This Entrepreneur Shares The Formula He Used To Create Several Billion Dollar Companies
Kevin Ryan is one of those startup titans, that when anyone hears he is raising money for a new company, they want it. With over $700M in capital raised, across 40 plus fundraising rounds and one of his exits going to Google for a cool $3B, he knows a thing or two about the startup game. In fact, he is considered one of the godfathers of the NYC startup ecosystem.
I had the great pleasure of an exclusive interview with Kevin Ryan in one of our recent episodes of the Dealmakers Podcast. He was incredibly generous and transparent in sharing his experiences from the trenches, and his secret sauces for building, structuring, funding and exiting new ventures (listen to the full episode here).
The Godfather of NYC Startups
When Kevin joined DoubleClick in 1996 there really weren’t any startups in New York City. There weren’t any talented people to hire with startup experience.
Fast forward a few years and 34 people became CEOs of new ventures. DoubleClick was bought by Google for over $3B. Other companies started and exited by Kevin include Business Insider, which got acquired for $450M, and Gilt which sold to Saks for $250M.
In the last five years Kevin says that “we have seven companies that are worth more than $100 million started by ex-Gilt people. And the seven Gilt companies already are worth about $2 billion combined.” VCs have a lot of respect for these CEOs and ventures, and the impact they are having on the ecosystem in NY.
He is certainly not done building companies, helping them get funded or strategizing substantial exits either.
When I asked him about the state of the market and outlook in our interview his reply was, “there’s a big difference between 1999 and today. I’ll say this definitively, there is no bubble today at all. Absolutely not. Capital will be tougher to get at some point, no question. Markets will get tougher. So I think it’s good to be cautious and have a little bit more money right now because of all these but you also know you just got to go forward because if you’re going to be super cautious and I’m competing with you, I’ll be more aggressive and you’ll be behind.”
Testing New Business Ideas
How does this startup veteran keep on coming up with new entrepreneurial ideas? How does he keep choosing winners?
Kevin says he is always thinking. Always looking for problems to solve. Where things take too long and people are underserved. A luxury he has given himself by choosing to implant others as CEOs to operate most of his startup ventures.
In terms of the industries he likes right now, Kevin told DealMakers listeners that “in general financial services, healthcare and education are still three of the biggest areas where there are startups but there’s still many, many large companies with bad products and there’ll be opportunities for people. So those are three good sectors.”
When incubating new startups Kevin’s approach is to “generally decide within the next 30 days you know maximum 60 days whether I’m going do it or not. And so if I decide I’m going to do it, I never put together financial model even though I’m a former CFO. I really have to just understand the consumer whether that’s a B2B or a consumer-consumer. I just have to understand what’s going through that person’s mind, what are the challenges, what are the problems. So it really involves a lot of interviews of people.” Then if it’s a go, it’s on to hiring the team to make it happen.
The decision to go for it comes down to just three things:
- It has to be a big market so it’s interesting enough. It has to feel like there is a billion dollar opportunity there. You’re not always going to get there but you know, if it works, it’s that big.
- Is there a clear vision of product that can be built?
- Is there a constraint? Is there some reason you can’t build this?
He also recommends to make sure it is interesting enough for you, for a long enough period of time. You may be involved in that business for 10 years. For example; he has lost interest in Ad Tech. If you can’t commit to 10 plus years in a startup as a founder or funder, don’t do it.
When you are testing his key metrics are:
- Do customers really like it?
- Are they coming back?
- Are your first five customers very happy?
- Is traffic growing without marketing?
You should be able to measure this within four months. Yet, contrary to many perceptions among entrepreneurs today, Kevin isn’t a big fan of blowing a lot on marketing. He says you are going to get the word out and do a little bit of PR. You might even buy a few keywords to generate your first 10,000 site visitors. By then he believes it should be growing from there.
Surprisingly, he told our audience that “Business Insider never spent $1 in marketing in the history of the company and now it’s probably getting close to 200 million uniques. And Gilt got to $100 million in revenue with very, very little marketing.”
When it comes to super-sizing growth and raising capital Kevin Ryan tells us that typically comes after he’s put in over half a million dollars, there is a team and product, and proof points.
Timing Your Fundraising Rounds & The Role of the Chairman
Kevin lays out his detailed timeline countdown for raising money strategically and putting together pitch decks in this podcast episode. As well as as how to choose and work with CEOs, and the time of investors founders should be trying to work with.
Listen in to the full podcast episode for all the details, as well as how to contact him directly with your ideas and questions (listen to the full episode here).