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10 lessons from Marketo’s growth to a multi-billion-dollar exit

Doug Pepper Contributor Doug Pepper is a managing director at Shasta Ventures. More posts by this contributor A New Revolution Modernizes The Revenue Supply Chain With Adobe’s acquisition of Marketo, I have been reflecting on what an amazing and pioneering company Marketo has been since it was founded in 2006. There are very few tech companies that have defined a new category, executed a successful IPO, been acquired by a private equity firm for more than four times the company’s initial IPO market value and now, at a price of $4.75 billion, become the largest acquisition of a world-class company like Adobe. The credit for this dream-come-true Silicon Valley company goes to the co-founding team of Phil Fernandez, Jon Miller and David Morandi, who together built an amazing customer-first product, defined a breakthrough category and launched a marketing automation company that continues to delight and amaze partners and customers alike. I had the unique pleasure of meeting the founding team in 2006 when they shared their vision and passion for marketing automation. At the time, all they had was a PowerPoint deck. But it was clear then that they had a special idea and the unique capability to build a breakthrough product to deliver on their vision. In all honesty, I couldn’t know how truly extraordinary the company would become. Thankfully, I was lucky enough that the team chose me and my former partner Bruce Cleveland as their first investor and also was fortunate to serve on the board for 10 years. Most recently, I was thrilled that Phil joined me at Shasta. One of the qualities I admire most about Phil — which was apparent all those years ago and continues to this day — is that he never stops iterating to do things better or faster or more efficiently or more thoughtfully. Phil always carried a notebook that said “THINK” on the cover, which epitomizes how he approaches his work. Phil recently shared his “10 Things I’d Do Even Better If I Did It Again” presentation with our team and our founder/CEO community. We believe his insights are “10…

Product Hunt Radio: The evolution of Y Combinator, and counter-intuitive advice for founders

Ryan Hoover Contributor Share on Twitter Ryan Hoover is the founder of Product Hunt and host of Product Hunt Radio. More posts by this contributor Product Hunt Radio: Finding the world’s lost Einsteins and putting an end to aging Product Hunt Radio: Online communities and the dark side of the web In this episode of Product Hunt Radio, I’m visiting Y Combinator’s San Francisco headquarters to talk to two of the people who are integral to Y Combinator — Kat Manalac and Michael Seibel. Michael is CEO of Y Combinator’s accelerator program. He has been through YC himself a couple of times — first in 2007, as co-founder and CEO of Justin.tv — and again in 2012 as co-founder and CEO of Socialcam. Justin.tv later became Twitch and sold to Amazon, and Socialcam was sold to Autodesk. Kat is a partner at Y Combinator and one of the people who convinced us to apply to join the program back in 2014. She has been at YC for five years, where she focuses on founder outreach, helping companies perfect their pitches, and much more. Prior to joining YC, she was chief of staff to Reddit founder Alexis Ohanian and also worked on brand and strategy at WIRED. In this episode we talk about: The evolution of Y Combinator — it’s changed a ton since Product Hunt went through the program four years ago. They’ve been working on several programs for founders — things that Michael wishes existed when he went through the program. Michael and Kat’s advice for founders, including counter-intuitive tips they’ve learned after working with literally thousands of startups. A key mistake that trips up new founders when pitching their company, as well as advice for founders seeking a technical co-founder. How YC has scaled the organization as a 50-person company with its 4,000 (and growing) alumni. Of course, we also chat about some of their favorite products, including a virtual assistant that will do anything, a $1,500 smart mirror that will get you fit, and a beverage that will get you high. We’ll be back next week so…

The funding mirage: How to secure international investment from emerging markets

Jose Deustua Contributor Jose Deustua is the managing director of Peruvian accelerator UTEC Ventures, the organization behind Peru’s largest investor event, the Peru Venture Capital Conference. Looking for funding as a startup in Latin America is a lot like looking for a watering hole in the middle of the desert. You know it’s out there, but finding it in time is a life or death situation. Granted, venture capital investment in the region is at an all-time high, with leading firms like Andreessen Horowitz, Sequoia Capital and Accel Partners having made inaugural investments in markets like Colombia, Brazil and Mexico, respectively. But, at the same time, while startup founders might be tantalized by the news of big investments happening around them, as many of them get closer to the funding stage themselves, they often realize it’s nothing but a mirage. And this isn’t just a problem in Latin America. All over the world, startups are struggling to find investment, as VCs are investing more money in fewer deals in the endless search for the next unicorn. Due to a dwindling number of VC deals in both the United States and Europe, even entrepreneurs in established ecosystems are having to look further afield for the resources they need to build their businesses, bringing many of them to emerging markets like Latin America. Fortunately, whether you’re a local or foreign founder in an emerging market, there is a way to quench your thirst for the international investment that you need to scale your company. Here’s what we recommend to the startups that are part of our UTEC Ventures accelerator program in Peru, and what we’d recommend to you, too. Find local seed money first As a startup in an emerging market, the prospect of finding local investment can seem challenging. In fact, this is probably why you’re looking for international investment in the first place. But the truth is, finding local seed money to get started is really the first prerequisite for securing international funding later on. Last year in Peru, for example, US$7.2 million of seed capital was invested in the…

