The WTFs of an Investor: #3 Hypermotivated Founders

In 2013/2014 Inventures asked me to write a series on our experience as a Seed stage fund, about stuff that makes us wonder, but not in a good way. This series originally titled “WTFs of a Business Angel” hasn’t lost its truth it seems, so we decided to revisit the content, update and adapt it where necessary and publish it here on our blog (also because investures.eu sadly is gone from the Web). Have fun!

When we started Speedinvest in 2011, we were a startup ourselves. A very well funded startup, but still, we were a team of people who had some experience in building companies and no experience in building a Venture fund. We’re still learning an awful lot, because you can profit tons from other people’s experience, but there is no way around doing things yourself, making mistakes, trying again and again, learning from what you’ve seen so far.

That is the spirit that we like to keep, a positive and pro-founder type of attitude, because the truth is: we love what we’re doing. It’s fun and exciting to meet visionary people, who have drive and enthusiasm to change whatever tiny bit of their world, step by step. However, there are those rare events where we sit across the table in our office and have a facepalm moment. When one of us gets an email from a startup or reads a piece of news about our industry that just makes you go “WTF?”. For your reading pleasure, but also to offer you the opportunity to learn, we open up our treasure chest of awkward moments and give you our top WTFs, of course with all due respect to those contributing to them.

WTF #3 The Hypermotivated Founder

As an investor, one of our main tasks is to talk to founders and grasp their ideas, try to understand what motivates them, what drives them and what vision they’re trying to bring to life. The first pitch often happens via email and it’s truly hard to write a good email pitch in times where people easily receive up to 100 emails per day. That probably leads to some of the mails that we get, where super- or even hypermotivated founders pitch us their idea as ”a revolution”, where they brag on about their business as being ”the biggest opportunity EVER” and that we ”surely don’t want to miss out on this” because this is ”unlike anything we have ever seen”.

Recently, we got an email from a founder, saying that ”only the heart sees everything, because the real beauty is hidden for the eye” and that if we only looked at his idea with ”our hearts”, we would see the true beauty of his media-related business idea. He then went on, presenting a list of things that the eyes see, followed by facts that only the heart sees. We had several WTF moments up until there, but our 2 palms were stuck to our faces when it came to ”now, after we have reached break even, we will launch in the US and this will multiply everything by at least 10, this is plain to see”. It all ended with ”what we need now, is someone like you, who sees with the heart. Are you ready for this? We are. Let’s rock.”. WTF?

I have witnessed this in pitches all across Europe as well: a very energetic founder goes on stage and completely ignores the world out there, thinking that his ”idea is going to revolutionise [fill in your industry] unlike anything else EVER before”. This might be true, and to be clear, we want motivated founders, we love if you create and dominate a category, we need you to believe in your idea, otherwise we can’t.

But there is a fine line between being really driven by your vision and being a megalomaniac that ignores that there is competition out there, doesn’t give a shit about business models and is basically drinking his or her own Kool-Aid. I have been there myself. As an entrepreneur you need this mode, where you completely ignore everything that keeps you from executing on your vision. You need to blind out the naysayers, otherwise you’ll never be able to cope with the rollercoaster you experience day by day, where one tiny success is followed by a massive drawback leading to another success within just a couple of hours.

Confidence without Attitude

But honestly: would you believe the salesguy who tells you that his product is truly the best out there, unmatched by anything else? You might be sceptical as well. And what you don’t want is that the potential investor becomes sceptical of you and your idea. It requires fine tuning, finding the right balance between being really confident about the potential of your idea and keeping the bullshit to a minimum. But once you figure that out, there will be confidence on our side that we can and want to work with you. Because we will also be very confident in our offer and the stuff we can help you with on your rollercoaster ride. Just try to keep the bullshit about exits, rich founders and all that glitter to the utmost minimum. Or like one Business School in the US puts it: “We make decisions based on evidence and analysis, giving us the confidence to act without arrogance.”

The WTFs of an Investor: #2 The NDA fallacy

In 2013/2014 Inventures asked me to write a series on our experience as a Seed stage fund, about stuff that makes us wonder, but not in a good way. This series originally titled “WTFs of a Business Angel” hasn’t lost its truth it seems, so we decided to revisit the content, update and adapt it where necessary and publish it here on our blog (also because investures.eu sadly is gone from the Web). Have fun!

When we started Speedinvest in 2011, we were a startup ourselves. A very well funded startup, but still, we were a team of people who had some experience in building companies and no experience in building a Venture fund. We are still learning an awful lot, because you can profit tons from other people’s experience, but there is no way around doing things yourself, making mistakes, trying again and again, learning from what you’ve seen so far.

That is the spirit that we like to keep, a positive and pro-founder type of attitude, because the truth is: we love what we’re doing. It’s fun and exciting to meet visionary people who have the drive and enthusiasm to change whatever tiny bit of their world, step by step. However, there are those rare events where we sit across the table in our office and have a facepalm moment. When one of us gets an email from a startup or reads a piece of news about our industry that just makes you go “WTF?”. For your reading pleasure, but also to offer you the opportunity to learn, we open up our treasure chest of awkward moments and give you our top WTFs, of course with all due respect to those contributing to them.

WTF #2 The NDA fallacy

It should be conventional wisdom by now, but it still happens more often than you would think: entrepreneurs that want to work with us, ask for an NDA, a non-disclosure agreement. This, however, is hardly manageable for us. Our job is to look at startups and their business ideas. We do this on a daily basis and have seen well over 5.000 startups in the past 6 years. If you consider the number of pitches we receive at conferences, startup lives and other events, this number may well be more than twice as high.

