Hey guys,

I wanted to pose this question on Twitter, but couldn’t describe it in 140 characters. Basically, if I want to learn about investing, what would be the best way to go about it?

I noticed, reading Business Accounting for Dummies, that accounting is a topic that is very nationally driven. Sure, there are general standards, but there will be subtle legal differences for each country and in the end you have to learn something twice or thrice (depending on how often you move).

Is it the same for investing? Am I better off talking to my local bank and seeing what my options are there? I have to say, I prefer being already informed before letting myself be sold service X or Y, so what is a good way to find out about investing via books or otherwise?

I’m not a Dummies-freak or anything, but I did like Consulting for Dummies a lot (review here) and some chapters in the (British) Business Accounting for Dummies book. Would you endorse reading the Investing for Dummies book or another one (bear in mind, that I am a “dummy” as far as investing is concerned!)?

In any case, those were my questions, which wouldn’t have fit the 140 character format. Any advice you can give is welcome!

Vincent

P.S. we are now on a new server, which shouldn’t affect your experience one bit. We may post more polls though :p

Inspired by the Grasshopper podcast on Venture Voice.

Har har,

Vincent

First, what I love about business plans. I contains four elements very close to my heart: Writing, talking to people, innovation, and entrepreneurship. That is not to say that writing business plans is a fun activity that should be taken lightly. The crux of writing a business plan is that it needs to be executed upon. And that is where the complication arises.

One of my last freelance projects was amazing fun and in two ways very rewarding. Financially, because the investment that followed it, far exceeded the more than generous fee I was paid. Creatively, because my involvement lead to a lot of focus product- and strategy-wise, and we developed what I thought was a clear timeline as to the execution of the plan in different phases of product and market development.

But, as mentioned, writing a plan does not mean that it reflects the reality. I was reminded of this again, listening to a venture hacks podcast on “pitching hacks” (you can watch and listen to the presentation here). Business plans are worth squat, because a. there’s a lot of them, and b. the proportion that is executed upon is fairly small.

In theory, business-plans serve as a way to make the strategy of a young company explicit. Kind of like Gerber’s “Franchise manual” for startups in the E-Myth Revisited, it allows you to solidify what you do while you’re doing it. But, I don’t think it automatically leads to a (better or actual) business…

…

Those three dots is where I stopped writing some three weeks ago, and I have in the mean time developed my thoughts further on this. I think that the gist of good business planning is taking ownership of the project. And the single most important key-component of the business plan is the timeline section. And the single most important action as an entrepreneur is to already have at least 10-30% completed of that timeline.

In other words:

• if you’re an entrepreneur you should write your own business plan: you cannot outsource this!




• The most well-developed section of your plan should be your timeline: as conservative and realistic as possible!




• The best way to illustrate the value of your plan (and timeline) is to already be following it: actions scream much louder than written words!

If those three components are in place, I think that the world of business planning and entrepreneurship would be a much better place.

End braindump…

Vincent

Addentum: The problem of multiple agendas! I should also add that another complication is that plans are written with a singular vision in mind, perhaps alternative scenarios are included, but it still very often reflects a singular approach to “doing things.” But… many companies are composed of multiple people, who may or may not have multiple agendas. I still think it can belong to taking ownership of the idea, in the sense that the plan is worked on together and perfected until everyone agrees with it. But more often than not, the business function is delegated to certain individuals, meaning that this isn’t the case.

Depending on where you stand, this is going to a long boring blog post or an interesting one. While I didn’t write much about it, my last consulting project as a freelancer was to help get a startup into the European Space Agency Incubator (ESI)… successfully, I’m happy to say. I wanted to write a post about how interesting it is, I think, to invest your time and money into space technology businesses, particularly because it’s about spinning space tech off to applications into the real world, but realised that this interview with Bruno Naulais, ESI network manager, would probably do the trick.

I conducted this interview in the summer of 2006, as part of my thesis. It was previously published on my personal blog, but it [the whole blog] has since disappeared into MySQL “does not compute” hell. Here goes.

The Interview

VvW: What is the ESA Incubator all about?

BN: It is actually called ESI, the European Space Incubator. It is part of a network, called ESINET, and consists of 35 incubators, spread across most of ESA member-states and some Eastern European countries (eg Ukraine, Bulgaria).

The ESI business-model, in a large part conceived through Niels Eldering’s thesis [a fellow Rotterdam School of Management graduate] and BN’s Business Plan, could be described as consisting of three dimensions. These are the start-ups, the stakeholders, and the supporting services.

1st Dimension: The start-up

The start-up is seen as a place where fertile (space) technology meets an individual or a team of people. They in turn go through an incubation process (at the ESI) and finally come out as a company to do business.

2nd Dimension: Stakeholders

This doesn’t apply to all incubators in the network, but in the Netherlands, the two main stakeholders are the ESA and the Dutch ministry of economic affairs (EZ). Both naturally want to promote employment, economic growth, and entrepreneurship in the Netherlands. Furthermore, ESA has the objective to improve the image of space in the eyes of the general public, of investors, and of businesses.

The latter is of particular importance, as space is still perceived as expensive, dominated by large players, and generally irrelevant to the lives of Earth’s citizens. What the incubator aims to do is to show to it’s stakeholders and to the general public, that space-technologies and space-systems can be benefited from in everyday life.

3rd Dimension: Support

This happens both through 3rd parties, something called Key Innovation Business Services (KIBS) and in-house. Through this, the aim is to prepare the start-up for doing business in the real world, and to receive further investment. The latter of course depends on the ambitions of the founder. Some are pretty limited in their targets. They only want to set up in their country, or perhaps the Benelux. Others want to go cross-continental or even global.

VvW: Exploring the “Support”-angle further, how does the ESI assist it’s starters in finding private financing?

