8 Ways To Become A More Successful Entreprenuer
Photo by Jason Goodman on Unsplash Whether you’re a seasoned entrepreneur or just getting started on your entrepreneurial journey, there’s always room to grow and lessons to learn. I spoke with award-winning entrepreneur Ashley Black, founder of FasciaBlaster to share tips on how she created her multi-million dollar business. Here’s the advice she shared to help entrepreneurs build their own successful businesses and companies: Start small. You can always scale a business once things start to take off, but it’s hard to rescue a business that’s over-extended from the start. Be strategic in the products or services you offer in the beginning, build a loyal following, and you can grow and expand from there. Black advises entrepreneurs to “do what you know, keep it simple, and don’t try to branch out too much or too soon.” Black’s strategy has always been to make small strategic moves that have a big impact. Prioritize your health and wellness. You absolutely must prioritize your mental and physical health if you want to achieve success and be able to actually enjoy it. Health and wellness have always come first for Black, and she credits much of her success to this practice. “I am not addicted to ‘the chase.’ I don’t work until I run myself into the ground. Instead, I focus my energy on my vision and I work to inspire my team to help me execute with passion.” This keeps her grounded and focused on what’s most important. Surround yourself with experts. Don't avoid aspects of your business if you're not good at them or don't understand them. Instead, surround yourself with experts who can teach you and educate you. That’s exactly what Black did in the early days of her business, and still does now when she’s faced with something new. “I did everything first before I turned it over to someone else. And because of that, I know all the ins and outs of my business.” Investing in learning always pays off. Think of it this way - if you pay someone to do something you’ll be reliant on them, but if you pay someone to teach you, you’ll be able to use those skills again going forward. Be involved with every aspect of your company. It’s important that you take an active role in your business. This doesn’t mean that you do everything yourself, but instead that you keep your finger on the pulse of things. Spend time working on the day to day operations, dabble a bit in customer service, and engage with customers on your social media channels. This will help you provide direction to your team and understand where you can be more hands-off and where you might need to be more hands-on. Create everything with your customer in mind. “I don't really focus on what my physical, tangible product is. Instead, I focus on what the contribution is to the customer,” explains Black. Black went through an extensive journey to heal herself from a life-threating bone infection and lifelong pain from juvenile arthritis, and that inspired her to create a product that would in turn heal millions of people. Think of the impact your product or service will have on customers and use that to guide you. Outsource what you aren’t good at, but maintain creative control. You never want to give up full control when you outsource things like design, content creation, and social media. When building and growing a company, it’s important to keep the brand voice consistent. When you outsource something, think of yourself as the creative director. You aren’t the one doing the actual filming and editing of photos and videos, but you’re providing a vision and direction for them, allowing you to maintain creative control. Be careful with funding and partnerships. Choose your source of funding carefully. Each type of funding comes with its own set of pros and cons, and you need to take the time to think through and weight your options before moving forward. There is however, one thing Black says that you shouldn’t do—don't give up ownership if at all possible. If you do have to give up ownership to get funding, buy it back as soon as possible. Black also shares a word of caution for taking on silent partners. "People say take silent partners. Well, they may be silent in the beginning, but not when they don't make the money that they’re expecting." Even if the money is there, they can still be an outside voice trying to exert control over things. It’s important for you to be able to stay fully in control of your business, so evaluate any potential partnerships before making that commitment. Don’t be afraid to break from convention. There really isn’t a conventional path to success as an entrepreneur, yet too often entrepreneurs fall into the trap of “it’s been done this way before so I should do it that way too.” Black achieved success by doing things her own way, and recommends all entrepreneurs find and follow their own paths and ignore so-called “convention.” 8 Ways To Become A More Successful Entreprenuer: By Ashira Prossack on Forbes.com – June 23, 2021
Digital whiteboards: The next must-have tool for hybrid teams?
Photo by Business Insider Digital whiteboards may be the latest success in online visual collaboration tools which connect teams in a productive and interactive manner. The scope of workplace collaboration tools available to teams today stretches far beyond anything employees might have imagined two and a half years ago. When work-from-home orders swept the globe in early 2020, most organizations were focused on ensuring they had viable video and chat platforms in place. Now, as a significant proportion of employees have decided to work outside of the office for at least part of the work week, tools that do more than just support workers’ basic communication needs are becoming more sought after. One product that has seen an explosion in growth this year has been the digital whiteboard. Also known as visual collaboration platforms or shared canvas apps, these tools let hybrid teams collaborate visually via an online interface. Between March and May 2022, Box, ClickUp, Mural, BlueJeans, and Zoom all made announcements relating to the launch of a new whiteboarding product or significant updates to an existing whiteboarding tool. Why the flurry of activity? Connecting a hybrid workforce Data published by Forrester in May 2022 shows that 62% of business and technology professionals who have transitioned at least some of their workforce to full-time remote work due to the COVID-19 pandemic anticipate that they’ll maintain a permanently higher rate of full-time remote employees, even across traditionally in-person industries. As a result of these wide-reaching changes to the workforce, many organizations are searching for ways to create a more unified collaboration experience for a geographically dispersed workforce. Digital whiteboard vendors say their platforms fulfill that need. Typically accessed via web browser, visual collaboration apps create persistent workspaces where team members can collaborate from any device, in real time or asynchronously. In addition to drawing and writing tools, the apps offer users the ability to add images, videos, diagrams, sticky notes, and other elements. Several platforms offer integrations with enterprise tools such as Slack, Trello, Jira, Dropbox, Google Drive, and Microsoft Teams. Andrew Hewitt, a senior analyst at Forrester, said that virtual whiteboards provide a way for organizations to reduce the friction between hybrid and remote workers. But, he noted, because very few people considered a physical whiteboard key to their work setup before the pandemic, workers who had no need for an online brainstorming tool three years ago are unlikely to be pushing for their adoption today. Historically, the customer base for digital whiteboard tools is made up of developers or those working in creative roles like design, not general business users. So, unlike more traditional collaboration tools such as videoconferencing and chat platforms, which have an enterprise adoption rate of almost 80%, digital whiteboarding tools have yet to become widespread in the corporate world. “Just like with any technology, getting people to deploy these tools and learn how to use them effectively is really important for their overall adoption — especially in this market where you’re asking people to collaborate in a way they might not be accustomed to,” Hewitt said. Whiteboarding tools are not just for “work” work In November 2021, Research Nester estimated that the visual collaboration market is set to be worth $1.67 billion by 2028. One company operating in that space is Figma, which offers a collaborative browser-based interface design tool. The vendor’s FigJam whiteboarding solution was launched in April 2021 and now counts Stripe, Twitter, Airbnb, and Netflix as customers. Adobe has just announced a $20 billion deal to acquire Figma. Emily Lin, product manager at Figma, said that even before 2020, the company was seeing a trend among Figma customers who were using the tool to make the design process more collaborative. Engineers and project managers who were not traditional Figma users were starting to use the tool to collaborate with design teams in a way the company had never seen before. “We saw that people were beginning to push the platform beyond things like classic UI design and instead beginning to use Figma for things like ideating on what they should even design,” Lin said. As a result, the company decided to launch a dedicated tool that would allow all these different teams to come together in one place and collaborate. When FigJam first hit the market, Lin said it had two key use cases, one being ideation and brainstorming and the second being user flows and basic diagrams. However, after the launch of FigJam, the company saw a spike in customers using the platform as a means of socializing with teams. Users started sharing their unique FigJam use cases on Twitter and developing team rituals such as a Friday coffee chat or a games night. Now the platform offers more playful capabilities, including a photobooth that takes digital polaroid pictures of