My startup has unbelievably promising prospects, having grown to 24,000 with just a $ 75 marketing budget. Customers absolutely love the product. When I polled them recently, 39% of over 1000 users responded saying that they would pay a small monthly subscription fee to access the new features we're adding.
The only problem is, to get those new features developed I hired a freelancer and I'm running out of money faster than anticipated. I've got about three weeks until I'm flat broke.
Is there any way I can find $ 10k – $ 50k without going through week-long accelerator and incubator application processes? How fast do angel investors typically work? Also, what's the best way to find angels?
The coronavirus pandemic has reached all corners of the planet and changed our lives in one way or another. It has forced the world to slow down in a lot of aspects, the most important one being the economy and everything that surrounds it. We live in a highly competitive world, in which, for years,…
in order to prepare for starting a business, I'm looking for a course that gets me up to speed with all the basic mathematical and financial knowledge needed to start and scale a company. I have a blindspot in this field and I want to change it – in order to make better decisions and be more confident.
Important: it should be practical, hands-on, and focused on what's really needed in day to day startup life (not too academic).
Is there anything you can recommend?
I just raised a seed round for my startup, and have been looking for my first designer. I legit think of it as the single most important decision I'll make in this company's first 24 months — this person is gonna have such an impact on the product.
I've spoken with 50+ people and done ~20 portfolio reviews with a friend designer who's helping me run them.
We ran one with this guy. His work was amazing — great process, great UI. Stellar prototypes and interactions that he coded himself. He also seems to have high maturity as a potential manager. My friend's verdict was "fuck yes."
Mine was "no," because I got weird signals about this guy's attitude. For example, at some point I shared a screenshot of the homepage of his current company, which isn't great. He said "thank God marketing isn't my responsibility." That seems like the wrong attitude to have as a designer of a company that's only 40 people (and much smaller when he joined).
At another point, I asked a question about a terrible button in his product — no label, and apparently you had to long press for it to work, with no indicator of that. He said that he agreed it was terrible, but the engineers made it this way because of tech debt or something. Again, not an owner's mentality.
I also noticed he hardly ever smiled during our 2.5hrs of conversations. Seems to take himself super seriously.
Am I putting the bar too high? Should I move to the next round of interviews with this guy, or just pass on him now?
Heading into the next phase of Palantir’s march to the public markets, I was very curious to see how the company would hone its S-1 filing to give itself the best possible shot during its impending debut.
And we finally did get a new S-1/A filing, a document that our own Danny Crichton quickly parsed and covered. What he found was a set of amendments that seem to increase the chance that three Palantir insiders will control more than 50% of the company’s voting power forever, possibly making it a controlled company which would loose the firm from select regulatory requirements.
Danny dryly noted that “given the diminished voting power of employee and investor shares, it is possible that these voting provisions will negatively impact the final price of those shares.” That’s being polite.
Mulling this over this morning, I kept thinking about Snap, which sold stock in its IPO that gave new shareholders no votes at all, and Facebook, which is controlled by Mark Zuckerberg as his personal fiefdom. The two are not alone in this matter. There are a number of other public tech companies that provide certain groups of pre-IPO shareholders more votes than others on a per-share basis, though perhaps to a smaller degree than what Facebook has managed.
It feels like many startups (and former startups) have decided over time that having material shareholder input is a bad idea. That, in effect, they must run companies as not merely monarchies, but unquestioned ones to boot.
I am not entirely convinced that this is the best way to create long-term shareholder wealth.
If you are on the other side of this particular fence, I understand. After all, Facebook is a global juggernaut and Snap has finally managed to eke out stock-market gains to bring its value it back where it was around when it went public. (A three-year journey.)
But those arguments are only so good. You could easily argue that the two companies could have done much more with less self-sabotage (Facebook) and a bit more spend discipline (Snap).
If you’re a founder strategising how to land your next funding round at this challenging time, then taking on advice from venture capital firms can certainly give you a head start. A few weeks ago, we ran an article Tips on how to land funding during the pandemic, from Europe’s VCs, in which you can find the opinions of different firms on topics such as timeline, adapting your pitch and communicating remotely.
Today we’re getting inside the minds behind venture capital firm Digital Horizon, an investment company bringing together a venture fund and a venture builder. With presence in London, Tel Aviv and Moscow, the firm has an international focus and supports B2B software-based solutions and marketplaces.
We spoke with Managing Partner Irene Vaksman, who leads startup incubation, business development and deal execution, about changes to the European funding landscape, raising funds in the ‘new normal’ and tips for founders.
