Corporate Accelerators, this seasons must have accessory

It seems that EVERY corporate is now exploring, starting or investing in their own startup accelerator. For the last few months I’ve had too many ‘groundhog day’ conversations with corporates who ‘are thinking of opening a coworking space / startup accelerator’ and wondering ‘have you any advice?’

I politely smile and say “Yes – but first can you can give me some convincing answers as to ‘why’ your company is doing this and ‘how’ you plan to tangibly help startups”

When I ask ‘why’ I have heard actual answers like;

  • We want to hire entrepreneurial talent, this will help us get to know some great innovators in our space
  • We want to be around exciting startups and new business models so that our company becomes more innovative (innovation by proximity)
  • Our CEO is friends with another CEO who is starting an accelerator
  • Our CxO was at a startup conference and decided that we now need to work closer with startups

Clever! Founders love job offers. Startup teams also have loads of spare consulting time to help your company re-create their innovation culture :)

When I ask ‘how’ I hear answers like;

  • We will give them desks in our office / new shiny coworking space / innovation lab
  • We will connect them to our internal management team for mentorship and to explore business development opportunities
  • We will bring in speakers and host meetups

Wow. Desks are a big differentiator. In fairness, Invoices are pretty attractive though.

I then ask about their companies internal experience of working with early stage companies;

  1. In the last 5 years how many startups has your company acquired?
  2. In the last 5 years how many startups has your company invested in?
  3. In the last 5 years how many startups has your company bought services from?
  4. Do you have any special / fast track procurement processes that allow your teams to easily buy from startups without killing them with legals & your procurement process

None? Really? Let’s move on.

Tell me about the network and resources you will provide with your accelerator;

  1. How much are you planning to invest per startup? And at what terms?
  2. What external mentors, with real startup experience, have you on board?
  3. What VC’s and Angel investors do you know well and are interested in this space?
  4. Who have you co-invested with in the past?
  5. Do you know any of the Startup / Tech journalists in this space?

Oh! You have not allocated any funds? You only have internal mentors who are managers from your various business units? You know a few bankers? Super.

Now tell me how you are going to attract the best startups?

  1. Why is a great founding team going to pack up their lives and move to your city?
  2. Tell me about your deal flow? What are the top 20-30 very early stage companies in this space that you are already tracking and engaging with?
  3. Are you already organising meetups & conferences for startups in this space?
  4. Do you have a team of ex founders / mentors / operators in this area who are respected and known within the startup community?

No? Oh ok.

More questions might include;

  • How does this fit with your company’s long term strategy and internal culture? Are you really ready to commit to this and do it right? Who is the C-Level executive behind this?
  • Do you run a company builder / internal lab too? How are you going to handle the potential conflicts of interest (or at the very least, the external perception of it)? Why would any smart founder risk sharing their business plan with you knowing that you also might compete with them via your innovation lab?
  • If you invest as a strategic investor are you aware how this could affect the company’s ability to raise future finance or work with your competitors?
  • If you are public how will you report any investments? Can you take equity in these startups?

What? You want me to shut up? Ok :)

If I was still wearing my Strategy Consulting hat (& tie) I’d probably call this something ‘expensive sounding’ like a Corporate Startup Maturity Matrix audit :) My main goal here is to help corporates understand that their ‘accelerator idea’ might not be as fun, easy or viable as they originally thought. I’m not trying to discourage corporations from getting more involved with startups, but rather give them some insights into the realities and challenges they will face both internally and externally if they want to do this right.

I usually end the conversation with the suggestion that they should reach out to the excellent team at Techstars who have been helping corporates like Barclays, Nike, Metro, In-Bev and several others get this right both internally and externally. Techstars built the playbook for corporate accelerators, have a quality global mentor network, a proven deal flow, and most importantly, have the trust and respect of startup communities around the world by always trying to put the needs of the startups first.

Yes it will probably involve making a multi-year, multi-million commitment to work with Techstars. But if you are serious, and are in this for the long term, it could be your smartest move to ‘accelerating’ your company’s entrance into the startup world :)

[Disclosure – I don’t work for Techstars. I am however a happy mentor with the Berlin Techstars program and have experienced first hand how much effort and thought they have put into making Corporate Accelerators succeed]

 

It’s a small old world

Some of my favourite stories end with the phrase ‘its a small world’.

