Exclusive Excerpt + Letter from GSV CEO, Michael Moe
LETTER TO THE READER
In 1849, pioneers from around the world came to California looking for gold, and what once was an empty landscape of natural beauty turned into a densely populated melting pot. A hundred and sixty something years later, the gold is long gone but the land of opportunity continues to BOOM. People still flock to California to chase a dream, but now one that is intermixed with microchips, apps, social networks, and most important: Silicon Valley.
At the heart of the tech revolution still in mid-swing, Silicon Valley is home to the superstars Apple, Google, and Facebook; the old-timers Intel and HP; and of course, the thousands of little guys still trying to make it: the startups. But Silicon Valley has quickly become more than a geographic spot on a map; it is a mind-set of innovation that has spread across the globe, and that’s what we at GSV stand for.
We’re delighted to share our vision of uniting a community of innovators who all hold a passion for changing the world for good.
One hundred years ago, Silicon Valley was filled with apricot and apple orchards with a twenty-year-old fledgling university called “The Farm.” Detroit was the innovation capital of the world with the young and ambitious migrating to the Motor City to seek fame and fortune. Automobiles were the disruptive technology, and Henry Ford was the Steve Jobs of his day.
Today, Detroit is bankrupt, and Silicon Valley has been the Mecca for entrepreneurs from around the world who believe that there is nothing more powerful than a big idea. Stanford University is Startup U, where people flock to pursue their dreams. Over the past fifty years, it’s been breathtaking to see how companies conceived on a napkin at Buck’s and started in garages between San Francisco and San Jose have transformed society and business.
Apple, Google, Facebook, Oracle, Cisco, eBay, Intuit, Intel, Tesla, Uber, Twitter, Lyft, Coursera, and Dropbox are but a few of the revolutionary companies that call Silicon Valley home.
While the sixty miles between San Francisco and San Jose remain the epicenter for innovation, the spirit and entrepreneurial mind-set that made Silicon Valley such a magical place have gone viral and global. From Austin to Boston, to Chicago and São Paulo; from Shanghai to Mumbai to Dubai, there is something very powerful happening: a Global Silicon Valley is emerging. And it doesn’t have to rhyme with anything, either.
GSV created a formula for determining the top fifty markets in the Global Silicon Valley based on factors such as VC funding, startup activity, educational institutions, and business climate. We then researched each market to highlight key features and asked the local experts to understand what makes their city tick. We answer entrepreneur need-to-knows on how to be successful in bringing their concept to life. Who are the top angels? Which are the top incubators? What should be in the pitch? What shouldn’t be in the pitch? Where is the power breakfast spot? What is the dress code? And much, much more…
The Global Silicon Valley Handbook aspires to inspire the next Steve Jobs or Elon Musk to create the future they can imagine.
We are believers in how one person’s vision can change the world and that whatever the mind can conceive and believe, it can achieve.
That’s what this handbook is about and why it is the official guide to the Global Silicon Valley.
Read on!
— MM
GETTING IN THE DOOR
Before you launch the next great startup, take a step back and look at the big picture. Over the past 15 years, venture capital funding and initial public offerings have accelerated at an astounding rate. Just look at the evidence.
The dramatic increase in the number of large private companies is mainly a result of two key trends.
First, venture capitalist (VC)–backed private companies are staying private longer (a median of three years in 2000 versus ten years in 2015) Second, there are now over 3 billion people on the Internet with 2.6 billion smartphones, enabling entrepreneurs to go from an idea to a product that reaches billions of people at warp speed.
We are riding powerful tailwinds that are rapidly transforming the world as we know it. In 2000, there were only 370 million people on the Internet (roughly 6% of the world population), no one had heard of a smartphone yet, broadband was a fantasy, and mobile applications off a platform had not been invented Today, the “digital tracks” have been laid and 140 billion apps have been downloaded from Apple and Google.
Moreover, in the Internet Bubble of 2000, the ten
Moreover, in the Internet Bubble of 2000, the ten largest Internet companies were valued off a figment of one’s imagination. Now, they are mainly valued on future cash flows discounted back to today. Apple, with a $640 billion market value, has $200 billion of sales and $190 billion in cash.
However, as those who have seen Benchmark Capital’s VC Bill Gurley’s tweetstorm know, valuations for private companies are reaching sky-high levels. On the one hand, the value of every Unicorn put together is less than the market capitalization of Facebook, and lower valuations means less VC money being spent. On the other hand, many Unicorns are reaching huge valuations with little profit to show for it, meaning a market correction may be in order. As Gurley argues, this means there could be a shift in venture capital from focusing on growth to focusing on the path to profitability.
