Posts Tagged ‘Thoughts’



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Today I had an opportunity to participate a pitching event arranged by FundingPost.com, in Palo Alto, California. The event consisted of group of entrepreneurs pitching for the audience and then the panel of Venture Capitalists giving comments on the state of the industry and the presentations as well.

It was stated that Friends&Family investment rounds can typically be up to half a million dollars (unless you have really rich friends and family) and VC investments typically start at 2 million. So there is a great gap in between, and that has increased the deal flow for angel investors. At the same time “time to liquidity” ie. time from investment to exit has doubled. Today, investors may have to be prepared to stick with the company even more than 10 years.

As always, some companies are more “hot” than others. That influences the interest to invest. In the best position is a company whose product or service is creating traction, revenue and is growing. Those companies may enjoy, even today, receiving several competing term sheets. On the other hand, rest of the companies have much more difficult situation.

Comparing the pitches to those seen back at home, there were few differences and many similarities:

  • wider range of industry segments
  • generally older and more experienced entrepreneurs
  • looking for funding in the range of 300,000 to 8 million
  • quality of pitches varied but in general, again, more or less same range than in Europe
  • in some cases more “forward-looking” pitches, with probably less substance but true interest

There were number of investors in the panel, moderated by Adrian Shulman, Partner at Bingham McCutchen.

I’m sharing some of the most interesting comments, in my opinion, what they said.

Ho Nam (General Partner & Co-Founder of Altos Ventures) said that they are looking for interesting phenomenon.

Obviously the best time to raise money is when you don’t need it. Venture Capitalists are like sheep, they move in herds. It’s entrepreneurs who think out of the box and are the smart ones in this room.

John Hall (Managing Director of Horizon Ventures) said that typically an entrepreneur should get investor’s attention within one minute. The problem and the solution must be so simple that your mother could understand it. Only after that message has gone through, it makes sense to go to the details. He also advices entrepreneurs to do background research on the investors, like have they done similar investments before. That way you also know to contact the right partner at the investor company. A good resource to check VC background, by the way, is The Funded.

Steve Goldberg (Partner at Venrock) said that they are looking for evidence of big market, early customers, great execution plan and team of people who can do it.

We fund entrepreneurs and we fund CEO’s.

Eric Chen (Venture Partner at WI Harper Group) was comparing the US entrepreneurial scene to that in China. He said in China even those start-ups who have million dollar revenue may not get funding as the competition is tough.

So what’s the biggest difference, say between Silicon Valley and Finland?

I’d say it’s the atmosphere, at least. And as it is all about motivation, acceptance of entrepreneurs but also competitiveness. It’s more likely here for entrepreneurs to keep trying, even after failing.

And how does our upcoming Venture Bonsai relate to this? As it’s a tool for entrepreneurs, it makes running a (crowd)funding round (with many investors) easier. It’s primary not meant for getting VC’s onboard, as it’s more for the seed stage. The standardized documents such as Shareholders’ Agreement, however do take into account VC investment being possibly the next step.

In summary, it was quite interesting to see the event, and gave a lot of things to think about, again.

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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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Part 1 of this blog entry is here.

So you’ve got this busy life as well? Probably have quite a few gadgets and electronic devices around you. Sometimes you feel it takes too much time to learn to use the full potential of those devices. Sometimes they just make life more complicated than it should be, let alone updating those devices to the latest software. Of course if you have a Mac (as I do) and a Nokia phone, you know that there is no need to update the software (as it’s only possible with Windows). If you are having difficulties with these issues, think about your mother, and how she’s doing all that (she’s not).

You are in your car, driving as it is raining like never before. And you know your carpool passenger is waiting for you, in the rain… Even though the Wizard tells you that there are umbrellas for sale three hundred meters ahead, you know that by the time (according to the navigator, 3 minutes) you get to your passenger, she does not need it anymore.

As you’re approaching the carpool passenger, the phones confirm that you are meeting the right person. You can see how she looks like, and she can see (in her mobile phone) how you and your car look like. Her phone also show your “reliability status” – which is fine. You pick-up the passenger, your phone tells you how to navigate to the drop-off location, she confirms her Wizard a safe arrival and you continue to your own office.

