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Key start-up lessons from a Silicon Valley Investor, Kal Deutsch: Silicon Valley In Your Pocket
By Madhu S
This is our learning series on ‘Perfect Pitch Show’ where Brandon Burns, Head of Community - Runway HQ, interviews small business founders / entrepreneurs and people making a difference about the secret sauce of their successful start-up journey.
In this article, we break down the simple and timeless lessons from our interview with Kal Deutsch , Co-founder at Silicon Valley In Your Pocket (SVIYP) Accelerator; Partner at Batchery Incubator. Kal is an international startup lecturer and coach. He has worked with entrepreneurs at global incubators and accelerators across Europe, Asia & Latin America. He also serves on the screening, diligence and pitch event committees for the Berkeley Angel Network, an angel investment group for UC Berkeley alumni. With a background in finance, strategy and product management, Kal has held a number of executive positions at companies ranging from Fortune 100 companies to early stage startup companies, including Visa, Wells Fargo, and Price Waterhouse. Startups include real estate tech companies Homegain, EscapeHomes, and TotalMove. Kal holds an MBA from UC Berkeley’s Haas School of Business and a bachelor’s degree in Management Science from UC San Diego
During our interview, Kal shares a few intriguing personal stories from his start-up experiences
We believe these discussion topics will help start-ups in regional Victoria with tips & tricks in setting up small businesses. Our breakdown of Kal’s insights begins with the introduction of his business.
Vision of Silicon valley in your pocket (SVIYP)
More than 50% of Silicon Valley founders who generate the best & brightest ideas are outside of US, says Kal. He continues, the start-up SVIYP is an infinitely scalable accelerator platform available to any entrepreneur anywhere in the world. The SVIYP offering includes weekly group coaching calls with experienced investors and founders, on-demand classes that includes videos, templates, tools, documents, calculators, go-to-market strategies and more that successful start-ups have used to become viable. All these nicely sets up the start-up founder to impress the investors.
High demand for coaching
Kal opines that there is a surge in demand for start-ups to opt for coaching. The health of the start-up, Kal uses the word ‘Investability’ is a strong factor which SVIYP tries to improve for all early stage start-ups through an iterative process and methodology. In the first year, Kal says, SVIYP reached out to individual start-up founders (circa 80 of them signed-up) who went through a rigorous programme. With high demand through the successful first year, SVIYP now focuses on B2B working with the seed stage firms, incubators and accelerators who have accepted more than 1500 applicants. Kal suggests there are two distinct advantages of the programme viz.seed stage investors de-risk their portfolio and a solution to ever increasing demand which the Brick & Mortar based training programmes cannot keep up with.
What’s in it for investors Vs What’s in it for the start-up founders
One stand-out achievement when it comes to transforming the start-ups, Kal talks about the ‘Investor’s Mindset’ and Return on Investment (ROI). He says many start-ups fail to articulate the ROI and hence Kal & his team spent a lot of time with these companies to build a sales pipeline and proving to investors that the start-ups have the velocity and traction to move the business ahead. The secret sauce for shifting the dial from an ‘investor choosing a start-up’ to ‘start-up cherry picking an investor’ Kal says is to have the investor’s mindset to think about how spectacular the product is for investment
and how great the ROI would be. Kal apart from the mindset suggests to leverage the freebies and discounts which are up for grabs for the start-ups. He quoted examples where $175,000 worth of perks were available along with discounts such as AWS credits, free provisioning of patents and six months of free accounting. There is also bootstrap and open source code which are readily available and not to forget the social media. Kal adds, his goal is to make things as frictionless as possible for the start-ups.
Unique selling proposition
When asked about the business model and key differentiation of SVIYP from others, Kal quickly jumps on to comment that a membership fee would be charged for the programme. The partners of SVIYP get a discount of $2000. Kal also says, if there is a seed stage investor investing $100,000 in a company, the fee would be 2% of that which is a powerful and great way to de-risk the portfolio investments compared to many accelerators charging a hefty $37,000 bill. The business model of SVIYP is that it has diversified the support service model to not just companies that are home grown in the US but also to international companies and at this point SVIYP does not take any equity from its clients.
Kal is a data driven decision maker and is very evident when he proudly quotes about his ‘Investability assessment tool’ which he and his team developed taking into consideration a data model with 40 variables across 9 different categories. He continues, the score ranges from 0 to 100 and if a company is scoring more than 85, that is when the introductions take place between the start-ups and the investors. Anything less than 85, Kal says the tool comes up with a detailed 8 to 10 page quantitative feedback report which are very much comparable to deal memo. Using this brutally honest feedback, companies can improve a lot quickly.
Lessons from the stalwarts
Kal has fortunately got a few great coaches and mentors. He says start-ups need to think constantly about the value proposition. He starts off with an example from one of his start-ups which works on a SAS platform for monetizing movie tickets. “The problem I was solving is for film makers who have got the inventory and not monetizing it. It taught me discipline and knowing who is paying for the tickets” . Kal suggests three great references for start-ups a. Steve Blank who drives the global business model canvas in a very analytical/structured way to validate the hypothesis. b. Eric Lease the lean start-up founder. c. Lean analytics book by Alistair Croll and Ben Yoskovitz
Know your cheerleaders
Kal has pitched umpteen times to investors and he says knowing the difference between who is writing checks and those who are cheerleaders is fundamentally important. Kal continues, the cheerleader always tests the start-ups to come back when they have more traction. SVIYP specifically train the start-ups to pitch at regular intervals say monthly, quarterly and suggests ways with which they can make a great relationship with the investors.
You can contribute too and be part of a great research!
Kal’s ask for start-ups based in Australia is to participate in a big data analysis research study which is completely anonymous and complete a questionnaire. This study will help build a robust predictive model with 130 variables will give out clear leading indicators for start-up success. Kal will be signing-
up for the beta version of the Runway virtual shortly and the early adopters who are already present in the platform can take advantage of this study and can reach out to Kal.
Which businesses can go the Silicon Valley way?
Kal is not a big fan of just hearing the buzz words e.g. blockchain, AI all the time from the start-ups. He wants to understand the business problem which the start-up is trying to solve. Kal continues, when a start-up is thinking about expanding internationally it has to assess the size of the market and the prevailing competitions in the local market. Kal gives two classic examples.
a. A start-up in Hong Kong invested in Silicon Valley and did well for sometime including fetching a deal from a major retailer. However, the start-up had a dozen other companies as competition and their exact counterpart expanded in Hong Kong, Taiwan and Singapore eventually leading this start-up to a unicorn exit.
b. A European Fintech company wanted to expand in Silicon Valley. SVIYP did a competitor analysis and realised they are up against 31 fintech companies just in Silicon Valley and there was c 500 fintech players just in San Francisco.
How can you reach SVIYP?
Kal concludes that he will be active in Runway virtual platform. He will be more than happy to work with the start-ups and make a few introductions to get them going. You can also check him out here: https://siliconvalleyinyourpocket.com/