Measuring AI startups by the right yardstick

Ivy Nguyen Contributor Share on Twitter Ivy Nguyen is an associate at Zetta Venture Partners. More posts by this contributor Finding the Goldilocks zone for applied AI GDPR panic may spur data and AI innovation Building a B2B AI startup is hard enough between struggling to obtain training data and fighting with major tech companies to secure talent. Building a B2B AI startup held to the well-established software-as-a-service (SaaS) metrics is even harder. While many AI businesses deliver value via software monetized by a recurring subscription like their SaaS counterparts, the similarities between the two types of businesses end there. AI startups are a different animal SaaS products built without data and AI offer generalized solutions to their customers. AI businesses more closely resemble a services business or consultancies because they provide solutions that become tailored to that customer’s specific needs. Like services providers or consultants, an AI product improves as it knows a customer better (as in, as it collects more data from customers with continued usage), and as it serves a broader customer base, from which it can collect best practices and make better predictions over a bigger data set. Services revenue has been the antithesis of venture-style growth because it yields lower margins and lacks repeatability and scalability; as your services business brings on more customers, you will need to scale headcount accordingly to support those accounts, which keeps margins low. Palantir, a big data analytics unicorn, is one company mired in services demands. Unlike services providers, AI businesses have the potential to deliver that targeted and greater ROI at scale. AI businesses are not scalable right out of the gate: AI models take time and require data to train. Moreover, not all AI businesses will scale. Here are the metrics we use to tell the difference early on. AI metrics Intervention ratio Hype will make enterprise customers trigger-happy to pilot AI solutions, but at the end of the day, enterprise buyers buy the best solution available to address their problems and don’t care whether that solution comes in the form of SaaS software, a consultancy or…

How corporations and startups can more effectively work with one another

Maria Palma Contributor Maria Palma is vice president of Business Development and head of Platform at RRE Ventures. Build versus buy? Potential partner or potential disruptor? The option set for corporations to collaborate with startups used to be simpler. Today, the options seem almost endless: build, partner, buy, integrate with their APIs, co-develop product together, white-label a part of their technology, share specific data sets, cross-sell each other’s products — and more. The notion of a straightforward “vendor” relationship doesn’t apply anymore. The landscape has also changed. If the corporate posture of the past around innovation could be described as “not invented here” with a strong bias toward building internally, today’s corporate posture leans in a much different direction, with many thinking about how to disrupt themselves before an external party beats them to it. Not surprisingly, this has created more corporate and startup partnerships. While getting this type of collaboration right is beneficial for both parties, if you speak to most startups selling into large enterprises or corporate executives looking to partner with startups today, you will find many justifiable frustrations on both sides. As the vice president of Business Development at RRE Ventures, an early-stage venture capital firm based in New York, a major part of my role is leading our business development initiatives, where we enable collaboration between corporations and startups. Before this role, I spent time on the corporate side and on the startup side, so I’ve gotten to see this dynamic from both angles throughout my career. While there is no silver bullet for this type of work, here are a few best practices I’ve learned, sometimes through painful mistakes, or observed along the way. For startups looking to sell into large enterprises Do your homework. Corporate executives expect you to be prepared. Spend the time to understand what their business might be going through. Do they need new growth opportunities? Do they need to cut costs? Given the size of these companies, it’s easy to find information on them. Spend time reading recent press, analyst reports on the company or understanding more about the division…

A new foreign investment bill will impact venture capital and the US startup ecosystem