Growing up in Ireland, you kind of take it for granted that everyone knows everyone. As you travel and work internationally you realise how wrong that is. However, sometimes you stumble across a story or two that makes you think…

Here are some of my favourite ‘small world’ stories with an Irish Startup twist;

Mark Suster’s first startup was an Irish company 

 I told the story last night how when I set up my first company the seed investor was a pig farmer from Ireland. That is a true story. It helps that my first company was actually founded in Ireland!

I came across this by random  few years back when reading one of his posts on Angel Investors – I even bumped into on of his Irish co-founders David Palmer at a random tech event one day who told me all about the early days of their company BuildOnline. I found this funny as I love Mark’s posts and never knew there was such an Irish connection.

Chris Sacca went to UCC in Cork (for a semester)

Not much more to say. I had heard this from a few people but in this podcast above he talks about the time he lived in Ireland and started drinking stout most days around 11.30 AM and figured out what he was going to do with his life!! Having also gone to UCC I could relate :)

 

Ron Conway sold his last startup to an Irish company

Ron conway is probably most famous for his Angel Investing career at SV Angel. Before SV Angel, he was CEO of PTS which was bought by CBT in 1995.  CBT was setup in Ireland and was one of the first European Tech companies to list on the Nasdaq. CBT was led by Bill McCabe who along with Ron went on to become seed investors in Datahug (16 years later).

He (Ron Conway) was the CEO of Personal Training Systems (PTS) from 1991 to 1995. PTS was acquired by (CBT later called) SmartForce/SkillSoft). (wikipedia)

I’m sure there are plenty more stories like that this out there and I’d love to hear them.

As I said, It’s a small old world :)

Why Sprint 1 should be all about surprises

Early in my consulting career I got the opportunity to lead a small product development project for a new client. I was excited and arrived at my clients office to have the kick off meeting with the partner in charge. We grabbed a cup of coffee and sat down to discuss the project. She only asked one thing – ‘I want no surprises’ – she didn’t care what the risks or issues were as long as we discovered them asap.

Looking back I’ve realised how much these words have helped shape my approach to product development and the software development life cycle. I always try to flush out the surprises early on in Sprint 1. This means that I like to focus on the following areas during the initial few sprints of any project;

  1. Identify the internal dependencies between various product teams (i.e. back end API and the front end developers) and rank them by potential risk
  2. Identify the external dependencies you have on external suppliers and teams and see how quickly they respond to your requests for support and change requests.
  3. Identify what new languages, technologies, tools or 3rd party solutions you are planning to use and make sure these are included in Sprint 1. For example if the team wanted to introduce a new DB like Redshift or use a new language like GO that they have not used before I would flag this as high technical risk and ensure these were included in my earliest sprints.
  4. Deliver a very narrow ‘end-to-end’ vertical use case which would allow your end user to touch most major parts of your product. For example, create a ‘to do’ task via the front end, pass it to the back end via an API, save it to the database and then generate an activity report. You will probably be embarrassed to show it to users as it is so buggy, ugly and slow – but it will help flush out several surprises.

As you may have deduced by now the goal is to to identify and tackle the biggest assumptions and risks from day 1. This may mean trading ‘perceived’ short term productivity to instead unearth 80% of the surprises you will encounter during any product development project. Here are some common surprise that I’ve discovered by taking this approach;

  • People: This first sprint will often feel a bit chaotic to teams that have not worked together before. Arguments and stress levels may rise as people feel forced to take shortcuts and introduce technical debt. This is ok and healthy when it comes to developing high performing teams (the Storming phase before the Performing phase in this study of team dynamics). This helps your team discover how to handle stress, conflict and internal disagreements in a relatively safe way. Overall I’ve found that despite these hiccups it quickly brings a team together as it allows for early collaboration, compromise, and an understanding and confidence in each others ability.
  • Customer: By delivering at least 1 very rough and functional use case you will now have something to test with your earliest beta users / customers. Most product users will have little experience of working with agile development teams at this stage so this helps you educate users on your process and identify the true early adopters in your beta group. Users may be initially disappointed at how crude your early iterations look and feel – especially if they have little experience in new product development – but once they get past this you can still get valuable feedback and ideas for course corrections and priorities for the next sprints. This super early engagement helps build trust and excitement with users as they rightly feel ownership over the solution which helps with adoption, retention and referrals when you launch your crucial early beta.
  • Process: There is nothing like real data to test your product. By tackling your biggest assumptions and risks early on you can better react and adjust to surprises. You may need to go back to the drawing board on several assumptions so the earlier this happens the better. This gives you more confidence in your estimates, planning and overall product development process

What I’ve outlined here is part of my strategy to discover surprises as early as possible during product development. Remember there will always be big surprises on every project, so why not discover them as soon as possible when you have a chance to do something about them and ensure they don’t derail your long term success.

