Jason Ball's TechBytes

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

Investing in Wrapp

As part of an ongoing effort to be more transparent and open about venture and investing, I thought I’d set out a few reasons for why I led the effort behind Qualcomm Ventures’ recent investment into Wrapp (great interview with Carl where he discuses product and roadmap).

Looking back at my recent posts, The Three P’s of Venture Capital and Terminal Velocity, let’s look at how Wrapp fits those criteria:

1) People. The team has a vision, is passionate and can execute. I’ve known co-founder Andreas Ehn for many years, I’ve worked with Creandum at Videoplaza for the past 18 months, I knew Hjalmar Winbladh, Niklas Zenstromm and Reid Hoffman by reputation. All star line-up of team and investors.

2) Product. Simple, clean app with a razor sharp mobile focus. Easy to use and easy to like (really, who doesn’t like to get a gift?). While considering whether or not to invest, I talked to quite a few users who didn’t like the product- they LOVED the product. (I also talked to quite a few users that hated it. Everyone has an opinion.) I listened to the 1 million+ people that have downloaded the app, and the 15 Million gifts that have been sent.

3) Potential. Wrapp crosses the digital/physical divide- they can move people into stores, gyms, restaurants, etc and convert those feet into purchases. That is potentially huge. It’s still early days, but that conversion cycle is very compelling for brands and retailers. The market for gift cards is $110 Billion in the US alone- disrupting that market is a major opportunity. Marketing is a hard space to be in… and it’s not getting easier. Brands and companies need to engage with customers, and Wrapp offers them a great way to do that on a deeper basis.

4) Terminal Velocity. Subcategories were:

a) Lots of funding. $15M Series B. Check.

b) Office in the US. Wrapp is roughly split between Stockholm and San Francisco. Check.

c) Connections. Spotify, Microsoft, Skype, Linkedin,Creandum, Atomico, Greylock, American Express. Check.

d) Chutzpah. Being Swedish, not so much… they’re too understated, but there’s certainly a lot of charisma and charm.

Clearly, the company’s metrics and performance were very compelling as well – growth, retention, engagement, etc.

I could go through this exact same list for our investment in Waze back in 2010 and have very similar answers for each point above. Critically, Waze had hit the 1 million user mark; that’s a fundamental milestone that’s very indicative of a company’s success. Granted, you need many, many green lights to all work in your favor to get to a successful result, but the raw materials for success were there.

Also, I recognize this is for a Series B investment, so I’ll do the same exercise for my latest seed investment once that’s announced in a few weeks.

Filed under: Mobile, Venture Capital

Escape 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: Escape Velocity

In physics, escape velocity is the minimum speed needed for an object to “break free” from the gravitational attraction of a massive body.- Wikipedia

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

The Desktop is Dead

Just to qualify the title, the desktop is dead if you’re under 20 years old.

Screens are migrating from living room to desktop to tablet to mobile. Depending on which generation you belong to, one of those screens is your home screen.

I made a heretical statement 2 years ago in this post – “Facebook is going to be irrelevant in 10 years”, which was true, but the unspoken part which was omitted was “Facebook ON THE DESKTOP is going to be irrelevant”. FB positions itself as a mobile company – they are doing their best to remain relevant in a post PC world. They bought Beluga – one of the companies I predicted to overtake them. Instagram was another good choice- so smart acquisitions by FB. (Although you could argue that FB will be irrelevant irrespective of anything it tries to do to change it’s fate- but that’s a separate post).

Another stat that I tweeted last fall was that Qualcomm’s market cap had passed Intel’s – another sign that the desktop was dead/dying. The two firms are at parity right now – but over the next few years term, mobile wins…

The key take away here is that we’re in the middle of a major transition (no real surprise) but most people out are still thinking web – in design terms, product terms and functionality terms. There are more third wave of mobile companies being launched, and they will be the ones to succeed. They aren’t written for the web, and aren’t written by or for generation web.

I realize some of this is stating the obvious- but if you’re reading this on your desktop/laptop “go directly to jail; do not pass go, do not collect $200

Filed under: Mobile

It’s not easy being green

This may seem odd, but one of my favorite new companies sells laundry detergent. As an entrepreneur (or investor) there’s a lot to be learned from the Company…

First a preface: I’m not a crazy tree-hugger, but I’m fortunate enough to live in a place where being green is relatively straight forward- central London. I don’t own a car (it’s impractical), I ride a bicycle and take public transportation, there are recycling containers in my apartment building, most of the lights in the house are eco lights, I shop locally and try to buy local, in season foods, when possible, etc. Most of this is a by-product of where I live vs some deep belief that cycling in the cold rain is better for mother earth than driving in a warm, dry car (traffic in London is a nightmare).

