ready to compete? seedcamp laibach application deadline 27th of april

there is a mini seedcamp coming up in laibach(slovinea). while the actual competition takes place on thursday the 14th of may 09, the application deadline is approaching fast: midnight on the 27th of april. apply right here.

although there is an expressed regional focus on southern europe, this is a rather nearby place for austrian start.ups to compete and certainly an opportunity not to be missed.

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barcamp innsbruck 2009 & 25 start.up competitions now on the start.upICT finance mindmap

barcamp innsbruck april 2009 is happening this weekend (25.-26. April 2009 ) in tyrol (AT) and i am glad to join. i propose to discuss the topic of start.up competitions. any inputs are welcome.

in preparation of the upcoming barcamp , the start.up finance mindmap has gained plenty of updates on the area of start.up competitions: there are 25 now on display.

furthermore the interviews with andraz tori and christoper clay as well as the series "six steps to venture capital" can now also be found in the ever growing topic map of the start.upICT blog.

the popular finance mindmap as well as the topic map can now be accessed directly through the top links on the right of the blog in the "START.UP FINDER" section.

interview with christopher clay, founder of "soup"

Image via CrunchBase

time was running fast, when talking with christoper clay of "soup". soup is a "tumblelog, a super-easy blog that can do more than just text: post links, quotes, videos, audio, files, reviews and events.". try it out here or just have a look what is going on at soup. winning seedcamp in 2008, working in vienna, london and san francisco, there was a lot to talk about the daily life of the young austrian start.up

this is the second interview in a series with creative new start.ups, after an interesting discussion with andraz tori, founder and cto of zemanta.

christoper, tell me about the (three) most exciting things about start.ing up your company?
first it is all about the places we have been. from berlin to cologne, living for three months in london and just coming back from working for three weeks in san francisco. talking to people, pitching to them all around the world, that‘s been great.

second exiting thing is all the feedback we got. we have 20.000 active users now from all over the world. just scrolling through our feedback tumbelog is simply amazing.

third exciting thing is being your own boss. that is hard. the most important decision is to focus on what to do next. it is fun to learn from your mistakes - and we learned a lot over the last year.

what about the (three) most unfortunate things about start.ing up?
first hard thing is personal. i started the company with two co-founders - none of them is working any more with me. i would not start a start.up again, without having worked intensively with potential co-founders before. so that was very stressful to go through. however, we are three in the team again.

second is the roller-coaster live. there are really bad phases. one day everything works right and you are convinced that soon you are going really big. the next day you are depressed and think that is never going to work and facebook is going to kill us. it is stressful but exciting. therefore you need a good team which motivates each other. i would not be able to do this alone.

starting up in vienna in the hindsight is the third unfortunate thing. the decision to start here was right at the time. but the chances to get investments in the united states would be much higher. unfortunately it is hard to move to the u.s. . for example getting working visa without having founded a viable company in the us is tricky.

what are your lessons learned until now about starting.up?
number one, carefully preselect your co-founders. e.g. by working on a three month non-profit project with them before founding a company together.
number two, not found in vienna again, but in berlin, london or san francisco. because funding is much more easier there.
product wise, number three, i would focus stronger on the build in viral aspects of soup.io. they should have them in place from the beginning, rather then relying on the initial users we got mainly from friends at metalab. then we would be already ten times as big as we are now.

and number four: never give up. for example seedcamp. we got rejected in the first round (when zemanta won), because the did not understand what we did. we still went to the next mini seedcamp in berlin, explained personally what we did to saul klein und reshma sohoni and they proposed us to try again. and well, we succeeded the second time.

when you hear the words "exit" and "shut down", what comes to your mind?
the good and the bad, the two outcomes. either we are in san francisco, have hundreds of thousands of users and funding or we are back in vienna, broke and start something new.
the possibility of failure is very real, statistically most start.ups fail. but we are giving our best and try to make an exit one day.
although losing soup.io would feel horrible. we can not let our users down, so even if it would not work out, we will keep it running.

final question of part 1: how do handle private life vs. work?
probably i have not learned this yet. for me, the start.up comes first. like moving to san francisco and leaving people behind is hard but i would do it. so i am rather unbalanced on this yet. i want to be sure i tried everything for it.
what i learned was to manage my own expectation. when i am too tired some times and therefore have a none productive day, i know now that´s ok. that takes pressure away from oneself.

this was the first part of the interview with christoper clay of soup. where he sees the need for new start.ups and more, read in the upcoming part two.

