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Posts Tagged ‘Entrepreneur’

Launching with ‘good enough’ productization

Last week’s blog series ‘art of productization’ continues with more insights from Kati Riikonen, our guest writer in this week’s blog.

Yes, it’s true, ’good enough’ is not measured in the amount of features or the length of specification.  For productization, the key customer promise is a top priority it seldom requires all possible features to be showcased.

Often there is no need, nor it’s feasible, to do full productization journey before going out to market making mode.

The level of necessary productization is depending on many variables. Most importantly one should crystallize concrete goals for the post-launch actions. There are also big differences on targeted audience is B2B, B2C or C2C. In reality, the limiting factors for productization often tend to be time and money.

The following provides examples of productization check points for various types of launches.

Idea launch

  • Examples of next steps: Generate public discussion, idea exchange, testing the idea, scouting potential partners, gathering insights
  • Productization check list: None. Just go out and talk the way you do – all entrepreneurs should do idea launches every day!

Concept launch

  • Examples of next steps: Seeking for finance, crowd-sourcing for development or more insight, thought leadership, publicity, scouting for ecosystem partners
  • Productization check list: Initial customer promise, name and descriptor, differentiators, user experience and marketing assets.

Tip on naming: In B2C or C2C concept launch a legally protected name in early phase is a real asset. In B2B concept launch, it is more natural and often enough just to differentiate with customer promise and descriptors, rather than spend limited resources on the naming convention.

Tip on prioritization: In case of very limited resources, focus on the concept’s customer promise and end-user experience as top priorities regardless if it is B2B, B2C or C2C.

Commercial launch

  • Examples of next steps: Market and sell! Business development, marketing, scout, sign and train distribution channels, agents, personnel.
  • Productization check list: In case of B2C or C2C launch, the further the productization check list is completed, the more likely are scalable sales and operations to accelerate. Of course, there are always exceptions, but the fact is that agents and sales pros tend to sell what gives them the fastest and reasonable payback. Having all the productization assets at immediate disposal gives the team a head start.

Reminder: Productization process does not mean that it’s done in vacuum before going out to public. Direct end-user insight, dialogue and co-creation can – and often should – be part of the successful productization.

Feel free to post your comments & example cases!


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Check list for software and digital service productization

Recently I had an inspiring discussion with Kati Riikonen, a doer, who has been working with several companies from mobility, web and software development domains. We were exploring the needs, pros and cons of the productization of software and digital services. With Kati’s permission, I am sharing some experiences on the topic.

Fully productized service should roughly cover the following:

Pitch check list

  • Clearly differentiate from companies and competitor’s other existing services
  • Name with trademarks and legal protection
  • Short and clear customer promise
  • The elevator speech, a short and crisp 1-2 sentences description of the product or services

User experience check list

  • User experience design drivers and design blueprint
  • Product definition: detailed description of the functionality. This element can be a demo, specification, description or any other format

Assets check list

  • Marketing assets that can be distributed physically or digitally
  • Detailed sales guide, that can be distributed physically or digitally
  • Organized documentation of the service and its operations

Sell check list

  • Price, which can be told immediately and clearly
  • Distribution channel and sales people need to be able to sell the product within feasible investment of time & effort
  • Company’s own personnel and agents need to be able to tell with is being sold with few sentences
  • A client, who is about to buy the service or product, needs to be able to tell with few sentence what he/she is about to buy

Naturally one does not need to take the steps in the right order – we entrepreneurs seldom do! The above should be treated more as a reference.

Shortcuts work very well – often for a period of time. However, significant shortcuts can cause unnecessary resource needs later on. Here is an example:

The project had user experience elements well designed, but did shortcuts in most of the other areas.  User experience assets showcased the concept so well that the company was able to start sales mode immediately. It did not matter that the service did not even have a name – and it still does not have legally protected name.  It might sound an easy way to reduce the pain of productization, but now the company is facing an increasing amount of challenges with press and industry discussion. They are now spending a lot of effort and ‘air time’ to correct the misleading names and messages instead of focusing on their own pitch.

The next question is what level of productization is ‘good enough’ for public launches?

While waiting for the Part 2, post your experiences, questions & comments – thanks!

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As part of the Venture Bonsai concept, we shot the first five elevator pitches today in Helsinki.

The idea is to make two videos for start-ups looking for funding: one public 100 seconds video and another 5 minutes non-public video which can be shown to potential investors.

To our knowledge, this is the first time elevator pitches are really made professionally.

Same questions were asked from each entrepreneur and if the answer filmed did not go well enough it was shot again. All the aspects of each answer were fine-tuned towards high quality of the message.

The filming itself was done by a professional as will be done the editing.