Bobby Franklin Contributor Bobby Franklin is the president and chief executive of the National Venture Capital Association and previously served as an executive vice president for the CTIA – The Wireless Association. More posts by this contributor The startup community must defend merit-based immigration Ensuring foreign-born founders can grow their startups in the U.S. President Trump’s time in office has been punctuated by rising tension with China on a host of economic issues. He’s received bipartisan criticism for the impact of tariffs on Chinese goods and the resulting retaliation against American exports. Democrats and Republicans have also unified over concerns about how Chinese state-associated actors are using minority investments in critical technology companies to gain sensitive information — like IP and know-how — about startups, many of them VC-backed. Policymakers are worried this technology is being used to propel Chinese advancement in emerging technology like artificial intelligence and robotics. These concerns led to passage of the Foreign Investment Risk Review Modernization Act (FIRRMA), which was signed into law by the president on August 13. NVCA has been at the table during FIRRMA’s consideration because it stands to have a significant impact on the venture and startup ecosystem. Who in our industry needs to understand FIRRMA going forward? Many more than you might think. VCs with foreign LPs, VCs with foreign co-investors or startups contemplating taking foreign capital are the prime examples, but given the shifting startup landscape in recent years, FIRRMA will leave a broad mark. FIRRMA expands the power of the Committee on Foreign Investment in the U.S. (CFIUS) to scrutinize foreign investments into “critical technology” companies for national security implications. Few in the startup world have dealt with CFIUS, but those who have understand its power and implications. It’s the opaque government entity that blew up the Broadcom-Qualcomm transaction for national security reasons and has been called the “ultimate regulatory bazooka.” Before FIRRMA, CFIUS reviewed foreign investments for national security considerations when the investment resulted in foreign control of a U.S. entity. But minority investments used to obtain sensitive information about a company have been outside the scope of CFIUS because those investments…

Startups should read this checklist before they go ‘whale hunting’ for big partners

David Frankel Contributor David Frankel is a managing partner at Founder Collective. More posts by this contributor You earn a million dollars a year and can’t get funded? Dear auto entrepreneurs, please think outside the gearbox A top-four tech company recently approached the CEO of one of our B2B portfolio companies with a tremendous offer. This company, with buy-in from its world-famous CEO, believes the startup’s core technology could help it catch up to a rival in an incredibly important space and wanted to discuss a $20 million investment on extremely favorable terms. This partnership would allow the startup to grow 10X in a year and would provide invaluable validation. The founder was elated. I was terrified. This kind of deal is a classic “whale hunt,” and most of the startups that engage in them are doomed to end up like Captain Ahab. While it’s immensely gratifying to receive this kind of validation from a market leader, the startup is at an early and important developmental stage. I’ve seen many promising startups blown up by ill-advised business development deals that swelled teams in a bout of euphoria only to see them wither if interest and focus from their partner wanes. In my experience, arrangements that pair a behemoth megacorp with a seed/Series A-stage startup have a success rate well below 50 percent. I didn’t tell the founder to decline the offer outright, but I did suggest that the management team consider a few questions before pursuing it. How much MRR will it add to your business? The project with the large company is in line with the startup’s long-term vision, but it’s a departure from their current focus. A $20 million investment is very nice indeed, but once that money is spent, what will the ongoing revenue be? And what is the opportunity cost of not supporting the current business plan? What discount rate will you apply to compensate for the small probability of this deal working out? My advice was that if he couldn’t satisfactorily answer those questions, it was probably the right move to turn down the deal.…

Boston-area startups are on pace to overtake NYC venture totals

Joanna Glasner Contributor More posts by this contributor Home run exits happen stealthily for biotech While tech waffles on going public, biotech IPOs boom Boston has regained its longstanding place as the second-largest U.S. startup funding hub. After years of trailing New York City in total annual venture investment, Massachusetts is taking the lead in 2018. Venture investment in the Boston metro area hit $5.2 billion so far this year, on track to be the highest annual total in years. The Massachusetts numbers year-to-date are about 15 percent higher than the New York City total. That puts Boston’s biotech-heavy venture haul apparently second only to Silicon Valley among domestic locales thus far this year. And for New England VCs, the latest numbers also confirm already well-ingrained opinions about the superior talents of local entrepreneurs. “Boston often gets dismissed as a has-been startup city. But the successes are often overlooked and don’t get the same attention as less successful, but more hypey companies in San Francisco,” Blake Bartlett, a partner at Boston-based venture firm OpenView, told Crunchbase News. He points to local success stories like online prescription service PillPack, which Amazon just snapped up for $1 billion, and online auto marketplace CarGurus, which went public in October and is now valued around $4.7 billion. Meanwhile, fresh capital is piling up in the coffers of local startups with all the intensity of a New England snowstorm. In the chart below, we look at funding totals since 2012, along with reported round counts. In the interest of rivalry, we are also showing how the Massachusetts startup ecosystem compares to New York over the past five years. Who’s getting funded? So what’s the reason for Boston’s 2018 successes? It’s impossible to pinpoint a single cause. The New England city’s startup scene is broad and has deep pockets of expertise in biotech, enterprise software, AI, consumer apps and other areas. Still, we’d be remiss not to give biotech the lion’s share of the credit. So far this year, biotech and healthcare have led the New England dealmaking surge, accounting for the majority of invested capital. Once again, local investors…