"surviving after investment", 6th and final part of the series "six steps to venture capital"

a successful venture capital investment into a start.up is a big step. having taken this hurdle, it is all now about staying in the game through fulfillment and transparency.

this is the final and sixth step in the series about approaching venture capital, where the systematic approach to acquire venture capital for a start.ups is discussed.

after the motivation got sorted out in step 1, the a-b list of potential investors in part 2 (part 2.1, part 2.2) got filled. the battleground was prepared in step 3, and how to approach venture capital in part 4 (part 4.1, part 4.2). the art of negotiating was the focus of part five (part 5.1, part 5.2). finally now it is all about surviving after the investment.

the entrepreneur has to be prepared to fulfil what he promised when searching for investors. the ultimate consequence of not doing so is simple: losing her job and/or the shares in company.
under-performance in revenues, product delivery and cost discipline lead to additional cash requirements, speaking vc investments. such a „down round“ (lower valuation then in the first round) is mainly done by the first investor. only some start.ups survive this without changes in management and none without the founders loosing substantial shares.

this in mind, a less ambitious company valuation and reachable key metrics (revenues, expenses, cash flow) can lead to a more desirable outcome for the founders already in the mid-term. in vc-language: increase in company value compared to the investment date.


being a start.up, it is evident that not all goals aimed for or promised get reached. ultimately the investor always finds out. many start.ups think they do not - but they always do. from customers, unsatisfied employees and latest when the company runs out of cash.

rather then „performing“ in board meetings transparency is key for survival. no investor, no advisory board member shall ever get surprised in a board meeting (link sun tzu). setting up a three to four week „one-pager“ reporting schema, outlining the good and the bad is one way. involving the investor in a „srum“ like company development process another. demanding input and such giving responsibility to the investor is crucial.

through fulfilment and transparency the so called „shit meeting“ can be avoided. this is the first meeting between investors and start.up after the investment, when the difference between the investment story presented and the reality come to the surface.

recommendation: 1) only promise what can be fulfilled, 2) fulfil what got promised and 3) always be transparent.

this „six steps to venture capital“ series is a guideline on how to get investor on board. every start.up is different, no product, market, investor or founder is alike.
it needs a compelling business opportunity and a thriving start.up team combined with a structured approach and some luck. then venture capital investments are just another task to work on.

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"negotiations" part 5.2 of the series six steps to venture capital

the negotiation process is key for a good contract. in "negotiations" part 5.1 of the series "six steps to venture capital" the general framework got laid out. in part 5.2 it is all about the details.

key points first

time line, term sheet, contract. in that order. never avoid any critical topic at the beginning. they will sooner or later surface anyway, so they shall be dealt with directly.

know the aims
it is vital to know the aims of the negotiations before they take place. the negotiation team has to decide beforehand what they aim for and how much compromise is acceptable.
one way to do that is to sit down for half an hour, discuss, decide and write down the aims to visualize and remember. then destroy the paper, as it must not be seen by the vc by any accident in the meeting afterwords. this holds for each separate meeting. no-one alone compromises the agreed terms in face of the investor. if a rethinking of the agreed aims is necessary, a break out session is necessary.

break out sessions
they are a common way to take speed or emotion out of tense negotiations. every party gets time to rethink, to cool down or to gather required information. start.ups can co-ordinate their negotiation aims. whenever necessary break-out. rather one break out session too much than having agreed to anything without realizing what it means. having experts on stand-by is recommended.

experts on stand-by
lawyers, technical experts, general advisers or friends are source for support during negotiations. they are to be informed ahead so they can be reached when required.



know the terms
drag along, take along, liquidation preference, right of first refusal, pre-post money valuation, milestones, catch-up, pay to play, ratchet, signing-closing, advisory board, due-diligence,... they all can be looked up. e.g. on investopedia or wikipedia. this is investment language, nothing really complicated about. one just has to be able to deal with them, know them by heart and be able to „play“ - meaning negotiate on the different aspects - them.

