’re so happy! Mary Meeker’s latest Internet deck just came out. 

(just click on the happy people)

Its Series A Crunch time. D’Oh!  Click on the Captain for the surprise inside.

As usual AVC provides perspective.

(Click on picture for very nice lesson in types of pivots; key is to accelerate velocity of learning and to pivot to eventual revenue/business model, and market, ones that institutional investors find attractive)

One thing that we have noticed consistently as we search for the best/brightest, most disruptive, startups in the Midwest+ (Denver - DC and Minn StPaul - Austin), is that these startups, as compared with their coastal brethren, tend to be slower to challenge their initial assumptions (revenue/business model, size of market, more) thus (much) slower to pivot and get to their optimal model and market(s).

This can have strategic consequences, especially if the better pivot(s) takes the startup to a much larger market that institutional investors will (following angel round) find attractive. Angel investors benefit by backing a company pursuing a market that VC’s will find attractive or potentially risk backing a small market play with no interest in an institutional follow-on round, thus a bridge (note) to nowhere.

Our suggestion is that entrepreneurs, angels, mentors, etc. systematically test the initial vision for improvements (revenue model, business model, size of market, etc) that make the startup attractive to institutional investors or DO NOT MAKE THE INVESTMENT.

Eventually this discipline will settle in as table stakes and the local/regional market will learn that this systematic exercise is required if seed/angel financings are to be possible.

We encourage mentors and angels to drive this valuable behavior. There is much written about this in Steve Blank’s blog; check out the Nudge/Team Dynamo case.

Mary Meeker’s latest Killer Deck (click the pic).

You have to spend some time with this latest MM treasure trove. Thank you Mary!

Summary:

* Global (innovate in US then take globally)

* It’s all about Mobile (but how to monetize at much lower pricing)

* Re-Imagination of EVERYTHING (New Gold Rush)

* US/Global Economy (Gulp!)

* Tech Bubble? (Look at recent IPO’s; Nice IPO Mkt Cap; followed by poor execution/performance; followed by big market cap haircut. Business models evolving.)

Lean(Venture)Cuisine. The LeanFinance Model naturally follows the Lean Startup model. Click on the pic for a smart Silicon Valley VC chef sharing his recipe.

Lean entrepreneurs have to understand the impact of the LeanCapital model on their financing strategy. It doesn’t make any sense to go to Tiffany’s on Michigan Avenue for a $250 pair of diamond earrings, their business model isn’t built for that. Similarly it doesn’t make any sense to go to a $200 million+ fund to raise $1-$2M; that fund has to move approx. $16M ($200M/12 portco’s) over each portco over the life of the fund after syndication. Assuming three like-sized funds in the deal, that’s $48m in each portco to get to a liquidity event. Assuming the VC’s own 70% at sale of business and an ok 4-bagger return, the portco has to sell for $250m. TILT, in most LeanCases. 

However, look at it from the POV of a $40M fund. $40M/12portcos = $3.33M/portco over life of portco. Syndicate with 3 like-sized funds for $10M all-in to liquidity event (plus angel capital: $.5 - $1M), that works IF portco is Lean Startup AND is capital efficient/scalable. This is LeanStartup entrepreneur as Goldilocks finding the investor porridge that is ‘just right’.

What does this mean; “Sherman, set the wayback machine (millennials won’t get this, boomers will) to 1995” when VC funds averaged $50M.’ See Dialing Down: Venture Capital Returns to Smaller Funds

LeanStart-up + LeanCapital = LeanVC = needs better/faster ecosystem to source,vet, monitor deals = need for more VenturePartners, more experienced mentors, more assessment/execution online tools. Technology + ‘just right’-sized VC.

Thank God for Mary Meeker and her KILLER DECK. 

Summary: Internet Big, Internet Good! INTER(net)GALACTIC!

The “Quick Smart” Start-up.

This is good advice from Nathan Furr, professor of entrepreneurship and Forbes writer.(click on the picture to link to the article).

Paraphrasing him, what is the difference between the old and the new entrepreneur? At the core, the idea is that when you are dealing with disruptive innovation, thus unknown problems, you have to test your assumptions in as capital efficient, fast and valid a manner as possible and then iterate (product feature/function; revenue/business model, etc.). The difference really comes down to the difference between a planning-based model and a learning-based model where you employ all the tactics you can to learn as honestly and flexibly about the unknown. It sounds simple but it can be difficult to break free of the old wisdom in practice.

The Dropbox case in Furr’s article drives home the point. They were one of eighty vendors with a cloud storage solution yet they won; why?