whiteboarding session participants, alongside the traditional options. External developers who use FigJam in a professional capacity have also extended the platform’s socializing capabilities. Lin said the company is seeing a lot of individual developers as well as partner companies build add-ons that have pushed that end goal of helping teams feel more connected and engaged. “Someone created a widget that had different icebreakers and games that you can play with people, and there’s even things like Rock Paper Scissors. There are now all sorts of activities which are really fun and sit alongside your traditional JIRA and Asana widgets,” she said. Although Figma is platform designed specifically for designers, Lin said that 70% of FigJam’s new users are people from other parts of the company. Financial services and software company Stripe is one of FigJam’s customers. Although the company declined to name the tools it was using before FigJam came onto the scene, Talia Siegel, product designer at Stripe, said the other tools didn’t offer templates that made it easy to brainstorm or work alongside many colleagues at a time. Like most customers, Stripe originally started using the platform for team brainstorms, but over time have embraced what she describes as the “playful side” of FigJam. “Illustrations, stickers, and emojis fill our brainstorming docs now. We also have used FigJam to create activities for team-wide bonding while working remotely,” she said. What’s the future of the whiteboarding market? Despite the spate of product launches at the start of the year, Hewitt said the market is still relatively undersaturated. But, as the popularity of these tools continues to grow, we’ll likely see more vendors enter the space — in mid-August, for example, graphic design platform Canva became the latest company to launch a whiteboarding product. “[For vendors] there's always this question of: ‘Do I build it natively? Do I integrate or do I acquire something?’” Hewitt said. “There’s also a lot of small vendors that would be ripe for acquisition in this space... but currently, there are only around six vendors total that are really making strides.” And where FigJam has seen its use cases expand beyond its original purpose, Hewitt said that a lot of vendors in this space don’t want to be seen as just a whiteboarding solution, instead focusing on the wider visual collaboration aspect of this technology that enables multiple types of collaboration, such as content creation, project management, mind mapping, and design sprints, among others. As the market continues to grow, Hewitt said we can expect to see these platforms integrate with other technologies including AR, VR, and the metaverse. “It’s very, very early days for that right now… but that is definitely something people are hypothesizing, that the market will move in that direction, and we’ll see better integration between AR and VR technologies and the visual collaboration tools themselves.” However, he warns that while employees might have started to see the benefits of having access to a visual collaboration tool, standalone platforms might find themselves struggling to grow their customer base in a tough economic climate. If companies are forced to make difficult budgeting decisions, a one-off visual collaboration platform might fail to justify itself economically, compared to a simpler whiteboard tool included in the licensing cost of a larger unified communication platform that addresses a company’s overall collaboration strategy. “[Whiteboarding tools are] an add-on capability, but it’s not the case that if you don’t have this product, you’re going fail as an organization,” Hewitt said. Digital whiteboards: The next must-have tool for hybrid teams?: By Charlotte Trueman on Computerworld.com – September 15, 2022
How to Develop a Company Vision and Values That Employees Buy Into
Photo by Ian Schneider on Unsplash It can be a long process, but it's well worth the effort. I'm sure you've read about the importance of having company values and a mission or vision statement. But why is it important and how do you establish them? When I first started my business with one client and a couple of employees, I didn't have the structure in place. But as we grew and added more clients and staff, I realized the importance of having a roadmap so that everyone was on the same page. I might have had a vision in my mind about where I thought we were going, but I needed to share that vision and get input from my team on where they wanted to go as well. Brainstorm what you want and what you don't After I made some key leadership hires, we met together as a group and did a lot of brainstorming. We thought about everything we wanted to be and what we didn't want to be. We looked at our staff and our clients, people we admired and looked up to and tried to reverse-engineer their characteristics (can you tell I'm passionate about reverse-engineering?) We agreed that we wanted to be more like "this," and we wanted to work with clients that are more like "that." We used these to create our values. Why didn't we like working with certain people? Because they were jerks — that's where one of our four core values of "Make it Fun, Don't Be a Jerk" came from. Once we came up with our mission and core values, we put a system in place to make sure those values became part of our workplace culture. We created a Slack channel to recognize people who live up to those values. Anyone can publicly recognize anyone else by giving them a shoutout for something they've done. Then at our biweekly company-wide meetings, we select a few people who were nominated and give them a financial award. I used to think mission, values and vision were just things they taught business school, but it's real and I've seen the positive impact it's had on our company. I was an SEO expert but didn't have a lot of experience as a CEO of a fast-growing company. At this point, I decided to work with a coach who recommended that I develop a "vivid vision," something that outlines where I see myself and the company three years into the future. He recommended that I go to a place that inspires me and just sit there and try to put the vision that I had in my head on paper. I chose to go to a nice hotel in Beverly Hills. I spent the afternoon sitting in a nice coffee shop where they had a piano player, beautiful paintings on the wall, people coming in and out and nice cars pulling up. It inspired me, and I came up with three pages of bullet notes. I used adjectives that described the specific details of what each part of the vision looked like. Creating a vivid vision doesn't need to be a whole book — just write a few bullet points of your dreams and goals. Describe in detail what the office looks like, how many people you employ, your revenue and perhaps even the awards you have received. The point is to create a visual for the rest of your employees so that they can envision the future in the same way you do. This way everyone is aligned and clear on where you are going as a company. Making the dream a reality After my time at the coffee shop, I got on a call with our director of communications to discuss what I had come up with, and then she wrote it into our vivid vision story. The mission and values were created with the leadership team. The vision was something that I needed to develop myself, as the CEO. It's written in the present tense, three years from now, as if it is already accomplished. We decided on a three-year vision as 5-10 years seemed too far in the future to be realistic. From here, it went to our creative team to make it come to life with visuals and images. Once it came to life visually, our engineering team then took it and turned it into a web page that is live on our website for anyone to see. That includes our employees, our clients, our bankers and our competitors. We're radically transparent, and we're very clear about where we're going, We just created our vivid vision last year, and there are already aspects of the vision that are coming to fruition. I think there's a lot to be said for being intentional about direction and then just watching the manifestation happen. As everyone starts to understand where we're going, it starts happening. As the CEO, I couldn't possibly do it all on my own, but I can instill the vision into the team and with them to make that vision a reality. We have our vision for the next three years. We won't change it or lower our expectations if we miss a target. We have set our sights high and will work towards achieving or surpassing those goals. We also review our vision once a quarter. We like to do this at our leadership retreat, where we get high-level reports on how things are going. If you haven't put together a mission or vision for your company, perhaps it's time to take action. If you think it's only something for large corporations or only something they talk about in business school, I hope my experience can help change that perception. Having a clear vision and a specific mission helps define the purpose of the organization. It makes sure you are working towards the right goals and helps you direct resources to the appropriate place. When everyone is working towards the same goal, it increases productivity. It gives employees a sense of unity. When employees understand the vision, it motivates them to work hard to achieve the goals that have been laid out. It takes some time to put together, but the results are more than worth it. I don't think I've ever worked in another company that has a better culture because of the way we initially structured our vision and mission. How to Develop a Company Vision and Values That Employees Buy Into: By Jason Hennessey on Entreprenuer.com – October 19, 2022
(De)risky business: Why your startup should outsource in an economic downturn