*Tip: When somebody asks you a direct question, give a direct answer. Telling the investor that you’ll get back to them later is a sure way to have the investor tell you that they’ll get back to you later.
HOW VENTURE CAPITAL WORKS
Venture capitalists (VCs) are people, too — most of them anyway. And as such, while insanely ambitious, competitive, and hopefully intelligent, just like anyone else, they aren’t looking for more work to do.
A blind business plan hurled over the e-mail transom has as much chance of being read as an e-mail starting out with “Dear Sir or Madam.” A top VC might receive 500 to 1,000 e-mails a day, so cluttering up the inbox without an edge is only making you the enemy of the assistant whose job it is to delete e-mails. You might think you have the best idea since Travis hitched a ride on Uber, but without a warm introduction from a trusted person in their network, your idea will die an anonymous death.
LinkedIn can be a start to finding out who you are “linked” to, helping you build a path toward your VC target. Unfortunately, many people are LinkedIn whores and send and accept LinkedIn invitations from people they barely know. Affinity groups are a good way to get your foot in the door. Going to the same college or high school as the targeted VC is super helpful. VCs will be courteous to somebody who comes from their hometown (they don’t want to be called the rich jerk who forgot where he came from) or from their alma mater.
Networking through past business affiliations of the VC is one of the best ways to get a meeting. If a VC worked with someone who can attest to your brilliance or your startup’s potential, you now have provided the VC the trusted shortcut to finding the next big thing.
Don’t send a business plan. That takes too much time to read and is often impossible to understand without an interpreter.
A short deck describing how your idea is going to transform the world is what will get their attention. Include the 4P description of your business — who are the people, what is the product, what is the potential, and what is the predictability on execution. Once you’ve got the meeting, the pitch is all about precision and passion — don’t speak in vague generalities or like a professor. No VC wants to understand how to build the clock — they want to know what time it is.
*Tip: In Silicon Valley, having business failures on your résumé is viewed positively (you learned something), but working at a bureaucratic brain-dead organization is viewed like cancer.
The beginning of the pitch basically sets the stage for success or to be sent packing. The first two minutes are about getting the VC engaged and establishing credibility. Recognizing that they reject 99.9% of the investment opportunities presented to them, you need to create the impression that what you have is revolutionary and that you are Marc Benioff’s better-looking clone.
Next you need to explain the market opportunity that you are going after. What is the TAM (Total Addressable Market)? What are the megatrends that your idea benefits from? Who are the competitors?
Now it’s time to explain your plan for world domination. What is your go-to market strategy? How does this disrupt the status quo? What kind of people and partners do you need to execute against your opportunity?
Finally, explain the financial model. What are the key metrics that will drive value and how are you focused on achieving success? List the key milestones that will provide confirmation that you are on the right track to take over the industry.
After going through your presentation, don’t overstay your welcome. Make sure you give the impression that you are tight on time and you are on your way to your next meeting, whether you are or you aren’t. Back to VCs are people, too — they want something that others want or can’t have.
The harder you are to get now, the more they will want you.
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GSV’s 4P’s
Investors aren’t always articulate on what they are looking to invest in other than “making money,” but actually we believe that 99% of the characteristics investor want are captured by the 4P’s — PEOPLE, PRODUCT, POTENTIAL, and PREDICTABILITY.
The first “P” — PEOPLE — is by far the most important component to the investment equation. While startups don’t have long histories, the people do. Winners find a way to win and also know how to get you to believe in what something can be.
The second “P” — PRODUCT — is critical, with investors looking to back companies that can be the leader in what they do. With technology in general and the Internet in particular, there is often a disproportionate advantage to the leader in a category.
The third “P” — POTENTIAL — is what investors need to envision. They want to believe that the fledgling enterprise could be HUGE. Megatrends pour gas on a fire for startups.
The fourth “P” — PREDICTABILITY — might seem like a challenge, since there is nothing predictable about a startup other than its unpredictability. However, creating confidence that a company can deliver, against its plan (see first “P”) is the difference between a startup being funded or failing.
For more, check out The Global Silicon Valley Handbook by Michael Moe and the GSV Team. Published by Grand Central Publishing. Copyright © 2017 Michael Moe.
Available March 07!