Some Berlin Recomendations

It seems every week someone new is visiting and asking for some ideas on what to do / see / eat / drink when they visit Berlin. Rather than re-hashing the same email I’m just going to ‘dump’ some common responses here.

I’m in no way an expert on the city and really only know my neighbourhood (Mitte/Prenzlauer Berg). The best times to visit are definitely during the summer months from May to Oct. Berlin is not the prettiest city – but when it comes to quality of life & fun it is right up there. If you are interested in technology too then the city is brimming with startups and people working on interesting creative projects – a trend that I sense is only accelerating.

Where to stay

Anywhere around Rosenthaler Platz. Most startups and people I know (including myself – hence the bias) live, work and hang out within walking distance of here. There are loads of hotels around it and it has good transportation links. It is close to the city center and the surrounding area is very lively, safe and full of restaurants and coffee places. I would opt for an AirBnB – and I’ve heard good things about the Circus, Amano and Ibis hotels which are all located on Rosenthaler Platz.

Food / Drinks

Foursquare is pretty good in the city. You can’t go wrong with anything in the 9/10 review category. Overall for the size of the city I must say I’m surprised at the lack of great food options here. However here are my favourites that are all located within walking distance of Rosenthaler Platz

  • Pappa E Ciccia – Our favourite local Italian dinner place, great food with a chilled atmosphere.
  • Katz Orange – Modern German style. Hidden away from the street, cool old-looking church with tonnes of ambience. Good option for a date night or relaxed business dinner
  • Papà Pane di Sorrento – I’m not a pizza person but this place is exceptional. Delicious pizzas and wine that won’t dent the bank balance. Bustling most evenings and great with kids too in early afternoon
  • Buck & Breck – Great after dinner cocktail bar around corner from Katz Orange. Literally a hidden gem as the bar is accessible via a buzzer via a fake front. Only seats 14 (+ now an extra 14 in back) and drinks are like rocket fuel. 2 will be more than enough.
  • Winerai Forum – Really chilled out wine bar / cafe. This place would go bankrupt in Ireland. After 8pm they put all the wine bottles on the counter and you can drink as much as you want. You then pay what you think you owe them when you leave.
  • Shiso Burger or Tommis if you are in the mood for a great burger
  • Salt N Bone is a great new Gastro Pub in a fun and lively area. Loads of bars nearby.
  • Prater Garten is the local Beer Garden. Well worth a visit on a sunny afternoon and the area is surrounded by bars and restaurants on Kastanienalle
  • If you are down by the Brandenburg Gate and fancy Sushi then try Ishin – it’s in no way fancy but best Sushi in town and very affordable.
  • Favourite sit down Schwarma places are probably Dada or Babel – great vegatarien options too – especially the Falafel plate at Dada.
  • Breakfast/Brunch with decent coffee – Go to District or Antipodes (not open Mon/Tues)

The Berlin Experience

  • Sunday morning and Sunny? – check out the Bear Pit Karoke in Mauer Park. It is basically thousands of Berliners just sitting around drinking beers watching randomers try to entertain them – a real Berlin experience, free, fun and outdoors. Usually starts around 3PM and check the website link to see if it’s on that day. You could walk up Kastanienalle from Rosenthaller and grab lunch / brunch at several great spots along the way.
  • Before/After Mauer Park(Mauer is German for Wall) you can visit the nearby Berlin Wall museum which has the only fully preserved section. It is also interesting as this area had all the escape tunnels and several stories and exhibts from the time. If you are a tech nerd – you will enjoy seeing ‘The Factory’ building along the way which houses Soundcloud and hosts several Berlin Startup events and co-working spaces.
  • Favourite wander – walk from Rosenthaler down to Museum Insel via  Hackersher Hoff – cool old section of the city full of bars, cafes…
  • Favourite place to chill on a sunny day – Wineberg Park – Grab a beer in the local store and sit out in the park. There is a really cool ‘shack’ hidden in the Rose Garten that is open in the summer. It sells beers, wine and hosts open air movie nights in the summer.
  • Berlin is surrounded by loads of great lakes -several have beaches and are a fun day out in the summer.

