Jason Ball's TechBytes

Technology & Venture Capital. Early stage venture capital news mixed with personal views and comments

Terminal Velocity

I posted my Three P’s of Venture Capital a few weeks back – Product, People and Potential.

There’s another component that I take into consideration as well: Terminal Velocity

The terminal velocity of a falling object is the velocity of the object when the sum of the drag force (Fd) and buoyancy equals the downward force of gravity (FG) acting on the object. Since the net force on the object is zero, the object has zero accelerationWikipedia

E.g. you need to be going fast enough to overcome the Earth’s gravitational pull. Or, for startups, you’ve got to have enough momentum and acceleration to break away… There are several components to this, and they don’t all have to be there, but one of them gives you the fuel you need….

1) Lots of funding. This is pretty straight forward – you have cash to do everything fast – and if you really raise a lot of money, implement the King Maker Strategy, e.g. raise so much funding you can guarantee your own success.
2) Office in the US (or plans to have one quickly) – either NYC or SF. Depending on where customers and partners are. This also gets you closer to your most likely acquirers. Keep R&D wherever you have it, and head West.
3) Connections. You need intros and doors to be opened. What’s that you say? “But that’s your job Mr VC to make intros” True, it is, and it’s something that all VCs do to varying extents. But you need your own networks – maybe you’re an ex-Googler or you went to Stanford, Oxford, Cambridge, Harvard or your co-founder did, etc. The old adage “it’s not what you know, it’s who you know” still matters. More than you possibly realize. You can borrow this from your investors, but you need to bring some of your own connections to the party. If you don’t have them, start making them. You will need them.
4) Chutzpah. Use this if you’re short on any of the above. With enough will, charisma, sheer determination and a bit of luck, you can break away. But this one is more of an art, but I have seen it in action – and it’s impressive.

I’m sure there are a few more I could add (great design comes to mind) – and feel free to add any in the comments below.

Hopefully this gives more color on what’s going on inside my head when I’m thinking about an investment…and what you need to make it as an entrepreneur.

Filed under: Entrepreneurship, Europreneurship, Technology, Venture Capital

Creative Destruction

Last week, I spent 3 days in Helsinki at Slush. It’s the second time I’ve been there – last visit was three years ago.

The differences between the two visits were staggering: last time there were circa 500-700 attendees. This year saw a 3000+ sell-out crowd. The floor was so thick you could barely walk. The demo floor was packed with startups – I, foolishly, thought they would be there both days. But they changed them out from Day 1 to Day 2. So, I missed lots of companies I wanted to see…

So how to explain all of this activity- it didn’t come out of nowhere. In my mind, it came out of Nokia. Or Nokia’s downsizing. A classic creative destructive force…

Nokia was the primary employer in Finland for engineers and tech talent, a safe, solid bet. Most Finns in tech were at Nokia 20 years, or that’s the only company they’ve worked with, etc. Working for Nokia was the brass ring. With the company’s decline and the layoffs that ensued, smart techies had to find something else to do. And they did.

Stand-out companies like Supercell have sprung up in the last few years; Rovio is a global brand now – and success is breeding success. The halo effect of these two companies alone means skills and know-how are being shared and transferred to new startups – whether that’s through mentoring, angel investment or collaboration.

It’s a painful time in Finland right now economically, but I think a little bit of short term pain will mean amazing things for the country. Not having Nokia is probably one of the best things that could have happened to the country and the start-up scene in Europe.

A serious tip of the hat to the entrepreneurs I met there building amazing companies.

Filed under: Europreneurship, Events, Conferences and Panels, Games

The European start-up scene. It’s finally working.

What a difference a year makes.

Last April, I posted that:

Europe has always had problems gaining start-up momentum – there’s no epicenter, there’s no critical mass- and there are no Heros.

The Wired 100 list has gone a long way towards making 100 heroes visibile. Big applause for the Wired team. This year’s Wired 100 is on stands now – one person I was happy to see on the “bubbling list” – John Taysom. He’s an awesome guy. I’ve got a few other personal favorites that aren’t on the list yet, but I’ll cheer for them in silence… oh, and obviously congrats to everyone that’s on the list.

Europe *has* a start up scene now – and fortunately for me – most of it revolves around London. Spotify, Mind Candy (Moshi Monsters), Soundcloud – all amazing companies are doing well on a global stage. Young startups like Groupspaces or Lightbox (go David, go Thai) are popping up and getting funding from tier 1 investors.

I could count on one hand the number of hot European startups two years ago. I can count them on two hands now. I might even have to throw in a toe or two as well.