Back to the story – a few months ago I stumbled across a company called Splosh.com. They have introduced an environmentally friendly detergent brand. The concept is simple: you buy a few empty bottles, they sell you a few refills, you add water and presto magico: you have your cleaning product.

Why did this impress me so much? In a nutshell, it’s a very innovative solution to a problem the founding team felt strongly about, and they did an amazing job convincing me I should part with some of my money on their website. Here’s part of the story, straight from their site:

The logic of recycling is not consistent across different material types. For example, it makes a good sense to recycle aluminium cans, but the logic for recycling plastic homecare bottles is less clear.

Let’s see what happens to that plastic washing up liquid bottle you put out for recycling.

And finally these pellets are re-manufactured into another washing up liquid bottle? No.

Owing to ‘taint’ (the residue left from home and personal care products) only bottles containing drinks can be recycled into other bottles. So your washing up liquid bottle gets turned into something like a fleece or a road traffic cone. In other words it’s not recycled, it’s ‘down-cycled’. And when this new product comes to the end of its life? It can be down-cycled no further and ends up in landfill.

The sad fact is: every plastic home cleaning and laundry bottle ultimately goes to landfill – and that’s not something you would imagine happens from looking at that neat little recycling logo.

So when a bottle is made from recycled material, the material used is usually either ‘pre- consumer’ waste (in other words un-used bottles) or former drinks bottles. Milk bottles are often used as they provide a consistent source of material with little contamination. This means that a recycling logo on a home cleaning product bottle does not stop the manufacture of another home cleaning bottle the next time you buy the product. It’s an illogical system and we can do so much better.

After reading that, you’re kind of hooked. But then enter splosh’s killer reflill approach: they sell small refill sachets that can easily be shipped via regular mail. They cost <$5 per order. That’s less than you’d pay for the competing product on grocery store shelves, and you don’t have to lug it home (remember, I ride a bike). Plus, they’ve done this enough that you get a refill reminder email a few weeks before you run out….which is just plain smart. Re-ordering is a simple process that results in 2-3 clicks max. I’ve used up my intro pack and have placed a few refill orders already. I will be a long-time customer because the products deliver, I save money and it’s environmentally sound. Talk about win-win-win.

Building a D2C brand on the internet isn’t simple, and we can learn a lot from the company:

1) Focus on a real problem

2) Be PASSIONATE about what you do

3) Find a great business model – you may have to borrow from other industries (classic razor blade model at Splosh)

4) Storytelling is a power brand-builder

5) Offer an introductory special – anything to get the ball rolling. If you can charge for this, even better.

6) Use your data to provide a better customer experience

7) Go for green bonus points!

So, if you live in the UK, go grab some splosh. Or buy it for a friend as a bizarre birthday present. Mother Earth will smile on you (even if your friend thinks you’re odd).

Filed under: Entrepreneurship, Venture Capital

The Perfect Pitch

Last week I posted on how you can meet VCs- this week it’s how to get the most out of that meeting.

What format should you use for the first presentation? This is the template that I developed over several years, and recommend whenever an entrepreneur asks what format to use. It’s a time tested format I’ve used for multiple pitch events that I’ve run- it works. The most important part of this pitch is your demo. Make sure that it’s flawless.

The objective of your first meeting is to get to a second meeting. You will start to drill down on one or two points of the company for that meeting. Then you will move on to other points for later meetings. But, for the first meeting, you want to give a fly-over, and leave plenty of time for discussion. Focus on the Product – your demo. It will be the shining point everything else is built on…

So, here’s the Presentation Outline. Stray from this sequence at your own peril.

1. Problem
2. Solution
4. Business Model
5. Underlying magic/ technology
6. Market
7. Competition
8. Milestones/Timeline
9. Financials/Forecasts
10. Summary slide

Good luck!

Filed under: Events, Conferences and Panels, Venture Capital

3 Steps to Meeting Investors (at Events)

You’re at a big event, lots of investors are there – how do you optimize your chances of getting an investment from a VC or angel investor? Follow these three steps (and do not stray).