tiredness
bad negotiation results can not be excused with tiredness. if necessary take break outs, get food, go scream on the balcony - whatever is necessary. then get back and keep negotiating hard.

socialize
vc are (also) humans. they have hobbies, family, worries, hopes. they are like everyone else. avoid the hawks through checking their references (discussed here).

heart & hard
being respectful and friendly is key. negotiating hard at the same time is no contradiction. not only for the negotiations and the daily life after with vc. it also holds for customers, suppliers, sales partners or employees.
at the end of a long negotiation process both parties are supposed to be unhappy with the results - but still happy to have closed the deal. with the negotiations finalized and vc money injected it is all about fulfilling and surviving. more on why it is necessary to deliver in the upcoming sixth and final part of „six steps to venture capital“.


recommendations: 1) define aims: time line & term sheet key elements, 2) take break outs, 3) have experts on stand-by and 4) know the terms.

in the final part of the series six step to venture capital read on how to survive after the investment. clearly not a trivial task.

"negotiations" part 5.1 of the series six steps to venture capital

finding the right vc is difficult. getting a good investment deal is worse. though with the right preparation, much can be done to achieve a result, which is mutually favorable.

this is the 5th part of the "six steps to venture capital" guide, where the systematic approach to acquire venture capital for a start.ups is discussed. after the motivation got sorted out in step 1, the a-b list of potential investors in part 2 (part 1, part 2) got filled. the battleground got prepared in step3. now it is all about bringing home the money.

experienced investors will take advantage of unprepared start.ups. therefore key topics have to be covered before going into the actual negotiations. to know more about strategy and preparation, see sun zi, moltke and douglas adams for start.ups. basically every contact with the vc can be considered as part of a negotiation process.

overall
time line - term sheet - contract signing & closing are the cornerstones of vc- negotiations. after the 2nd meeting the vc should have figured out the idea, market, business model, competition, exit channels and team - the investment story of the start.up. that done, it is all about nailing down a deal. that´s the same for the potential investor as for the start.up.

time line
the time line outlines the time frame from the beginning of the negotiations until the money flows. agreeing on the time line is rather non controversial and allows to get know to each other. simple does not mean irrelevant. by committing to a time line (especially) the vc has to reserve resources, meaning money.

term sheet
next thing is the term sheet. using common (non lawyer) language, all the important topics of the investment get outlined in it. it is basically a multi-page text document which both parties sign. example see here. whatever key topic relevant to the start.up or vc has to be part of the term sheet.
struggling for compromise is part of this process. moving key topics to be solved „afterwards“ or through proposals of lawyers in the final contract often leads to late break ups. thus involving high lawyer bills and wasting weeks of negotiations. typical time line to reach a term sheet is four to eight weeks. every party covers their own costs. granted that the negotiations were successful, it´s then about fixing a contract.

contract
the final contract gets drafted on the basis of the term sheet. it should merely be a reformulation in lawyer-language. a common lawyer between the vc and the investee reduces costs. based on a well negotiated term sheet, it rarely leads to a break-down of the investment process. the paperwork can produce contracts between 35 to 100 pages.

the costs are typically covered by the start.up after the investor injected money. a maximal allowance for the cost should already be settled in the term sheet, anywhere around thirty thousand dollars/euros. anything above is to be covered by the respective parties.
time line for the contract should be four weeks. two weeks for signing and another two to four weeks for closing finalize the process.

giving the general line (term sheet - contract signing & closing), there are some topics which deserve an in depth coverage, like knowing the terms, break-outs or tiredness.
this will be covered int the upcoming part two on "negotiations" of the series "six steps to venture capital"

linktip: for the MIT 100k participants: executive summaries

updates start.up financing mindmap

the european business angel network and the european venture market are now @ the start.up mindmap.

the members area of the european business angel network gives an european wide overview of business angel networks in the respective member countries. e.g. germany has four listed business angel networks.

the european venture market takes place for the 11th time. registration for entrepreneur is open. time & location: 19th & 20th of may 2009, berlin. prices for entrepreneur presentations are 450-535€.