Photo by Mathieu Stern on Unsplash Data from startups across Europe shows clear signs of an economic downturn in the European tech space, leading businesses to reevaluate their burn rates and expenditure. To keep flexibility and agility while growing their team and optimise costs, some startups are turning to outsourcing. “A large majority of functions in a company can be outsourced, from customer support, to sales, platform management, software development or compliance services — from the most simple task to the most complex one,” Andréa-Lou Laffitte, group programme director at outsourcing partner The Nest by Webhelp, tells Sifted. “The important thing is to make the right internal vs. external decisions. When you have a repeating process that you’ve mastered internally, that’s one of the best things that you can outsource.” But what does your startup need to know about outsourcing? And how can it help in turbulent economic times? The outsourcing model Outsourcing is not only about recruitment; it can involve training, managing, upskilling and retaining your extended team. All of these are important yet time-consuming tasks — even more challenging when startups need to extend their teams internationally. “By outsourcing, you can deliver a quality experience to customers without needing to divert internal resources” A key perk of outsourcing is handing over repetitive, tried-and-tested projects to an external company to free up time and resources internally. Robert Gamble is chief operations officer at GO Sharing, a Netherlands-based micromobility startup that offers shared electric vehicles. He believes that working with a business process outsourcing (BPO) partner can help derisk in times of economic uncertainty and focus resources on critical core competencies. “When starting or scaling a company, it’s easy to get distracted away from focusing on, investing in and developing your core competencies and service offerings that make you unique or disruptive,” says Gamble. “By outsourcing, you can deliver a quality experience to customers without needing to divert internal resources.” De-risking business plans Working with an outsourcing provider can also help startups absorb market shocks. “While we are able to set up and ramp-up an international team for a start-up within a few days/weeks, we are also able to “take the hit” in times of crisis for the start-up, if they need to reduce their staff and costs” “While we are able to set up and ramp up an international team for a startup within a few days/weeks, we are also able to ‘take the hit’ in times of crisis for the startup — if they need to reduce their staff and costs,” says Laffitte. “This way the startup doesn’t have to carry out internal layoffs and we can easily reassign our experts to other projects.” Outsourcing specific activities to a specialised partner may be a solution for some startups to consider, in order to focus on their core business and their best in-house talents. For example, Gamble notes that for early-stage startups, the recruitment and HR functions are often under heavy pressure as companies enter hypergrowth stages. So working with an outsourcing partner can allow recruitment teams to allocate more time to hiring management roles, facilitate the recruitment of larger international teams or acquire new skills and industry best practices. One issue GO Sharing had was a need to provide high-quality customer support in multiple languages. And within western Europe, it was difficult to find full-time customer support team members who were also interested in working evenings and weekends, which are the company’s peak demand periods. The Nest by Webhelp’s team in Turkey was able to find talented multilingual staff to support GO Sharing’s customers. This ability to source talent from multiple countries is a key attribute of outsourcing, helping startups scale faster without hiring permanent staff and burning through cash. “If you were a startup we work with and you were planning to enter six new countries in two months, you could just send us an email and we could easily build up the ideal team to manage those new markets,” says Laffitte. “This is simple because we already know your brand and processes, so we can adapt your processes to local specificities through our knowledge of local markets.” Culture and knowledge In addition to knowledge sharing, it’s important for startups to ensure there is a good culture match when selecting an outsourcer. It’s crucial that a provider acts as an extension of your team rather than as a separate entity. “It’s really important to take the time to know the outsourcing company, understand the culture and go and meet your teams in the specific sites” “It’s important to work with the best BPO partners to ensure you can achieve this without losing touch with your customer base,” says Gamble. “Really early-stage startups can also learn a lot from working with a BPO experienced in collaborating with companies at a similar stage in growth.” Laffitte agrees, adding: “It’s really important to take the time to know the outsourcing company, understand the culture and go and meet your teams in the specific sites or countries where you will operate.” Adding value Trusting a third party with key tasks and projects may seem daunting, but taking time to select the right outsourcer will ultimately free up valuable time for startups to focus on their core goals. So what is the best approach to deciding on a provider? “It’s not only manpower or costs — it’s also about gaining access to new skills” “Go in with a clear understanding of your own business processes that BPO agents will interact with to ensure a smooth transition,” says Gamble. “I would also advise away from ‘bargain hunting’ when selecting a BPO partner because in the end, you are selecting a BPO partner to provide a quality service.” Despite the current economic uncertainty, Laffitte says The Nest by Webhelp’s operation has grown by 400% in just one year. “It’s not only manpower or costs — it’s also about gaining access to new skills,” says Laffitte. “As a startup, you can think you perfectly master some processes but as we work with several industry leaders, we have access to best practices and some of the best tech partners on the market. By outsourcing, you get access to these best practices and technologies.” (De)risky business: Why your startup should outsource in an economic downturn: By SIFTED - October 12, 2022
Use the Enterprise Investment Scheme (EIS) to raise money for your company
In case you are wondering what the Enterprise Investment Scheme (EIS) is, it is a means of getting funding if you are a growing startup. This scheme is aimed at growing companies, if you are looking for your first funding round then you will need to look at our other post on the SEIS scheme. Below is the government outline on how the EIS scheme works and your eligibility as a startup to apply. Use the Enterprise Investment Scheme (EIS) to raise money for your company The Enterprise Investment Scheme (EIS) is one of 4 venture capital schemes - check which is appropriate for you. How the scheme works EIS is designed so that your company can raise money to help grow your business. It does this by offering tax reliefs to individual investors who buy new shares in your company. Under EIS, you can raise up to £5 million each year, and a maximum of £12 million in your company’s lifetime. This also includes amounts received from other venture capital schemes. Your company must receive investment under a venture capital scheme within 7 years of its first commercial sale. You must follow the scheme rules so that your investors can claim and keep EIS tax reliefs relating to their shares. Tax reliefs will be withheld or withdrawn from your investors if you do not follow the rules for at least 3 years after the investment is made. There are different rules for knowledge-intensive companies that carry out a significant amount of research, development or innovation, and either: want to raise more than £12 million in the company’s lifetime did not receive investment under a venture capital scheme within 7 years of their first commercial sale Approved EIS funds The rules for EIS approved funds will be changing on 6 April 2020 to take account of the: changes that will focus approved funds on knowledge-intensive investments increased flexibility available to fund managers in the timing of investments Read the draft guidelines to find out more about the amendment to the requirements for an EIS approved fund. What money raised can be used for The money raised by the new share issue must be used for a qualifying business activity, which is either: a qualifying trade preparing to carry out a qualifying trade (which must start within 2 years of the investment) research and development that’s expected to lead to a qualifying trade The money raised by the new share issue must: be spent within 2 years of the investment, or if later, the date you started trading not be used to buy all or part of another business pose a risk of loss to capital for the investor be used to grow or develop your business Companies that can use the scheme Your company can use the scheme if it: has a permanent establishment in the UK is not trading on a recognised stock exchange at the time of the share issue and does not plan to do so does not control another company other than qualifying subsidiaries is not controlled by another company, or does not have more than 50% of its shares owned by another company does not expect to close after completing a project or series of projects Your company and any qualifying subsidiaries must: not have gross assets worth more than £15 million before any shares are issued, and not more than £16 million immediately afterwards have less than 250 full-time equivalent employees at the time the shares are issued Your company must carry out a qualifying trade. If you’re part of a group, the majority of the group’s activities must be qualifying trades. Limits on money raised Your company cannot raise more than £5 million in total in any 12-month period from: Your company cannot raise more than £12 million from these sources in your company’s lifetime. This includes any money received by any subsidiaries, former subsidiaries or businesses you’ve acquired. Limits on the age of your company You can receive investment under EIS as