BN: First, it is necessary to assess the type of start-up. Depending on the type of product/service and the market, an advice is given as to what the growth-strategy should be. This doesn’t always need to be angel or venture financing. In many cases, the advice is to consider a strategic partnership. In this case, there’s a larger company already active in the market/industry that the start-up is targeting, and has an interest in taking a stake in the company, with the option to acquire it at a later stage. This requires there to be a kind of fit between the partners. So far, the ESI has had two start-ups taking that option.

Then there is also the option for a joint venture, an equal partnership between two starters in ESINET, or a starter and an existing company. One ESI start-up has done that.

For private financing, like a business angel or venture capitalist, start-ups usually still have a way to go. Usually, they first attract financing from the 3 F’s: Friends, Fools, and Family. This can happen before or during the incubation-phase. More experienced investors usually require the company and idea to be more mature. With a proof of concept, you can attract a business angel. When you are ready to sell a commercial product, you can approach venture capitalists. There are some exceptions to this of course, but this is the way it usually works.

The aim is to ultimately have a core group of business angels that are allied with the incubator. To a degree, this is already the case with venture capitalists, of which a group is being made aware of the inner proceedings of the incubator-companies. The idea is that the start-up does not need to educate these people on space or their idea, the incubator is already doing that for them. And the incubator will basically give residing start-ups feedback on their stage of development and, depending on that, the availability of pots of business angel- or venture capital.

VvW: What are the advantages of a start-up approaching investors through the incubator, rather than going at it alone?

BN: To start, a venture capitalist can receive thousands of business-plans during a year. The aim is that ESI-plans land on top of that pile. This is because the ESI, and the ESA, provides a quality label to its’ residing startups, which manifests itself in four ways.

For one, there’s the quality of the work done at the ESA, their procedures and methodologies. The incubator tries to pass those on to the start-ups.

Second, there are the favourable statistics for technostarters residing in incubators. A survey from 2004 [which I still have to read] reports that ca. 87 % of start-ups in the incubation process are still alive after three years. For a standalone technostarter, this figure is much lower, between 20-30 %.

Third, there are the networking-aspects of the ESI. Business incubation does not work well as a standalone function, it has to be part of a network. In the case of the ESA, it is present in 17 countries, as well as active in non-member states, such as the US and Russia. This can be useful as a gateway for the start-up to expand or move to another country. It’s also good for cross-fertilisation—between different ESI-start-ups and -graduates, suppliers and customers, investors, and other companies. Through the ESINET-network, it is also easier to conduct international market-studies.

Last, but not least, there is the access to the ESA technology and resources (experts, labs, test centre, software tools, facilities, etc.).

VvW: Are there examples of venture capitalists investing in any of the ESI startups?

BN: Sure, there’s ThruVision, which received a substantial amount in two rounds of investment [note: I know the exact sum, but am not sure if I can make this public knowledge: I think it's public since it is mentioned on their web site; perhaps you should have a look (http://www.thruvision.com)]. This company has now graduated, i.e. no longer resides within the ESI.

VvW: From your experience with venture capitalists, how do they feel about the companies that are still in the incubation-/seed-stage?

BN: As was mentioned, they prefer more mature ideas to work with. The key-phrase here is “work with.” Venture capital really means two things, investment + support. Along with the investment, the venture capitalist wants to coach, put people in the right place—on the board, as a CEO. For the latter, most of the start-ups in the ESI-program are founded by someone with an engineering-background. A founder is typically someone that understands the technology and how to build a service or product on top of it.

A venture capitalist, on the other hand, looks at the team, the product/service, the market. He or she will look for people that can run the course, manage the growth. The preference then usually falls to someone with a track-record, who has experience doing that. In the case of ThruVision, the founder is now the technical director, and the CEO is someone with an impressive business-cv.

Another statistic from the European Venture Capital Association (EVCA): In something like 95 % of start-ups invested in by venture capitalists, the founder has been replaced as CEO.

VvW: Do venture capitalists also support the incubator itself in some ways?

BN: Not hands-on, no. They do provide access to a network of companies, investors, and people to work with, which wasn’t there before. There will be more, once the ESINET-fund is started.

VvW: What is the ESInet fund?

BN: First a little background. There is obviously a gap between early stage and growth. This was known from the start of the incubator. This is especially so when you talk about space. Investors look at the space-sector with skeptical eyes. They see it as a market for large players like Alcatel and Astrium. They see it as a niche-market. And when you think about satcom, there’s a lot of international competition from the terrestrial systems. The satcom has already lead to a few big-name and big-investment projects to go bankrupt, example of this are Iridium and GlobalStar.

Furthermore there’s a misunderstanding about what the utilization of space-technologies and -systems really means. Utilization means you are using something that already exits. You only need to adapt it to a non-space sector. This means testing, modification, and validation, something that doesn’t need to take years, rather months. Space-systems refer to satellite-technology, for which you don’t need to build the satellite, you need to be able to receive a signal and use it. For space-technologies, we are talking about transferring and adapting applications and materials used and developed for space to non-space sectors.

First investors need to get this picture. But even if a few of them understand, that doesn’t mean they have the needed expertise. Usually venture capitalists are experienced in certain areas like biotech, meditech, telecoms, etc. Space-related technology does not have that many corresponding VC-experts. So the thought was, if investors will be so hard to find, why not start our own fund?

And this is where the ESINET-fund comes from. Its fund managers don’t need to be convinced on potential business development from space systems and technologies (much) and there is funding for early stage ideas. ESA was convinced to sponsor the fund with 5 million Euros and recently selected a management company from 12 applicants to manage the fund and raise more. The target-size of the fund is 40-50 million Euros in total, to be completed by mid-2006. The ESI is responsible for the deal-flow. This will mostly come from ESI-startups, though if those do not fulfill the needed requirements, investment van occur into other ESA-“ventures.”