If we signed an NDA with every company we talked to, we wouldn’t have time to work with all the great entrepreneurs that we end up investing in and get ourselves in a legal clusterf***. So please, trust us. Apart from the fact that many ideas are not as unique as they may seem in the beginning, we are actually dependent on your trust and that of everyone else, because we intend to stay in this business for a while. Plus: for later stage deals, where lots of proprietary data of the company is provided, we do sign NDAs. But I think we are in the double digits here, even after 6 years in that industry.

Ideas are sh*t

Even if we do not end up making a deal with you, we know that our industry is small, tightly knit and builds on the trust of all parties involved. I once heard a Slovenian entrepreneur on stage talk about ideas and his business. He said “I have an idea every day. Ideas are shit, they are worth nothing. It’s the execution that counts, so please, go ahead and talk about your idea, that is the only way you get valuable information for executing on it”. Damn right.

Associate (m/f) at Speedinvest (Vienna)

Associate (m/f) at Speedinvest (Vienna)

Speedinvest is a leading European venture capital fund for tech start-ups. We work alongside entrepreneurs to achieve a common goal of building great companies. Due to our global partner network that includes operations in Silicon Valley, we have become a key investment and development hub for Europe’s start-up community. We are involved in early stage investments and specialise in operational support. Our company philosophy states that we only work with projects where we can have a truly purposeful long-term impact, by offering experience combined with the right network.

Your Responsibilities

As a Speedinvest associate you will act as a junior investment manager. You will be responsible for trend scouting, industry analysis, number crunching and research. Additionally, you will support deal sourcing and due diligence for investment opportunities as well as providing operational support to our portfolio companies. This means assisting start-ups with business development (e.g. sales support, communication and the preparation of sales pitches) as well as any other critical company functions.

We need someone who

  • is a start-up aficionado.
  • reads Techcrunch as part of their daily routine and would pick Pioneers as their festival of choice.
  • understands acronyms such as CAC, LTV & LiqPref.
  • has completed a Master’s degree. (Any technical background, would be a plus.)
  • has either worked in a start-up or consultancy for a minimum of two years.
  • loves numbers, structure and results.
  • enjoys presenting, representing and networking.
  • is well acquainted with Excel, Power Point and social media platforms.
  • has excellent German and English skills. (Any other languages are appreciated.)

We are looking for someone who is

  • driven, takes the initiative, learns fast and works autonomously.
  • curious, adaptable and flexible; preferring new challenges over routines.
  • entrepreneurial with a ‘can-do’ attitude and is keen to learn.
  • able to juggle multiple projects and work with tight deadlines.
  • able to digest complex information, form an own point of view, and communicate it in a clear and relevant way.
  • passionate about business models, performance marketing and deal structuring.

Compensation

The Associate position is full-time (40h/week) and based in Vienna.
The minimum salary offer starts at €2.400 a month and is negotiable depending on education and previous work experience.

If you fit the profile,
please send your resume and application to [email protected] and we’ll be in touch! Feel free to include links to any websites or other sources where we might learn more about you (e.g. personal blog, Twitter).

 

Financial Analyst (m/f) at Speedinvest (Vienna)

Financial Analyst (m/f) at Speedinvest (Vienna)

 

Speedinvest is a leading European venture capital fund for tech start-ups. We work alongside entrepreneurs to achieve a common goal of building great companies. Due to our global partner network that includes operations in Silicon Valley, we have become a key investment and development hub for Europe’s start-up community. We are involved in early stage investments and specialise in operational support. Our company philosophy states that we only work with projects where we can have a truly purposeful long-term impact, by offering experience combined with the right network.

Your Responsibilities.

As a financial analyst at Speedinvest, you will support the deal structuring process and take care of fund reporting. This includes reviewing existing contracts and reports. Furthermore you will calculate captables, draft termsheets and LOIs, assist with deal completion and communicate with the finance department.

 

We need someone who

  • can calculate captables, liquidation preferences and distribution waterfalls.
  • takes pride in being reliable and precise in their work.
  • isn’t a total stranger to acronyms such as CAC, VC, IRR, LOI & LTV.
  • has completed a university Bachelor’s degree in finance.
  • can read contracts, extract the relevant numbers and complete deals.
  • is an Excel wizard and Power Point pro.
  • has excellent German and English skills.

 

We are looking for someone who is

  • driven, takes the initiative, learns fast and works autonomously.
  • renowned for their strong analytical skills and is highly numerate.
  • passionate about business models and venture capital.
  • is curious, adaptable and flexible.
  • has a “can do” attitude.
  • is able to juggle multiple projects and work with tight deadlines.

 

Compensation

The Financial Analyst position is full-time (40h/week) and based in Vienna.

The minimum salary offer starts at €2.200 a month and is negotiable depending on education and previous work experience.

 

If you fit the profile, please send your resume and application to [email protected] and we’ll be in touch! Feel free to include links to any websites or other sources where we might learn more about you (e.g. personal blog, Twitter).

 

The WTFs of an Investor: #1 The Valuation Presentation

In 2013/2014 Inventures asked me to write a series on our experience as a Seed stage fund, about stuff that makes us wonder, but not in a good way. This series originally titled “WTFs of a Business Angel” hasn’t lost its truth it seems, so we decided to revisit the content, update and adapt it where necessary and publish it here on our blog (also because investures.eu sadly is gone from the Web). Have fun!

When we started Speedinvest in 2011, we were a startup ourselves. A very well funded startup, but still, we were a team of people who had some experience in building companies and no experience in building a Venture fund. We are still learning an awful lot, because you can profit tons from other people’s experience, but there is no way around doing things yourself, making mistakes, trying again and again, learning from what you’ve seen so far.

