Recap of Startup Saturday Hong Kong 2011 #sus2011

A very impressive turnout, the guys at startups hk have done an awesome job building out the startup and entrepreneur community in Hong Kong! I would say over 200 people came to today’s event.

Doing my best as a blogger, for those who wished they could go and missed it, I took notes from the keynote speaker, Dave McClure from 500startups venture capital fund and incubator.

Below are my “raw notes” as I typed on the spot.

Dave McClure from 500startups speaks at Startups Hong Kong

IIts getting cheaper and cheaper for startups to “start up” because there are so many platforms to choose from to build your startup.

Firstly, whats a platform, it consists of these 3 things:
users
money
features

—> most valuable is users.

Some example of today’s platforms:
google
android
apple
youtube
Facebook
linkedin
twitter

This means lots of changes in venture capital
—> lean startup
mostly now is seed and incubator….
—> not money

the cost to acquire a user is getting lower and lower.

building product — I can do product cheaper, faster, better
getting customer easier more measurable

MEASURED USER BEHAVIOR

change/adapt your product faster based on these user metrics
or change your MARKETING
—> you can change the subject line of an email much faster than your product
you guys are geeks, not marketers! think marketing

Identify your target market!

—-
we keep making it too complicated. we think social media is cool…but we need to solve problems!

solve someone’s problem.
people will pay real money to solve those problems

LOTS OF FOCUS ON MARKET
don’t sit hidden in your room for 9 months building something without talking to a customer.

Disruptions in VC world

Do most startups succeed or fail?
FAIL

So, if you could invest in:
1 startup at 1 million
10 startups at 100,000 each
100 startups at 50,000 each

the 3rd of course!

but…
Why isn’t it changing?
most VCs are incentivized by management fees
is it easier to manage 1 investment or 100?
So the VC can spend more time on the golf course

But we (500 startups) think we can work our ass off, invest in 100 or 500 startups, then we are more likely to reach successes.

you need SCALE to get VC investment

won’t get VC-
small business
consumer internet
consulting.

good for VC
hardware
enterprise SW
clean tech
bioscience
Facebook, zynga
groupon

now that startups need less investment – founders keep more of their business.
Sooooooo,….a smaller “buyout” offer is more attractive to the founder because he/she has more %

All of this is GOOD for all parties – EXCEPT large investors. Its good for the startup founders, the big business acquiring.

Big companies DO NOT HAVE INNOVATION
they need to “outsource” innovation, buy small companies

Phases to think about when thinking about building your business:

Product
Market
Revenue

Startup Incubators:
Y! combinator
techstars
seedcamp
500startups

Still…….most things fail.
60-80% – but at least on smaller investments
if it takes only 3-6 months on a $50,000 investment to find out you’re an idiot, thats not so bad as investing more and taking more time.

500 startups talk:
Incubators – if you’re in early stage there is value being there to learn from others
but if you
“tribe” dynamics start happening..
people start working together in all sorts of unusual ways
if 20 – 30 companies are in the same space
if they are succeeding, they still compete against each other
they learn from each other
all are GOOD, but they want to be THE BEST
the next startups that come in, see that successful behavior in that local proximity, they model after it.

BEHAVIOURAL physchology, learning from people in your environment
create a petri dish where things happen quickly
LEARN FAST
change happens fast
and inexpensively.

If we have our own METRICS in this incubator to measure success of this group work and behavior, this is how we grow.

Discover customers
steveblank.com

Product / market fit – MODES:
search for a business
the growth of a business

BOTH OF THESE are different mindsets

—–

Iterate: Learn, measure, build
eric ries, startuplessonslearned.com

productivity is MEASURED when conversions is increased – customer is HAPPY
making MORE features may move that the other way.
I have X features on a page, if I add 1 new feature, what happens to my conversion rate? CONVERSION RATE IS LIKELY to go down. (if all things are equal)
so, theoretically, to increase conversion – WE KILL FEATURES.

startup metrics for pirates

AARRR
acquisition
activation
retention – do they stay, do they use it
referral – do they refer others?
revenue – users conduct some monetization?