Silicon Roundabout is real now – thanks largely to initiatives like techhub. Seedcamp continues to expand it’s footprint and pulls together the who’s who of the European start-up world during seedcamp week each September. There’s an event this weekend spear-headed by Songkick for developers – silicon milkroundabout. Sign up for it here. This just wasn’t happening 2 years ago…

There’ve been some interesting companies getting acquired -M&A activity is picking up significantly - and money is getting returned to investors in Europe. But, we need to see more high-profile European IPOs. Skype is grabbing for the ring, just got bought by Microsoft for a cool $8.5bn, Daniel Ek at Spotify is (rumored) to be gunning for an IPO. (That would be awesome if you did Daniel.)

All of this is coming together to make London a hot spot. It’s a great time to be here… (plus the weather’s really great this year). One more turn of the wheel and I think we’re there -

Filed under: Europreneurship, Events, Conferences and Panels, Mergers and Acquisitions, Venture Capital

Think Small

Ok, you’ve finished the Thoughts on Entreprenurship series and you’re thinking:

“This doesn’t really work for me.”

I’d say you’re probably right. Thinking big and shooting to be the next Twitter isn’t for everyone. So,

Think Small.

Don’t raise external money- bootstrap. Don’t hire A-team players (don’t hire anybody for that matter). Don’t go to a hub – work from home. Don’t do any of those things. It’s OK. Worry only about launching, making the best product you can with limited resources and get profitable as quickly as you can. This is really the equivalent of a base hit vs a homerun. And for many businesses, and people, it makes sense. Maybe you have a day job that you *want* to keep (or need to keep), no problem. Run something in your spare time. If it starts to grow nicely, you can always leave your day job to run the business. Or not.

By keeping things small, you maintain control and flexibility. But small now doesn’t mean small forever; but it does mean you can take your time. Just be sure to get your product or service out the door as quickly as you can.

A quick story (no names for this one) to illustrate my point: A model airplane fan in one European country decided to start importing planes from China and selling them on eBay locally. He started small- buying only 10 planes or so and then reselling them. Once they were sold, he bought more- 100, then 500, then 1000, and so on. The business is now turning over 7 figures a year, with a very healthy profit. He runs the business with his wife out of their home outside of the Capital. The company will never make the front page of the Wall Street Journal, but it’s a *great* little business.

I recently launched 700x23c.com. It’s a small site that sells bicycle tires. Was I looking to start a big business, with big money and a big team? Nope. It’s small, it’s me, a few tires, some boxes and a printer. Total cost to launch- maybe $200 (I bought a good printer). Will it grow? I hope so… Do I do love it? Absolutely. Am I wearing 700x23c cycling jerseys on all my rides? You’d better believe it. (Side note to the non-cycling geek: 700x23c is the size of a road racing tire. If you ride a road bike, you know this number. You might even know what the “c” means). It’s a small project that with a little tlc may just become like the airplane business above, and turn a nice profit.

So I practice what I preach to some extent; I think small. (but try to think Big during my day job).

Good luck with your business-  which ever road you take…

Filed under: Europreneurship, Venture Capital

Get Profitable

This is the 3rd Key Milestone from the Thoughts on Entrepreneurship series…

Profitability = Independence. Raising money is a pain- no matter who you are. It’s time consuming, and it’s a distraction. The sooner you can get to profitability the better. Yes, there’s the Twitter model of Build it and They will Come- worrying about revenues and profits later, but personally, I don’t think that’s what you want to do or how you want to think. Profitability should be a *choice* you can choose not to be profitable- by scaling faster – but fundamentally you should be able to cut (or curtail) headcount and be a profitable business very early in the game- this is ultra important because you never know when the economy is going to take a dip and venture funding is going to dry up. From the minute you take funding, the clock is ticking. And you’d better be running for the profitability line.

Ask any entrepreneur how much better they sleep at night knowing their company is at break even, or profitable. They’ve made it… sure, there’s still work to do to scale further, but they know they made it to first base. They’ve got a chance- and they don’t need anyone’s help (on the financing front) unless they decide they want it.

Filed under: Europreneurship

Iterate and Innovate

Once you’ve launched your product, you’d better be ready to change it. Listen to your customer (or users), they will tell you what they need. Make changes accordingly.

You have one goal in mind: to build the Greatest Product you can. It’s all about building a great product – that’s one that I’ve borrowed straight from Rolof Botha.

Examples of kind of crappy first products are plentiful: iPhone first gen (vs the 4G that launched last summer). Apple listened to its customers, and refined the product. They did exactly the same with the iPod (which was more like the iWhat? back when it launched). Spotify is a great example of a company that has taken Europe by storm because it’s a Great Product (mobile product is not great though. which is too bad…keep working on it guys).

Keeping things as simple as you can, then adding features is a great way to be successful- again, back to Twitter as an example. It’s a simple service that has evolved over the past 3 years- Twitter has iterated and innovated (they’ve come up with completely new ways of handing all that data). They obviously didn’t worry about that when they launched – hello Blue Whale of Death- but they figured it out (mostly).