That is the spirit that we like to keep, a positive and pro-founder type of attitude, because the truth is: we love what we are doing. It is fun and exciting to meet visionary people, who have drive and enthusiasm to change whatever tiny bit of their world, step by step. However, there are those rare events where we sit across the table in our office and are having a facepalm moment. When one of us gets an email from a startup or reads a piece of news about our industry that just makes you go “WTF?”. For your reading pleasure, but also to offer you the opportunity to learn, we open up our treasure chest of awkward moments and give you our top WTFs, of course with all due respect to those contributing to them.

WTF #1 The Valuation Presentation

A clear leader on our list of WTFs was an e-mail that we got from a founder with a promising business. He had a nice idea, a good target market and had already launched a product. It was still in an early stage, but you could tell that this could turn out to be a valuable investment. We had had some talks already, everything seemed OK, when all of a sudden his lawyer called our partner Erik in the US asking for a meeting to draft up a termsheet.

What Erik then told him was: “Well, you know, we only had one phone call and before moving forward we would really like to spend more time with the team and see if we could add any value there”. Already awkward, but still only a taste of what happened then. A week later, we got an e-mail from a well-known business consultancy with two presentation decks, one in English and one in German.

The content? A picture perfect, textbook case of company valuation showing a company value well north of 10 million Euro. Valuations like that are not unheard of these days, in Seed stage, still a very high mark for a company with barely a product, let alone customers. But even more surprising giving where we were in the process. Just for the record: we hadn’t even met the team at this point, nor discussed anything about investing in the company.

Good founders can read social situations, even if they are unknown to them

Why did this make us go ”WTF”? 1. Because of the total misjudgement of the process, and 2. Because of the crazy valuation expectations, without even having met the team, looked at the product in detail, etc. Yes, startup valuations do go crazy from time to time, but you have to consider what stage you are in. And where you are located. Although reading TechCrunch for valuation indications might seem reasonable there is a difference in valuations, which can be explained by one simple fact: Neither Vienna, nor Berlin is Silicon Valley – yet.

Just to be very clear on that: I am not saying that an Austrian company could not be worth more than 10 million, a lot of companies have proven the contrary. But in that early stage, sending over a valuation calculation just doesn’t make any sense. The holy grail of valuing a startup is not easy to tackle, but the easiest way is to just talk to someone who knows the game a little and get feedback early on, because you could ruin a relationship that might have been valuable.

After all, getting an investor to support you is basically like a sales process, and sending a quote for 100k for your product to a little retail store across the street, when they haven’t even asked for it is not something many would consider.

It’s Complicated

Insurance against cyber-attacks, AKA cyber insurance, is surely the most exciting domain in insurance today. Companies globally are purchasing cyber insurance for different reasons including skyrocketing cyber security costs, banks that are demanding suppliers to have such a policy in place and board members that are worried with liability due to new emerging regulation such as GDPR next year. Eventually cyber insurance is the only “cyber” solution that will support an organization post-breach and will refund costs.

But many different parts still need to come together to deliver on its promise. While the estimated $5B US cyber insurance market today is still in its early days and is a small part of the approximate $1.2T+ net annual premiums written, it certainly is the fasted growing segment with around 30% CAGR expected for the coming years.

However, this market is still small relative to the size of the cyber risk pool with estimated costs of cybercrime to reach $2T in the US alone in 2019.

And so, a range of issues and concerns must be addressed in order to have cyber insurance realize its full potential:

  • Customer Segments: Clearly an immediate need for cyber insurance is with B2B. Companies need cyber insurance to protect both 1st and 3rd party risk, including smaller companies supplying to third parties. But, consumers should also be able to insure themselves against cyber risk.
  • Data: Insurance companies are mainly dependent on questionnaires which are not only outdated the day they have been filled, but also contain information which is often inaccurate and requires specific expertise to be gathered. In many cases, such collection process cost is higher than the cost of the premium itself. In a world where everything, and certainly IT resources, provide detailed data, attack surfaces expand and attack vectors develop, using real-time data to assess cyber insurance risk is a must.
  • Customer Experience: Signing up for cyber insurance today means filling out long questionnaires regarding infrastructure, data, policies, people, etc. Complex info, hard to collect, introducing significant friction in the process. Hardly a process that scales, and a data-driven world allows for much of the user experience to be almost frictionless.
  • Distribution: As a company, will I buy cyber insurance separately, or as part of other types of insurances? Is there a reason to buy it from an insurance company? Why would I not buy insurance for my customer data with AWS, and DDOS downtime insurance from Cloudflare? I get security updates with Windows – why not a basic insurance against the OS being hacked if I run their endpoint security that’s built in?
  • Risk Modelling: From the outside-in or the opposite, one can automate data collection relevant for the process of underwriting a company, including risk domains such as digital, HR, regulatory and other types of data that can support predicting claims. Breach data is somewhat available in public repositories, however much of the interesting data is collected by ongoing OSINT and dark web intelligence (e.g. breached servers, account credentials, etc) and in some cases even the company itself is not yet aware of the breach. This data can be used in risk modeling to predict cyber claims and attacks impact. Aggregate and systemic risks are a main concern for insurance companies when discussing cyber. When the goal is enlarging market share, aggregated risks are sometimes invisible until a catastrophe hits.

So yeah, it is complicated.

But it is clear that insurance carriers need real-time, data driven technology solutions that can accurately assess cyber risk, to help deliver products across multiple segments and multiple distribution channels and with a great user experience.

Cyberwrite is building the technology to facilitate rapid growth of the cyber insurance industry and we could not be more excited to support Nir and Rotem achieving that goal, and doing so now!