The fund-management company will act much like a venture capitalist as far as investing is concerned. It will be present during selection of start-ups and have a supporting role in the development of invested-in companies. And it will take shares in the companies it invests in.

VvW: What do you think the effect will be on other investors, to have this fund running?

BN: It’s always a nicer picture to have a fund tied to an incubator. Having a fund will hopefully attract other investors. Many venture capitalists like to invest in syndicated deals, meaning a group of investors spreading the risks between them. In investments, there’s also usually a leader and followers. It is hoped that the fund can fulfill a leading role in the process.

For business angels and the three F’s, there will always be space. For one, they invest much smaller sums, and second they provide the added value that they bring as people. Like many informal investors, business angels are often interested in a hands-on approach, to be involved in their start-ups, which will benefit entrepreneurs greatly.

VvW: What is the investment climate like in the Netherlands, compared to other European countries?

BN: The Netherlands is not so great for finding private capital, except for subsidies. Both the UK and Germany rank highly for private capital. France and Italy have good governmental support.

VvW: OK, back to your start-ups, what criteria do they need to fulfill to become part of the incubator?

BN: During the course of the incubation-phase, they are asked to prepare financial projections, including parameters like Net Present Value (NPV), Return on Investment (ROI), and other ratios. Templates are provided, if needed, and access to third parties that can help. Over the course of the incubation-phase, the incubator-staff tries to follow the evolution of the NPV. In the future, it is hoped that NPV will be calculated at the application-stage, before the start-up becomes part of the incubator. If that’s possible, of course.

Other than that, the number 1 criteria is the market. If they are not able to define it, they will not be accepted. Similarly, a market-study must be prepared.

VvW: How does the ESI feel about teams starting?

BN: Very supportive. On the whole there are both types, entrepreneurs starting solo and finding partners along the way. Or entrepreneurs that start in a team. Generally the incubator encourages partnerships between technologists and business-people. Investors invest in a team after all. The incubator also has good ties with MBA-programs to find people for start-ups.

VvW: Is the staff able to deal with all the demands of the incubator?

BN: The staff has broad knowledge about issues like legal and intellectual property matters. There are specialists that advise on strategy, market, technology, etc. But it is impossible to know everything in depth. For that the start-up can approach third-party specialists, of which they can get the contacts via the incubator.

VvW: Do you compete with other incubators?

BN: Not at all. In fact, collaboration is encouraged and projects are sent to others as well. Geography is also very important to entrepreneurs, they have a life, etc., so it’s not that feasible to draw them away from a more logical location-choice.

Note: If you have any questions, don’t hesitate to post a comment or mail me. If you are interested in applying to the incubation programme at the ESA also, check out this page and also don’t hesitate to ask me about my experiences of working with two tech-startups in the programme.

Vincent

I’m sitting here writing this on my new Intel Macbook, 4GB of RAM and 256MB of video-memory, coming from a 4-year old PPC iBook with 1GB of RAM and 32MB of video-memory. The latter is the very definition of the principle I’m talking about. From the beginning, I’ve had to find creative solutions to doing my work and it’s been incredibly rewarding. I’ve yet to experience a boundary to the Macbook’s abilities. Having total freedom is exhausting. It encourages exploration, rather than getting things done, and it leads to exhaustion. No matter how far you try to go, you’re still inside that box.

I’ve been engaged in three funding proposals in the last two months. The first, ok, more of a business-plan competition than a funding application. The second, applying for a government grant. The third, applying for a large venture capital investment. Of these three, the grant application was my least favourite and I loved the VC application process. Why?

We have an undefined amount of time to apply for the government grant. We had to follow a template with ultra-confusing headings (e.g. I have three sections that want me to describe the market… am I supposed to do it thrice?). And the total had to be no more than 25 pages.

We found out about the VC option very late in the game, 24 hours before the deadline in fact. We had to fill out a webform, which was in total ca. 8 chapters. Each section had a character-limit (not word), ranging from 100 to 4000. One section for the market and business model = 4000 characters. What the company does = 100 characters. A simple form to fill in the finances, focussing on the key-figures only (revenues, EBIT, equity) which forced us to do all of the complicated calculations for ourselves, and a section for what we wanted to give away of the company and why. Instead of doing an unlimited amount of writing, we used whatever extra time we had to discuss the problems and solutions.

I wrote the 8-page piece for the competition in two hours. Because that’s all the time I had left, after handing in the VC proposal that same day. It forced me to focus on the essentials and nothing more.

It doesn’t matter if we’re talking about a productivity-tool like a laptop, making a startup survive, raising kids, educating people, boundaries are the key to ultra-focussed, ultra-creative solutions to the problem at hand. Giving people total freedom rarely leads to the right results; it makes life easier to both in the very short-term. In the long-term it definitely creates more overhead, as you’re constantly chasing after those that you gave the freedom to. “Kid, it’s been a month, where are you now?” “I’m on the introduction, but I have all the time in the world, right?” Kid, for your sake, I hope not.

The end.
Vincent

P.S. looking for the right picture lead to this article on the same topic.

Audience: How do you set yourself boundaries? I’d love to know!

I attended LeWeb, a conference dedicated to…the Web industry, almost 2 weeks ago in Paris. I apologize not to have blogged before, but December was a frantic month, business-wise, and I wish I could blog during the conference but as you may have read on the blogosphere, there was no Internet. On top of that, I wanted to leave some time before I blogged to check whether my words would soften.

I arrived at Le Web, investing a lot of time (2 full days) and money (more than EUR 800, that is to say around USD 1100 – which is a lot of money for what I got), with very high expectations, and I have to say that this conference was a huge disappointment to me. Actually, it was more of a disappointment: I actually found Le Web ‘08 conference to be a huge piece of crap. Here’s why.

