Startup success is the execution of your ideas

Startup success is the execution of your ideas

 

 

Startup success is in the execution of your ideas

 

“Ideas are just a multiplier of execution” is what Derek Sivers wrote in his book “anything you want”: You can see how this plays out in the visual scoring table of idea versus execution below. To see the true value, you need to multiply the idea with the execution.

 

ideas are a mulitpier of execution

 

Investor logic supports this approach: investors usually prefer investing in an A-team with a B-idea instead of the other way around. This is because ideas are easy, turning them into a profitable business isn’t. Once you have your brilliant idea, you need to see if it sticks, check with real potential customers if it is a viable solution to a real need that they have. You will need to get out of your bubble and gather hard feedback. You will need to create a product, scrape money together, build a first version (MVP) of that product, and IF you get traction, scale the business. It sounds easy enough, but as the startup curve shows, it’s a tough process, and most don’t make it past this stage.

The Startup Curve

The Startup Curve

Once you do get to a real solution/market fit, you’re ready to start scaling. But be warned: scaling at a rapid pace comes with its own unique set of challenges. What has worked for your startup in the past may not work going forward with your scale-up. You’ll likely experience additional stress and chaos that comes with exponentially growing your company. You will need to navigate additional pitfalls like shifting focus and alignment, hiring prematurely or too late, establishing long term goals, focusing too much or too little on marketing, postponing the next funding round, and lacking of a scalable infrastructure, to name but a few.

Implementation is everything

Everything needs to fit together in order to get to a successful implementation of your growth plans. Ignace Van Doorselaere, current CEO of Neuhaus, explains thus as follows:  “If you line up five dominoes, and you push the first … so that the second, third and fourth fall – but the fifth remains standing – then the score is not 4 out of 5, but 0 out of 5. Because everything that is not implemented does not exist.”

The good news is that companies have been scaling for ages, and that there are some strategies you can build upon. One needs real implementation of the strategy and ideas, because if something isn’t implemented, it’s all wasted effort. You’ll need to take a hard look at your current capabilities and how they fit with your future aspirations, clarify your strategic priorities/opportunities/challenges, and then build an action plan to take your company to the next level.

 

 

If you have a startup, how can you hire your A-team?

If you have a startup, how can you hire your A-team?

Image by Lynn Andrews | Department of Defense

I can’t help it, I’m seventies kid and grew up with the A-team. So if you have a problem no one can help you with, it’s time to put together your own startup A-team.

One of the things that is important to grow your startup and scale-up is the team composition. Investors tend to look at the team behind the startup, and prefer well-balanced teams. Especially the core team needs to have what we call “complementary skills” – you can’t all be the CEO or the head of tech or the finance wizard. Put all finance wizards together, and most likely you get skewed views on the market, and the chances of success diminish significantly. The same goes for all the other functions. After all, not having the right team is the third reason startups fail:

Source: CB Insight

Complementary skills

Hence the reference to the A-team. Those who remember the series or the movie know that all team members had wildly different personalities and skills. And for those who don’t remember the movie/series, let’s look at two other sectors where the right diverse team matters: gaming and the military. One of the more popular game formats these days revolve around different teams competing either team on team or in large battle royale games (if you’re not familiar with the latter: in a battle royale game your team and about 60 to 100 other people get dropped without anything in an ever closing circle of doom until one team is left standing… much like startups trying to conquer markets). in Overwatch, a typical team on team game, you are in a 6 vs 6 team fight, where the only chance of winning is if you have a team of complementary members that can fill in the gaps in the other’s weaknesses.

Another adaptation that is in vogue now is the link with SEAL teams. After all, if they can kick the behinds of people in jungles and deserts far off, something useful has to be in there, right? Well, other than a lot of training, SEAL teams focus on group flow and what they call “dynamic subordination“, which basically means that the person who knows what to do next is the leader, a form of fluid leadership.

” We expect to lead and be led. In the absence of orders I will take charge, lead my teammates and accomplish the mission. I lead by example in all situations.”
Excerpt from the Seal Code

Why the link? Just like combat situations can be very chaotic, so can be the life of a startups. Pivots, anyone? To get into this group flow, teams need to really work on getting their culture right, in order to work together as one well oiled machine.

Successful teams work like a Formula 1 tire switch

Team performance is a whole other topic for another post: how to make the team work together? How to get different working styles perform as a team? For this, startups can learn a lot also from sports teams and sports coaches, as they really work on how to make teams of alfa players work together where each know their place.