Tourist Stuff

  • The 2 hr free walking tour is great. Go early on Sat/Sun and it starts at Brandenburg Gate
  • If raining/cold – the Red Bus Tour is good to see more of the city as it covers the West and the East. Gives you a good sense of the differences between East and West
  • If sunny – the Canal tours are great. Sit out on deck with a beer and watch the city float by
  • The Museums are great – Go to the Pergamon if open
  • The Reichstag Tour is nice – book in advance
  • Apart from the tours – Avoid the city center area down by the Gate / Checkpoint Charlie / Adlon hotel / Museum Insel / Alexander Platz as its is very touristy and commercial. Not the real Berlin that you will love. Check out Hackescher Markt, Fredrichshain, Kreuzberg, Prenzlauer Berg areas and you can’t really go too far wrong.

Nightlife

I’ve a baby and a toddler so I’ve no clue :) Although the most accurate quote I’ve heard is that there really is so few shit bars or clubs in Berlin. They are all pretty cool and the only downside is that smoking is allowed in several places. The holy grail of nightclubs is Berghain and there are several cool areas around the city. Ask someone cooler like Chris Murphy or Enda Crowley about Nightlife :)

Logistics

English – You can get by with English very comfortably in the areas I mention. Most will all be fluent and even the menus will be in English. English is so well understood that it’s only downside is that it is hard to learn German.

CASH – Most places will not accept cards. Trust me it is ridiculous – even places like IKEA and LIDL will not take Credit OR Debit cards. They mostly only take the local German EC card. It is a serious pain in the arse…

Sundays – All shops are closed. Cafes/Bars/Restaurants are open

If possible fly to Tegel. Avoid Schonefeld which is further out and beyond crap. Trains from Schonefeld are good though and cost on $3.20 for an ABC ticket.

The local Taxi app is ‘My Taxi’ as Uber is usually pretty slow / thin on the ground.

If here for a week+ then look into signing up for BMW’s Drive Now car sharing program in advance. You will need to visit a Sixt Car Rental to verify your docs but they are centrally located. You can pick up cars everywhere and most importantly drop them anywhere within the city for €0.30 per minute. Cars are usally a range of Mini’s and BMWs – great service and means most people don’t bother with a car.

The local ‘City Bikes’ program is ‘Call a Bike’ – Berlin is a flat city so cycling in the summer is the preferred option for getting around. There is relatively no traffic and very safe.

 

Berlin comes to Dublin

Not every day you get to interview and welcome the CEO and Co-Founder of a $7.2B company to your country. Zalando are hiring 200+ Engineers and Data Scientists in Dublin over the next year.

From a European eco-system perspective this is very interesting when you consider that despite being based in Berlin they are coming to Dublin for our engineering talent. As they will not have any sales functions in Ireland, they will not be taking advantage of Ireland’s low corporate tax rate of 12.5%. This for me is big news… and emphasises that Ireland is growing in reputation as a location to ‘scale’ ALL areas of fast growing tech companies.

Stop Delaying Your Most Important Job as Founder

tomorrow

First time founders are often guilty of outsourcing their sales responsibilities, but all too often, they are even more guilty of delaying selling in any capacity until it is too late. This delay often comes down to fear and that is why I’m constantly asking founders to test their sales hypothesis as soon as possible. Unfortunately most founders, including myself at one point, don’t want to hear this.

Let me give you an example of a typical conversation that highlights this fear.

Me: “Your product sounds great. So do you have any customers?”

Passionate Founder: “The market potential is huge. We have done extensive market research,spoken to 50+ potential customers and conducted hundreds of surveys. The feedback has been great and really helped us shape our product roadmap’.

Me: “Did you ask them for money?”