Managing Partner Speedinvest Media Team (m/f)

Managing Partner Speedinvest Media Team (m/f)

Speedinvest is a Pan-European venture capital fund with over EUR 100 Million assets under management that invests in seed stage technology start-up companies in the sectors of  fintech / insurtech, core technologies as well as in media & e-commerce. Besides providing financial investments, the fund and its partners actively deploy their network and know-how to support the portfolio companies. Furthermore, Speedinvest’s office in Silicon Valley supports portfolio companies entering the US market.

Find out more about Speedinvest at: www.speedinvest.com.

Managing Partner (m/f)

Media & E-Commerce (Vienna, Berlin)

As part of the growth strategy at Speedinvest doubles down in media, marketplace & e-commerce space. Therefore, the senior team of investment managers (Partners) will be increased by two further members who will steer and manage all media & e-commerce related activities.

In this dynamic and challenging role, you will be personally responsible for a portfolio of start-ups and will offer relevant insights in a charismatic and self-confident manner. You should be able to advise start-ups on their strategy based on your experience in media, marketplaces or investment management. Rolling up your sleeves is the type of work you enjoy.

We are searching for exceptional individuals who have managed or been involved in flagship projects in the media & e-commerce ecosystem across Europe.

Main tasks and responsibilities

  • Establishing and managing the Speedinvest Media team and setting up and leading a team of associates
  • Program management: Development and implementation of the investment program including additional offers
  • Deal sourcing and negotiation management as well as managing the investment processes including structuring and due diligence
  • Building the portfolio according to strategic considerations
  • Continuous development of investment roadmaps in cooperation with Speedinvest and other media investors
  • Contribution to the growth of the managed portfolio companies by offering structured services to start-ups
  • Preparation and support of portfolio companies for exits
  • Serving as a point of communication between the Speedinvest Media team and the various stakeholders of the ecosystem

Requirements

  • START-UP BACKGROUND: In an ideal world you have founded a company in either media, marketplaces, e-commerce or online (classified) ads or have management experience in a relevant position in the start-up industry. Alternatively, many years of experience in the start-up industry would be key.
  • If you have a corporate background we would expect you to have some experience working in or with start-ups.
  • OR: INVESTMENT EXPERIENCE in the aforementioned segments, either with a relevant fund or incubation program etc.
  • We expect a strong network of relevant players in the media and marketplace, e-commerce or another area that is complementary to the existing Speedinvest network.
  • Leadership experience
  • Excellent communication skills
  • International approach and mindset
  • Confident in negotiations
  • High intellectual maturity
  • Self-initiative and self-motivation
  • Constructive and solution-oriented approach
  • Hands-on, “straight to the point” pragmatism

We look forward to discussing this position with you personally. Please contact Maria Baumgartner for further details. All information will be treated in the strictest of confidence.

Contact

Maria Baumgartner

Managing Partner

M: [email protected]
T: +43 (0)664 1650788

About Si Heroes:

Our goal at Speedinvest Heroes is to support startup founders in their quest to build healthy companies, with strong teams. Everything that furthers this objective is at the heart of the Speedinvest Heroes mission. The company has been founded with the conviction that personal and organizational development is as important, as finding high potential individuals and integrating them into a team. Recruiting, especially when it comes to searching for those rare candidates in senior expert roles and in C-Level positions, is our passion. This is what we love to do.

Speedinvest Heroes finds the brilliant minds of today, who are striving to become the heroes of tomorrow.

www.speedinvest-heroes.com

 

Exit No. 7 – a big one for us

The next exit for Speedinvest, and this one is a big one for us.

Anybody close to Speedinvest (or even just close to me) knows about Hitbox, knows about the monumental struggle it was to build a global streaming media powerhouse out of tiny Austria – with small cheques, but tons of dedication, late nights, last minute saves and so on. Werner, my partner in crime here, and me collected more than 27 other investors who believed in the crazy vision of this company to take on Amazon, YouTube and all the other US powerhouses in one of the hottest tech sectors . Funny enough, Hitbox not only survived, but continued to thrive, showing a hockey stick in user growth that typically only exist in startup textbooks.

The team, the founders Martin, Rene and Markus are exceptional people. Few founders that I know would have weathered the perfect storm that Hitbox has been for the last three years as well as these guys. And few founders deserve a happy end as much as they do. Speaking of happy end, the merger with Azubu is really just the beginning. Merging #2 and #3 in eSports makes for a great story and the skill sets of these two teams could not be more complementary. They will need tons of cash to win in this game but now they are in a super strong position to get access to this capital.

For Speedinvest, this exit is big in many ways. Hitbox, coming from our first fund, was the single biggest investment we did, both in capital committed, in time invested and in risk taken. It’s nice to see when things work out in the end. And, by the way: the Hitbox office in Vienna will not only remain there, but it will grow tremendously in size as all tech related work will be concentrated here. Good for Hitbox, good for Vienna, good for Austria.

Anybody – founders, team, co-investors – who were involved here will testify that no lengthy blog entry can do justice to the efforts put in here.

So, all we want to say is THANK YOU. It’s been a blast.

Beyond Capital – Addressing the Human Resource Gap

Access to Capital has always been at the heart of focus for startup founders. There is tons of good (or bad) advice out there, venture funds keep popping up and the business angel ecosystem is growing at a healthy rate. So, the demand of founders for this critical resource is increasingly addressed.

Surprisingly, for the other key resource that any startup needs to grow, there is very little happening within the investor’s community.  Some larger funds offer functional advice on recruiting, many try to leverage their personal network here and there to fill critical positions. But, all in all, these approaches are opportunistic at best.

All this would not matter if startup can get what they need on the market. But if you talk to founders, from London to Berlin, from Estonia to Ljubljana, the message is the same: recruiting is broken.

But what is it exactly that our founders cannot solve via traditional search companies or their own recruiting activities?