A basketball team is like the five fingers on your hand. If you can get them all together, you have a fist. That’s how I want you to play.”— Mike Krzyzewski

What’s the right team composition then?

Well, that’s highly dependent on the mission. For one, in a startup you need FSO’s or “Figure Shit Out people“. More on that in this article on startup hiring. In a nutshell, you need people you can throw a problem at and that will then run with it and solve it without you needing to micromanage them to do that. Lateral thinkers. T-shaped people. Think The Hipster, Hacker, Hustler team – also know as the 3H. More on that here and here. In this composition, the hipster is the creative lead, the hustler the sales lead and the Hacker – of course- the tech lead.

But that’s not quite enough…

Investors would rather invest in a great team with a mediocre product than vice versa, because they know the team makes all the difference. Management is the most important factor that smart investors take into consideration. VCs invest in a management team and its ability to execute on the business plan, first and foremost. Ideally they invest in executives who have successfully built businesses that have generated high returns for the investors. If you don’t have experience, create an advisory board of experienced, qualified people who will play central roles in your company’s development. Or join an incubator or accelerator, they can usually help you find the right people in their network. If you’re still an early startup, you can find a match with a business angel that has experience in your field, and that can either help you him/herself or look for someone in his/her network.

If you’re convinced now of the importance of a good, well rounded team,come join us at one of our EYnovation happy cofounder events, or participate in our workshop on putting together your advisory board.

And in the mean time, enjoy putting your A-team together.

… You’ll love it when the plan comes together.

Venture Capital, the Secret Service and the military

Venture Capital, the Secret Service and the military

Image by ar130405 from Pixabay

What do spies, soldiers and venture capital have to do with each other, you might ask? Well, even spies need innovative new ways of working and spying. Not to mention that the whole security and protection market is also moving online. Servers and sensitive data need to be protected … or hacked. New wearable technologies need to be developed to support agents and soldiers in the field.

No Matter Who You Are, Most Of The Smartest People Work For Someone Else (Bill Joy).

Nobody has the monopoly on knowledge

After all, not all the brightest people in the world work for your company, so why not invest in those companies that employ a number of these bright people?

Even though their investments are (mostly) public – after all these are VC investments in startups – not many people know that the secret service departments of various countries tend to also invest in startups.

Starting with -of course- the United States. The most well-known secret service in the world- the CIA – invests in startups and scale-ups through its own investment arm in-q-tel (apparently a a cheek-in-tongue reference to the original Q character from the James Bond movies). Business Insider tracked down a number of their investments in their article on companies funded by the CIA (link here). Some of these investments may surprise you, but there’s always some link, like the Atlas Wearables fitness tracker, which is something that can be used to manage the status of operators and agents in the field. For the full list of the on-q-tel portfolio, check out the IQT site here.

But they are not the only US agency investing in innovative startups. Meet AVCI, short for “Army Venture Capital initiative”, managed by Onpoint, and the DIU (Defense Innovation unit. AVCI is or was (it’s unclear whether they are still investing) the venture capital agency of the U.S. Army and Department of Defense. From their website, they were to strategically invest in cutting- ­edge technologies, and support venture-funded companies developing innovative technologies in areas such as mobile power and energy enabling technologies, autonomy, cyber, health information systems, and advanced materials. There are no investments listed on the website, but Crunchbase does list a number of investments of Onpoint. It’s unclear whether the fund is still doing new investments at this stage (2016 was the last one tracked on crunchbase). The DIU on the other hand is still active, but takes a different approach, going the other way and accelerating the adoption of leading commercial technology into the military.

The US is of course not the only country seeing the value of startups. Libertad Ventures is the Technological Innovation Fund of Israel Security and Intelligence Service (the Mossad as most people know them), and tends to be a bit more secretive, so they haven’t posted any startup on their website – you can however find the the challenges that they put out to startups: robotics, energy, encryption, web intelligence and big data and text analysis. This doesn’t sound too far off of what regular VCs also invest in. And if you are wondering where all that startup talent in Israel comes from, have a look at Unit 8200, its crack cybersecurity and intelligence team, whose alumni, FORBES estimates, have founded more than 1,000 companies including Waze, CheckPoint and Mirabilis.

But even closer to home, we have the Cyber Innovation Hub of the Bundeswehr, which is the digital innovation accelerator of the German Armed Forces, linking the military with the start-up scene and driving digital innovation in the Armed Forces. They look at technologies in the international start-up scene and then adapt these for use in the military. In the UK, they are doing it by means of DASA , their Defence And Security Accelerator.