Hi Irene, thank you for joining us! Firstly, could you briefly explain what you offer early-stage tech companies to help them build and scale-up?
Digital Horizon is an investment company that brings together a venture fund with an international focus and a venture builder that launches and scales technology startups. I head up the venture builder arm focusing on the European markets. Our main objective is to leverage two sources of expertise – a deep understanding of a market vertical as well as hands-on practical co-creation experience – in order to launch competitive investable companies. We achieve this by providing initial funding and access to a professional shared services team that can take care of development, operations, back office, basically anything that is not essential to the product proving itself viable in the initial stages. Such an approach allows for sufficient cost reduction in those early stages. And of course the network that we keep building throughout is essential to gain access to industry professionals and corporate decision-makers alike. This sufficiently speeds up business concepts and tech hypotheses validation, agreeing pilots and generally paves the way for further business development efforts by the portfolio companies on their own.
I would also add that we accommodate both a founder-led model where we come on board as a co-founder and leverage available resources, and a model where a business concept is developed in-house and we engage an industry specialist under a ceo-for-hire model where an upside is available as part of the motivation.
Do you have any stats about your deal flow, and how this has changed over the years?
In our experience so far the venture build cycle is generally shorter than that of a VC fund. Over the last three years DH has launched seven ventures out of which there are two exits, three are in the final stages of closing the next external round and another two are under freeze subject to testing possible pivot strategies. Currently we’re in the early stages of venturing out a martech product as well as lining up several others within the core fintech space.
An MVP would normally take us anything from 2-4 months, that remains fairly stable, while we strive towards reducing time to market which has now come down to 10-11 months vs 18 in the initial stages.
Could you tell us your impression of the current Venture Builders landscape in Europe? Have you seen anything change in the past few years?
We see the development of the venture builder model as part of the execution risk reduction strategy for VC funds, allowing them to leverage the available resources and expertise in the early stage segment. Another stream is led by government funds as part of the overall industry development effort as well as a model for purpose-built ventures with a certain socio-economic effect, for instance financial education to reduce public debt and improve credit scores.
In recent years, we’ve also seen the role of corporations evolve significantly in the venture game driven by demand for advanced technological expertise, as well as valuable customer insight provided by innovative products in the market. We see that it’s in partnership with larger businesses that a lot of breakthrough companies are able to scale up – up to the point of being able to disrupt the industry and change it to the benefit of all those involved.
Since coronavirus hit, many VC deals have slowed down or fallen through. Have you noticed a rise or a fall in campaigns as a result? What’s the feeling?
Once the realisation that this is not just a short-term thing settled in most decision-makers’ minds, it did of course slow down the processes. All of the companies had to regroup and we were no exception. But I would say that this time has allowed everyone to re-prioritise, evaluate what is truly important for business and what is simply white noise, catch up on internal processes in order to come out of the quarantine in a better shape than we went in.
It has also shown to a lot of our strategic partners and potential clients that business automation is not just a trendy fad, something that’s nice to have or something that can launch a corporate career – under current conditions it becomes critical for the businesses to be able to perform. A great example of this effect is one of our portfolio companies, supply chain finance platform Factorin, that grew to over $ 100M turnover over the lockdown months with the nearest plans to introduce its platform to international markets. Another example would be the Swiss-based fintech Aximetria that has doubled the number of active users in the first half of 2020 despite the pandemic crisis.
What medium-term changes do you foresee the pandemic having on the way funds are raised by startups in Europe, in the ‘new normal’?
The pandemic has indeed disrupted the investment cycles for a lot of startups out there. Fundraising is a constant process and taking several months off is just not an option for most. This resulted in reduced valuations, second-tier investor choices or development freezes that would not be that easy to catch up on.
I would think that this experience would actually raise additional interest in the venture builder model, startup studios or similar formats that allow founders to weather the storm, re-allocate resources and reduce run rates in hibernation, or on the opposite – provide them with additional funds to speed up and get ahead of the competition scrambling for funds in “open waters”.
Do you see any long-term changes or shifts on the horizon in the next 5 years?
We feel that while the most low hanging fruit have been gathered over the last several years, it seems that pandemic has lasted long enough to create a shift in consumer and business behaviours, to create a different set of needs that have to be fulfilled with a wider set of solutions than those existing today. We place our bets on a more nimble segment of small to medium sized companies, which form a large part of any economy.
