Posted on November 15, 2015
I recently had a call with a tech startup that complained about wasting too much time during initial calls with potential VCs because they have so much to tell. Their excitement about the product is killing them!
I should stress that we’re talking about a one hour conversation, which is a sufficient amount of time for any startup to spark the interest of a potential investor, as well as business partners or early customers. We all know there is a significant difference between raising capital from seed investors or series A investors but in either case the initial call or talk after an introduction is key.
Investors are always looking for warning signs, for reasons not to invest, so you have to show off your strengths in an honest way right from the beginning. Investors are going to assess the founders’ abilities to present and attract attention, which is a necessary skill for selling the actual product or service. Leadership skills are also important, while investors will also assess the founders’ abilities to learn and process new information. Finally, the team’s motivation, ambition and track record can play an important role in shaping the investor’s initial reaction, as they strive to find an A-team that has the ability to outperform the market and create a successful outlier.
So, what’s the best way to approach such calls and conversations?
Switch perspective and look at it from the investor’s point of view. Investors are busy people, as you no doubt are yourself, so it’s essential to make the best use of the time you have available. After doing your research on the investor to ensure their investment focus represents a potential fit, ask yourself what information the investor might need from you. What do you need to convey in order to help them decide to take the conversation to the next stage, and how can you best sell your business at every stage?
Here’s a framework to help you better structure the content of your initial conversations:
- Why did you start your business? Tell the investors about the pain that you felt yourself or recognised in your potential customers.
- What’s your personal and your team’s motivation? Let the investors know where the excitement and passion comes from, what keeps your team awake at night.
- Who are the key performers behind your venture? Give investors an introduction to your team’s key members and how you got together, the company culture and why you’re the guys to make it happen.
- What is your solution, the new thing the world needs? Don’t read out your plain product description! Show in a tangible / visual way how your solution works (make it imaginable), the impact it has on your customer’s life, and why it makes them happy.
- Time to shine?! Share your vision, sell the dream, the market potential and upside of your company. Investors are all about decreasing risks, so don’t point them towards them, but show the positive sides of any challenges you’re facing.
- What stage is your company at? Explain where you are right now: your team, your product, the business and the market.
- What is your ‘ask’, why are you speaking with this investor? Tell the VC what you need, where you think he or she can add value, and what you’re looking for. Be tough and also ask questions about them.
Keep it simple, stupid…and keep it short! Don’t elaborate too much on each point, if the investor finds anything interesting or requires more information he or she will ask for it anyway. Be prepared for the fact that this will be a dialogue not a monologue, but be ready and willing to lead the conversation as that is a sign of strong leadership.
Finally, it’s your goal to figure out if there is a good fit. Making things up doesn’t work, it kills the relationship even before it gets started. Be open and be honest.
Posted on October 28, 2015
How startup CEOs can improve their fundraising skills
I recently came across this very good piece by Christoph Janz, managing partner at Point Nine Capital in Berlin.
His post reveals the biggest pain points early-stage tech startups face when fundraising, based on a survey of 110 founders:
- Founders are being left in the dark most of the time as there is no clear YES or NO, and constructive feedback is rarely provided either
- Fundraising can be a painful process across all stages
- VCs back out of signed, non-binding term sheets more often than might be expected
While it’s great to see that the VC industry recognises some of these fundraising challenges, startup CEOs also have an important role to play in removing some of those pain points themselves.
Here are a few things startups CEOs can do to overcome these fundraising hurdles
(Note: This relates specifically to venture capital. Angel investors might have different investment motivations)
- Be prepared! It can’t be repeated often enough: startup CEOs need to do their homework to research and screen every potential investor upfront. If there is an obvious mismatch, save yourself and the investor time and resources by focusing on VCs that offer a better match. Although it might be exciting to talk to a famous VC or one that is later stage, your time can be better spent with those who are more relevant and interested in your startup’s current stage of growth.
- Know what you want, and need! Some startup CEOs can be smooth talkers, highlighting the positives while glossing over any facts that could represent a deal breaker. While it is vitally important to point out your strengths, needs and the upside for the investor, it is equally important to share your challenges right away. The investor will find discover your startup’s issues or challenges in due diligence anyway, but drawing attention to these facts early will help both sides quickly determine if this collaboration is mutually beneficial.
- Be proactive and straight forward! Fundraising is similar to the sales process – YOU need to close it. Startup CEOs often allow VCs to lead the conversation because they are afraid to fuck it up or hear a NO. Instead, communicate in a direct manner, bring the negotiation to a conclusion and strive to close the ‘sale’. Additionally, have your information like the investment deck ready, up to date and send it along with the initial contact, introduction or follow up after a meeting or conversation.
