Category Archives: Start-up data

What’s a start-up?

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Why should I ask such a question 4 years after publishing my book and isn’t this obvious? I do not think it is when I see how many times I need to clarify the difference between a start-up and any corporation. After all, any corporation being launched is a start-up, right? Not so. Thanks to my colleague Pascal :-), I just read another article by Steve Blank, Why Governments Don’t Get Startups, who gives the perfect definition:

“While large companies execute known business models, startups are temporary organizations designed to search for a scalable and repeatable business model.”

In my book, I had said it this way: “A start-up is a company which is born out of an idea and has the potential to become a large company” and I had also added “Apple, Cisco, Google, Intel, Microsoft, Oracle, Yahoo, YouTube. You certainly know these names. These companies did not exist forty years ago. They are technology giants today.”

Why do I like Blank’s definition? Because of his use of “temporary” as well as “search for a scalable and repeatable business model”. Apple, Cisco, Google, Intel, Microsoft, Oracle, Yahoo, YouTube clearly belong to the start-ups; I had not mentioned that non-existing business model.

Now Blank adds something:

“Scalable startups require risk capital to fund their search for a business model, and they attract investment from equally crazy financial investors – venture capitalists. They hire the best and the brightest. Their job is to search for a repeatable and scalable business model. When they find it, their focus on scale requires even more venture capital to fuel rapid expansion.”

This is the typical Silicon Valley model of fast and usually non-organic growth. Gazelles have often yearly revenue growth of at least 50%, not to say 100%. Look again at the growth rates of Gazelles and Gorillas in my post on the topic or at the revenue growth below (table 8-8 from the book).

I see at least two opened debates:
– In Europe, the growth is often slower, at least less than 100%! Is slow growth compatible with a start-up definition?
– Blank sees two phases of VC funding, the first one to search and validate the business model, the second one to fuel rapid expansion. At least Oracle and Microsoft never had the second funding and their growth was more than 100% during their first 10 years!

10 lessons from the Dropbox story

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Forbes recently published Dropbox: The Inside Story Of Tech’s Hottest Startup or is it its legend already? (I should thank my colleague Mehdi for mentioning the link to me, 🙂 )

It looks so similar to many of Silicon Vallley success stories that we should sometimes be a little skeptical about such beautiful stories. In any case, it is worth reading and here are my 10 lessons from it:

1- YOUNG GEEK – Drew Houston, the “typical” American start-up founder, began playing with computers at age 5 and began to work with start-ups at age 14. Steve Jobs knew this kid who had reverse-engineered Apple’s file system. He was 24 when Dropbox was launched.
2- ROLE MODEL – “No one is born a CEO, but no one tells you that” is what Houston learnt but when he saw one of his friends starting his own company he thought “If he could do it, I knew I could”.
3- COFOUNDER – In 2007, Paul Graham selected him in his Y Combinator program but insisted he has a cofounder. This would be MIT dropout, Arash Ferdowsi.
4- FRIENDLY ANGEL – Months later, they are supported by Pejman Nozad (famous with Saeed Amidi for their family rug business turned into office space [Logitech, Google] turned into investing [PayPal]).
5- VENTURE CAPITAL – Soon, Nozad introduced them to Michael Moritz (Sequoia’s legendary investor in Yahoo and Google) who invests $1.2M.
6 – MIGRANTS – Both Ferdowsi and Nozad have roots in Iran. They chatted in Farsi when they first met.
7- TALENT & PASSION – “I was betting they have the intellect and stamina to beat everyone else” claims Moritz. “Houston and Ferdowsi moved offices again and often just slept at work.”
8- LEAN & SPEED – Ycombinator funded Dropbox in June 2007, Sequoia in Sept. 2007, followed a year later by $6M from Accel and Sequoia. 9 employees in 2008 (with 200’000 users) and 14 people in 2010 with 2M users.
9- CUSTOMERS – In 2011, Dropbox should make $240M in revenues, from only 4% of its 50-million user base. 70 people and profitable.
10- RESOURCES – Being profitable did not prevent Dropbox to raise another $250M from Index, Greylock, Benchmark and existing investors. At a $4B valuation.

Another French start-up going public!

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They may not be that many, but it is at least the 3rd French start-up going public in 2011, after Sequans and Envivio. Whereas these two ones went public on Nasdaq and NYSE, Mauna Kea Technologies went public in August on Paris Euronext. I did not anything about MKT until recently but I looked at their IPO prospectus.

A nice entrepreneurial story. Two founders, apparently friends before high school, launched MKT in 2000. Benjamin Abrat (MBA, a few years with Givaudan) and Sacha Loiseau (Ecole Polytechnique, PhD in astrophysics and a postdoc at Caltech) are the typical young entrepreneurs with not so much experience but probably a lot of mutual trust.