Looking forward seeing really cool videos next week!

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Last week week we discussed the first five items of the following list, this week we cover rest of them.

  1. How do I find the potential investors?
  2. Which regulation applies and what can I actually do?
  3. How do I get the investors’ attention?
  4. How to deal with all the required documents?
  5. How can I negotiate all the terms with so many investors?
  6. What about company valuation?
  7. What is Due Diligence and why do I need it?
  8. How on earth do I get all the papers signed by a large number (say, 90) of investors all over Europe?
  9. How can I securely communicate with all those potential investors without answering the same questions over and over again?
  10. How to take advantage of a large number of investors, after I got them?

6. What About Company Valuation?

Company valuation is always a tough call. There is no real truth available for this, but typically (we entrepreneurs) over-estimate the value and the potential investors under-value the company as they want to “get a good deal”. So what would be fair price for a share issue?

The easiest way to set the price is just decide a value that you think would be acceptable for the investors. It makes sense to ask around your friends and other entrepreneurs as well as to compare the valuation to other similar companies. The challenge is, however, that typically the values of financing rounds are confidential and there is no good way to do good market research. A good way to know if you are in the right range is also just asking some potential investors. Even though their opinion may be biased, they are after all “your customers” and you get the feeling if you’d be able to sell your product ie. the shares to them.

You could also use the Dutch Auction model which Google used in its IPO offering. The Dutch Auction is a type of auction where the auctioneer begins with a high asking price which is lowered until some participant is willing to accept the auctioneer’s price, or a predetermined reserve price (the seller’s minimum acceptable price) is reached. The winning participant pays the last announced price.

If you want to use even more exotic and different model you can also use the Vickrey Auction model. This is a type of sealed-bid auction, where bidders submit written bids without knowing the bid of the other people in the auction. The highest bidder wins, but the price paid is the second-highest bid.

The Dutch Auction and Vickrey Auction models may turn out to be interesting due to the relative fairness of the valuation but they do require software tools in order to manage the process properly.

7. What Is Due Diligence (DD) And Why Do I Need It?

Wikipedia defines Due Diligence as “a term used for a number of concepts involving either the performance of an investigation of a business or person prior to signing of a contract, or the performance of an act with a certain standard of care.”

Concerning fund raising with crowdfunding model there is a need for “vendor due diligence” meaning basically a Due Diligence carried out at the expense of the company. This is necessary (among other things) in order (1) to find and correct any matter potentially decreasing investors’ interest in company, (2) systematically documenting anything that positively increases investors’ interest such as Intellectual Property Rights (IPR) and (3) having a third party opinion on issues such as “is this technology working or could it work” and “are all financial and legal matters as they should”.

Those objectives can be achieved by

  1. Company itself documenting and listing certain issues
  2. Having a third party doing the Technical Due Diligence (sometimes this is not relevant)
  3. Having a third party doing the Legal Due Diligence (this is often the most important one) and includes for example checking the balance sheet, accounting reports and the IPR
  4. Having a third party doing the Financial Due Diligence (as this concerning the issues such as market and future development, may be the most difficult one)

There are no really standardized ways of doing the DD and this typically means that there are quite many different ways of performing this. It also means that it is good business for lawyers and other parties. However, there are efforts already (among others our GrowthOS project) solving this problem. Standardized Due Diligence, when successful, means an easier way to analyze company as an investment target (good for the investors) and more affordable way of performing one or more Due Diligences (good for the entrepreneurs).

8. How On Earth Do I Get All The Papers Signed By A Large Number (Say, 90) Of Investors All Over Europe?

Let’s imagine that your company has successfully completed all the above mentioned steps. You have 90 investors agreeing to invest certain amount of money in your company, with the specific terms agreed. The remaining challenge would be printing 90 copies of each document and having all signing those papers. Sounds like a lot of work…

This is luckily not necessary.

You can either structure the documents so that each party can just “join” the agreement (consult your lawyer on this) or use some other method. This “other method” means processes currently being developed several parties, enabling signing documents with legal binding with electronic means.

9. How Can I Securely Communicate With All Those Potential Investors Without Answering The Same Questions Over And Over Again?

Email is not really good means of communication for secure discussion. You have a need (and in a way, an obligation) to answer to the questions asked by the potential investors as part of a funding round. You also have to share same information with all parties, keeping them equal as required by the law. At the minimum, you may want to set up a secure discussion board for all the participants and keep all discussions there.