NATO is also looking at the space, with their NATO Innovation Hub which looks at the future capability challenges of NATO, and design solutions for them through their innovation challenges.

Self-driving cars and the military

Even though we now see a big push towards self-driving cars and big strides being made by Google and others, it was actually DARPA that initiated the autonomous vehicle challenge, spurring innovations from different actors in the ecosystem, as early as 2004. DARPA stands for “Defense Advanced Research Projects Agency” and is a US Department of Defense agency that drives the development of emerging technologies for use by the military.

If you are curious what the current challenges (and associated prize money) are, check out the current DARPA challenges. Two interesting active challenges are the subterranian challenge (tunnels and boring companies anyone?), and the launch challenge (launching stuff into orbit on extremely short notice – think Space Force). AI research is another ongoing program. – giving you an idea of where the future challenges for the military are taking us. Quoting: ” DARPA envisions a future in which machines are more than just tools that execute human-programmed rules or generalize from human-curated data sets. Rather, the machines DARPA envisions will function more as colleagues than as tools. Towards this end, DARPA research and development in human-machine symbiosis sets a goal to partner with machines.

But what does this mean for us

It is worthwhile to note that a lot of what comes out of secret service and military research and investments can and will also be used to enhance people’s everyday lives.

Take your iphone for starters. Mariana Mazzucato made a whole study on how almost al of the technology in your iphone come out of the US army research programmes.

Source: Mazzucato

The below 2 video’s also give you a good idea of how US future soldier research programmes can have an impact on commercial exoskeleton development. A quick look at the below video of US research on enhanced soldiers gives you an idea that what comes out of this also has applications for our daily lives. Exoskeletons, personal drones, better motorcycle helmets, thermal management for people working in in extreme envorinments etc.

US Research on the future of tech-enhanced soldiers
Ford’s take on using exoskeleton vests to prevent worker injuries

For more on this topic, have a look at this keynote of Mariana Mazzucato :

The Secret history of Silicon Valley

In light of what was written above, it is also very interesting to see the story of the actual origin of Silicon Valley, as told by Steve Blank, silicon valley investor and author of the startup owner’s manual.

Take for example your microwave oven. That technology was actually invented by Dr. Percy Spencer as part during a radar-related research project around 1945, and subsequently patented by his employer, defense contractor Raytheon, into a device to cook food. I kid you not, you can see the original patent here.

You can see the full history, slides and video on https://steveblank.com/secret-history or below this article.

So, what to take away from all this?

The one thing is that innovation doesn’t happen in a vacuum. Fundamental research is still required, and then people that can build successful technologies and companies, and whether they are funded by the government or private investors shouldn’t matter. As long as these companies get to develop tech and product that get to better our lives.

Is there a second valley of death for startups and scale-ups?

Is there a second valley of death for startups and scale-ups?

Before we talk about the second valley, let’s go back in time to 1991, when one of the “must read” book for high-tech startups was “Crossing the Chasm: Marketing and Selling High-Tech Products to Mainstream Customers”. 

Crossing the Chasm

It was a book targeted at tech startups (yes, in the nineties we had those too) and focused on how to bridge the “chasm” between early adopters and mainstream customers. For a more in-depth intro, check out the wikipedia page.

After crossing the chasm (what we would now call the valley of death I guess), came the ride up “inside the tornado” (yes, that was the follow-on book, still available on amazon). It becomes interesting when you also plot the visual of the chasm onto the Gartner hype cycle. It is often in the stages between getting from their early adopters into getting sustainable traction through larger and consistent sales that most fail. But for startups turning into scale-ups the story doesn’t end there.

 

 

 

 

 

 

Credit www.businessprocessincubator.com

The second valley of death

Recently, some articles popped up talking about the further challenges for scale-ups, namely in wat is now dubbed “the second valley of death”.

What happens to companies once they have secured their first funding rounds and achieved product-market fit? According to the statistics, they’re not all successful in the long run. There are different opinions on what entails this second valley of death for scale-ups, and I tend to go with this one: overcoming the financial hurdles (i.e. later stage funding gap), and finding the right markets to truly scale up into.

