SY Podcast: Mergim Cahani, Founder and CEO of the Fastest Growing Tech Company in the Balkans

Tomas Tunys, StartupYard

This Machine Learning Geek Thinks You Need StartupYard

Tomas Tunys: Machine Learning Geek

Tom Tunys is the “silent one,” of the Rossum.ai team. He is a prototypical machine learning geek, which is to say: quiet, thoughtful, and rigorous in his thinking. He joined StartupYard along with co-founders Tomas Gogar and Petr Baudis, two also geeky, but comparatively outspoken AI/ML geeks in their own right.

As StartupYard focuses on AI/Machine Learning startups and founders for our upcoming round of acceleration (applications close June 30th), I reached out to Tomas to talk about his experience at StartupYard. Tomas is, as he would say, not a business minded person. This is the story of how he came to appreciate his experience at StartupYard despite initially doubting its value.

Here is what he had to say:

Hi Tomas, you have always been the quiet member of the Rossum.ai team. Can you tell our readers how you joined Rossum, and your background in Machine Learning and AI?

Tomas Tunys, StartupYard

It’s almost a year since the moment Tomas, Petr, and I were discussing the possibility of creating our own startup, but our history together is much longer than that, so let me briefly tell you my story, and how we met.

In late 2012 I started my PhD studies at the Czech Technical University, under the Cloud Computing Center research group led by Jan Sedivy. It was there where the team behind Rossum first met (albeit not all at the same time). We all together worked on a dozen different machine learning applications, supervised students, and helped to build up what is now known as eClub Prague. To sum it up we have known each other for more than 3 years now.

When I think about it I started my PhD back then out of love for mathematics, optimization and machine learning that had built up in me doing my master’s thesis. I should say that prior to that I had no background in machine learning whatsoever but I could always appreciate the beauty and elegance of mathematics and optimization.

Since I had no clear idea what to work on I laid my hands on many different machine learning topics such as document classification, topic modeling, information retrieval, and learning to rank. The last mentioned has become the main focus of my research and it is about developing algorithms for sorting “things” in a particular order such that the final list has the desired property. One example for all would be a web search where you might try to order the list of documents for a query in a way optimized for user satisfaction.

To me this has always been about the act of accomplishing new things in a very intellectual way. What’s strange about my journey to Rossum and StartupYard is that I am really, really not a business guy. Not at all. I just love math.

You’ve described yourself as someone who finds the business aspect of technology unappealing. You’re very critical of business culture. What motivates you to do the work you do, and what do you hope will come from it?

Quite simple to answer: I do what I do because I love it, and moreover I work with amazing, smart, and genuine people which I see as an endless source of inspiration and motivation.

What am I working on right now? I am part of the research and development team in Rossum which is currently building a machine learning engine capable of reading and understanding the content of textual documents on a human level.

This is of course a far-fetched goal (yes, even now with the current level of technology) and we wanted to make a business case out of it right now, not really building a business on empty-handed promises.

We know that we need to take small steps, like the saying “you need to learn how to walk before you can run” (I can imagine a business person would use fly instead of run without hesitation here), so we decided to focus on understanding a particular instance of documents, which are invoices. I’ll leave what we do in Rossum at that, you can find out more at rossum.ai.

What I hope will come out of our work? My only hope is that in the end we built something amazing that everyone can benefit from.

I am of course looking far into the future, but just imagine what can be done with a technology that can go through gazillions of documents accumulated throughout our history, such as research articles, medical reports, legal documents, books, newspapers, internet -take your pick- and provide access to knowledge, not only information, hidden inside them.

How much can research be sped up? How many lives could be saved? How many hours could be spared at court (sounds stupid unless you know how the Czech judiciary system works)? The list may go on. And I know I chose words that make this sound totally abstract and unspecific and I made it deliberately, because it would be really hard for me to formulate concretely what I mean by “access” (interface specification) and “knowledge” (data store and inference engine).

This is something we will be more than happy to contemplate at Rossum.

We had a discussion recently about the impact that AI/ML is having and will have on humanity and society. Can you talk a bit about your perspective on the role AI will play in our lives going forward?

I think that ML already plays an important and maybe irreplaceable role in the everyday life of a modern person and it is going to be more so in the future.