Confused Founder: “Well, no. You see our product isn’t ready yet. That is why we are fundraising. We need investment to hire engineers, finish our beta product and hire a head of sales’

Me: “So… Could you ring 5 of your most excited potential customers now and ask them to register for your Beta program. Tell them that it will only cost them $50/500/1000/? today and for that bargain basement price they will get earlier access to your beta when it is ready, the opportunity to shape your product roadmap, and 3 months free when you go live.”

Ill Looking Founder: “…ahem… [voice cracks]… but… ”

By this stage the founder has typically gone slightly pale and looks like they might get physically sick. Their warm friendly expression will have left their face and been replaced with a look of disgust that often makes me feel guilty that I’ve insulted them somehow.

The next few seconds are usually pretty painful. However I’d rather that the founder experience some awkwardness now, instead of 12 months from now when they have finally run out of excuses to ask customers for money. I tell these founders to think of this approach as ‘Kickstarter for Business’.

If they cannot get 5 early adopters to write small checks today then they might change their assumptions on how real the demand is for their product. Conversely if they get 50+ pre-orders with ease then they may not even need to raise capital to get their product to market. They will also have demonstrated valuable traction data that should have investors clamouring to their doors.

By the way, that example conversation above is real. The CEO left the mentoring session soon after that conversation. She was dejected and glad to get out of the room. Happily, 1 hour later she was back at my door smiling from ear to ear. She had just closed her first 2 sales using the ‘kickstarter’ approach and was looking forward to calling back all her prospects. It was pretty cool as her confidence had soared, and more importantly, she now had the beginnings of a real business!

So stop delaying, pick up that phone, and ask for the money. NOW.

2 Ways to Raise Venture Capital

Raising VC

One of the most frequent questions I hear from 1st time founders is ‘How do I raise venture capital?’. There are so many smarter people blogging about this (for example Paul Graham, Naval RavikantMark Suster, Brad Feld and Fred Wilson) but I think you can break it down into 2 ways; the ‘Data Way’ or the ‘Story Way’.

Or said differently, the Traction way and the Hope way. Let me explain;

Option 1: The Data Way (Traction).

This is where you have some early traction and supporting facts around your business model. For example, you might open your pitch with;

“Hello, We have $10K a month in recurring revenue and have been growing 20% a week since we launched 8 weeks ago. Our margin is 85% and are acquiring our customers via an equal mix of referral and paid sources.”

By this stage, most early stage investors / angels will have dropped their iPhones and start rummaging around for their check books :) They still don’t know your name or even what your company does but you will have their attention. By leading with traction data you will have differentiated yourself from the 99% of startup pitches they normally hear.

Unfortunately most early stage founders do not have much data or else they are too afraid to share it when they feel their data is not positive. This means that the vast majority of early stage founders need to fundraise via option 2.

Option 2: The Story Way (Hope).

This is the long hard journey that most founders, myself included, end up having to take. This is the long drawn out sales process where you have to sell your vision to multiple investors in the hope that it resonates. This route relies on articulating your vision and hustling to get introductions and meetings. You need to learn and master the ‘soft skills’ to craft, communicate and present your ‘story’ in a clear, concise and compelling way.

In terms of workload, you will probably produce 50+ versions of your slide deck, have 100’s of coffee meetings and give so many pitches that you can recite it backwards by the end of the process. You will spend weeks ‘imagining’ different versions of business plans and forecasting a number of ‘what if’ scenarios on growth rates and estimates on the costs of customer acquisition and life time value.

Unfortunately, this route really sucks and rarely works! Worse still, every day spent fundraising means another day you are not building your product, acquiring customers or growing your team. When you consider that raising a ’story round’ normally takes 6-8 months, you are taking a huge gamble relying on ‘Hope’ as your main fund raising strategy.

My Advice?

The answer should be fairly self evident by now;) You should aim as close to Option 1 as you can. This means staying as lean as possible (with some Angel financing) until you can get the ‘data’ you need to validate your core assumptions and demonstrate you have begun to unlock growth. One of the best (and maybe more extreme) examples of this is Ryan Smith’s story at Qualtrics where he talks about how you should aim to ‘Nail it before you scale it’.