1. The big, unsolved challenge: IT recruiting.

Everybody across Europe talks about the same problem and nobody has a good answer. Affordable, skilled coders are rare everywhere (especially in European startup hubs like London or Berlin) and for everyone, but for digital startups in particular, access to these resources basically dictates the speed at which they can move, iterate and scale. It defines the horsepower of their engine room. Solving this puzzle would provide an amazing competitive edge to our portfolio.

2. Avoiding “quick & cheap” solutions.

Recruiting is an old business with very established business models. Unfortunately, they do not fit for early stage startups. So far, the only answers are performance based offers which often result in a low effort, low hanging fruit approach by service providers. But top quality startups need top quality service. This is another puzzle to solve.

3. Employer branding for a network.

Startups are a funny thing. While each of them has no brand power whatsoever and joining them is perceived as a big risk, together they create significant talent pull these days. This is where a portfolio approach towards employer branding (i.e. putting Speedinvest in front) can be very powerful. At the same time, successful recruiting has always been driven by personal networks. So what if we are able to leverage the personal networks and brands of all our 50+ companies? Crucial for doing this is the adoption of a clear set of rules that build a trusted, long-term relationship between our founders. A joint lead investor has the power to implement and execute such a rule set.

With Speedinvest Heroes, our new unit solely dedicated to this topic, we plan to tackle these challenges. If we succeed, we will have built a powerful competitive weapon for the founders we support and for us as a fund.

Heroes has a few very distinctive advantages:

  • In our core region, we are a natural magnet for talents
  • As startup insiders, we can hit the ground running
  • We have reshaped the business model to be in sync with early stage startups

The result will be faster and cost-effective hiring of top people for our founders. And if this works, maybe other funds will take notice.

Reinventing venture, one piece of the puzzle at a time.

www.speedinvest-heroes.com

The Wrong Answer

I’ve come to realize that to understand how an early stage B2B Enterprise startup thinks about it sales process there really is a very simple question that provide a key insight: “Can you send me your sales deck?” (or white paper, blogs or whatever).

If the answer is along the lines of “we don’t do sales decks” then that is very telling. (Personally, I’d always start with the sales deck, how else would you know what to build? But that aside) But it is the wrong answer. Why?

Well, for starters it suggests you have not considered how to scale your sales process beyond yourself. I get it – there’s really only you and your cofounder that are selling, and you’ve been working on this for years and so has your co-founder. In fact you started during your PhD and you both know the tech inside-out. You do not have a sales team, let alone a distributed one, so why bother. Still, you should think about how to enable others to “sell”, maybe partners, friends, relations, your network, etc – but also within your customers.

It also means you may not have figured out your customer’s journey and buying process. I understand – you’re super focused on understanding your customer’s requirements, you sell to the C-suite and require face-to-face meetings with the decision makers, to build trust, undsoweiter. But if your customer will spend more than X/year with you, the buying process will extend beyond the meetings you have with them. It will include internal decision making, vendor selection, stakeholder alignment (IT, Legal, Procurement, Marketing, Sales?), budgeting, etc. Your buyer or champion will need something (potentially more than 1 thing) that they can pass on internally to convince the rest of the organization – upwards and downwards. Landing a POC, for example, without this process having taken place means you have razorthin levels support within your customer and the risk of landing in a fringe use case, being “confined” in a corner of the organization (Innovation Department anyone?) and being a keystroke away from losing what felt like a sure shot.

Obviously the case here is pretty specific to a B2B business selling to “Enterprise” but the principle extends beyond this. If you’re selling B2B on a more transactional basis, a key thing to focus on is how customers “drive themselves” trough the funnel with minimal high-touch efforts, and providing the right content at the right time is key. Similar for B2C.

If you are a B2B startup – we’d love to talk. And now you know at least one question you can expect, and the answer I’d be looking for…

The Founder’s Logbook

A logbook (a ship’s logs or simply log) is a record of important events in the management, operation, and navigation of a ship. It is essential to traditional navigation, and must be filled in at least daily.

Wikipedia

Now here’s a thought: Captains keep logbooks. For scientific experiments, detailed logbooks with outcomes are kept. It seems like records of important events are needed in situations where uncertainty has a role and you want to reach a goal, but don’t know really how to get there. This should sound familiar to startup founders.

Why don’t founders keep logbooks? Not a personal journal (although this may also be a good idea), but a record of their organisations? It seems like navigation is easier than running an early-stage company:  there is a clear and tested methodology for navigating by instruments. Learning is facilitated by well documented training material and procedures (and particularly because you have clear, historical reference of what happened, not just anecdotal evidence.  Thank you logbook!). It provides a level of reflection and provides routine.

Are you keeping a logbook? You probably should.   The question now is what do you track within a startup?  KPIs?  Roadmap?  Summary meeting notes and daily interactions?  Evolution of company culture?  Hiring?

Going from point A to point B in a boat is (relatively) straightforward, but perhaps there is some hidden best practice in the volumes of growth data that startups generate.  We would love to hear from founders who have had success in keeping startup logs, and have ideas about key metrics.

Scaling your Startup – Some insights

‘The only way is up’ – Yazz (1988)

If you are running a startup, working in one, or you just follow the industry news, you will not have been able to avoid all the craze about scalability. „Does it scale?“ will be a regular question in VC meetings, „that doesn’t scale“ a common feedback in pitch contests. But why is everyone so obsessed with scale?

So let’s look at this question and some learnings from around 40 companies:  why, how and when to scale.

Why?

The Why is largely linked to the nature of high growth, tech startups, and is contingent with the requirements of VC investors; many well-known investors have weighed in on the topic:

„A startup is a temporary organization used to search for a repeatable and scalable business model.“ – Steve Blank

„A startup is a company designed to grow fast.“ – Paul Graham

The most obvious reason to scale is that most business models need at least a certain size to work at all (called the Break Even Point) and a certain scale makes running a company much more fun (Just think of running a coffee shop with just 1 client per day. Pretty dull, right?).