While approaching the office, the security gates are opened automatically as it detects your safe arrival. While walking the stairs upstairs, the Wizard has a message from Jobita. You were asking for babysitters, remember? You have three offers, you pick one that your friends have used and you confirm a deal. One worry less, great!

During the day, in the meetings, the phone does not disturb you with messages you don’t want. Family messages have priority, however (thanks to Fambit service) – so you know when to answer your daughter’s call. And if you happen to forget about the next meeting marked in your calendar, the Wizard tells you when to leave to be on time, and even gives you the public transportation route plan if you wouldn’t have a car with you as you have this time.

It’s almost six o’clock. As you have agreed to meet your wife soon in a restaurant 10 blocks away, you call her to check with her everything is ok. You drive to the restaurant, the Wizard in your phone tells you the best parking options (based on real-time information from other users) and you easily find a parking place. You pay for that, naturally with the mobile phone again.

You have a nice dinner … and whenever you wonder what’s going on at home, you just check the life video feed from home. Cool. As it turns out to be a really memorable moment for both of you, you ask the waitress to take a picture with your phone. The Wizard knows what to do with the photos. It’s sent to your Life Album, as well as to your daughter’s phone. Soon the phones gives her feedback to the picture… obviously she would like to be with you. Oh no, maybe next time.

That’s it, an imaginary story what all a mobile phone could do to make your life a bit easier. As you can see, there’s no rocket science involved. All this is perfectly doable. Bits and bytes are available in some applications, maybe, but they are not really part of anybody normal life yet.

What do you think? Do you have better ideas how this should go? Let us know, feel free to comment!

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So you’ve got this busy life as well? Probably have quite a few gadgets and electronic devices around you. Sometimes you feel it takes too much time to learn to use the full potential of those devices. Sometimes they just make life more complicated than it should be, let alone updating those devices to the latest software. Of course if you have a Mac (as I do) and a Nokia phone, you know that there is no need to update the software (as it’s only possible with Windows). If you are having difficulties with these issues, think about your mother, and how she’s doing all that (she’s not).

The question of the day is the following: Why is managing life so complicated even though you have all these gadgets (or maybe because of that) that should be helping you? How should they help you?

Play a game?

Let’s envision a day how things could go if you would have what I call “Life Wizard”.

Let’s start with your mobile phone. It already knows

  • who you are
  • who you know
  • where you are (and where you should and should NOT be)
  • where you are going to be
  • who you communicate with

You wake up in the morning. It’s 6:45. You walk to the kitchen and take a quick look of your phone to see if you have any messages (yes, some people really do that). Now the Life Wizard knows that you are awake. It can also detect the movements and audio around it.

You grab your iPad, along with the breakfast and read the personalized news. There are certain benefits reading news on a device like this. It’s more local, more up-to-date and more relevant just for you. If your wife reads the news on the same device, the news may look different. And oh yes, even ads are customized for you.

While reading the news, an alert window pops up and wants to confirm something.

Are you are ready to leave in half an hour to a meeting marked in your calendar?

There are no worries with the weather, the traffic on the freeway is normal (traffic jam, as normal) so you may want to activate the carpooling in order to use the carpool lanes and avoid the bridge toll. You say “yes” and keep reading. Now the Life Wizard knows where you are going, what time, how and which route.

Rest of your family is now joining you for the breakfast so you put away the gadget. Time to talk person to person 🙂

Just before you leave the house, you remember that you don’t have a babysitter for the evening. No problem. You tap the screen of your iPad (you could really do it with your mobile or computer as well) and post an ad to Jobita. Outsourcing tasks to reliable people couldn’t be easier. The Wizard knows what you need, what time, where and what are the requirements for the candidates. Off you go!

You hit the road. Your navigator knows where you are going, and how to get the ride-sharing passenger onboard. Well, that’s because the Wizard told that, there is no need to enter the same information again.

The phone rings. It’s your Wizard calling. Well, using a mobile phone while driving is forbidden but hands-free audio is still ok. It’s about  weather this time, there is heavy rain ahead. So your passenger is going to be wet.


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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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