Getting your future funding secured on time is key, as the story of our local startups Collibra and Small Teaser illustrate. 2 great stories, yet quite different outcomes with one becoming a unicorn and the other forced to close shop due to a lack of further funding…. which actually prompted this article (in Dutch) about the lack of growth capital in Belgium for scale-ups. But Belgium is not the only one with this challenge, as this Australian story highlights – clear issues in later-stage funding. SO … don’t forget to start your next funding round on time, and don’t be shy to get out of your home market to find additional funding.

Of course money is not the only pitfall when crossing the second valley of death. Have a look at the video below where Mahesh Kumar of Result talks about other challenges faced in the second valley of death. And if you’re looking for help, don’t hesitate to contact us at EYnovation.

Mahesh Kumar on the second valley of death.
So you’re looking to fund your startup?

So you’re looking to fund your startup?

Congratulations, and realise: you are not alone. The startup scene is still growing across Europe and is a focal point of governments, private companies and the EU. On the bright side, this means that there is money available from both private and public sources to support innovative startups. On the other hand, there are a LOT of startups competing for that money, so you will have serious competition to get hold of the money you need to grow YOUR company.

A lot has been written about the different forms of funding, so I’m not going to go into detail on all of them. if you want an overview, here is a good start for the US,  and here is one for the Belgian market. Below, I’m offering some general thoughts and tips.

Get the right funding for your stage

The type and size of funding you can get access to will typically depend on the size and stage of your company. if you’re just starting out and don’t even have a product or an idea of your customers and revenue plan yet, don’t count on getting in millions of dollars. That typically doesn’t happen. There are always exceptions of course… don’t count on you being one. So for you, this will mean that you will need to work within the smaller budget, find creative ways to spend that budget and work like hell to get access to bigger funding.

Very early companies typically have to start with using their founders’ own money, and some funding from the infamous  3F’s: friends, family and fools. The good part of these latter 3 investors is that they typically want to help you, may not be as focused on a return on investment as a VC, and will be more hands-off. You won’t face too many difficult questions from them, and they won’t conduct an in-depth due diligence before handing over the money. Of course, they usually won’t put in big budgets either, so if you can find an angel investor early one, you’ll have a shot at bigger funding, and angels typically also take on a more hands-on role. You can also get bank loans here, or get free office space and mentoring through incubator or accelerator projects. Now… do not get focused only on the money, and don’t underestimate the value of the mentoring – that is, if the incubator you are in has a good mentor network. Why, you ask? A good incubator project and mentor can get you faster access to funding by helping you getting your story right (that’s right, pitch training) and help in validating your product ideas to make sure that your business idea is a viable one that people will pay for.

At this stage, you will typically not have revenues yet. But even here, there are some options to get funding and support from other sources. Do your homework: there may be a number of different possibilities depending on your specific sector and country. Did you know for example that if you are a European startup in e-health, you can apply for the EIT Health Launchlab, where you get no money but – if you are selected – you will become part of a 2 month program to test out your idea for a company. KBC StartIT also offers fresh starters in Belgium incubation space and mentorship.  There are surely opportunities in your country or sector. Do your homework and find out what is available.

Don’t forget to look at public funding

In these early stages, you can get both private and public funding. The advantage of getting public funding is that it typically comes without you having to give up any equity in your company. But there is a lot of competition for public funding too. In most countries there are specific government agencies that can provide funding. For example in Belgium, and depending on whether you are in Flanders, Brussels or Wallonia, it will be either VLAIO (Flanders), Innoviris (Brussels) or AEI (Wallonia). There are a lot of options in public funding, ranging from low to high budgets on innovation, research, etc. Every country that takes it startup and innovation support serious will have a program to support their local companies. A good start to look in your own country is the government subsidy sites (just google for these terms).

Next to these agencies, there are other option to get public funding, like “open calls”, typically from local organizations or bigger Horizon 2020 projects. One program that is now finished was the FIWARE accelerator program, where 80 Million EURO was invested in startups (up to 150,000€ per startup). There are other H2020 projects that are now providing startups with equity-free funding. A good place to start are places like F6S or FundingBox where you can find access to more public funding and incubation programs. Alternatively you can do a google search on terms like “open calls”. One other form of getting access to further funding or mentoring are the so-called startup competitions. These happen on a local and European level. Sites like Startup Calendar or F6S can give you a good start on finding some competitions that are interesting for you. Typically you’ll need to first apply with your idea online, and the best ones then get selected to pitch and get access to some funding and possible investors. You won’t need to do all of this alone. Without a doubt, once you get some visibility you will get contacted by a plethora of agencies and companies that will offer their services to you in order to help you get access to funding; usually for a fee.