But the requirement to reach a large scale is also the basic assumption of a lot of business models in this industry. VCs need to build businesses of a certain scale to create the value they need to satisfy investors. And the digital economy is generally very beneficial at scale (because transparency and global economies lower prices, thus cost efficiency is a big topic. Also an additional user or client will result in very low additional costs, making it attractive to go for size).

Your personal goal might simply be fame and fortune, and, generally, humanity seems to be obsessed with phenomena at scale. If Facebook were a local player in Germany with 40 million registered users, media wouldn’t care that much.

Or, you scale because you can: it is much easier than it ever was to scale using all the mechanisms and tools available in 2016.

How?

Answering this question is already much harder than the Why. There is no one size fits all, but we learned that Startups follow a pattern of Scaling that might have some scientific evidence (which is carefully omitted here). Let’s look at some of the parameters that we have seen, focusing on the Founders and their responsibility, the challenges, possible risks, common strategies, the number of employees and the learnings on what to do between phases:

Phase 1: Make something people want

Founders: Know the product inside out, because they most likely built it, encountered the problem that they want to solve themselves and/or are experts in the field

Challenge: Find a market aka Product/Market Fit.Build something people want, meaning that not only do you create a product but find out who to sell it to, at what price and how

Risk: Premature Scaling. Being so in love with your product and overestimating the fit on the market is quite common. That leads to bloated organisations, misaligned business plans, constant bridge funding rounds and eventual demise.

Strategy: Hire good people (instead of cheap people) and be brutally honest with yourself. Why good people? Because if you built the product with the cheapest guys / girls available you will find yourself rewriting it in the next stage. And honesty helps in self-assessment, in addition to figuring out when you actually failed in product / market fit (which is very likely to happen).

Employees: at this phase, typically below 10:  short communication cycles, no overhead, small and agile team. Everybody runs in the same direction. Sometimes uncoordinated, but with high energy.

So you mastered it? Congratulations. Learnings on the way to the next stage:

  • The oldest / longest / closest employees are not always the best Team leaders.
  • Always be hiring. Even if you are not. The one person that just steps into your office, might change the course of the company.
  • The sooner you accept that you will handover responsibility, the easier for everyone. Otherwise scaling is impossible.

Phase 2: Keep that engine going!

Founders: concentrate on hiring and fundraising. Your job is to find the best people, fire those that don’t perform and make sure that the fundraising story works.

Challenge: accepting that you need to hand over that precious product of yours to someone else, you can’t know every client personally and leadership can be quite a lonely place. Growing on a personal level and accepting that others now do the work (differently from how you would do it) is the most important lesson here.

Risk: Ant death spiral (see video). Clarity on direction, goals and purpose are key. Otherwise your team (including yourself) will just die in the trenches. Organisations breathe: they are organisms. Breathe in, breathe out.

Strategy: have just enough processes. It’s not about bureaucracy but about guidance and clarity. With an organisation that is twice or three times bigger as your Phase 1 team, you will need to define some basic rules that previously would have been negotiated on the spot in the team.

Employees: roughly between 10 and 40. (The specific number is probably one of the oldest debates in academia. Anything between 7 and 11 seems to be a magic boundary, 25 is usually the time where some kind of hierarchy or delegation system is introduced).

Learnings on how to get to the next stage nicely:

  • This is where Leadership becomes a full-time job. Founders should start working on the system instead of in the system. Your thought should be „how can I make this organisation more effective“. You are taking care of a living being here. Respect, nurture, develop it.
  • Try, learn, fail, repeat. There are tons of processes that you can leverage and learn from.
  • Culture eats strategy for breakfast.
  • Your personality determines the culture like nothing else. Develop.

Phase 3: Get out of the way.

Founders: usually by this point fundraising is no longer a problem. Hiring has been taken over by someone who has tons of experience in HR. Now, your job is to have a vision, constantly develop it and tell it to everyone. Find the best way of doing so. Without a long-term plan, companies are stuck.

Challenge: becoming a company without losing your agility, your soul and spirit. Growing up, but still keeping that child-like enthusiasm, the „can do“ attitude that originally got you here.

Risk: Losing the soul.

Strategy: preserve the core values that built this organisation. Whether it is relentless design focus, constant innovation or an aggressive sales engine.

Employees: Anything over 40. The moment you got 50, 80, 100 employees you as a founder won’t know all of them by name anymore. Accept that.

Learnings on how to master this:

  • There are people who have done it before. Hire them. Learn.
  • Even the biggest Egos on the planet have managed to hand over the CEO role. Larry Page!
  • If you want to scale, spend!
  • Ride the train and have fun. Millions in revenue create opportunities you never had.

When?

Uff. Arriving at the hardest part. There is no hard evidence on when, just gut feeling, some observations and some checkpoints. Probably the When is governed by Heisenberg’s Uncertainty Principle: either you know where you are or you know how fast you are moving. Startups usually focus on the latter, only figuring out where they are when they don’t move anymore.

  • Some things we learned (the hard way) over the years:
  • Product/Market Fit is further away than you think. Nobody ever really scaled too late. So be patient.
  • When you constantly hit your Business Plan, it might be here.
  • Unit Economics point the direction. If they are good, good. Otherwise you have a product, but not a business.
  • Startups are ‘options games’. Never run out of options. Especially in fundraising. Always have a Plan B.

One of the most important qualities of a startup CEO is to be self-aware, and to be able to adapt and to change roles quickly.  You might be the CEO through phase 1 and phase 2, but find that you need to bring in a professional to manage a mature organization.  That is OK!  Founders need to know themselves, know their limits, and be brutally honest about the requirements of scaling at each phase. 