long as it’s within 7 years of your company’s first commercial sale. If you have any subsidiaries (including former subsidiaries) or businesses you’ve acquired, the date of your first commercial sale is the earliest of the group. If you received investment in this period (under EIS, SEIS, SITR, VCT or state aid approved under the risk finance guidelines), you can use EIS to raise money for the same activity as long as you showed you were planning to do so in your original business plan. If you did not receive investment within the first 7 years, or now want to raise money for a different activity from a previous investment, you’ll have to show that the money: is required to enter a completely new product market or a new geographic market you’re seeking is at least 50% of your company’s average annual turnover for the last 5 years If your company owns or controls any other companies they need to be ‘qualifying subsidiaries’. This means: your company must own more than 50% of the subsidiary’s shares no one other than your company or one of its other qualifying subsidiaries can control this subsidiary there cannot be any arrangements which would put someone else in control of this subsidiary The subsidiary must be at least 90% owned by your company where either the: business activity you’re going to spend the investment on is to be carried out by the qualifying subsidiary subsidiary’s business is mainly property or land management The subsidiary can be set up to complete a project or series of projects before closing, as long as it supports the growth and development of your company. Risk to capital condition The investment in your company must meet the risk to capital condition, which means: your company must use the money for growth and development the investment should be a risk to the investors capital Growth and development means you’ll use the investment to grow things like your revenue, customer base and number of employees. The growth and development of your company should be permanent and not rely on the investor’s continued support. The investment should carry a risk that the investor will lose more capital than they are likely to gain as a net return. HMRC will not consider the maximum return an investor could get if your company is successful, because this cannot be guaranteed. The net return includes: income from dividends, interest payments and other fees capital growth upfront tax relief When deciding if you meet the risk to capital condition, HMRC will look at things like your company’s: sources of income assets structure use of subcontractors marketing of the investment opportunity relationship with other companies You will not meet the risk to capital condition if there are risk reducing arrangements in place that result in an investor: getting priority over other investors being able to withdraw their money as soon as possible protecting their money so that other investors money is used first The shares you issue must be paid up in full, in cash, when they’re issued. Your company should have a way to accept payment before shares are issued. Your shares for EIS investments must be full risk ordinary shares which: are not redeemable carry no special rights to your assets The shares you issue can have limited preferential rights to dividends. However, the rights to receive dividends cannot be allowed to accumulate or allow the dividend to be varied. When you issue the shares there cannot be an arrangement: to guarantee the investment or protect the investor from risk to sell the shares at the end of, or during the investment period to structure your activities to let an investor benefit in a way that’s not intended by the scheme for a reciprocal agreement where you invest back in an investor’s company to also gain tax relief to raise money for the purpose of tax avoidance - the investment must be for a genuine commercial reason Before raising your money Your investors will only be able to claim tax relief if you meet the conditions for EIS. You can ask HMRC if your share issue is likely to qualify before you go ahead, this is called advance assurance. How to apply If you’ve got advance assurance, provide copies of any documents that have changed since HMRC gave you advance assurance. If you’ve not got advance assurance, you must provide the following information for your company and any subsidiaries: the business plan and financial forecasts a copy of the latest accounts an explanation of how you meet the risk to capital condition details of all trading and activities to be carries out, and how much you expect to spend on each activity an up to date copy of the memorandum and articles of association the information memorandum, prospectus or other document used to explain the fundraising proposal to your investors details of any other agreements between your company and the shareholder a list of the amounts, dates and venture capital schemes under which you’ve previously received investment any other documents to show you meet the qualifying conditions You’ll also need to show evidence that you’re a knowledge intensive company if you’re applying as one. You can only submit your compliance statement when you’ve carried out your qualifying business activity for 4 months. You must submit it within 2 years of this date, or within 2 years of the end of the tax year in which the shares were issued (whichever is later). You must complete a separate application for each share issue. Send your application You can email or post your compliance statement and supporting documents. Email: firstname.lastname@example.org. Post: Venture Capital Reliefs Team WMBC HM Revenue and Customs BX9 1BN What happens next If your application is successful, HMRC will send you a letter and compliance certificates (form EIS3) to give to your investors. The letter will include a unique investment reference number. You must include this on the compliance certificates you give to investors. Investors need the compliance certificate and reference number to be able to claim tax relief. You must follow the scheme rules for at least 3 years after the investment is made - otherwise tax relief will be withdrawn from your investors. You must tell HMRC if you no longer meet the conditions within 60 days. Where HMRC decides the investments do not meet EIS requirements, we’ll write to you explaining why. If you disagree, you can ask HMRC to review the decision, or appeal against it.
Venture is not the only option
Venture Capital is glamorized and celebrated as the best route for every company, but it isn’t the right funding option for many businesses. It should be no less aspirational or exciting to self-fund businesses, take on debt, or grow non-profits. Fantastic businesses have been built and scaled without venture capital, for example: Mailchimp which bootstrapped (or self-funded) their growth, or Skyscanner, which ran for six years before raising Venture Capital. Khan Academy, the education technology company providing educational tools and resources to millions of children, which is a non-profit. Cards Against Humanity which raised their initial $15k of funding through Kickstarter and built the company from there. It is frustrating that raising Venture Capital funding is seen as an important milestone or the mark of a ‘good’ business. It is a tool like any other and it should be presented as such, with the pros and cons clearly signposted. It’s also troubling that many funding options aren’t available to all founders, for example, the idea of ‘friends and family money’ which is completely unrealistic for many people. At Ada Ventures we believe that we need to do more as an industry to be transparent about when venture capital is not right for a business. As Josh Koppleman puts it: “Big problems have occurred when you have founders who have unwillingly or unknowingly signed on for an outcome they didn’t know they were signing on for […] I sell jet fuel […] and some people don’t want to build a jet.” — Josh Koppleman, investor at First Round Capital as quoted by Erin Griffiths in the New York Times. This guide should be read before starting your company and should help think through: The right company structure The right funding route Some questions to answer before deciding to take venture capital Space X’s Falcon Heavy lifting off. VC investment is like rocket fuel but isn’t right for every business. Decide on the right company structure Before starting a company and way before considering venture capital funding, think about what the right company structure is for you and your definition of success. What is the principal mission of what you’re building? Are you interested in maximising value for shareholders, which is the primary purpose of a company? Or are you interested in having maximum impact on the biggest possible number of people, which might be a better fit for a non-profit? Are you trying to change policy? Or create a product that will be bought by millions of people? This will help determine what company structure is best for you. For-profit Limited company Limited company with B-Corp status Limited Liability Partnership (LLP) Social Enterprise (you operate as a company (not a charity), but you focus on maximizing social impact as well as financial profits) Community Interest Company (CIC) Company limited by guarantee (eg. Diversity VC) — enables you to set up subsidiaries which might make a profit in the future Charity Entity with protected tax status, restricted from making or distributing profits. The core purpose is likely to be to help and raise money for others When you have decided on the right company structure for you, consider the options available to you for funding your company. Decide on the right type of funding for your business Every funding option has advantages and disadvantages, and some are better suited to certain types of businesses and business models. It is important to explore the funding options available before deciding how to build your company as the route you take will have knock-on consequences. The founder of RXBar, which was funded with $10,000 of the founder's