Your goal is to get a meeting. You’re not going to close a deal right there on the spot- understanding that and what you’re trying to achieve is essential. Securing funding is a multi-step process- you only need to take one step at a time. Step one is getting that meeting. So, on to the process:

1) Do not, and I repeat, do not walk up randomly and pitch them on the spot. (Aka Don’t pitch me, bro!)
VCs are busy – even if they are standing there alone, it’s been a full day of meetings meeting new companies or working with current ones. Their brain is full. They are probably tired. They probably don’t want to hear about your business – even if it’s a deal of great interest. If that’s the case, why are they there? For one, to keep current contacts fresh – to say Hi, ask about progress, see other VCs- ask about deals, etc. But, they are also there to meet new people… so, how do you meet them?

2) Get an intro from another VC, Angel or Portfolio Company.

Social validation is your best friend. Getting an intro to a VC is old info, but it’s far and away your best option. It is also rarely how companies approach me. Your chances of gettting a meeting go up exponentially if you’re introduced. Case in point- I was at the Seedcamp party last week. I’m chatting with the Seedcamp team on how the week had been going when a VC walks up to me with an entrepreneur in tow- he says “Sorry to interrupt, but I wanted to introduce you to Mr. X. I think they’re doing something great that would be of interest to you. How about I send you an email next week to connect you two?”. And that was it. The chances of Mr. X getting an HOUR of my time the following week was 100% at that point. The gain there is huge – my undivided attention and a full hour of it. Not 15 min in a loud venue, with no demo, no deck. And probably no deal.

3) Walk away.

Once you’ve made contact and made a good first impression – get out of there! In the above example, the entrepreneur simply shook my hand, said hello, and said he’d look forward to exchanging info. That’s the perfect thing to have done. I stopped him later in the evening, asked where he was based, and started checking dates for a meeting.

Now, you’ve got the meeting with the VC – what do you do? Prepare your slide deck and demo. I’ll post next week on my thoughts on the perfect pitch.

Good luck!

Filed under: Events, Conferences and Panels, Venture Capital

What’s next in Mobile?

I joined Qualcomm Ventures 5 years ago because I thought the newly released iPhone would herald in an era where the web met wireless – and what a 5 years it’s been…

The first wave of companies, when I first started, were “mobile only” plays – they were remnants of the dumbphone age. I couldn’t have cared less – I was only interested the next wave: web services where the handset was the window into the service. One investment based on this thesis was we7 – a cloud based music service which became “a personal DJ in your pocket” a la Pandora for the UK market (we exited last year). Spotify is an excellent example of this type of business that more of you will be familiar with. We didn’t make many investments here, but lots of good companies came out of this space.

The following wave was mobile-only or mobile-first companies. Foursquare springs to mind immediately- and is an example I’ve used many times. They launched with a mobile-only offering, and have only recently added a website. We’ve made quite a few investments in this space – Viddy is probably our best known, launching on iOS only, growing to 25M+ users and then opening up content on the web to continue to develop the product and expand reach.

Things have continued to evolve, and I’ve basically stopped looking at apps and started looking at services – delivered via an app. A great example of this category is Citymapper – a London based company that crunches data in the background to optimize your journey using a combination of bus, train, tube, overground etc through London. I use the app every single day to navigate London. One of our better known companies is also in this space- Waze, which helps users “outsmart traffic, together”. And it really, really works. It’s saved my neck in San Francisco, L.A., San Diego and London as well – I wouldn’t think about driving in L.A without it. Waze takes all active users (drivers) at any given moment in time, and optimizes their route based on that data. It’s a lot of crunching. It’s an awesome service that’s made possible by millions of mobile devices. 34M users and still rocketing up. More users = more data = better service. I love it. Google Now is the last example that I’ll highlight – if you haven’t had a chance to experience it, have a look at this Google Now video.

And this is where we are now, smart, predictive services. They are what’s next in mobile- we’ll be seeing more and more of them.

Filed under: Mobile

That two letter word…

[This is a guest post I wrote in 2010 on 24waystostart. It still applies, so I thought I’d repost it here]

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

It’s not easy for us to say, and many times, not easy for an entrepreneur to hear. You’ve been working hard on your business, you think it’s great, your only friend thinks it’s great (you’ve lost everyone else because you’ve been holed up working on your project), your family parted with their hard-earned cash to help you out… and then you meet with investors and they say No.