Copy these great companies, ship your product, then iterate and innovate quickly and continuously.

Filed under: Europreneurship, Venture Capital

That two letter word…

“No.” It has to be one of hardest, yet most frequent words an investor says…

Read the rest of my guest post over at 24 ways to start, along with the other 23 posts. There’s some excellent food for thought in there…

Happy 2011!

 

Filed under: Europreneurship, Venture Capital

24 Ways to Start

My buddy @davestone and some of his pals (@joshr and @aegirthor) have put together an entrepreneurial yuletide blog : 24waystostart.com, the advent calendar for entrepreneurs.

Ex-VC Max Niederhofer kicks off with Reflections on Entrepreneurship. Dave asked me to contribute, which I joyfully did. And apparently Techcrunch will be part of the Christmas Party as well. 24 opinions on entrepreneurship…

What a happy Christmas celebration. Minus the Eggnog.

You can follow the daily progression on twitter @24WaysToStart.

Filed under: Europreneurship

Ship Product

Guy Kawasaki wrote a great book a few years ago- The Art of the Start. One line really stuck with me- “Don’t worry, be crappy”. He also stressed the importance of shipping product. I couldn’t agree more. Don’t worry about getting your product or service perfect- just get it out the door. Europeans are famous for tinkering things to death and analysis paralysis. Just get something out the door. I’ve been putting together a cycling business- 700x23c. Is it commercially ready? Nowhere near. Is there a blog to start generating relevant traffic to my domain and give me keywords to start analyzing? Absolutely. Is the design perfect? No. Do I care? Nope. I’ll fix it later. Will it be perfect ahead of a commercial launch? No, it’s a hacked together Amazon Associate business right now. Did l I launch with an ugly website- Yes, I did. I’ve already changed it several times. (And luckily, everything relating to bicycles, except for Rapha’s website, tends to be dead ugly.)  Will all of this change over the next few months? You better believe it.

Shipping product is your 2nd most important milestone (after fundraising)- again, straight out of Guy’s mouth. And I agree wholeheartedly. And the next Big Milestone you’ll reach is Profitability.

Let’s think about *the* recent success story- Facebook; Facebook was a complete skunkworks project designed for Harvard students. Nothing was big or glamourous originally- but it existed. The founders got a product built and out the door. They started to worry about features and what to do with it once it was in the wild. They also changed the concept significantly after launch, which I cover in the next post- Innovate and Iterate.

But before you worry about that, you’ve gotta launch your product. And if you can launch long before you go anywhere near a VC or Angel, the better.

Get shipping.

[Update]

In case you’re wondering why 700x23c is just a blog vs a commerce site, that’s because after I set it up, launched it  and ran it for about 6 months, I recognized that it didn’t offer anything unique to customers, so I killed the project (I had a set amount of funding for it), and reverted it down to a blog based on cycling. I’ll do something cycling related with the URL in the future, but for now, it’s just a blog. Key learnings from the experiment were: Magenta is a good ecommerce platform, payments integration is *tough* for the little guy and in ecommerce, you’d better have a very good value prop. Rapha, as highlighted above, offers a unique product that you can only get from them. I’m still toying with the idea of custom tires- but getting radials manufactured is a little more complex than getting jerseys sewn together…. it’s still something I’m keeping in the back of my mind.

Filed under: Europreneurship, Venture Capital

Visit the Valley

Greetings from California! This is the third post in my Thoughts on Entrepreneurship series.

If you’re not based in the Valley, you need to get here as fast as you possibly can. No, really.

If you haven’t seen, smelled and tasted what the Bay Area is like, you have no idea what I’m saying- and you won’t until you do. The density of connections, and the ability to Get Things Done is amazing. Buy a ticket, spend a week networking and you’ll leave a new man (or woman). But don’t stop there, once you’ve been (you’ll see what I mean), you need to plan on visiting at LEAST quarterly for 1 week; 2 weeks if you can afford it.

I bumped into Andy McLoughlin, co-founder of Huddle at an event on Sand Hill Road earlier this year. I was delighted to learn Huddle had raised $10M from Matrix Partners and had recently re-located to the Bay Area from London. Huddle, if you don’t know them, are becoming a great European success story- they had really good local investors initially (Eden), and thought big.  Plus, they even established and ran what is one of the most successful entrepreneur events in London- DrinkTank- which in a way created their own epicenter and network around the company. Andy was giving a talk on what it means to be an entrepreneur in Europe, and making the transition to the US. He practices what he preaches, and he’s a believer in the Church of Silicon Valley.

I’m a believer as well. Make plans to make your first pilgrimage- go Visit the Valley…

Filed under: Europreneurship, Venture Capital

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