savings and sold to Kellogs for $600m. Bootstrap Bootstrapping is a term for growing without taking on external capital. Founders can self-fund through selling products or services to customers which they can then use the proceeds to fund the development costs of their tech and team. This requires a highly disciplined approach to cash-flow management. Best for Businesses that generate very early cashflow without much tech infrastructure (agencies, recruitment, consultancy). Advantages Owning 100% of your company. Disadvantages Difficult to start a company without savings. Slow growth. Bootstrap + Debt As above but consider taking on debt to finance growth, which could be done through invoice discounting, venture debt, loans. However debt is not widely available until your company has something to borrow against — (usually tangible) assets, or (predictable) cash flows — typically receivables or profits! Grants are also possible for businesses. Check out Innovate UK to see if you’re eligible for R&D grants which could bridge you to the metrics you need to take on debt (predictable cashflow). Best for Businesses that generate very early cashflow without much tech infrastructure (agencies, recruitment, consultancy) but still want to grow and can raise debt. Advantages Owning 100% of your company but also having the additional working capital to invest in growth. Disadvantages You have to achieve a certain size or maturity to take on debt Revenue Share Taking investment, but instead of taking equity, the investor is paid back by a revenue share agreement. This is often capped at 3–5x the initial investment, and only kicks in after 1–2 years of putting the capital to use. Models can include a conversion mechanism into actual equity, if down the line that becomes an appropriate model. Model made famous by Bryce Roberts at Indie.vc but is not yet mainstream in the UK or Europe (AFAIK — please let me know if I’m missing a fund that does this)! Best for Owning 100% of your company but also having the additional working capital to invest in growth, without the risks associated with taking on debt. Advantages Owning 100% of your company Having access to working capital to grow Maintains the option for VC-like funding if that later becomes more appropriate. Disadvantages Limited universe of investors. Typically requires higher margins to ensure the paybacks are palatable. Angel investment Early-stage investors who typically invest anything from £10k-£1m. Raising money from angel investors is quite different from raising money from venture capitalists. Some companies raise angel money first before raising VC, some companies find that angel investors are a better fit for them overall than venture capitalists. An overview of how to find angels is here. Best for A light touch personal relationship and operational value add. Advantages Not being encouraged to grow at the expense of everything else. You know what you are getting in terms of a board member (they are unlikely to leave / swap board seats with someone else). Can be faster to close on investors investing their own money, compared with a fund with longer processes Disadvantages Very dependent on the kind of angel you have Can require a lead investor to close larger angel rounds Crowdfunding Crowdfunding sites allow you to aggregate many small ‘retail’ investors together. Typically they require you to create a video pitch and be prepared to answer questions from investors while you’re the business is ‘live’. Check out Crowdcube, Seeders and Syndicate Room which are the three major UK sites. Best for Consumer businesses which can be easily understood that want to give their customers access to their company as an investment opportunity. Advantages Can generate good marketing as well as investment. It is the most democratic form of investment as people can invest as little as £10. Disadvantages Works best when companies have raised 50–75% of the round off the platform and they are using crowdfunding to finish off the round. Doesn’t work so well for B2B or complex businesses. Accelerators Accelerators or incubators fund companies that are pre-product. Typically the deal is a home for [two months], combined with mentorship and guidance, wrapped up in a demo day event at the end; in return for which you’ll give away 5% or more, which may or may not be paid-for equity (i.e. come with cash). Best for Real hands-on, operational advice on building a product and in some cases, building a team. Advantages Safe space to figure out if you want to do an idea Some great accelerators are equity-free and still provide real benefits and a badge of approval — e.g. FirstGrowth in the US. Disadvantages Can be expensive in terms of equity % and there are widely varying levels of value add. There are purported to be over 500 accelerators/ incubators in the UK alone — be sure to reference past cohort companies to determine if the value offered is worth it. Venture Capital Venture Capital is typically for businesses after they have built a product and usually once they have some early customer traction. Venture Capital is usually equity investment of anything from £100k to £100m, for between 10–30% of a business, but typically 15–25% at each round, with rounds increasing in size as the businesses get more mature. Venture capitalists will invest in ~30 companies per fund, on the expectation that 1/3rd will fail, 1/3rd will do ok and 1/3 will hit a ‘home run’ (sell or IPO for at least 5–10x their original investment). Venture Capital is glamorized in TechCrunch and other tech media, but has real disadvantages for businesses that are worth knowing about before making a decision to take on this type of funding. Best for Businesses that can grow and scale very fast. Businesses addressing a large problem, or a niche problem adjacent to a large market. High margin businesses (eg software), or where there are network effects as they scale (i.e acquisition of new customers gets easier as the company grows and the COGS are non-linear to each incremental user). Businesses with ‘winner take all’ dynamics like some marketplaces where rapid scale is crucial to success. Advantages Capital comes with operational support and a strong network (depending on the fund that you work for). You will be part of a ‘portfolio’ of other companies you can learn from. Disadvantages Can be expensive in terms of equity % and not all VCs provide value beyond capital. Reference them before you take the money. Once you’ve taken venture capital it is difficult to ‘go back’ to a bootstrapped business and you might need to continually raise money It is difficult to buy-out your VC investors, in fact, the average founder / VC relationship lasts longer than the typical marriage. You will be pushed to scale and ultimately exit the business at some stage so that VCs can return capital to their investors. Questions to ask yourself before raising venture capital money: (These are non-judgemental questions, but are a guide to how VCs may assess your business) Is there a realistic possibility that you could sell your company, or take it public through IPO for at least £100m; and for bigger funds £1bn? Are you building a business in a big enough or high growth enough market to do that? Are you aiming to grow 2–3x y-o-y? Is your business model capable of potentially delivering this? Are you open to putting in place a formal board? Are you prepared to report to your investors on a monthly basis and hold board meetings monthly or every other month? Are you prepared to have a venture capitalist sit on your board? Are you aware of what negative control provisions (consent matters) are and the restrictions that would put on you (for example not taking on debt, not hiring someone above a certain pay grade)? Are you prepared to have your existing shares reallocated by a vesting schedule, and for 75% them to re-vest following the first ‘round’ of capital you take on? Are you prepared to keep raising money throughout the journey of growing this business? Have you modeled out the dilution to your shareholding that raising multiple funding rounds would involve? Have you looked at any IPO filings of public companies to see how much the founders own on an exit? Are you aware that you could be fired as the CEO/ founding team? Are you aware of the terms ‘good leaver’ and ‘bad leaver’ and what they mean for your shareholdings if you were to leave the business? These is a non-exhaustive list but hopefully helps as you start thinking about whether Venture Capital funding is really what you want. Written by: Check warner - Ada Ventures - Published on Medium
Deconstructing VCs’ Decision Making Frameworks