The organizers: Loïc & Géraldine Le Meur

Prior to the conference, I was a big fan of Loïc Le Meur. The guy looked like Midas to me: everything he touched became gold. The guy gets people lining up to invest in his startups (look at his list of investors in his last startup Seesmic here, impressive). Loïc understood that blogging was going to be big before everyone, and positioned himself accordingly (a huge blogger and founder of Six Apart, the editor of TypePad). Loïc is also an early investor in LinkedIn, my favorite web app, and recently founded and funded Seesmic that I find to be a very cool video conversation platform. Well, the guy seemed to be the perfect investee for VCs, and the perfect investor for entrepreneurs. However, when it comes to organizing conferences, I would tend to say it’s not there yet. Loïc and his wife Géraldine have been organizing the Le Web event for something like four years. Last year already, criticism had emerged, but overall comments were positive. Well, after attending one Le Web conference, I can only blame myself for not having due diligenced better: I wasted my time and my startup’s money.

The theme

Love. This year’s Le Web conference was about love. At first sight, I found this theme brilliant – too bad the idea wasn’t well executed. Love is a universal value that is only discussed in novels and Vogue. Plus, Love is the perfect theme if you want to think an outside-the-box conference program. Unfortunately, this wasn’t the case at all. Although there were a number of supposedly quality speakers, most didn’t actually mention the theme, and I guess some didn’t even know that the theme was Love (Marissa Meyer of Google, Didier Lombard of France Telecom, Maurice Levy of Publicis, to name some of them…). I think it’s a big waste, because having a truly deeply-thought consistent program around Love, with at least some continuity between speakers, could’ve made of Le Web a truly mainstream event rather than just a reunion self-proclamed visionaries.

The speakers

Speaking of self-proclamed visionaries, I had a hard time looking for new ’stars’ on Le Web panels. Or even just interesting content.

Paulo Coelho is a brilliant man, but he had nothing to do at Le Web: his speech didn’t bring anything new, it was self-promotion, and an uninteresting one as a matter of fact. Same with Susan Wu from Ohai, preaching her church (virtual goods): boring slides, boring intervention.

Didier Lombard was absolutely out of scope too. He basically paid to get on stage. And you could feel it.

I was very disappointed by Maurice Levy from Publicis (and by the questions asked by Loïc Le Meur: boring) – the guy could’ve given us interesting insights on web advertising. Instead, we had a boring “fireside chat”, as they say. I liked one thing about Maurice Levy though, he publicly gave his email address saying he was looking for startups to invest in.

Startup competition updates were extremely repetitive; the only thing you could here was “despite the crisis, there are still a lot of innovation around; I’m thrilled by what I saw in the startup competition room”. Except that when you looked at the jury in the room, they were all on their Blackberry or iPhone aswering emails.

I liked Yossi Vardi, Chris Anderson, John Buckman (good tips for entrepreneurs), Marissa Meyer (a few insights on the Google roadmap, like wanting to take Chrome out of Beta) & Joi Ito though.

The sponsors

Le Web’s official sponsor was no company else than Microsoft, the tech giant that probably least understands the Web provided the very poor quality of its online applications, like Hotmail, or its total absence of the collaborative web apps landscape outside its expensive minority stake in Facebook. The good news is, Microsoft folks are smart asses and let some selected startups (some of them embedding no single Microsoft technology) demo their applications rather than demo Microsoft products. Microsoft alone paid Le Web USD 110,000 or EUR 80,000 to get its brand on top of others, rent a lounge space, and get speaking time.

Google also was a sponsor of Le Web – they had Microsoft move first when it came to getting the “official sponsor” title. Google had a special room dedicated to presenting its own stuff during day 1. Nothing new there, except that Google brought in speakers on a number of topics like Adwords, APIs, etc. I guess the fee also included the 2 keynotes Google got. If I were Google, I would, to ensure a maximum buzz around my brand, not attend or sponsor Le Web. That would make the entire conference speak about the absence of Google whilst the whole web revolves around the Google search engine. Google being a sponsor amongst others makes of it a regular company. Too bad.

There were other partners, like SwissCom that sucks big time (they had a booth, and did not manage to make the Internet work during the entire conference + Loïc Le Meur says they got paid more than USD 100,000! to make nothing work), Facebook (?), SixApart & Seesmic who got it for free obviously,…and a number of others that are not worth talking about in this not-so-long post.

The budget, the price

1,400 participants x an average of EUR 1,000 per entrance

Sponsoring & demo room for at least EUR 200,000

The overall budget for this 2-day conference amounted to EUR 1,500,000. Yet, there was no wifi running, definitely not enough food for all participants (I had to go grab a sandwich each 2 days), no consistent editorial line, a crowd of people investing time and a lot of money to listen to the same self-called visionaries on stage.

I haven’t paid myself in one year (I live on my fiancée’s salary), every since I started Verteego. I bought myself a ticket to Le Web almost as a Christmas gift, hoping to enjoy a lot. It was a sort of sacrifice (EUR 850 + 2 days of turnover for Verteego – I’m the sales guy there – is hell of a lot of money! the price of a superb laptop or a great long weekend, say, in Venice) but I was plenty of hopes. The least I could say even 2 weeks after the conference is that I have a very angry feeling at myself: I feel I’ve been financially abused. And I lost two days of hard work during an important period.

The place, and the temperature…

Well, it was free-zing. Which is okay for me, except that with so many people inside, there must have been a sort of natural warmth, which wasn’t the case. I felt this place had the worst energetic efficiency in Paris. This absence of environmental awareness stroke me: the second day, it was warmer. I couldn’t believe how much energy was used to heat the place. I am very disappointed by the overall lack of consciousness of web entrepreneurs for environmental issues: if you are really about changing the world, then you should think about measuring their environmental footprint and take action to reduce it from one year to another & compensate the remainings. But they sure didn’t. And I’m not writing this just to sell Verteego Carbon here: I just don’t understand entrepreneurs to pretend they want to change the World and who don’t care about behaving socially & environmentally responsibly. I think that Le Web, an event that took place in Europe at the same time as the Poznan conference (pre next Kyoto talks in Poland) AND which theme was Love, was just perfect place to ensure Social Responsibility and Sustainability became buzz words in the blogging, startups & VC microcosm. Géraldine & Loïc completely missed the train here.