Consider bringing onboard a professional coach early to help you identify your own challenges, and to prepare yourself to adapt effectively before you might even realize you have to!

What are your learnings on scaling organisations?

 

Links

chaotic-flow.com: Startup scaling – overcoming 5 key operational challenges

Firstround.com: The Dos and Donts of rapid scaling for startups

quora.com: What is involved in a startup scaling

entrepreneur.com: 4 Ways to Smoothly Transition From the Startup to the Scale-Up Phase

inc.com: 7 ways to prepare your startup to scale up

fastcompany.com: Three strategies for scaling your startup sustainably

forbes.com: The scale-up challenges every audacious startup must face

gigagom.com: Accelerate your startup spend to scale the business

We move your ideas

On August 31st in 2013 I received the following task by Marcel in my Inbox:

Bildschirmfoto 2016-08-29 um 14.39.01

We were using Socialcast at that time and Marcel had first met Stefan and Christopher in Silicon Valley about 3 months before. A team from Klagenfurt doing Adaptive Streaming, having co-authored the MPEG-DASH standard? That caught our attention.

Stefan, Christopher and Christian were a founding team right out of university, with a company that would hardly have been investable by a conventional VC at that time. Fast forward, that has dramatically changed. We are happy to celebrate this moment with the team, as Atomico leads the Series A of 10m $ in Bitmovin. A couple of existing shareholders, including Dawn Capital and Speedinvest, have participated in this latest funding round, which is designed to continue the growth of the company during the next years.

So what can be learned out of this tremendous journey over the past 3 years? Some takeaways from our perspective.

Even a world-class product is not fundable, unless you make it fundable.

Looking at the old slidedecks and the material we prepared for the initial investment, it becomes evident how much work went into adapting the company structure and the collateral material on the way (The first claim of Bitmovin was “We move your ideas”, I spare you the logo ;-). Marcel and the team in the US spent countless hours refining and reworking the material around the product and many months engaging potential customers and partners to understand their requirements and forge the initial deals.

Go early, go fast!

In early 2015, we encouraged Bitmovin to apply to YCombinator, after Flaviar (another portfolio company of Speedinvest) had a positive experience with massive business impact the batch before. The application was late, but we managed to get the necessary attention and eventually only 2 weeks after sending the video in, the team would relocate to the US for an intense 3 months program and continued setup of their offices there. This transformed the client base and also the investor base, as international investors joined after YC, and set the company up for accelerated growth .

Even though this might seem like a natural result, we see with many other companies out of YC, that even the best Accelerator in the world can’t spare you the grind: raising from Top VCs is still going to be very hard for European companies.

It’s the team, stupid

Regardless of all the support an investor can bring to the table, and seemlingly random circumstances that can provide favourable tailwinds to the company it is the founding team in the end that is the largest factor determining the succes of the company. How they deal with set backs, but also how they make the most out of opportunities that appear. When they slow down and not jump on what might feel like too-good-to-be-true opportunities, and doggedly pursue a chosen direction, swinging for the fences.

We once again would like to congratulate Stefan, Christopher, Christian and the team for this achievement. A big thanks goes to Constantia New Business, with Sabine Fleischmann and Philipp Thurn und Taxis, who proved to be co-investors that share our values. Helping founders achieve their goals is and was always the reason we founded Speedinvest. Seeing them thrive and grow, is what motivates us to ride the rollercoaster with them. Thanks for sharing this ride. We are curious to see where this will take you and us next.

 

What it’s like to be a Speedinvest intern

Christopher, Isabel and Thomas are the first batch in Speedinvest’s new internship program. They support our team in evaluating startups, preparing deals and helping our portfolio companies succeed. But now, we would like to put the spotlight on them and let them share their experiences.

What you get:

From our first day onwards, we knew that our internship at Speedinvest would be very different from those we had in the past. There is simply no need for unnecessary formalities; hierarchies are flat, decision paths are short. The communication within the team is completely open and to the point and everyone is totally excited about what they do. This contributes to a unique team spirit, manifested in team outings from volleyball tournaments to several days in Mallorca together (and by team we also mean our portfolio companies). Probably most astonishing for us was that we were fully integrated into the team from day one, from informal Q&A sessions with the founder Oliver Holle (yes, there was beer) to participation in start-up conferences (and yes, Pioneers festival is as awesome as everyone says).

interns_groß

What you have to bring to the table:

When we say that everyone is excited about what they do, it’s not only because working at Speedinvest is actually fun, it’s also because you know that your contribution is valuable. Even at the bottom of the foodchain (aka as interns), we always felt that our opinion counted: imagine the surprise when during your first week one of the partners asks you straight-out whether you would invest in a start-up (and be aware: the partners might attack you with Nerf guns if they don’t like your answer). This requires a certain amount of independence, the ability to familiarize yourself quickly with new topics and industries, and above all the confidence to speak up in the presence of partners that have years of experience (even if they don’t share your opinion). Also, you should have at least some idea what you’re talking about as you will be in contact with rockstar-founders regularly and you should be able to give them the feeling to be adding value to their operations.

Your takeaways:

So, when people ask us what we learned during our internships, what will we say? For the majority of the time, it didn’t even feel like work – but looking back, we learned a lot. We’ve seen so many awesome (and less awesome) pitches; our own pitch decks will be nothing short of perfect. We feel like we’ve learned almost everything there is to know about VCs: how to approach them and how to negotiate with them (no, they don’t want to screw you over… well, of course we can only guarantee this for Speedinvest) and we received a crash course in all of the technicalities of venture capital: from cap tables to liq prefs, drag-alongs and tag-alongs, anti-dilution clauses and preemptive rights – you name it. But honestly, the VC business is all about people, so our final and biggest takeaway comes from having been able to work with a team of such great individuals with diverse backgrounds and working styles. The network that we were able to build up and the range of experiences that we take away is a great foundation for whatever we end up doing after our studies.