Most of our daily job as VCs consists of identifying uncertainties and spending time on trying to build a strong enough conviction on what the distribution of outcomes might look like. Why? Because this drives investment decisions. For entrepreneurs, understanding the decision-making process of a VC is perhaps equally complex. Doing so is nonetheless the key to assessing their chances of raising VC money. At Point Nine, we are aware of entrepreneurs’ need for transparency and this is why we’ve published a few posts about our investment thesis, made our internal deal memos public, or even created some (in)famous funding napkins (SaaS and Marketplace). But we are not the only one; most of the experienced investors have also become more vocal about their own investment principles. If you’re curious why, check out this post I wrote some time ago. The simple exercise I run in this post consists in combining a few frameworks I’ve learned either doing the job at Point Nine, at Alven, or reading posts from some of the most famous VC firms online. After reading ten(s) of posts about VCs’ investments principles, I ended up with a simple framework with 5 categories (or 5 Ts) outlining how VCs think about: The Team The Tech (a.k.a. Product) The Total Addressable Market (a.k.a. Market) The Traction (a.k.a. Growth) The Trenches (a.k.a. Defensibility) — thanks to all of you who gave me a synonym of moats! The idea of exposing this framework is two-fold. First, by scoring investment opportunities according to these 5 criteria, I might be able to arrive at a ‘more rational’ investment decision myself. Second, I might be able to help entrepreneurs better assess their chances to raise VC money. At a high level, this framework seems to be consistent with the traditional mental process that we go through as VCs before making an investment decision. Click to try the calculator! I also created a TL;DR version of this post, which is a Typeform calculator. If you have no time to read this post, but still want to assess your chances to raise VC money, just click the image on the left. That being said, most of the answers and the formula behind the calculator are mentioned below, so if you want to score highly, it’s probably best to skim through this post briefly! The scoring system is entirely arbitrary but it might make the experience of reading this post more enjoyable. T #1 — Team 1. “There is always a secret at the core of every business” The best startup teams own a secret. If you look at the startup ecosystem as an efficient capital market — I know it’s not completely — “there is no free lunch”. Hence, opportunities that are too obvious will likely be too competitive or already optimally priced by the VC market. We believe that founders who have first-hand experience of the problem they’re trying to solve approach this problem with an information advantage over the market. VC Compatibility Calculator: Add +1 if you think that you have an information advantage versus the market due to unique market insights, better access to technology/data or stakeholders in your industry. 2. Purpose Building a startup is hard. Founders with a purpose are resilient and will find other reasons than financial ones to survive the difficult days. I could not find a better way to put it than Homebrew in their investment thesis: “We believe that being mission-driven is a competitive advantage for an entrepreneur. Mission-driven founders are better recruiters — they can explain the “why” and not just the “what” and “how” of their vision. Their convictions make them better leaders, and their employees more loyal, through the ups and downs of startup life. Their passion adds energy to every room and every team.” VC Compatibility Calculator: Add +1 if you’re on a mission to bring a specific idea to the market. 3. Leaders + Managers + Doers Now, if we dive deeper into the characteristics of successful founding teams, I would agree with Jean de La Rochebrochard at Kima Ventures when he writes that “a company needs honest Leaders, Managers, and Doers”. Having a strong leader is all the more necessary in that it helps startups to hire, sell and fundraise. VC Compatibility Calculator: Add +1 if there is one strong leader, another +1 if there is one manager, and another +1 if there is Doer. 4. Decision Making Startup founders need to be able to listen to feedback from employees, customers and their board. Nonetheless, this feedback can sometimes be misleading and contradictory. Hence, founders also need to say “no” and have good decision making skills — Tom Tunguz’s post on that is great. A wise man I recently met summarizes this decision making ability in having “a f*ck you attitude”. Yes, saying “no” to your employees, “no” to your customers, “no” to your investors can sometimes be the right way to go! VC Compatibility Calculator: Add +1 if you believe there is someone in the founding team with good decision making skills. 5. Learning curves “One must learn to assess the learning curve of young founders as a primary reason to decide whether or not to invest into them.” Across the startup journey, founders will make mistakes. The best of them can spot mistakes, reflect upon them, and become better. As long-term investors, we put more emphasis on understanding the trajectory that founders are on than on the discrete point they find themselves in at the point of the investment. VC Compatibility Calculator: Add +1 if you work in fast iteration cycles and can integrate feedback quickly. Total T#1 = Secret, Mission, Leader + Managers + Doers, Decision Making, Learning Curves / 7 Now, that you have the right team and scored highly on the team assessment part, let’s try to understand if you are building the right product. T#2 — Tech (aka Product) 1. Product Picker This part is a good transition between team and product. If you don’t know what a product picker is, I would really recommend giving Michael Wolfe’s post: “The most important job in Technology” a good read. Said briefly, a product picker is someone with great product instincts, someone who understands the needs of the users and the overall vision of the company to make the right product choices in a timely manner. Having such a person early on in a startup team is an invaluable strength and we can often see that looking at the product velocity of a startup. VC Compatibility Calculator: Add +1 if there is one great product picker in your team. 2. 10x better AND cheaper Marketplaces like Uber and AirBnB, as well as SaaS products like Salesforce won in their respective markets because they could offer a product with a much better user experience than their competitors whilst leveraging technology to have a much better cost structure as a company enabling them to offer better prices. Uber did not create private drivers, they just made it available “as tap water”, and at a competitive price because they leveraged technology. 10x Better AND cheaper. As Benchmark’s Sarah Tavel explains well, the devil is in the AND. I’ll try not to say more, because you should really read her post! VC Compatibility Calculator: Add +3 if your product is 10x better AND cheaper. Why+3? This is VERY rare but when this happens, this is a very powerful driver of growth and defensibility. 3. Fast product iterations Just like with teams, in the early days what matters when it comes to technology is the trajectory, not the current status of the company. Hence, i) knowing how to prioritise between product features, ii) releasing often, iii) being able to integrate user feedback fast and iv) working on weekly product sprints is a great advantage in the early days. Yes, that’s a long list of things to get right! VC Compatibility Calculator: Add +1 if you work on weekly sprint iterations and consider that you can test product hypotheses quickly. 4. How critical is your product for your (future) customers? Last but not least, building a 10x better and cheaper product matters only if it is critical for the customers. VC Compatibility Calculator: Add +1 if your product is a must have (vs. a nice to have) for your customers. Total T#2 = Product Picker, 10x Better AND Cheaper, Speed of Product Iteration, Criticality of your Product / 6 Ok, well done, now you have the right team and the right product. Let’s see if you’re going after the right market! T#3 — TAM (aka Market) 1. Large markets Union Square Venture’s investment thesis fits in 140 characters: USV “invests in large networks of engaged users, differentiated by user experience, and defensible th(r)ough network effects” But what does “large” mean? Most VCs would agree that bottom-up wins over top-down market sizing. For SaaS, Christoph summarizes what we look for as follows: “We’re looking for markets that consist of at least 3,000 whales ($1M ACV), 30,000 elephants ($100k ACV), 300,000 deer ($10k ACV) or 3M rabbits ($1k ACV)”. WTF are these animals? (See image above). How does it work with marketplace businesses? Just exchange ACV by (AOV X take rate) and the # of animals by (Transaction frequency/user X # of users). Bottom line, VCs look for multi-billion dollar markets. That said, the more industry specific or vertical (vs. horizontal) a startup is, the more likely it is that a company can own a significant market share (>15%) because of a lower expected competitive intensity. As a consequence, VCs’ expectations regarding market sizes are lower for industry specific solutions — think $1bn markets for vertical solution vs. multi billion dollar markets for horizontal ones. If you’re a SaaS company there is a high likelihood that you’ll need to hunt animals in the US (aka you need to win the US market). Why? Because more than half of the current software spending per year comes from the US. VC Compatibility Calculator: Add +1 if your bottom up TAM is above a billion for vertical startups, in billions for horizontal ones, and add another +1 if you have a chance to win the US market. 2. Feature/product/real company (aka how high is the ceiling?) The reality is that market sizing is always a complex exercise. Why? Because “Innovative tech companies typically disrupt an existing market by undercutting the incumbents on the one hand (and hence shrinking the market), while creating a new use case attracting a larger number of new users on the other hand”. Hence, being a little creative around market shrinkage and long term market expansion is especially important. An interesting way to look at the potential for market expansion is then to think about a startup as either a feature (stalling at 1M ARR) / a product (10M ARR) / real company (100M ARR) — see Nico’s post for more here. VC Compatibility Calculator: Add +1 if you have enough crazy ideas on your product roadmap to build a “real company”. I know this question might be VERY difficult to answer in the early days of a startup. One way to look at it is to think about the current product features of Salesforce and ask yourself if there is enough demand/space in your market to develop such a complete product in 10 years! 