Not so common, in France at least, is the funding history:
– a seed round of €1.6M with the renowned French business angels: Marc Vasseur (Genset), Jérôme Chailloux (Ilog), Jean-Luc Nahon (Isdnet), Christophe Bach (Isdnet), Patrice Giami (Isdnet), Philippe Maes (Gemplus) and Daniel Legal (Gemplus)
– a 1st round in 2004, €5M
– a 2nd round in 2007, €20M
with a €50M IPO this year. here is my usual format for the equity history and structure.


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In an interview (in French), Sacha Loiseau gives his views on what French PhDs are lacking:
“What do you think of the PhD training ?
S. L. : It brings autonomy and initiative, two important qualities for fundamental or applied research. However, the French system does not cover other important topics, which are essential to the business world: the customer, teamwork, market intelligence, intellectual property and technology transfer, as well as mastering the English language. The strong point is that, facing tough problems, PhD students learn how to find a solution, often alone. This is a great asset for companies which must always innovate, but it may not favor teamwork, openness to the world… Many PhD students, I think, are isolated and do not know what their competitors do.”

More data on IPO and founders.

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Following a recent post on the age of founders, I just did a more systematic analysis on the topic and at the same time analyzed more elements on the cap. table of many companies. I had 47 companies in my previous post. Here I just have 100!

The two tables give the founders’ age, the number of years from foundation to IPO and the founders’ remaining equity at IPO by field and geography.

Now if you want to have a look at the full record, just click on the next picture, you will get a 107-page pdf with all data. But please be aware of some of the following difficulties. All this is best effort! The cap. tables are subject to mistakes and comparisons are tough to make. For example:
– Founders do not always share equally the initial stake.
– There is no real definition of founders but the group of people who recognize themselves as such.
– ESOP reserved for future grants is a quite artificial part of the overall picture.
– When age was not available, a indirect measure was to consider a BS is obtained at age 22.
– Directors include independant directors only, not the investors.
– Finally not all companies went public, some were acquired and some filed but did not go public (yet)

Is there anything worth noticing? Well Biotech/Medtech founders are the oldest whereas SW and Internet entrepreneurs are the youngest. Surprising? Not really, but remember, these are not statistically valid data, this is just a compilation…

Age of founders

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As I just mentioned in my previous post on Carbonite, I promised to have a look at the age of founders again. This follows some challenging comments from Pascale on a recent post, Is There A Peak Age for Entrepreneurship?

I have data, the ones I may bore you with when I publish cap. tables of IPOed companies. Well, the companies publish the age of their officers so when the founders are still active, you can get their age at IPO and getting the number of years from foundation to IPO, you have the founders’ age. Usually, the biographies also give the previous companies founded by these people. So I did yesterday the exercise in two broad groups: companies which went public recently (mostly in the last 5-10 years) and companies which had gone public in the 90s or even before. Just remember that in my book, I had compiled the age of the “famous” entrepreneurs and it was 27.

First the group of recent companies (52 founders from 25 companies):

Then the older companies (53 founders from 22 companies) with the average of the group but also of the two groups at the end.

These are not stats, just anecdotes and you should also see that when I did not have the age, I looked at academic background with the idea that you have a BS when you are 21… So the average is 34, increasing from 33 to 35. Definitely not the 27 I had, not the 40 either claimed by recent analysis. Is the glass half empty or half full, I will let you decide! I still wonder why the big successes seem to induce a lower average (if true!).

A final (and not related comment): “years from foundation to IPO” has increased from 3.7 to 6.8, being 5 overall. Still very far from what I had in Europe, which was closer to 9 or even 10 years.

IPO again: Carbonite is the new star

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I just discovered about Carbonite, one of the companies in The 17 Most Important IPOs To Watch For In 2011. Storage and backup are clearly hot fields in 2011 (just have a look at Fusion-io for example). In the 1st link I just mentioned above, Carbonite is described this way:

Carbonite, the online storage backup for consumers and businesses, has raised roughly $67 million in various venture rounds, while its sales have doubled each year since its launch in 2006. The company claims to have backed up some 80 billion files, with more than 150 million new files backed up daily. It also claims to have restored more than 7.2 billion files that would have been otherwise lost forever. Inc. Magazine placed it as #9 on its Inc. 500 list for 2010 of the 500 fastest growing private companies. With “the cloud” remaining a hot topic and with its annual basic plan starting at less than $55.00 a year, Carbonite should have a solid reception when it comes to market.