In line with Ryan’s advice, I often tell founders who ask me about fund raising that they are simply asking the wrong question. Instead I ask them ‘Where is your Normandy?’ because if you can first gain traction, even in some tiny niche, you are much better placed to demonstrate the proof (i.e. traction data) that you have unlocked a formula for growth. A formula that will more than likely lead to investors coming to you and hustling you to listen to their ‘story’ on why you should allow them to invest in your company.

And who doesn’t enjoy hearing a great VC story :)

Raising VC
Raising VC

The Power of Networks

My recent talk at the Konnect Again conference for Alumni Directors in Dublin. In this talk I talk more about the lessons from my first startup J1 Summer and how technology can be used to facilitate and organise networks.

The conference included Alumni Directors from around the world including Stanford in the US and Durham in the UK. The Irish Minister for Diaspora opened the conference at Government Buildings in Dublin. Congrats to Jayne, Helen and their team on organising what I’m sure will be the first of many Alumni conferences around the world.

2 KPIs for measuring startup eco-systems

 

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It often seems like the whole world is trying to produce the next Silicon Valley, or at the very least, a globally recognised startup city / accelerator / community, that is in everyone’s ‘Top 10 List’ for startup locations. Every day more and more journalists and bloggers are writing about the ‘Next Silicon Valley’ or why X is the best place to start your FinTech startup etc….

So how should we keep score? Or put another way, how can we really measure and compare how strong or successful a startup eco-system / accelerator really is? Most articles seem to cite the number of companies / accelerators created and how much money was raised. However, for me, there are 2 more important ‘metrics’ (a.k.a. KPI’s) that I think should be considered to really measure the potential of a startup ecosystem. These are Exits and Immigrants.

Exits create huge downstream momentum and are the most obvious measure of an ecosystems health. These liquidity events help recycle precious capital AND talent. Positive exits can turn founders/employees into angel investors, who are the best early mentors to the next generation of founders. Exits also signals to outside investors and acquirers that this ecosystem might deserve more attention (and their cheque books). Finally, exits attract more talent to the ecosystem and encourage more people to enter the startup world as they see how their peers have performed.

This leads into my second KPI – Immigrants – which I believe is a good leading indicator to the future/continued success of an ecosystem. Talent, in either the individual or collective form (i.e. a company like Google), moving to or joining a startup ecosystem is a very strong signal. Immigrants are a large part of the driving energy in most tech ecosystems and this is best reflected in Silicon Valley, when between 1995 and 2005 over 50 percent of the venture-backed technology companies in Silicon Valley were founded by immigrants. [Learn more about how Immigration has helped Ireland foster new startups in this post about Profitero]. If an ecosystem can succeed in attracting quality ‘outside’ talent then I believe the exits will accelerate and compound.

So should we ‘test’ this theory and investigate the data around this? The exit data should be available from the likes of Crunchbase. LinkedIn probably has the data on immigration (but maybe harder to get). I could be totally wrong, but anecdotally this ‘Exits and Immigrants Index’ makes a tonne of sense to me. Let me know if you want to get involved in the ‘proof’ [i.e. hard work] of getting the data to ‘test’ this formula and see how various ecosystems perform :)

Where is your startups Normandy?

Approaching Omaha Beach Normandy

The vision wasn’t Normandy. The vision was Berlin.

It’s the same with startups. Your vision is bigger than any beach in Northern France. Your vision is to disrupt the whole world and change history. Your vision is BIG.

Many a driven entrepreneur, rather than take the ordinary path, is blinded by their vision, and carves a new path. It should come naturally. If it isn’t big or impactful enough to sustain long term interest, why bother. Others may not see the things the same way, and that’s okay. Focus on the outcome. Steer the disruption. Feel it and soon maybe others will too. Nothing excites and energizes the entrepreneur more than this. The entrepreneur knows he can chafe the world and you better get on board or get out of her way.

Great. Let’s go to Berlin. You’ve convinced me. Now what? Oh shit.. that is less obvious… that is scary.

This is where I now focus my time and energy. Without Normandy there is no Berlin. Without somehow getting a small, yet strong, toe-hold in your target market you are going to struggle.

Facebook’s Normandy was Harvard. Apple’s Normandy was the home computer clubs.

Don’t give up on your vision. Just keep it at bay and focus on first finding your Normandy. A small initial market where you can focus all your energy and resources. A small strip of sand that you can attack, secure and defend.

So where is your Normandy?