3. Optionality / Macro trend Now that your market seems big enough on paper, how do you get to the billion dollar market capitalisation? There needs to be something like a macro trend that transforms a great company into a truly exceptional company. When you think about Zendesk, beyond a great product, beyond the founders’ execution capabilities, couldn’t we argue that the shift towards a more “customer centric” world has also increased the market appetite for helpdesks and thus made the company even more successful? VC Compatibility Calculator: Add +1 if you can already foresee that you could ride a macro trend which might push your growth once you’ve reached a certain size. Total T#3 = $ Bn Market + US, Real Company, Optionality / 4 Ok, well done, the market is big enough. Let’s now wonder about how your startup will grow and gain market share. Because, as Nakul Mandan from Lightspeed writes in his own investment thesis, “Ultimately, startups are valued for growth”. Hence, we try to understand what could drive a company to grow from 0 to 1M, from 1 to 10M, and from 1 to 100M and how much cash each of these steps would require. T#4 — Traction (aka Growth) 1. Market timing: “Is your market in pull or push mode?” It’s always easier to sell if markets are in “pull mode”, ie. when your next clients are already looking for a solution like yours. In “push mode” you will need to convince them that your solution fits a need that they don’t know about. VC Compatibility Calculator: Add +1 if your market is in “pull” mode 2. Distribution advantage Keeping customer acquisition costs low at scale is often very difficult. Why? Because startups need to convince later stage users that are less keen to buy or who are more difficult to find on online channels, and/or because competition will likely push down margins. This explains why “the largest outcomes tend to have one common feature: something in their core product allows them to grow faster over time, while bringing acquisition costs lower”. Digging deeper, we can outline three ways to overcome distribution challenges: The product becomes better with time because the product has intrinsic network effects. It can be either a network of people for a marketplace or a network of data for AI products (see USV Andy Weissman’s post here). Startups can keep on acquiring later stage users because they “provide a better experience to customer ‘n+1000’ than they did to customer ‘n’ directly as a function of adding 1000 more participants to the market” — it’s not my definition, it’s Bill Gurley’s here ;) The product is intrinsically viral: the more users there are, the more people are exposed to the product (eg. Typeform, Venmo). Or channel partners become multiplicators after a startup has reached a certain scale. Tom Tunguz published an interesting post about that earlier this year. Xero and Bench are interesting examples that fit this category. VC Compatibility Calculator: Add +1 per source of distribution advantage. 3. Avoid the graveyard of low LTV and high CAC Last but not least, growth costs money and beyond VC money, the only way to finance it will be to maintain healthy unit economics at scale. In SaaS and marketplaces, this means aiming at a good enough CAC/LTV ratio to avoid what Christoph calls “the graveyard of high CAC vs low LTV”. If you have little chances to benefit from the distribution advantages mentioned above, you can still get extra points if you can charge 100k-1M ACV because you’ll be able to spend big money on sales and marketing. What matters here is not the unit economics at the Seed stage but much more what these could look like post Series A. VC Compatibility Calculator: Add +2 if you have an idea on how you’ll avoid the graveyard! You can be creative :) Why +2? Because it’s almost the most important question. Total = Pull/Push + Network Effect + Virality + Potential for channel partners + Healthy Unit Economics at scale = /6 Ok, now you have a great team, you’ve built a great product, your market is large and looks for a solution like yours. All in all, you have a great business, but what will prevent greedy incumbents or new players from attacking your rent? Moats or Trenches. This is why any investor will try to understand the types of trenches a startup could be building with time. T#5—Trenches (aka Defensibility) Sources of defensibility are not mutually exclusive and each of them is questionable per se (see this 2011’s post: “How strong are network effects online, REALLY?” or my most recent post “Routes to defensibility for your AI startup”). But here is a non-exhaustive list of sources of defensibility: 1. Network effects AirBnB is defensible today because they have the largest inventory of private housing and the largest amount of demand for private housing. They have won consumer trust, built strong user habits and own the supply side by driving consistently high volumes of paying leads. 2. Data network effects ML products become better as they ingest more data. If you own the data that is required to train a ML-powered product, and nobody else does, chances are high that greedy incumbents won’t be able to build a product as great as yours. 3. Superior technology / protected IP Another way to prevent competition is to have a unique technology that is just very difficult to copy, which could be patented or not. Patents for new drugs in the pharma industries are a good example of protected IP. 4. User or Data lock in This is more questionable, but switching costs increase with the amount of data that is stored and locked within a product. If you have all your contacts or deals in Salesforce, and can’t export it, you’ll likely think twice before switching CRM. The defensibility of a product is also correlated with the number of users on the platform. If your entire company has been using and collaborating on Zendesk for a few years, it might not be that easy to change your ticketing software. 5. Brand or Mindshare This one might be as controversial as this is intangible. Nonetheless, we could argue that once companies become top of my mind for their customers, they’re simply not looking for alternatives — remember the last time you used Bing for search? 6. Economies of scale Last is Economies of Scale (which is different than network effect). Once startups get bigger, they lower their break-even points, increase their bargaining power to increase prices, decrease costs, and protect themselves from new envious startups willing to enter the space. Did you ever think about starting a book marketplace? VC Compatibility Calculator: Add +1 per source of defensibility Total = Network effect, Data Network Effect, Superior Technology, User or Data lock-in, Brand, Economies of Scale = /7 Total Team = /7 Tech = /6 TAM = /4 Traction = /6 Trenches = /7 Total = /30 Congrats for finishing the post! Time to test it on your own company? The last extra point I would like to mention to finish this post is a quote from Fred Wilson: As a VC, “You have to figure out how to insert yourself into that journey in a way that is constructive and value adding. And you have to do that work before you invest because if you can’t figure out how to play a role that is constructive and value adding, you should not make that investment and join that Board.” I would probably add +1 here as well, but this is not a question for founders ;) I hope this post brings a little more transparency into the decision making process that we go through as VCs. Written by Point 9 & Published on Medium
How startups can usher in the circular economy
Photo by Matheo JBT on Unsplash The circular economy — a model of production and consumption that prioritises reusing, recycling and sharing products rather than disposing them — could provide a meaningful intervention in the climate crisis. A report by the think tank Circle Economy estimates wider adoption of the principle could reduce greenhouse gas emissions by 39%. However, knowledge of the circular economy is lacking — a survey by YoungPlanet found that nine in ten adults in the UK haven’t heard of the concept. “It’s hard to pinpoint what it is,” says Rachel McCausland, CEO of Lowe Rental, a refrigeration unit rental business based in Northern Ireland. “But the circular economy has the potential to revolutionise how we think and why we buy and I think that it’s going to become more and more prevalent in day-to-day life, personally and professionally.” What does this have to do with startups? Here’s what you need to know — and how startups could catalyse much needed change. Circular from the start Startups have the opportunity to build businesses based around the circular economy from the start of their lifecycle. “Startups have the ability to build their businesses from scratch, truly disrupt the status quo and educate both consumers and businesses, in the process” “Startups play a crucial role in helping the economy transition to the circular economy, because they don’t have the red tape or consumer expectations big tech does,” says Thibaud Hug De Larauze, cofounder and CEO of scaleup Back Market. “They have the ability to build their businesses from scratch, truly disrupt the status quo, and educate both consumers and businesses in the process.” Back Market, founded in 2014, says it’s now the globe’s biggest online marketplace for refurbished devices and appliances, with over 6m users and over €1bn raised. According to figures cited by De Larauze, as much as 70% of existing n is due to disposed electronics, while only 12.5% is recycled. De Larauze says big tech is always looking for the new — offering expensive products that they want consumers to purchase on a yearly, or biennial basis. That creates two problems for customers: affordability and impact on the environment. “Refurbished technology can solve both of these problems. Not only are renewed devices much more affordable, they are key to creating a circular economy and drastically reducing the impact of technology on the environment,” says De Laurauze. This impact of technology and electronic devices can also be mitigated by renting equipment rather than purchasing it. This is particularly useful for smaller businesses and startups that may not know what equipment they need as they begin their journey. Try before you buy Lowe has been leasing large refrigeration units to clients for the past forty years. Primarily helping food and drink businesses display their products at trade events and exhibitions, they also provide longer term contract solutions for clients. “If a customer comes to us with a budget and they want a certain specification, we feel it’s our responsibility to put options on the