So I digged the IPO S-1 document and looked at the company with my usual interest. Cap. table. founders, investors, ESOP. The 2 foudners has 7-8% each pre-IPO, investors 60% and employess the remaining 25%. What might be a little scary though is the lack of profitability. Here it is.

The S-1 also gives the list of selling shareholders.

But following a few exchanges of comments on a recent post, Is There A Peak Age for Entrepreneurship?, I looked at something else, the founders and their age. Here is what the prospectus gives:

David Friend (63) has served as our chief executive officer and as a member of our board of directors since he co-founded our company with Mr. Flowers in February 2005. Mr. Friend also served as our president from February 2005 to September 2007 and again since August 2010. Prior to starting our company, Mr. Friend co-founded with Mr. Flowers and served as chief executive officer and president of Sonexis, Inc., a software company providing audio-conferencing services, from March 1999 through March 2002 and served as a director of Sonexis from March 1999 through August 2004. From June 1995 through December 1999, Mr. Friend co-founded with Mr. Flowers and served as chief executive officer and as a director of FaxNet Corporation, a supplier of messaging services to the telecommunications industry. Prior to that time, Mr. Friend co-founded Pilot Software, Inc., a software company, with Mr. Flowers. Previously, Mr. Friend founded Computer Pictures Corporation, a software company whose products applied computer graphics to business data, and served as president of ARP Instruments, Inc., an audio hardware manufacturer. Mr. Friend served as a director of GEAC Computer Corporation Ltd., a publicly-traded enterprise software company, from October 2001 to October 2006, and currently serves as a director of CyraCom International, Inc., Marketplace Technologies, Inc. and DealDash Oy. Mr. Friend holds a B.S. in Engineering from Yale University. We believe that Mr. Friend is qualified to serve on our board of directors based on his historic knowledge of our company as one of its founders, the continuity he provides on our board of directors, his strategic vision for our company and his background in internet and software companies.

Jeffry Flowers (57) has served as our chief architect since April 2011, as a member of our board of directors since he co-founded our company with Mr. Friend in February 2005, and as our chief technology officer from February 2005 to March 2011. Mr. Flowers co-founded with Mr. Friend and served as chief technical officer of Sonexis, Inc., a software company providing audio-conferencing services, from March 1999 through March 2002 and served as a director of Sonexis from March 1999 through August 2004. Prior to that time, Mr. Flowers co-founded with Mr. Friend and served as chief technology officer and as a director of FaxNet Corporation, a supplier of messaging services to the telecommunications industry, and co-founded Pilot Software, Inc., a software company, with Mr. Friend. Mr. Flowers served as VP of Development at ON Technology Corporation, a publicly-traded software vendor, from June 1994 through February 1996. Mr. Flowers holds an M.S. and a B.S. in Information and Computer Science from Georgia Institute of Technology. We believe that Mr. Flowers is qualified to serve on our board of directors based on his historic knowledge of our company as one of its founders, the continuity he provides on our board of directors, his strategic vision for our technology, and his background in internet and software companies.

Doing simple math (so maybe not very accurate, this would give the following table)

Founder Friend Flowers
Born in 1948 1954
Company Founded at age Founded at age
Sonexis in 1998 50 44
Faxnet in 1994 46 40
Computer Pict. in 1982 34

So it shows that the founders are not young, not even middle-age. They are serial entrepreneurs and probably close friends given the facts they have co-founded 3 companies together and were definitely not in their twenties when they did it. In my next post today, I will come back on the topic.

Ecommerce cap. tables: Responsys, Salesforce and Broadvision

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For different reasons, I’ve been looking at a few other ecommerce companies. No real connection except the field. It’s more a summer post for my archives but at the same time, there are interesting elements. These are

– Responsys founded in 1998 and IPO in 2011.
– Salesforce.com founded in 1999 but public in 2004.
– Broadvision was founded in 1993 and public before any of the two others even existed, in 1996!

They are all based in Silicon Valley. They are typical in their structure (founders, managers, VCs, stock options, directors. Now let’s have a look at them individually.

I studied Responsys because it was one of the early 2011 IPO. An old company (13 years!). Two founders with very little equity. It could be explained with the large amount of money raised ($60M) but this cannot be the reason. Just have a look at teh price per share of the rounds. $3, then $16, then $6 then $0.25. The terrible down rounds… of course this was extremely dilutive for many shareholders.

The two founders Ragu Raghavan and Anand Jagannathan were not active with responsys for some time.

Broadvision is the oldest of the 3. It was one of the stars of the late 90s. It’s still a public company but its market cap. is $50M only. Today Responsys has better revenues and profits… In a way, Broadvision and Responsys might be The Tortoise and the Hare of the fable.

Also of interest is the fact that id had a unique founder, Pehong Chen, who  was also (and still is) the chairman and CEO.