So far ML (Machine Learning) is mostly prominent (and this is solely how I see it, and might be wrong) in the realm of the internet. Web search, social networks, e-commerce, all these services are intertwined with ML algorithms which are programmed to make a user more satisfied, more engaged, click more, purchase more, etc. But ML is going to have a big voice in “the real world” pretty soon (Do not ask what soon means!), for example, Tesla with its self-driving cars.

This big shift is going to make Machine Learning something that more people can directly benefit from. ML works best wherever there is the most data to leverage. That has meant the internet, and advertising, and so forth, but soon it will mean anywhere there is a sensor and a stream of data coming in. It is hard to imagine the range of applications that will propagate from the Internet of Things.

Let’s play for a bit on a more futuristic and philosophical note, because such a question always deserves it.

In my opinion, it is just a matter of time before AI reaches and supersedes the human level of performance in every aspect. There is nothing that would suggest otherwise, on the contrary, and that makes me think what would be there left for humans?

Everyone kind of says, there will always be something left, without having any clue what that something might be, which does not give me a lot of comfort. I fear that in the end AI will rob us of our curiosity, which I reckon is the main driving force of human progress (definitely of mine). Just think about it, there is no way anyone would wait for you to find answers which are already there (definitely not in a business)  – the only person that would need to resist going for the shortcut and get the answer from your pal HAL, is you.

Sadly, I do not see people nowadays willing to ponder over even the simplest of problems, stackoverflow-copy-paste simply wins (if you are a programmer you know what I am talking about). Now imagine there is an omniscient stackoverflow — disaster is in our way! Is there a solution or is it even a problem that needs solving? I do not know what it is for you, but I’d rather stay curious.

We also talked about the nature of intelligence, our assumptions about our own intelligence, and the capabilities and benefits/drawbacks of AI. What do you think most people are getting wrong in our understanding of these topics?

Let me share with you some of my thoughts on how some of us may see their own intelligence and relate it to the idea of (general) AI.

I think that people tend to think about themselves and their intelligence as something superior, and (so far) unmatched, yet I do not think there is an agreed upon concept of AI. There is definitely more than one, hence, for me there is not a firm ground to base a comparison on. How do we define general AI if we don’t understand what makes us intelligent to begin with?

But this sort of an egoistic self-regard, a proclaimed superiority in terms of intelligence that should definitely not become part of the AI we are trying to build. Because if you stop for a second to think about how we treat the runner ups in this ridiculous game you would not want to become a runner up.

Machines can replace humans, like machines have replaced humans throughout history. But there is an important distinction: the machines do not replace humans by doing exactly what humans used to do. Hand-sewing was replaced by the loom. Hand crafting of parts has been replaced by machine tools and moldings, and now 3D printing. The machines that replace humans don’t function the way we do, or produce exactly the same results we would.

So when we consider machines replacing humans, a mistake we can make is to imagine that the process or the product carries on as it did before. But that doesn’t happen. The process and the product are changed, and we as a society and different industries adapt to those changes out of necessity or convenience. If something used to be handmade out of wood, but is now made of plastic, we accept this change because of the cost savings, or because of the superior qualities of the plastic.

We don’t think much about the kaleidoscopic effects of those changes. Industrialization helped create products that couldn’t be imagined before. A car or a plane are just a machine, but now they shape the way that all of society functions.

That same process happens also in services. We had bank-tellers, but people accepted a less personal approach in order for the convenience of cash machines. Bank-tellers became fewer and more specialized. Call centers and phone operators are another case of this. Soon it will apply to more professions. The outcomes will be different, but it will be about what people are willing to accept- not about exactly reproducing the same results using AI.

Today we do not understand what those results will actually be. We cannot know, just like we couldn’t know what the results of the industrial revolution were going to look like. Some huge positives, for sure, but also some big, big negatives.

A big mistake I have heard from people, some of whom invested a lot of money into the research of general AI, is that they can make sure to build AI that obeys certain rules of conduct.

Nothing can be further from the truth and we, humans, are the best example. When you are a parent, you may try your best to control for all the factors that can influence your child’s growth (external factors could make this a false analogy, but I do not think so), but there is no way of saying for a 100% certainty that a child will become a nobel prize winner or a serial killer. The problem when it comes to AI is the latter.