MallforAfrica goes global, Kobo360 and Sokowatch raise VC, France explains its $76M fund

Jake Bright Contributor Jake Bright is a writer and author in New York City. He is co-author of The Next Africa. More posts by this contributor Harley-Davidson to expand EV lineup, may include scooters, bicycles Sokowatch closes $2 million seed round to modernize Africa’s B2B retail B2B e-commerce company Sokowatch closed a $2 million seed investment led by 4DX Ventures. Others to join the round were Village Global, Lynett Capital, Golden Palm Investments and Outlierz  Ventures. The Kenya-based company aims to shake up the supply chain market for Africa’s informal retailers. Sokowatch’s platform connects Africa’s informal retail stores directly to local and multi-national suppliers — such as Unilever and Proctor and Gamble — by digitizing orders, delivery and payments with the aim of reducing costs and increasing profit margins. “With both manufacturers and the small shops, we’re becoming the connective layer between them, where previously you had multiple layers of middle-men from distributors, sub-distributors, to wholesalers,” Sokowatch founder and CEO Daniel Yu told TechCrunch. “The cost of sourcing goods right now…we estimate we’re cutting that cost by about 20 percent [for] these shopkeepers,” he said. “There are millions of informal stores across Africa’s cities selling hundreds of billions worth of consumer goods every year,” said Yu. These stores can use Sokowatch’s app on mobile phones to buy wares directly from large suppliers, arrange for transport and make payments online. “Ordering on SMS or Android gets you free delivery of products to your store, on average, in about two hours,” said Yu. Sokowatch generates revenues by earning “a margin on the goods that we’re selling to shopkeepers,” said Yu. On the supplier side, they also benefit from “aggregating demand…and getting bulk deals on the products that we distribute.” The company recently launched a line of credit product to extend working capital loans to platform clients. With the $2 million round, Sokowatch — which currently operates in Kenya and Tanzania — plans to “expand to new markets in East Africa, as well as pilot additional value add services to the shops,” said Yu. MallforAfrica and DHL launched MarketPlaceAfrica.com: a global e-commerce site for select African artisans to sell wares to buyers…

Shoe startups aren’t dragging their feet

Joanna Glasner Contributor More posts by this contributor Hydrate, intoxicate, caffeinate, repeat: Meet the startups pouring the future VCs serve up a large helping of cash to startups disrupting food Good thing Carrie Bradshaw, the shoe-loving heroine of Sex and the City, wasn’t a footwear venture capitalist. The high-heeled, high-priced and hard-to-walk-in pairs beloved by the TV icon are pretty much the least fundable concept in the shoe startup space lately. Instead, when they do dip their toe in the footwear space, venture investors have been putting a premium on comfort. At least that’s what recent funding records indicate. Over the past year-and-a-half, investors have tied up roughly $170 million in an assortment of shoe-related startups, according to an analysis of Crunchbase data. The vast majority is going to sellers and designers of footwear that people might actually want to walk in. Top funding recipients are a varied bunch, including everything from used sneaker marketplaces to high-end designers to toddler play shoes. Startups are also experimenting with little-used materials, turning used plastic bottles, merino wool and other substances into chic wearables. Below, we look at how startups are leveraging market trends to get a foot in the door. Growth market It should be noted that recent footwear funding activity comes on the heels of some positive developments for the shoe industry. First, this is a huge and growing industry. One recent report pegged the global footwear market at $246 billion in 2017, with annual growth rates of around 4.5 percent. Second, public markets are strong. Shares of the world’s most valuable footwear company — Nike — have climbed more than 50 percent over the past nine months to reach a market cap of nearly $130 billion. Stocks of several smaller rivals, including Adidas, have also performed well. Third, men are spending more on footwear. Though they’ve long been stereotyped as the gender with more restrained shoe-buying habits, men are putting more money into footwear and could be on track to close the spending gap. Sneakering in Both men and women are spending more on sneakers, and venture capitalists have taken notice. Sneakers and sneaker-related businesses…

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