Find out for yourself what it’s like to be an intern at Speedinvest: we’re on the look out for interns! Apply here

interns2

Is FinTech different?

I’ve recently been asked to be at a Panel that covers the questions:

– Is there a difference when investing in FinTech startups and startups in other industries?
– Do investors consider different aspects?
– Is the risk bigger?

So my answers are yes, yes and not really. Blog post done. But in all seriousness, if it is appropriate, of course there is a difference when investing in FinTech startups compared to startups from other sectors. But there is also a difference between investing in E-Commerce and investing in AdTech. Or B2B vs B2C plays. Every business, every vertical has its characteristics and nobody knows them all. I briefly want to explain based on three sections why (and how) I think FinTech is different.

Legal, legal, legal and compliance

Licensing requirements, compliance, regulation — catchwords that every banker gets nightmares  from— are topics every FinTech company has to deal with. Securities law, laws protecting borrowers, privacy laws and many more are part of the day to day business. And those laws are different from country to country. You have to know your country specific regulatory laws and licensing requirements. Know your issuer, your customer, your banking provider, etc. If you compare for example FCA and BAFIN — KYC processes and requirements are completely different. Things that are not necessary in the United Kingdom are obligatory in Germany. Also when it comes to licensing. There are businesses that need licensing and BAFIN approval in Germany and that are unregulated in the UK; the latter is anyways completely different from the rest of Europe (and also one of the reasons why London as a FinTech hub is so successful). And there is more or less a basic rule: if it is allowed in Germany, it is probably allowed everywhere else ;). So scalability is not that easy (it is never easy actually) due to the reasons mentioned. In reality it is pretty hard. As a result there are e.g. a lot of regional champions in payments and mobile banking but not that many Pan-European FinTech players. Because of these challenges experience in the Financial Services industry is crucial. Knowing local rules, habits, players and having contacts within the industry is definitely for the good if you want to be successful.

But also regulation for FinTech companies changes in the US and in Europe. This has to be considered. These two papers are just an outline of two recent changes that are affecting a lot of FinTech companies. But regulation definitely is worth an own blog post (for the nerds then).

Branding and user acquisition

Also, user acquisition is different. “Hey, that’s easy. I’m just paying for some Facebook and Instagram Ads for customer acquisition.” Said no one ever in Financial Services (and probably nobody else except bloggers). Customer acquisition costs are typically pretty high compared to other industries and it takes a lot of effort to acquire a customer (especially SMEs). Why? Because people are much more cautious when dealing with banking, payment or other financial services and it takes time to convince them to use your product. Everybody cares about his money and in the end it comes down a lot to trust, brand and reliability. Or as amazon puts it: “payment is a trust business”. And you have to earn that trust. This definitely is a long process. Therefore competing on cost or betting on an aggressive growth strategy does not really work (and somebody can backfire). As it is simply not possible to have a fail whale in financial services. The product has to work 24/7.

To dig deeper into the topics it is definitely worth reading these excellent Holvi blogposts:

· How to build a FinTech brand from scratch
· Marketing assumptions that don’t apply to FinTech
· From branding to customer acquisition in FinTech

Strategic Partnerships and cooperation

A third point I want to highlight are strategic relationships and industry focused investors. At most FinTech cases strategic relationships are key. So often it is more about cooperation than competition because 1.) banks do not sleep and 2.) you probably need a bank and other infrastructure providers for your service to work even better.

Banks used to be in deep sleep mode (not even mentioning insurance here) but now it seems they woke up and are well rested and ready to go. There a couple of banks which made an impressive shift towards a real digital focused bank. Especially when I think about the presentation of Carlos Torres Vila, CEO of BBVA, at Money 20/20 in Copenhagen this year. When he was talking about its bank digital strategy, I think a lot of FinTech companies in the room got scared for a second. Or as Matt Harris from Bain Capital Ventures put it: „The empire strikes back!“ But to be honest some banks are still sleeping (no names). Pretty well. They can only hope that there won’t be a rude awakening soon.

The second support beside strategic investors you will need are VCs with deep experience in the financial sector. If you want to build up a scaling VC case this can be crucial. Experience, having contacts to banks, card issuers, payment companies and others are very important. This goes hand in hand with what I mentioned in the first section: know your business inside out. And sharing is carrying. It is always a good idea to bring FinTech founders together. Our founders love that. Because there are people that have the same issues with regulation, processing, whatsoever and that understand each others’ problems. But you only benefit from this experiences and knowledge sharing with an investor that already did FinTech deals. So in the end it’s like a marriage: finding the right partner(s) is key.

To read more on that, the Deutsche Bank wrote a paper about different ways of cooperation between banks and FinTechs.

Is the risk bigger?

IMHO I don’t think that they downside risk of FinTech investments is bigger than in other businesses. I think the risk is far less. Most E-Commerce and Consumer plays are really binary cases. It is either one or zero. You either go big or you go home. In Financial Services there are many potential exit cases. If you take banks and insurance companies as an example. There are hundreds of regional banks and insurances in Europe. Most of them don’t have a clear digital strategy or even an own digital team. For them it is a clear make or buy decision, most of the times it is cheaper to acquire than to build up on their own. This point also goes hand in hand with the strategic partnerships mentioned above. And there are also a lot of other financial service or non-financial service companies that could be potential exit cases. But that is a whole different story I want to talk about soon.

So that’s it. Just a brief summary of my opinion. Always open for comments and an interesting discussion.