Being traditionally underserved as well as not necessarily ready to fully embrace the available tech solutions, SMBs were often lacking the appeal as a target audience, however, we see this continuing to change greatly over the next five years. And the trend of technologies getting deeper and more complicated poses a certain challenge to the funds to be able to spot and evaluate such companies. We see great synergies between the tech talent in the Digital Horizon builder team being able to lend its expertise to the VC fund for the tech due diligence processes.
What advice would you give to startups thinking of raising funds from cautious investors during the ‘new normal’? What are you looking for?
Like any other period of global change, it’s a great time to launch a business. We’re looking at two components – expertise and ability to move fast. Digital Horizon venture builder is constantly reviewing product concepts within fintech, martech and retail segments looking for co-founders with deep understanding of the unresolved issues and experience to drive this change.
We’ve seen a lot in the news recently about VC firms trying to increase the diversity and inclusion both within their teams and their portfolios. What’s your approach?
Whilst initially it wasn’t a purposeful objective, over time we came to a realization that most key positions in the Digital Horizon venture builder are female led and this definitely has an impact on how we approach things. Flexibility and such instruments as inclusive design has proven time and time again that these are a great source and driver of sustainable business appeal and product differentiation.
What advice would you give to startups with female and underrepresented founders, who are currently experiencing pushback?
If we look at almost any profile of a successful entrepreneur we’ll see that a large part of their day-to-day life is about overcoming difficulties and solving all sorts of problems along the way. Traditional business setup, regulatory frameworks, society as a whole are prone to resisting change, which is driven by innovation. And only those with enough resilience are able to create real shifts and changes. The underrepresented groups have a lifetime of experience powering through the barriers, and building on this background can be a great driver in achieving success as an entrepreneur.
One of the things I’ve learned in working with aspiring entrepreneurs is that managing and leading a team is a scary venture into the unknown for many people, even if they have worked as a business professional for years. Having worked in my own career on both sides of the fence at various times, I recommend that everyone practice thinking like the boss in every role to prepare.
This will improve your effectiveness in your current role, and give you a head start towards a future role, such as startup founder, where you are the boss. You will find that the same key principles apply in both situations, and that every business professional has a boss, and should be a leader in their own domain to others with less experience and expertise.
I found some good insights and details on this approach in the classic book, “How To Be A Great Boss,” by Gino Wickman and René Boer, who speak from years of experience working with leadership teams of both small and large companies. Here is my summary of their key principles on being a great boss, which I will characterize here as applying to any business professional:
- Surround yourself with great people. As an entrepreneur, executive, or team member, you are most impacted by the people you gather around you. The smartest team members and the smartest bosses spend more time with people who are smarter in the relevant domain than they are. Then when you have to hire people, you will pick the best.
- Make more effective use of your own time. We all know bosses and peers who are always too busy, but never seem to get much done. Make sure that person is not you. Free up time for others by eliminating low priority tasks, and delegating items to the right people. Work on habits that improve your productivity, and find better tools every day.
- Understand both leadership and management. In business, leadership consists of creating the vision and direction, while management is primarily about gaining traction to achieve it. You don’t have to be a boss to be a leader or a manager. You should be practicing both in every role, and there will be no surprises as your career evolves.
- Train yourself to follow leadership best practices. If you practice all the key elements of leadership in every role, you will make a great team member or a great boss. These elements include giving clear direction, providing tools and training to the right people, getting out of the way, walking your own talk, and reflecting regularly on the big picture.
- Focus on demonstrating accountability for your actions. Accountability is everyone’s obligation, to accept responsibility for their activities, and to disclose your results in a transparent manner. Accountability cannot be imposed on you by a boss or entrepreneur – it’s a practice that you must learn to impose on yourself to be effective and appreciated.
- Develop productive relationships with people around you. Effective relationships, inside your business and outside, are critical in every professional, management, and leadership role. The most productive people get things done by working in concert with others, not demanding actions and results, but by orchestrating win-win relationships.
- Learn to deal effectively with people who disappoint you. While highly productive relationships lead to success, dysfunctional relationships make you a poor employee and a bad boss. People issues cannot be solved by avoidance or edict. If you surface and manage relationship issues early with respect and minimum emotion, you will be seen as a good team member and a good boss.
Thus, putting yourself in your boss’s shoes to see what they see, and act as you would expect them to act, is the best way to assure success in your role today, or prepare you for the startup founder role you dream about. In fact, the best team members and managers I work with always see themselves as their own boss. Try it – you may find and train that great boss you never had.
Startup Professionals Musings