More money

So you made it passed the first hurdle, got some funding and are rolling along? Congratulations, but unless you are creating some solid revenues at this stage, you ‘re going to need even more money to keep up. And even if you are creating those revenues now, if you want to grow beyond your borders, you’re going to have to get more money. Welcome to First Round Financing. Here is where you’ll need to get bigger capital for your venture that has successfully passed the initial start-up phase. Hopefully by now, you have your business plan all figured out and a product is under development or even shipping.

At this stage, there is one crucial question that you need to ask yourself: do you need the VC money? Are you self-sustainanble already? Can you grow organically? For some this may be a no brainer, but be fully aware that by accepting VC investments in your company, you will give up some ownership and control of your company to someone else. Do you need to grow big and fast and need funding for that? Then it may make perfect sense. But be aware that once you take on the investments, YOU will be held responsible for the fate of the company by your board and investors, and if things go south, it will be your head that will roll. Not being melodramatic, but that’s what boards are for.  If you’re ready to go for it, do your homework and learn all you can about the investment process. if you are looking at your first round (typically called the seed round), have a look at the advice of Y Combinator.  Next to a mentor that has gone through the process before, there are some good books that can help you with the ins and outs of the investment process. “Venture Deals” is one I recommend you read. One other book that deals with various aspects of running  a startup is “the hard thing about hard things” by Ben Horowits.

The SME instrument

There are some alternatives to early stage VC funding. The best known of these in Europe is the public funding for small and medium sized companies by the European Commission (EC), commonly known as the SME instrument. The SME instrument is part of the EC’s Horizon 2020 instrument, and can land you funding of up to 2,5M€ – equity free, meaning you will not need to give up part of your company. There is always a catch though: as the SME instrument becomes more well known and is open to companies from the whole EU, there is some fierce competition going on. Because, who wouldn’t want this kind of funding? As you would have guessed, a lot of companies apply for this funding, and the success rate is rather low. According to the 2017 report of the EC, out of the 31,000 applications, 2457 companies got actual funding. The figures don’t lie: 8.4% of Phase 1 applications were selected for funding, and only 5.5% of Phase 2 applications were selected for funding. These programs also work with cut-off dates throughout the year. If you miss submitting by the due date, there is no option but to wait until the next date.

The SME instrument has three “phases” where you can apply for funding:

  • Phase 1 is typical for concept and feasibility studies, has a fixed funding of 50,000€, and lasts for about 6 months. it’s got the easiest application process (only 10 pages).
  • Phase 2 is more for companies that are ready to scale up demonstration, market replication, r&d and product development. Here the EU may contribute 70% of your total project cost, between €0.5 and €2.5 million, with project lasting about 12 months. it’s also a harder application process (30 pages) and typically follows after a company has passed Phase 1.
  • Then there is a 3rd phase 3 for business acceleration and support services to get ready for market launch. However, there is no funding here, but business acceleration support, including training, coaching and facilitating access to risk finance.

There is a yearly overall budget for the SME instrument, which is spent as follows: up to 10 % of this is used to support companies in phase 1; at least 87% goes to phase 2; at least 1% of the annual budget will be used for phase 3 related actions, and 1% will be used to support coaching and mentoring activities supporting phase 1 and phase 2 and up to 1% will be used for evaluation. What all this means for you, is that this is a yearly budget, so if it’s spent on the top applications, and the budget has run out for that year, there is no more budget for you, even if you had a great score. You will however get a seal of excellence. Even if you didn’t get funding from the first go, don’t despair, because you can adapt your proposal and apply for the next deadline.

There are at the moment 13 different topics for which you can submit. The open disruptive innovation scheme is the most general, but there are other topics specific for healthcare, agriculture energy etc. depending on the focus of your company.

Getting acquired

OK, this last one isn’t really a way to get more money to grow your company, but it can definitely solve your money problems, and if you have what a corporate acquirer is looking for it can go really fast. Look at Indian company Halli Labs which was acquired by Google.  The company was less than a year old when they got scooped up. So, one of the items in your pitch deck can be your “exit strategy”, where you can list who you think can acquire your business in some year’s time. Techrepublic has a good guide to get your started on the M&A approach of some tech giants. Big corporates realise that they are in dire need of innovation and what better way to “insource” that innovation than to integrate a promising young startup into their ranks? “Innovation through acquisition” as they call it. Of course, that doesn’t always work and acquisitions are no guarantee to succes for either side, but that is for another post.

 

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