does not need to be in this order -but normally get users (acquire), and get them to use it (activate)

how to tell users enjoy:

do they pay for it
do they NOT abandon it
do they engage with “your commercial”

One step at a time –
1)Make a good product
2) market the product
3) make money!

product -> market -> revenue
make it – > scale it -> make money

MAYBE – you cannot scale until you make money, so (2) and (3) may change

——————
Investment stage 1

Structure
2-3 founders
25-100k investment
incubator environment

Test functional prototype – MVP (minimual viable product)

demonstrate con station retention product
develop metrics
————
investment stage 2

market validation + revenue testing

2-10 person team
$100k – 1m investment
syndicate of angel investors

—–
stage 3
5-25 peron team
1-5mil invest
seed and venture investors

Make money (or go big) – get sustainability

build milestones

those stages mirror stage 1 – 2 – 3 — to move up the food chain
product stage 1
market stage 2
revenue stage 3
=================
Global trends

how many languages:
4- engish, mandarin, spanish, arabic (many forget this one, growing rapidly)
2 maybe on portugese and hindi.
3 local market – japanese, cantonese, german

think about how big those places are, how much discretionary spending they have, how fragmented it is.

You need to have INTIMATE UNDERSTANDING OF THE LANGUAGE AND THE CULTURE – and move to the middle of that target market.

conclusion
you don’t need to be in silicon valley – don’t be insecure
–> you don’t need to be insecure, people are from other places! Geek is only 50 years old in california.

many times its oppression to create innovation

questions for Dave McClure:

1) wall st journal says startup funding is drying up.
– dave says that is BS, many newly “minted” founders from silicon valley are investing the money they made, so there are lots of people like that. also many VCs feel threatened by seed incubators,

2) how do you value a business when you invest:
depends on
seed – 50,000 on 7-10 million ( 1-2% )
incubation – investment on a 1mil valuation

its better to give away 5% at a low value, then 30% at a higher valuation

when to get investment:
when you get a customer
when you find a scalable model

you should think about – at what stage am i in when i seek investment? the higher in the phase, the higher the valuation. how much capital will it take you to get from one stage to the next?

So you pick 100 – 150 investments a year- how do you cut?

how long do you make subsequent investments?
normally we give them a 4 month – 6 month to go from something to something more
as investor, do we see them making progress on 3-6

on seed stage, we give 9-12 months.

how much of your investment decision is based on attitude?
investing is emotional, so yes, its the person you are investing in.

how do you evaluate users? outside of profitability
within 12 months what are they worth…
most stretched – within 36 months
what the conversion from offline to online
growth over time
customer acquisition cost by CHANNEL

what extent do you trust customer opinion?
don’t trust them unless they are paying or clicking
feedback is hard….normally they don’t know what they really want
its not useless, but its much better to do landing page testing with conversion testing.
different pictures and text
keyword volume
indicate customers from keyword and reaction rather then directly asking

how do you figure out the local market without being here
go out drinking with them
hire locals
learn the language, culture

what kind of investor should entrepreneur look for?
someone who writes checks on relatively clean term sheets
matches your current stage.
if you have a strong product vision, hopefully the investor doesn’t have a strong product vision.

After David’s speech, we had a lunch break, Bill Liang took a few of us out to lunch in a nice Dim Sum place…so many conversations about startups, business, investing, entrepreneurship. Tony was with me and mentioned that he was trying to listen to 3 conversations at the same time…so overwhelming!

After lunch, we returned at 2pm for the following:

2pm hong kong startups round table
3pm – us startups roundtable
4pm – brian chesky of airbnb
4:30pm – startup investors roundtable

then there was the after party, where there would be massive networking opportunities, but I couldn’t make it as I had to catch a bus back for my buddy and roommate David Ho’s birthday bbq house party.

Then tomorrow they setup “geek adventures” – with a few different trips in the local hong kong scene.

It was really one of the best startup events and networking events I had been too…a bit overwhelming…there has to be a solution coming for being able to find people who you should network with in a large group meeting….maybe one that reads who is in the room and tells you which of these people are most “relevant” to trade business cards with.