The startup competition

I didn’t apply to the startup competition. I felt it wasn’t right to make startups pay EUR 1,500 for just a pitch. I was wrong in doing so. The startup competition was probably the only interesting thing during this conference. I paid, as I said, EUR 800+ to go to Le Web Paris ‘08 and basically meet with friends. It would’ve been worth paying the double to try and get 7 minutes to pitch Verteego in front of around 300 people. That makes it 5 euros per viewer’s attention, + the backlinks, visibility, and blog coverage you could get later on. Not applying to the startup competition was perhaps my only regret. And that would probably be the only reason I would attend next year.

The food

It was a shame. There’s no other word for it. I could get no food at all, not during the first day, not during the second day. The first day because there was none left. The second because there was no vegetarian food! Both days I went outside for a sandwich. I could then make friends because people were coming to me to ask where I had gotten this.

Worse: during Day 2, I needed to drink water during the day because I caught a cough during Day 1, because of the cold. And I was basically given a negative answer, because the bar was opened neither at 11am, nor at 3pm (which actually made me leave the place). You get 1500 people pay EUR 1000 on average, and there’s no food, and no water???

The Internet

There was very little Internet during the whole conference. Here’s a recap of this lousy situation: not only were you locked in with boring old speakers & because of the price you paid, you couldn’t answer client requests, or blog because of this.

Loïc Le Meur wrote an apologetic post, but I found this post actually ridiculous for him: Le Web gave EUR 100,000+ to SwissCom not to get a service. The excuse is: no provider is used to so many attendants. This is untrue: the very week before Le Web,  I attended a huge (20,000 visitors per day!) Trade Show, Pollutec, in Lyon. And there was perfect Wifi.

The attendants

Obviously, I met with many of my existing friends, and I was glad to. I also met with new people from everywhere around the world. Lots of great people there, from everywhere around the World. But come on, at what price…Furthermore, the mindset was rather negative: people weren’t ambitious or optimistic. They should be: the crisis is a great opportunity to move fast whilst remaining lean.

The TechCrunch party

It was so-so, I was disappointed and angry: 1) I had bought my business partner (who hadn’t attended Le Web) a EUR 30 ticket, to be told at the entrance that a pass to Le Web was worth 2 entrances. I think it should’ve been explained somewhere because I basically wasted EUR 30 with no possibility to get a refund. 2) I waited for 30 minutes outside, in line, to get in. And during this time I saw 2 groups of people showing up in front and squeezing the line: I found this very abnormal, because the Web is about democracy, having all the same access to information. 3) the place was very small, but this is less of an issue.

Conclusion

For the price I paid, I got very little value back (basically, the only benefit of Le Web was that I got to see many of my friends in very little time). Rather than apologizing, and provided the HUGE profits this conference made, I believe not reimbursing participants for providing no wifi, no heating, and no food services is irresponsible at that cost. I repeat: rather than blame their food supplier, Swisscom or the Cent Quatre (for the heating), I think Loïc & Géraldine Le Meur should’ve refunded participants for providing such a low standard service rather than making this huge profit (I also think they should display publicly the P&L of the conference). This is the least they could’ve done since giving me back 2 days of work isn’t physically possible. Loïc and Géraldine Le Meur didn’t show any social responsibility here, no respect for their customers.

Last, but not least, those who are not going to complain about Le Web ‘08, both in terms of organization and content, are either those who didn’t pay anything to attend, or those who paid so much that blaming the event would make them look stupid.

PR: wait… I: wait… L: wait… LD: wait… I: wait… wait… C: wait… SD: wait…

In many ways, I consider this the best strategy book, I’ve ever read. “Valuation,” by George Norton, is, as the name suggests, a book that uses financial models as a basis to build (sound) strategies. It is also a textbook—my version is hardcover and 190 pages long—but written in a format that reads easily and is structured to be implemented—ca. 30% of the book are (group-)exercises meant to implement what the book suggests.

If I had to criticise it, it’s that I don’t consider it very practical in an entrepreneurial setting. One thing that such methodologies require, is time, which is often a luxury that smaller/younger companies and projects do not have. Building up a set of co-ordinated, organisation-wide strategies can be a matter of years, and, I expect that if you were to follow the book’s advice, you’d engage in a 6 month trajectory, at least.

That said, it is a well-written book and achieves the objective of a book, which is to make understood its topic. In this case, valuation means understanding the value of companies, their products, and business activities. The financial part only really plays a part in the first third and last third of the book, while the middle is more about the actual coming up of the company’s mission, its broader goals, its objectives, and its strategies—the latter being the nitty-gritty activities of how to fulfil the grander vision.

And, where valuation comes in, everything will affect the cash position of the business: some activities may be research-intensive (= costly), but lead to greater rewards in the long-term; others will be quick-sale actions, which generate revenue, but may not always improve the long-term position of the business, unless that revenue is re-invested in more sustainable growth.

I find that these principles easily translate into small business- and individual activities, but only if taken on a holistic level, in which case reading this book may be overkill. But if you’re a finance-geek that wants to learn how to better translate the numbers into practical company-activities, or, vice versa, if you’re a creative business-person, who wants a relatively easy intro into the financial fundamentals behind strategies, then this book may be for you.