You cannot predict how something will evolve when it is inherently as complex or more complex than you are. No simulation or set of rules can account for all variables when you don’t know what all the variables will be.

By this I am not implying we should drop the idea of developing general AI. I am saying that we should become really careful parents for the AI we want to raise. In the end we need to hope for the best (or just roll the dice) when we decide to let it go into the world.

I guess most people also see AI as something that is bound to become evil. But this also begs the question: what is meant by evil? This is a favourite theme recurring in literature and movies and I am talking about it mainly to mention a particular one — R.U.R. by Karel Capek — where Rossum gets its name from, which also kind of gives away what we plan for the future (just kidding?).

You’ve said that you initially were very skeptical about StartupYard, but that now you would recommend the program to others like yourself. What changed?

I experienced StartupYard! That’s what changed. I guess my skepticism about StartupYard stemmed from my ignorance and lack of a “business” gene.

When we joined StartupYard, I suspected that it would be a distraction and a waste of time. I want to work on AI/Machine Learning, and not talk about working on AI/Machine Learning. So for me that’s a struggle, and one I still experience.

The Rossum Team: Petr Baudis (left), and Tomas Gogar (middle), with Tomas Tunys (right)

But on the other hand, for the other members of our team, Petr Baudis and particularly Tomas Gogar, I saw incredible changes in their thinking, and really noticeable growth in their abilities outside of the technology we are working on. The other Tom definitely has the business gene, and StartupYard brought it out in him and made him much more confident, and much more wise about the business, and all the challenges we face.

Honestly, I would be lying to say that this was an experience that transformed me as a person, but as a team we were quite transformed. We began to work with much more focus, and so much more effect, on problems that are going to help us grow and keep climbing new mountains.

I can see the difference between our mentality at the beginning, and our mentality today, and it is remarkable.

What would you say to someone like yourself, who is deeply invested in advancing new technologies, but doesn’t believe that an accelerator StartupYard is what they really need?

Well, I don’t want to make a case out of myself, but I would say this:

If you are on your own and you want to do business for whatever reason, then you definitely need something like StartupYard.

I am not a sell out. I will not claim StartupYard is the best thing that can happen to you, but I will say that from my experience the whole team behind it does its best to shape your idea (or if you have none, it helps you to formulate an idea) into a real and viable business.

It does so by providing access to a vast network of mentors, which you certainly do not have and who are non-technical for the most part. In the end many of these mentors can become your potential customers, while others can come up directly/indirectly with an opinion or an idea that can really move you forward in your own thoughts. Moreover, StartupYard teaches you how to think about your business and prepares you on how to talk and present your ideas appropriately. That’s the most crucial part: getting others to understand clearly what are you bringing to the table.

I guess I read this on the StartupYard blog, but I grew fond of it: you and your ideas need to be the fire and StartupYard is the gasoline that makes it go big. I know it sounds like a cliche, but the people behind StartupYard really live up to that message.

And if you are a part you a bigger team, where the others are eager to take over the business part and you have the luxury to concentrate on what you love, then it would really depend on the others, but after seeing the personal growth of Petr and Tomas after going through StartupYard, I can only recommend taking that chance and joining.

You can now apply for StartupYard Batch #8.

  • Robots
  • Artificial Intelligence
  • VR/AR
  • IoT
  • Cryptography
  • Blockchain
Applications Open: Now
Applications Close: June 30th, 2017
Program starts: September 4th, 2017
Program ends: December 1st, 2017

Friday Funnies: Thought Leaders

 

Our Thoughts

Thoughts are very important. Leadership is very important. Thought leadership may be the most important development in thinking, or leadership, since before thought leadership.

In all seriousness, this video is a valuable teaching tool for StartupYard, and we use it to show startup founders that the elements of a convincing presentation are from a separate skill-set than a deep knowledge of what you’re actually doing.

Knowledge is never enough, but nailing the format is also never enough. Always, founders must compromise between what they know, and the things they need to do to gain the trust of others. We call it “being clear,” rather than “being accurate.”

You can now apply for StartupYard Batch #8.