In a nutshell, the key to better fundraising is to streamline all communications (calls, meetings, email), set clear action points and timelines, keep pushing for responses and always be closing.
Posted on October 15, 2015
“Startup hubs are preventing startups from failing.” Paul Graham
Startup hubs are one of the biggest buzz words of the past years. There’s not a single week without an article that presents a statistic about rising hubs like Amsterdam. My experience of building, accelerating, advising, mentoring and investing startups in hubs of different maturity levels and regions like Austria, San Francisco & the Bay Area, London, and Amsterdam helped me to understand how different ecosystems can benefit a startup at different times in their lives.
A startup hub’s biggest value add is the entrepreneurial mindset that helps founders increase their chances of growing their business successfully. Though the motivations to move vary, all hubs have one aspect in common: Startup hubs are environments where you’ll find like-minded individuals and people you can learn from.
These days, theming hubs like FinTech for London & New York, are a common method to draw startups in. There is a huge interest for stakeholders of all kinds like venture capital investors and co-working spaces, private wealthy individuals, event spaces, governments and municipalities to step into the game as the economic upside of having successful technology companies in their region is a big plus for the future welfare of any region.
What startup hub is best for your company? Below are view considerations for founders before making the move.
- Know your stage
It is necessary to understand that going to a startup hub doesn’t make any sense when you are just about to build your business. Everything in the “idea and concept” stage is not worth of moving at all. Don’t get me wrong. Fly to San Francisco, Berlin, Amsterdam or any other place to get in touch with your peers, build relationships and inhale the startup vibe But without a MVP, moving will only increase your burn rate and you’ll lose time & focus. In fact, hit a MVP with actual users, then fly there to develop it further, grow your user base and network. As soon as you have found a repeatable use case, you are able to go from ‘tested idea to scalable company’, it is time to move.
- Set your goals
Each startup needs to identify their most critical challenges for the coming 6–12 months to narrow down which startup hub can best save them from failing. For instance, if you have a market place startup and it is key to go international, attract peers and raise funds to grow even faster, an international hub like Amsterdam would be a great choice. Companies like Booking.com, Treatwell and TravelBird, have already made Amsterdam their home-base and you’ll find a wealth of knowledge, experience and a broad international network already in place.
As great as startup hubs can help you growing your business successfully, the lifestyle of going to meet ups & events, working from trendy co-working spaces, hanging out at cafes, etc. can be distracting. Staying focused and setting your goals accordingly is crucial. A few broad examples are:
– Meet peers of your industry to validate your concept
– Get in touch with early adopters to gain traction
– Build relationships with relevant angel investors and VCs for funding purposes
– Become active in communities to attract future talent
- Know your industry & peers
Every startup hub has a special set of resources, a certain level of maturity and a specific environment that can prevent startups from failing. At a certain stage, it is necessary to be on-site where the industry peers are and the most activity is in order to be on the fore front of technology, talent and knowledge.
According to your goals, startups need to analyze their industry activity in each environment. It is important to have access to mature startups of the industry to benefit from their knowledge and experience, not only through employees acting as advisors, but also through investors in the early and growth stages. Additionally, having competition in your own field sharpens your focus and keeps your team motivated. Staying with the marketplace startup examples of Amsterdam, the afore-mentioned success stories are already putting a lot of support into the city’s fast growing ecosystem and newcomers like Peerby, CrowdyHouse and Fashiolista are a sign that this ecosystem is able to help startups succeed. Additionally, investors are feeling confident due to local successes, and already have the experience and network to push you even further internationally.
- Check the ecosystem
Along with an active industry, startups need to dive into the existing ecosystem and identify if there are enough relevant organisations to make a healthy startup environment flourish. Every startup hub needs to grow itself and therefore, tries to add value and resources to the ecosystem through various ways. In the Netherlands, startup accelerators like Rockstart, corporate venture activities like the IBM Innovation Space, the entrepreneurship space B.Amsterdam, the University incubator YES!Delft, as well as governmental initiatives like Startup Delta are vital for the long term success of any ecosystem and show another relevant ingredient: the adoption of the entrepreneurial mindset.
This is also recognised by leading technology companies like Netflix, Uber, Tesla, Google and Facebook, among others. For a combination of these and other reasons, like the beneficial corporate taxation, they’ve set up their overseas offices in the Netherlands. These companies attract highly-skilled people and big salaries. They are, over time, passing on their knowledge and expertise to the rest of the ecosystem, helping startups become successful by advising, investing or building them.