10. How To Take Advantage Of A Large Number Of Investors, After I Got Them?

This may be the coolest advantage you’ll get, potentially benefiting you more than just the money. You know  how the investors always emphasize how they have connections to help your startup. In some cases that may be true, yes. However, the likelihood that you get quite a lift for your business from the large number of investors, is higher. What this means is that as the number of crowdfunding investors (in your company) grows, the likelyhood that they can help you to get more lead, customers and revenue, grows equally. Each of the investors has a motivation (ownership) to help you.

What would be the best way of managing this communication? As an entrepreneur you don’t want to spend all your time with those questions that have no value. Here you may not want to treat all the shareholders equally (meaning: communicate with all of them equally much concerning business). Similar discussion forum as was used during the investment round may be useful, but may also not be adequate.

If you are facing these challenges, and would like to use a leading edge service to solve them, please get in touch. We are currently working on a solution that would help you on this.

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Crowdfunding is gaining some momentum as a potential investment vehicle for startups. As the traditional Angel Investors and Venture Capitalists have become more careful on the early stage investments and number of investments has dropped dramatically, there is a need for new methods.

But how do you actually run a crowdfunding investment round? There are no tools currently available for this so it may seem like a lot of work. And it is. This means it’s just another challenge to be solved.

The issues you have to consider and solve when running a crowdfunding round (or any investment round):

  1. How do I find the potential investors?
  2. Which regulation applies and what can I actually do?
  3. How do I get the investors’ attention?
  4. How to deal with all the required documents?
  5. How can I negotiate all the terms with so many investors?
  6. What about company valuation?
  7. What is Due Diligence and why do I need it?
  8. How on earth do I get all the papers signed by a large number (say, 90) of investors all over Europe?
  9. How can I securely communicate with all those potential investors without answering the same questions over and over again?
  10. How to take advantage of a large number of investors, after I got them?

1. How Do I Find Potential Investors?

In most cases you need to find all the interested investors yourself! You can also use some of the crowdfunding initiatives, such as GrowthOS and Vestify, to find those people, but it can take some time before these are the quickest way. You can also consider making a deal with a large bank and make a underwriting deal with them. In any case you have to keep in mind the regulative limits set by the financial authorities of your country, such as SEC, European Union and national laws.

2. Which Regulation Applies And What Can I Actually Do?

This depends where your company is based and where your investor candidates are. Regulation is largely unified with the European Union (excluding UK), USA has its own regulation as is the case with for example Japan and Australia. Due to the legal reasons and as I am not a lawyer, you should consult your lawyer if you are unsure about this.

3. How Do I Get the Investors’ Attention?

If your service or product is on the market and if you’re lucky, they’ll contact you. It’s always the best if you can get yourself and your offering visible so that the potential investors call you (and you don’t call them).

However, if you are really early stage company, or there is nothing in public yet, or if you just are not famous (yet) then you need other tools. One thing we are piloting next month is producing professional-grade “elevator pitches on video”. One of the videos is 100 seconds long and is meant to be public, including publishing it in Youtube. The other video is 5 minutes long and can contain “more confidential information”. The purpose of the videos is simply to get more attention of potential investors and get them in touch with you. We have developed a special “format” with pre-determined questions  related to startups and funding to speed up the process. Both shooting the ideo and editing it is done by the professionals, ensuring high quality and nice feeling.

You should, one way or another, have your own “Show Room” with all the videos, screencasts and other material you want to use for showing what you do.

4. How To Deal With All The Required Documents?

In order to raise money you need in minimum

  • Business Plan (with an excellent Executive Summary)
  • Share Issue Offer, including the Term Sheet
  • Shareholders’ Agreement

There are many guides on how to write a business plan so we don’t cover it here. Concerning the Offer and Term Sheet, you may want to take advantage of services such as The Funded (only for entrepreneurs) or consult your lawyer (again:-). Shareholders’ Agreement is discussed in the next chapter.

5. How Can I Negotiate All The Terms With So Many Investors?

The thing is, you don’t (negotiate with all of them). You must have such versions of the key documents such as the Shareholders’ Agreement that it is acceptable for all the parties without further negotiation. It’s “take it or leave it” kind of thing. An if it is not acceptable by the investors, they may “leave it”.

Luckily there are number of initiatives taking place in this field. There are for example already few “Standardized Shareholder’s Agreement” templated downloadable for free. You can always customize these with your own lawyer, but the key thing to keep in mind is that it has to be acceptable by both the investors and yourself.

Next week: Challenges 6 through 10!

PS. I’ll be in London and the Bay Area early March, please contact me if you’d like to discuss crowdfunding (as an entrepreneur or as an investor)

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Three days to go. As the year is about to end, it’s time to look back and learn from this year.