Vincent

A lot more multi-part blog posts on Tech IT Easy; finally some continuity again, which is nice for both you and me! So, today was the ceremony for stage 1 of the New Venture business-plan competition, the submission of the idea, of which a prize of €500 was to be won by 10 contestants. As I expected, for several reasons, I wasn’t among those 10, though the race isn’t over yet! The next submission is February 26th 2009, the feasibility-study, for which I may compete with my own idea or change it (to another, if needed). The feasibility of an idea entails technological and business aspects, and there’s still a lot to be worked out on both ends. I’m letting you know for completely selfish ends—it would be nice to see a familiar face, if only on the other side of the court. Of course, one team-member must be residing in the Netherlands!

So how was today? I wasn’t really top-fit as it feels like I’m doing a 101 things and am a little overwhelmed, i.e. stressed out. So I didn’t come with high expectations, mostly to check out the competition and perhaps meet some people. The event was presented by Roland Koopman, a Dutch TV-presentor, and the awards were handed out by Pim Batist, founder of SellaBand.

Two “insider”-stories were presented, one was SellaBand and other was Taniq, a rubber-company, for lack of a better word—the company makes it so that rubber hoses and similar are more stable, while using less materials and no metal. You should check out the film their site, it’s very well-made. Most important insight from Taniq: the importance of coaches/mentors, which appear to be abundant if you take part in the competition, for bouncing off ideas & solving problems. But also on the hiring process—when the three young founders decided to look for some “grey haired” commercial talent, they found out, the hard way, that big-company sales-talent is not the same as small-company talent. In the end, if you can’t sell your own products as an entrepreneur, you’re probably in trouble!

The best example of this was perhaps Pim Betist; what a magnetic personality! SellaBand is a crowdfunding mechanism for bands, who, instead of walking to a record-company (for whatever reason), can place themselves on the site, after which fans can vote—with their wallets!—for the band they like. And with that a music-cd, etc. can be produced… He came up with the idea in 2001, residing in New York. Then, for reasons unexplained, he decided to take on a 3-year job at Shell, until he finally quit that job, sold his car, moved into some (illegally) free housing and focussed all his energy on working out the idea. He recruited a guy from Sony BMG as co-founder, by posing as a student wanting to write a thesis and holding several meetings with the company under that subterfuge—a side-note: recruiting people from Sony should never be hard, these guys, from my experience, are all chronically made unhappy by the politics in that company. I’m a little more into music over rubber, as you can tell, but that’s maybe also because the presentation was excellent. Not that Taniq didn’t have a nice movie either, definitely to be watched on their site!

So what about the winners? If there was a definite theme to the evening, apart from innovation, it was that pretty much all of the prize-winnars had a sustainable idea. It wasn’t necessary green, but more efficient, more ethical, more social, etc. What I remembered was:

• a one-handed fire-extinguisher for handicapped people
• a crowd-funded electrical cart for people in third world countries
• a way to make fuel consumption more efficient in cars
• a sensor that measures how people sleep

On the off-chance that you are planning to take part in round 2 (send me a mail, if interested), that should give you a hint of where to direct some energy at! Looking at the credit crisis now, it should perhaps not be a surprise that attention is being drawn towards both efficiency, but also more sustainable ways of doing things—that is, incidentally, one the conditions that will probably be imposed on the car-companies, if they receive financial aid: to become more green.

That’s it from me on this subject! It’s not too far a leap for me to write a feasibility study, but I’ll only know for certain if I’ll take part a few months from now. So, let’s hope for a part 3, 4, and beyond!

Have a nice weekend!
Vincent

From Stanford Entrepreneurial Thought Leaders, a lecture by Mohr Davidow Ventures partner, Erik Straser, on innovation in Clean Tech:

…As you’re thinking about what you’re going do, the no. 1 thing I would advise you is how to find a long wave. Some immutable trend that is gonna permeate most of the 10 years of your career, the next 15-30 years! If you sat down and thought “what are the big long waves during my lifetime?”, jumping on them as a professional will probably be one of the smartest things you ever did. Because if you did nothing, but jump in the computer-business in the late 70s, early 80s, maybe even up to the Microsoft IPO, you had a phenomenal run, 20-something years where you had a very high chance of achieving a higher position, more material income, and just being in a better place, then if you’d chose, for example, Detroit.

So you got to think what wave you’re on and how you get on the wave that makes sense for you both from an interest perspective, a geography perspective, what you want to do with your life. […] Its easiest to see [these waves] right here on campus (note: talking about Stanford School of Engineering). […] Research universities are the start of the waves.

The no. 1 thing you can do is figure out what wave are you riding, and make sure you’re not on a wave that’s going down.

He identifies three streams, according to what’s going on at Stanford: IT, which is a mature wave, biotech, and clean tech. It puts a lot of things in perspective for me, regarding all the companies, projects, and my own business ideas that I come across on a daily basis.

Focus on things that are going up, not going down! And focus on your fit with them!

Thanks to vodpod, you should be able to watch that whole scene here (if not: here).

[vodpod id=ExternalVideo.747763&w=425&h=350&fv=]

Vincent

If that phrasing sounds a little weird, let me explain. Over these last three days, I’ve been watching Dharmesh Shah’s really great presentation on what he knows about startups, in which he talks, amongst other topics, about the attention economy vs. the wallet economy. If you haven’t already, you should really check it out!

The attention economy is based on eyeballs, on non-paying visitors to your site or users of your app that, through some magical reasoning, will translate into clicks on advertising, eventually leading to income to you the entrepreneur. I call that magical because no one I know of actually clicks on adverts.

The wallet economy is based on eyeballs with little hands reaching out of it that hold cash with which they pay you. I serve product A, it costs $20, you pay, I just gained $20 (minus cost of goods sold). The feedback is instantaneous and you don’t have to wait for X000 customers to land on your site and 0.000X% of them clicking on adverts.

This is pretty much the way the world has always worked, with the exception of newspapers and, arguably, the internet is one big newspaper (seriously lacking in editors).