In between, there is Salesforce.com. The Hare and the Tortoise at the same time. Went public 5 years after foundation. Still had losses at IPO even with good revenues. A market cap. of $1B. But in 2011, it has a market cap. of $19B!!! Explained by revenues of $1.6B even if the profits are below $100M. Not typical in terms of investors though. Mostly business angels and very little ownership.

Four founders at salesforce, Marc Benioff, Parker Harris, David Moellenhoff, Frank Dominguez. The first is a star of Silicon Valley, the last one nearly unkwown to me at least. Apparently, they still all work there…

You can still go public as a web1.0 company: Homeaway and Kayak

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I just had lunch with a friend-entrepreneur and we were looking at the big high tech winners.

– the 60’s was the decade of the Semiconductor and gave Intel,
– the 70’s was the PC/SW, with Apple and Microsoft,
– the 80’s was the Network with Cisco,
– the 90’s was the Internet with Google,
– the 00’s will probably be the Web2.0 and remember Facebook.
Of course, there is more from Fairchild to Oracle, 3com, Yahoo, eBay and Amazon.

Now what about the 10’s? For me it is not clear, I do not beleive enough in green/clean-tech but I see the smart management of data and apps, with the Cloud. But no clue on who would be the decade winner.

Now you can still go public as a web2.0 company has I mentioned in my post The Z IPOs: Zynga, Zillow, Zipcar and … Zuckerberg. But even better you can go public as web1.0 company. here are just two examples, Homeaway and Kayak. So I give you my usual cap. tables and a few comments.

Homeaway went public on July 5 and the stock is doing great. Once again you can see the ownherships of founders, managers, investors, independant directors. What is obviously carzy again is that the company raised $400M and has no profit yet. But this helps be to understand why Index supports HouseTrip, a company in the field, out of Lausanne and now based in London.


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Next is Kayak. A travel company. Can you believe you can still have new companies in the field? Well this is the proof. Similar comments: check the equity of various players such as founders, managers, directors and investors. A lot of money invested but at least profitable. This one reminds me of another very nice Swiss start-up that deserves much more visivilty: routeRank. (I have no personal interest in routeRank neither in HouseTrip!).


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The Z IPOs: Zynga, Zillow, Zipcar and … Zuckerberg

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I do not why 2011 saw three IPOs with companies beginning with Z. I thought that beginning with an A was what mattered (Apple, Amazon, not to say @Home). Maybe this is the Zuckerberg effect!

So I looked at the cap. tables of these three companies. Zipcar went public earlier this year, Zillow today and Zynga filed earlier this month. Zuckerberg might wait until 2011 though. They do not have that much in common, except they are all Internet companies with nice revenues (but not always a profit) and a lot of venture capital too. Zynga being apparently the current star, I begin with it. Of coure the price per share is a guess, as the company is not public yet, it just recently filed at the SEC.


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As the fund raising included sales of existing shares, the following data is also of interest. But I still have to admit there are missing pieces in all this and it might still be a little confusing (in comparison to previous tables, sorry!) Zynga has only one founder, Mark Pincus (check his Wikipedia profile). As with Zillow (and Google in the past), founders have shares of a special class which usually guarantee more voting right.


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Zynga has raised $850M, had about $600M in revenues and a profit of $90M in 2010. Nice! KP and IVP are the two famous VCs and Union Square is the new emerging player (Twitter, FourSquare, Etsy). As a sidenote, Fred Wilson is a partner and has a great blog, avc.com. Reid Hoffman was the seed investor (co-founder of LinkedIn, former VP at Paypal, investor in more than 80 start-ups).

Next is Zillow. Again the 2 founders (with about an equal amount of shares) have also special voting shares. The company is a little older but has raised less cash ($80M), has smaller revenues and not a profit yet. Another element of interest is the equity that independant directors own (you also have this in the Zynga and Zipcar tables). Zillow changed its price again up from $18 uin my table to $20.


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And finally Zipcar. Again two founders, but not much info on them as they are not active anymore. A lot of money raised, good revenues but no profit. Much older (11 years old). Benchmark again is a VC (just as in Zillow).


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A word of conclusion: Zynga will be the big winner if it goes public at the mentioned valuation until Zuckerberg goes out (you can still have a look at my “tentative” Facebook equity table).

When Wavecom was surfing

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I just published a post on the French version of my blog about Wavecom, one of the European success stories. This is coming again from my reading of old Red Herring articles. You can at least check there the RH scan as well as my typical cap. tables. I do there something unusual, I also give the cap. table at the secondary which followed the IPO one year later. The secondary is an important event (even if lesser known than an IPO) where shareholders can find some liquidity. Just check here.