Jobita – Market Place for Jobs

Year 2009 was the launch year of Jobita, formerly known as Tikitagi. Late March we launched the prototype of the service. Jobita is an Internet tool for local service professionals (and those who want to become those) as well any individual to market their skills and manage the assignments. For consumers Jobita is the easiest way to find qualified doer for any task at hand, either at home, at the office or for example on the boat.

It was a great learning experience, later also leading to concept called “gasellizer” – more efficient way of producing software with outsourced resources.

Already in January I wrote about using True Identity instead of pseudonyms. We are proud to announce that Jobita.fi is the first of its kind to truly support True Identities. Jobita is working together with NorthId on this. It’s called “Nettihenkkarit” in Finnish, loosely translated as “Online Identity Card”.

End of October we launched the totally rewritten version of Jobita, initially only in Finnish language. During the first two months of existence, the number of members and posts increased rapidly.

Creating Software as it always Should Have Been Done

Software Industry is relatively new as industry. Therefore it is no surprise that it is still facing many fundamental challenges, such as understanding the customer problem and turning that into a successful business. Together with few other people from the industry we worked on a concept called “Gasellizer”. One of the observations was that managing the specification process is still a major headache for most of the developers, and no, Agile methodology as such is not an answer for this. It’s more question of “User Defined Features” or uDef’s as we call them. Simply put, there is a need for recording, and managing as the needs evolve throughout the process, the users’ need with their own words.

One way of approaching the problem is learning from the movie industry’s way of operation.

And it is always great to learn from those who have already done it in real life (lessons learned from Mårten Mickos, ex-CEO of MySQL).

Entrepreneur is the Most Critical Resource

This discussion is going on all the time: “there is not enough money for the start-ups”. That is absolutely true. In order learn a bit more about the actual problem, I tweeted and blogged about a simple question “Which one of the following is the most critical and the least supplied resource: ideas, entrepreneurs or money?”.

As was to be expected, there was a lot of support for the answer of “money is the missing link”. However, the poll made revealed that the majority of the people thought actually that we do not have (good/experience/etc) entrepreneurs to implement those ideas. Nobody claimed that we would not have enough ideas. I am 100% of the same opinion, we don’t have enough entrepreneurs. As many of the supporting organizations and tools fail to understand this most fundamental question, also many of the solutions (no matter how well-meaning) do not touch and help the actual problem.

Simply put: as long as we do not have enough those entrepreneurs who will use the money available to build succesful and brave enough success stories, we will not have successful software companies. Period.

Crowdfunding is the Modern Way of Raising Funding

Okay, in the previous chapter I claimed that the most critical missing resource is the “entrepreneur”. It does not mean that getting funding would be easy, not at all.

Raising money for an idea or early stage start-up never has been, nor will be, very easy.

There is, however, always the possibility of looking for new solutions for the problem. One of the hottest ideas right now is “crowdfunding“. I wrote a small article about that in August. According to the polls made, this kind of funding is well received by both entrepreneurs and investors.

There is a new exciting company working on the concept of crowdfunding, GrowthOS. If you are member of LinkedIn, you can apply for GrowthOS group. Check out also an interesting opportunity to get a really high quality video pitches for your company.

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We are testing new kind of production for high quality video pitches in February, 2010 (in Helsinki).

The thing is as follows: many startups (and actually other companies as well) have a need to produce video clips for investors, customers and other stakeholders. Typically there are two main options here:

  1. Produce it yourself, typically ending up with pretty low quality production due to lack of time and experience
  2. Outsource the production to professionals, ending up with probably high quality video but it easily costs more than 10,000 €

We have drafted new way of doing this process.

  1. We are using professional television producer and editing facilities
  2. We have created “standardized” templates and scripts what’s on the video and what needs to be filmed
  3. Participating startup gets instructions how to prepare, we have on-stage coach helping and filming is done “as industrial process”
  4. Editing is done by the professionals and the results are going to be fabulous!

The scripts will take care of asking the right questions, focusing on the right things and getting the message clear. And unlike traditional “elevator pitch” done in one shot, editing will help to make the video deliver the message properly even if you would not be so experienced in doing this.

In this pilot we will create two videos: 100 seconds “teaser video” which the startup can distribute publicly and another, 5 minutes version with more details (for a financing round) and that is to be given to selected investor candidates only.

The cost per company is going to be less than 1,500 €, the potential value for these being much, much higher. As it is commonly known that investors only have few minutes per startup to make up their mind (Go or No-Go), this will greatly help to make the great first impression. The second video sent for those gives more details and then you’d be already arranging a meeting.

There are six places available for the first session, half of them are gone already. If you are a Finnish startup  (or know somebody who is), and are interested in this then hurry up. Deadline is around beginning of January.

You can see some production examples (for television, not startup pitches yet) here.

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