- Define your personal lifestyle
Another important factor is to make sure the area you’re moving to suits your current and near future lifestyle. Choosing another country when having a family doesn’t only mean cultural differences in work habits, but also changes in how you will raise your kids, how to plan for your retirement and health care. Cities like New York, London, San Francisco or Seoul might not suit your lifestyle when you are used to a more relaxed environment or don’t want to deal with a long commute. Not to mention, the much higher living expenses in such places. Dealing with an environment that doesn’t suit your lifestyle is a distraction you don’t need when your own time & resource management is so crucial. Additionally, keep in mind your company culture. Different hubs mean you’ll find different types of people to join your team. For instance, in the Netherlands 90% of the population is able to hold a conversation in English and with 180 nationalities it is voted the most international country in the world which stands for a very diverse workforce. Another important consideration is a city’s public transportation and how easy and affordable it is to access other cities.
Moving to the right startup hub is a critical business decision these days as it can put you ahead or behind your competition. This July, Compass published their most recent report of the world’s fastest growing startup hubs showing another metric for the first time: from 2012–2014, the number of startups that either opened second offices or moved their headquarters from to another ecosystem rose 8.4 times. Top tier talent is already moving to these hubs too, as foreign employees working at startups within the top 20 ecosystems represent 29% of those company’s workforces. In addition, CITIE, the initiative for technology, innovation and entrepreneurship, evaluates cities from all around the world by their openness to new ideas & businesses, infrastructure for high-growth businesses, and own innovative activities, where again Amsterdam is highlighted among the top 5.
Summing up, locating your business in an entrepreneurial environment, a startup hub, is beneficial for a variety of reasons — access to experienced mentors, competitors, venture capital and most of all the energy like-minded individuals bring. This entrepreneurial and collaborative mindset, where people are not willing to accept the status quo, and have passion, perseverance, tenacity, ambiguity, and strong visions are the key ingredients to prevent startups from failing.
Connect with other startups in different scenes globally for specific insights via StartupTravels, and get detailed information about cities via Teleport and Nomadlist.
Posted on September 15, 2015
The publishing industry, and in particular the book publishing industry, has experienced a huge shift in the past decade. From disruptive products like e-readers & tablets, the mass appearance of blogs, and the dramatic growth in online video consumption, all have affected the behavior of readers and writers alike. Not only the consumption of books has changed, but also the way how they get distributed and promoted.
The Renew the Book Startup Competition is focused on entrepreneurs and startups that offer new solutions to promote, distribute and publish books. The deep dive program is based on the successful accelerator program Rockstart that has run since 2012. It is an immersive educational program of 40 days that will help participants
- find product-solution fit
- receive feedback from industry peers
- build one’s network in the international publishing scene, and
- learn the basics on how to build, grow and pitch a your business.
The program includes workshops & 1:1 sessions on customer development, value propositioning, and business modelling, and also pitch training. Deep Dive sessions will enable participants to set next actions for their most relevant challenges, and private events will connect them to the industry peers. Mentors, including serial entrepreneurs, international experts and professionals from both the publishing & technology industry, will be available to counsel startups during the program. More here
The General Publisher’s Association (GAU), as the initiator of this startup competition, is in a very unique position to help innovative startups. As an industry association, GAU can deliver value to startups on a broad scale, providing participants
- access to all relevant players in the publishing industry
- stakeholder and industry specific insights from publishers, authors, book-sellers, consumers, etc., and
- the reach through their international networks to publishers across the globe
From a startup perspective, the publishing industry continues to grow, is lucrative and ripe for innovation
- The publishing market is huge. With $103B in annual revenue in 2014, this market is nearly 7x of the global music production and distribution market. 2.7B books were sold in 2014 showing people continue to spend money and time consuming them — a big plus compared to other industries.
- The scale of digital enables the publishing industry to grow. On the growth perspective, research forecasts a $8bn revenue growth until 2019, which is driven by the rise of new markets like India. Furthermore, the mass market is affected by the growth of new tech products that changes the way we buy and consume books. The rise of tablets and e-readers enables the publishing industry to change the way they engage with their consumers, and reach new target groups also at different areas of the world.
- Most people think the publishing industry has been slow to move to address the dramatic changes in the marketplace, which is a good time for innovators to spot opportunities and start a business. As the competition is lower than in a hot sector like online video streaming, the potential upside and chance of winning a big market share is higher.
The Renew the Book Startup Competition by the General Publisher’s Association (GAU) shows the motivation and the willingness to change from the inside — a unique advantage of the 2015 Renew the Book Startup Competition.
Publishing remains an impactful business. These days, entrepreneurs are always looking to generate a positive influence on our world, making it often the main reason why they started a company. While the ways we publish and consume books are changing due to technology, the stories themselves help us understand the world we live in. At Rockstart we strongly believe books have been and will stay important for us as human beings.