table that use less energy” McCausland says their role within the circular economy is a “natural byproduct” of their offering to customers, but that businesses now have a role in educating their clients and customers about its role in building a sustainable future. “We always provide options,” she says. “If a customer comes to us with a budget and they want a certain specification, we feel it’s our responsibility to put options on the table that use less energy.” Lowe works with a number of early-stage businesses. They offer a scheme called “Try It, Buy It” — which McCausland says is popular with startups — where customers can lease equipment on a one or two-year basis, before purchasing the equipment should they need it. “It gives startups that flexibility to understand whether that product is going to add value to their organisation,” says McCausland. “It fits in with the circular economy as well. By acquiring equipment that has a proven track record and has been used before, they can be more sustainable.” What about waste? Even with these initiatives, there will always be some waste generated by personal and business consumption. Lowe has a stringent wastage policy in place, supporting clients in ensuring that any product that has to be replaced will be recycled if possible, and that any polluting chemicals such as refrigerants will be disposed of properly. “Two billion people around the world are not connected to an effective waste management system” However, there is also an opportunity here for startups to offer an alternative waste management system. “Waste management is broken,” says Nicola Stones, vice president of marketing at Cleanhub, a Berlin based startup which helps clients dispose of their plastic waste. “2bn people around the world are not connected to an effective waste management system,” she adds. “And the legacy waste management systems in most developed countries lack the data capture and transparency needed to support acceleration to a more circular economy.” Cleanhub’s goal is to create a “circular economy for plastics”. Their credit-based system calculates how much plastic waste a brand may create, and then helps them invest into disposal schemes of non-recyclable plastic waste in high polluting areas. Stones says it has already saved 2kg of waste from being improperly disposed of since 2020. But, according to Stones, “there isn’t a silver bullet”, when it comes to plastic packaging. Brands want to do more, but can’t simply quit plastic overnight. “We need packaging alternatives, but we also need effective waste management. Funding waste management in areas of high plastic leakage is an immediate action that brands can take to start having a positive impact on the problem,” says Stones. “Startups can play a huge role,” she continues. “It is much easier to implement the circular economy model from scratch than to transition existing systems. All new products should be designed and sold with a clear plan for how the materials would later be collected, recycled, and used for something else.” How startups can usher in the circular economy: By SIFTED - October 13, 2022
Nauta Capital launches new pre-seed initiative for European deeptech startups
Source: Nauta Capital Nauta Capital, a leading pan-European venture capital firm investing in capital-efficient B2B software companies, has today launched a new initiative to support pre-seed deeptech European startups. Called ‘Nauta Labs’, the specialist venture programme will offer pre-seed B2B deeptech companies capital to accelerate their concepts and grow into the next generation of Europe’s deeptech category leader. According to the European Commission, Europe’s deeptech companies are worth a combined €700 billion, making Europe a rising digital power and a hotbed for deeptech startups to flourish. Despite this potential, research shows that only 20-30% of pre-seed startups in the deeptech space receive funding due to extended R&D needs, while funding for seed-stage startups in the UK fell by over 80% in 2020 according to research by Plexal and Beauhurst. Inspired by the scarcity of capital available for pre-seed and pre-revenue B2B deeptech companies, Nauta Capital’s new initiative will back 12-16 companies for the next 12 months to bridge this gap and fuel the next generation of deeptech startups in Europe. Focusing on deeptech companies within verticals such as cybersecurity, quantum technologies, advanced AI/ML, commercial open-source software, and developer tools, Nauta will invest between £100K – £250K (around €117K – €292K) per startup through its Nauta Labs programme. Open for applications now, startups fitting in these verticals are encouraged to apply for the opportunity to access capital and expertise from the programme’s investors. Leading the Nauta Labs programme Nauta Capital’s Venture Partner Pratima Aiyagari said: “The Nauta Labs program will explore areas which are foundational for the coming decades and the mainstay of the current shift in software consumption patterns that have emerged – from quantum to AI. R&D Labs across Centres of Excellence and Universities in Europe are working on some of these hard problems. As scientists and entrepreneurs stand at the cusp of spinning out their businesses, we would like to partner with them on the journey towards commercialisation.” While the programme officially opens today, several startups ranging from cybersecurity, network management to open source have been offered pre-seed investment under the Nauta Labs umbrella. Nauta Capital will continue to invest in Seed to Series A through the fund it launched with a €120 million first close in 2020. While the primary thesis for the VC firm remains on investing in capital-efficient B2B software companies, Nauta hopes to further invest and co-invest in the startups accepted into its Labs programme as they mature and commercialise their concepts. Nauta Capital’s London-based Partner, Carles Ferrer said: “Nauta Labs fits well into our main B2B approach and making sure we can back future deeptech winners from the start, and Pratima has a fantastic experience to lead this effort.” Nauta’s main areas of interests include B2B SaaS solutions with strong network effects, vertically focused enterprise tech transforming large industries and those leveraging deeptech applications to solve challenges faced by large enterprises. With over 60 investments, and more than 10 exits including Brandwatch and recently announced Holded exit, Nauta is one of Europe’s largest and most active B2B investors. EU Startups: By Charlotte Tucker - June 30, 2021
How to move from prototype to minimum viable product (MVP)
Microsoft Startups 6/3/2021 1. Collaborate with the right technical professionals When you're ready to begin building a working product, you'll want to first find a collaborator who has the right knowledge and experience to help you. Even if you're confident about your technical expertise, having a partner who can provide diverse business insight, or a specific technical skill is a big asset. While many founders may find short-term hires and engineering interns valuable at this stage, keep in mind that not every partner will provide you with the support and commitment you need to work efficiently and effectively. Lindsey Goodchild, Co-Founder and CEO of Nudge, a communications platform that empowers deskless employees to drive better business outcomes, said that she teamed up with her now co-founder to build her MVP only after losing time and money with an outsourced development agency. "When you're starting a tech startup, I recommend having the technology chops in-house from the start," she said. "Even though you might get by from outsourcing your MVP, you have to have capital to do it, and it might not give you best the product in the long-term." 2. Test on the right users By now you should know that customer feedback is crucial for a successful startup. Once you've built your MVP, the relevance and usefulness of any feedback session will depend on who is testing. This means you need to include both purchasers and end users in your sessions. Julia Regan, CEO and Co-Founder of RxLightning, a digital platform that automates specialty medication enrollment, carefully curated her MVP testers to ensure they were also her target customers. "We identified beta groups based on specific experience within the healthcare technology industry," she said. "By narrowly targeting this group, we had interest the moment our MVP was ready." Goodchild noted that she made sure to test her MVP with hundreds of end-users who were employed with a potential customer. After the users downloaded the app, her team conducted focus groups where each employee shared what they liked and what they didn't like about it. "I think a lot of founders forget that their purchaser might not be their overall end user. And then there's just a lot of boxes that are left unchecked when developing their MVP," Goodchild said. 3. Be creative with your feedback methods Whether you are testing with a purchaser, end-user, or both, keep in mind that many testers will need encouragement and direction. You can enable them to provide useful critiques with these creative feedback ideas: - Ask customers to speak their thoughts out loud as they use your MVP. - Let customers take a collaborative role in your design by asking them write, draw, and sketch to demonstrate their idea of an improved feature. - Create a second version of your MVP with a few different features or designs to gauge reactions with separate groups. Creative thinking can also mean re-imagining how to gather feedback at all. For Regan, this came into play when doing beta testing at home during the past year, when everyone was working remotely. "It wasn't ideal, but I ran customer discovery sessions virtually, showing features on screenshares and asking questions around them," she said. "If I've learned anything, it's that if you want to keep moving forward with your product and startup, you have to stay flexible." ref: https://startups.microsoft.com/en-US/blog/mvp
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