It’s very easy to go the attention route, because it’s very easy to build soft-/webware in the first place. When you start a business in the real world, you make real investments, usually with the help of external funding like banks, that want to see a real return on their money. When you start a “digital” startup, you need a PC, you need to know some code, you need to spend $20 on a domain and $10-50 per month on hosting. The pressure isn’t there to really push for every dollar of income, because you aren’t feeling the banks et al. pushing down on your back. As a matter of fact, you can just set up a service, and go pursue another career, waiting for it to magically attract enough eyeballs to make you millions.

It’s nice, in theory, but it’s not what entrepreneurship is about. Entrepreneurship is like the film “There will be blood.” Life is tough, you have to fight for every drop of oil, people hate you and you will probably end up killing (=divorcing) a member of your family in the process.

And that kind of work deserves the instant gratification that cash for your product provides.

The end. Have a nice weekend, y’all!

Vincent

Where does most radical innovation come from? Where, as an individual, can you expect to get plenty of access to that type of information? If your answer isn’t universities, please let me know!

As promised, I’ll be focussing more on innovation on Tech IT Easy these coming months, and you can be sure that my search for content will focus on universities and other institutes, rather than the internet.

It’ll be interesting challenge for sure, particularly as I’ll be reading a whole bunch of dry scholarly articles and dissertations, as well as tracking down interesting organisations for interviews, to hopefully produce something of value for you and me.

As I’ve asked before, if you have interesting ideas for content of this nature, or even want an interview, article, or thesis (summary) of your own to be published here, please drop a comment or mail!

Bookmark this site for more info!
Vincent

After completing a previous business development project just a few days ago, I immediately “ventured” onto my next challenge, writing a business proposal for the first stage of the New Venture competition. To those that don’t know it, it is one of the largest of such competitions in Europe, builds on top of a methodology developed by McKinsey, and exposes your plan to a number of experts (financial or otherwise) that provide you with feedback and coach you through the next two stages: the feasibility study and the final business-plan.

The requirements for this first stage were to present a 2-page max document, which includes:

• The name
• Describing the idea
• Describing its innovativeness
• Describing the market
• Describing how you will make money

I actually started collecting data on the market and how to build the product about a month ago, as the market was similar to my previous project (though there is no conflict!). These last two days, I spent writing this thing full-time, minus some blogging here and twittering there, of course (in retrospect, I should’ve written something about it before the current deadline passed—it ends sometime today. Sorry about that!).

I went a little overboard, I think, splitting the idea into three components: the product, the underlying technology, and the organisation; translating “innovativeness” into competitive advantage; splitting market into target audience and competitive landscape; and proposing a number of parallel trajectories towards making money. I really maxed out those two pages and hope it wasn’t all too wordy.

What did I learn? Nothing on its effectiveness yet! But that it is a. very difficult to put an idea into simple words that everyone would understand it—my father doesn’t get it at all, for instance. And b. it really forces you to rationalise your thinking into concrete steps. “Does the idea make sense?” was a question that I constantly kept asking myself.

I don’t expect to win this competition, but as with all things, if you don’t try, you certainly don’t fail, and you most certainly don’t succeed. Wish me luck! More when I get the feedback!

Vincent

I spent today at an entrepreneurial seminar, hosted by Star here at the Rotterdam School of Management. A number of speakers gave lectures, including Bernard van Oranje (co-founder of Levi9), Marc Cornelissen (adventurer), Annemarie van Gaal (founder of AM Media & panel-member at the Dutch Dragon’s Den), Henk Keilman (founder of RIG Investments & also at Dragon’s Den), and Dirk Scheringa (founder of DSB Bank).

As readers of this blog are mostly non-Dutch, most of these names will mean very little to you, and I won’t go into their individual companies here. Rather, I’ll focus on individual points that came forth.

The most interesting speaker to me was Marc Cornelissen, who spoke mainly of his expeditions into the Antarctic and the North Pole and is also active in combating global warming.

3 main points:

• Terrain: When you’re operating on ice, there are different kinds of terrain and they also change dynamically. Sometimes everything is stable, sometimes you can walk on it, but can’t stand still, and sometimes you should avoid it. Traversing such terrain requires attention to detail, improvisation, teamwork, and speedy reactions.
• People: people’s motivation can change during the journey. Sometimes you find that you have to turn back at the beginning because for some reality was different than expected. It’s affected by the management-style certainly—sometimes putting too much pressure on someone can produce favourable results in the short-term, but cause burn-outs after a while—and it’s affected by what Marc called the iceberg: you see two parts of a person. The tip, which is the human resource with a certain skill-set, and the much larger part underneath, which is the personality, the motivation, the passion, the ownership of an idea. Getting to know that bottom-part requires interacting in an environment where it becomes visible.
• Choices: There are macro- and micro-choices. Macro-choices are the big ones you make, e.g. start a business, relocate your operations, etc. Micro-choices are the ones you make within each macro-choice and can affect your motivation. If you’re in hell and you have a choice to turn back, you will more often than not turn back. If you have no choice, you finish or die. Creating “no-option choices” may be scary, but they are sometimes what is needed to succeed.

These points resonated with me throughout the whole day, and hopefully for longer.

Annemarie van Gaal also mentioned three success-factors that were critical for starting her media-business in Russia.

• Have a flat organisation with no HQ to speed up decision-making and minimise overhead.
• Unlearn past behaviours, especially if the reality of where you are requires out of the box thinking.
• And immerse yourself in an environment and give yourself little choice to pull out. Find motivation in what you do and don’t give up.

Again the points of preparing for uncertain terrain, managing people well, and no-option choices was present in all of these.

Dirk Scheringa of DSB Bank was probably the best way to end the day. DSB Bank is a bank that has managed to avoid most of the pitfalls undermining current financial institutions. It focussed on simplicity, transparent & solid decision making, and growing stably, rather than explosively. Well, I can’t pretend to know enough about banking to give a good explanation.