Great. “Investors are such idiots” you’ll think… well, maybe. Or maybe not. It turns out No has many meanings…

First, I’ll admit I personally hate saying no, but I do try to be pretty blunt when doing so, and giving a good reason why I say no (not always, but I try). Your job as an Entrepreneur is to figure out what the investor is saying when they say no… because there are different flavors of No, and different reasons for No.

The most frequent No is actually “Not now”. If that is the case, all is not lost, find out how to get to “Yes.”. It’s going to be a specific milestone or proof point. Find out what it is, ask clearly if you achieve x or y, will they invest at that point. The answer will normally be “Yes.”, and they will lay out exactly what they want to see. This usually lowers the risk of some element they’re not comfortable with yet. If that’s the case – then get on it and get back there. You’ll find a way.

There’s also a variant of “Not now” known as the Excalibur Test. I’ve given many entrepreneurs the Excalibur Test – give them something to do then have them come back with it later. If they’re successful, you write a check. And if they don’t come back…well, the story ends there. Excalibur tests or proof points are fine; but be careful that an investor doesn’t have you running around in circles when they have no real intention of investing—regardless of the outcome.

Another reason investors say “No” is bandwidth. Most people don’t realize an investor will only make 1-5 deals per year—depending on many factors (stage, size, etc.) They may actually like your business, but simply can’t deal with another investment at that exact moment in time, even though they love it. It definitely happens…

Other reasons you may get a No: lack of fit with the firm or individual’s investment thesis/areas or stage. This one is far more likely. Many investors are not what they seem. Every VC you meet in London will say “We do early stage.” What they actually mean is “We invest in profitable companies that don’t really need money”. The risk profile of that firm is simply not one that’s going to invest into an early stage – let alone a seed stage business. Everyone says “Great companies get funded.” but that’s an urban myth. I know several very good companies that haven’t been able to get funded because they were simply “too early”. Think about Fit and Stage when you’re talking to an investor and understand that you may simply not fit the bill. You can test this by asking if they think you should talk to someone else. If they make a suggestion, ask for an intro. You will have confirmed that you’re not right for them, and the intro helps act as validation for your business in the next investors eyes.

Another reason investors may say No is simply a lack of vision. They don’t actually get what you’re doing. It happens a lot. This one is really easy to spot, and understand. If this is the type of No you get, take it and move on. It doesn’t mean they’re an idiot (although that’s what you’ll be thinking), and it also doesn’t mean you’re some gifted visionary (which actually you may be). More likely it just means you see the world differently. It’s a simple No. Move on…

And then sometimes, the No is actually because the baby is… well… ugly. No one likes the Ugly Baby and it’s even worse to have to say it; but bad ideas are plentiful. Perhaps the business won’t scale well (niche business), will be difficult to execute operationally (manually intensive, for example), doesn’t create any real value (reselling someone else’s product/service), is crawling with competitors, etc. This is the hardest one to swallow. When it finally sinks in… and you realize that you’re working on a dud, I’d recommend you cut your losses and do something else.

Whatever answer you hear, focus on your business (unless it’s an ugly baby), and your customers. You’ll get to a yes… maybe it’s a different investor, or it’s a paying customer. But it will be a Yes.

Keep pushing. Believe in yourself.

Filed under: 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

Android Fragmentation – Your Options

If you’re developing for Android, this picture from Open Signal Maps (portfolio co) is only the start of your problems. Fragmentation permeates every level of Android devices: 400+ devices  with varying screen sizes and resolutions, OS- various versions running (few of them up to date), Silicon – ARM 5, ARM 7, etc. Not so much fun…

Why go through the pain? Well, Android is ramping 6x faster than iPhone. The iPhone is great, but the large mass market is Android. You’re going to have to be there.

There are a few things you can do to make your life easier if you’re resource constrained:

1) Study the OSM map. Pick the top 5-10 handsets to focus on. Develop for them only.

2) Draw a line in the sand. Instagram did this when they launched on Android this spring- they simply didn’t support a range of Android handsets based on an OS line (2.2 and above, thank you). Apple is notorious for doing this as well. Follow their leads.

3) Use testing tools. TestdroidDeviceAnywhere, Perfecto Mobile, etc. These tools allow you to do more testing than you normally could in house and possibly on handsets you’ll have difficulty getting. Use them (they’re inexpensive, or free).

Good luck coding!

Filed under: Android

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