His key-lesson for me: surrounding yourself with smart people, means that you grow with them. It seems like a simple thing, but it often requires reducing your ego to work with people that are (as) smarter than you.

That’s all folks!
Vincent

I only have a second to write this. Recently ReadWriteWeb asked about what Twitter’s business-model is. More recently, a rumour came about that Twitter will start monetizing in 2009, shortly after the company saw a CEO-change.

In a discussion about the RRW-article on FriendFeed, I wrote the following:

The real value of Twitter for companies and their customers is that they get instant feedback on their products and vice versa. I just have to say one bad thing about a brand, and I get a rep talking to me about it (from Skype to 37signals). It’s like Getsatisfaction, except distributed. Ironically, twitter-search made that happen.

Could this be a key-factor in how Twitter will try to make money? And, if so, are there comparable metrics that could give an indication as to the company’s value? I’m thinking that with Twitter’s reliance on search-results, perhaps a comparison could be made with Google’s early business-model?

What do you think?

Vincent

Hi, my name is Vincent, a now-familiar face in Tech IT Easy’s blogging family, and today I’d like to write about my thoughts about startups’ reasons to fail (and as a consequence: reasons to succeed). This is my 3rd non-tech topic in a row, and if you hadn’t guessed it, I have little inspiration to write about tech these days.

So, “why do startups fail?” seems to be a relevant question these days and I guess to everyone running or thinking about running or working in a startup. Depending on who you talk to, no actually pretty much everyone, over 90% of startups fail within 2 years of their launch. The stats vary according to whom the startup works with, it is much lower with venture-funded companies, as well as within certain incubators.

The Credit Crunch

One of the most popular reasons I heard while writing my thesis (which involved me interviewing over 200 tech-startups), is of course lack of money. That seems really relevant today, and is certainly a factor.

To give a personal example of how the credit crunch is affecting our lives negatively, back when I started a bachelor in Manchester, UK, about 10 years ago, I was able to get a student-loan quite easily at a British bank. You walk in with your details, get a 1000 pounds overdraft and a credit-card to boot. This was still the case until a few months ago. My brother, who just left for Lancaster, UK, was counting on a similar deal. But banks had withdrawn that service to non-UK citizen, rather abruptly, forcing my brother to find alternative solutions. Banks don’t care about who needs or deserves a loan, when they cut it off, we’re all screwed.

Fred Wilson pointed out that seed-funding will likely suffer most, and true, banks are, both directly and indirectly, an incredibly important source in that arena, as well as at later stages. The graph below showed my own results, for two measures carried out during 2005 and 2006 on the investment climate for high-tech startups in the Netherlands (a Dutch version of that report can be downloaded here).

What this graph also shows is that even pre-credit crunch, most startups didn’t use or weren’t able to use much beyond their own savings (the turquoise part) at the seed and sometimes the later stage (of course that still includes credit cards and similar bank-related funding sources). No way that this is something that should be generalised across all countries of course, I imagine that the distribution of investors will vary quite substantially from country to country.

Forget funding

I happen to think that funding is not the factor to focus on when talking about startup failure. In a perfect financial market, which, many financial people try to convince me, exists, you get funding if other conditions are in place. Receiving an investment is a validation of your idea, and if you can’t get investors to talk to you it’s either because:

1. Your idea is bad.
2. Your presentation is bad.
3. There are too many similar startups applying for funding.

The key here is then for 1. to improve your idea, for 2. to improve your presentation, and for 3. to stop being a sheep and reinventing the mousetrap. While this makes me sound like an asshole, the point is that none of these reasons have to do with funding, they have to do with the quality of your venture.

Non-financial reasons for failing

A startup is a machine that needs to be built, needs to operated and maintained, and needs to produce sufficient output/income to cover the costs that building, operating, and maintaining require.

Therefore, startup-failure is related to:

• Too expensive a building-process (both in money, people, and time), which comes out of bad planning and insufficient skillsets to get results.
• Improper operation and maintenance, which is really to do with bad HR-practices.
• Insufficient output/income, which can be related to the quantity produced (bad planning, skills), bad pricing, and of course a bad market.

The “bad market” factor is an interesting one, because it seems very related to the credit crunch problem. My brother, who is forced to look elsewhere for funding, will be less likely to buy a laptop from the start now. Everything ties back into funding somehow.

Bad market or bad business-model?

The top business models, in my mind, are built to withstand recession. Some could argue that they are built during a recession. An example of this is discounters like Aldi, which was built in a poor Germany, many years ago, and has caused a revolution in European retailing. Im not 100% sure, but I think that the strength of European discounters here has even prevented monsters like Wal Mart from taking over the place.

Other streams of thought about this take you into “blue ocean” or “long tail” territory, both somewhat hip ways of saying that you should think outside the box.

A bad market can be a lack of desire on consumers part to pay for your product. And it can be that the market is simply to small, suggesting that it may be a good idea to think globally from the start. Certainly, investors like the idea of entrepreneurs thinking (realistically) big. Also when you see some of the industry-growth-stats in emerging economies, it makes sense to target those markets, instead of the many 0-2% growth economies in the Western world.

I guess what I’m saying is that a bad market is just an excuse for failure. If your business is advertising dependent, you should be aware that most advertisers cut their spending during recessions, a recession that has been predicted for years now. The same applies to certain luxury goods, etc. So, perhaps the market isn’t bad, perhaps the business-model is bad too.

In summary…

Yes, the credit crunch is scary, as are all recessions. Yes, we would all like our ideas to simply be output – input = profit. But the core of entrepreneurship is to think in opportunities, to not get stuck in ideas, and be market-focussed. It is about breaking rules and making new ones. And, while it is a harsh world where failure is accompanied by a high price, at the core of entrepreneurship is also optimism—the belief that everything can be solved with the right perspective.

So why do startups fail? By setting themselves up to fail.

Vincent out