  • Robots
  • Artificial Intelligence
  • VR/AR
  • IoT
  • Cryptography
  • Blockchain
Applications Open: Now
Applications Close: June 30th, 2017
Program starts: September 4th, 2017
Program ends: December 1st, 2017
Startup Fail, StartupYard Accelerator

Pitching: Form Over Function

In the past few weeks, the StartupYard Batch 7 startups have been practicing their pitches for DemoDay. Tonight, they’ll be live online and in person at Kino Svetozor, at 18:30 Prague time.

The pitch gets a lot of attention in the startup world, but for good reason. Done well, it is an effective way of communicating your ideas, and also challenging yourself to define the problem (or problems), you’re really solving.

Form and Function

Though you do hear the stray complaint about the emphasis pitches receive in the tech world, I generally find most objections miss the point. Certainly there are bad pitches, and there are ways in which founders and investors are not served well by them.

A startup pitch is very predictable. You introduce the theme in an exciting way, framing the pitch in the broader context. Then you address the “problem” you are solving. Then you present your solution. You then talk about the competitive landscape, and why your competitors (or whatever solution your customers currently have), are silly and outdated, and then you talk about your business and your team, and maybe ask for money.

Pretty simple. And anywhere you go, the format stays the same. Investors from anywhere, going anywhere else, know with some certainty that they will hear those things. The discussion is then about whether they agree with the conclusions the startup is making.

But every round, our startups struggle with staying in those boundaries.

This is at least partly because pitching is quite unlike the other ways in which founders are asked to prove themselves. We expect startups to break rules. To get around the usual processes. To “disrupt,” as the jargon word of the century puts it. But pitching is just not like that.

It’s the Problem, Stupid

For starters, pitching is form over function. It’s a tool of rigid constraint, that is meant to contain “out of the box” thinking inside a narrative box. Consider that at StartupYard, we spend 3 months helping founders to see that the normal rules don’t apply to them. And then we insist that they follow a pretty strict set of rules in order to pitch.

But we do that because the format shouldn’t matter. The only thing that matters is the content. What is the problem being solved? What does that problem mean in a broader sense?

The format is standardized because formal variations on that standard tend to draw more attention than the content of them. Anyone who’s been forced to write a haiku in school will know what I’m referring to. Constraints can force us to be creative in ways that we are not used to. Attention getting can work, in some cases, but it also carries a different set of risks.

I can give you an interesting example: a startup I heard pitch back in 2014 at LeWeb, called JukeDeck. Now what’s interesting about JukeDeck is that they use neural networks to auto-generate music according to a few simple parameters.

Of course, if you had been at that pitch, you wouldn’t have known that, because almost all of the pitch was taken up with the whole team dancing and rapping over music that had been generated using their software. It was certainly entertaining.

I did understand from their pitch that companies would probably use such software to auto-generate background music for corporate videos, and maybe even retail environments. But I learned nothing about the current solutions on the market, the business case for this one, or the actual pain point it was solving.

JukeDeck won LeWeb. And they won TechCrunch Disrupt a year later. If it’s a competition, certainly breaking the rules can help you win. But did that pitch actually help their business? I’m really not sure. The panel’s questions following the pitch were revealing: “why would a business want to use this?” and “how much would a company pay for this software, when stock music is relatively cheap?”

The whole panel was taken up with answering basic questions about the business- questions that could have been answered in the pitch itself. That instantly puts the founders on the defensive. This exciting, crowd-pleasing pitch, which generates buzz, might not actually help people understand what you do. And while the panel asked basic questions about the business, they consequently had no time to ask questions about the underlying technology.

Boring Works

StartupYard startups have won numerous awards for pitching themselves. Not least would be companies like Gjirafa, Neuron Soundware, and Speedifly. I’ve seen our startups pitch outside our program, and heard the feedback they get. Clarity, honesty, strength. These are none of them mind-blowing, but nevertheless more important.

I can tell you one thing about all of these pitches: they are not outwardly exciting. If you were to watch them from behind a pane of glass, you’d have no idea why they win awards.

Instead, they are exciting in the sense of what they talk about, and what new ideas and thinking they illustrate. But they contain no gimmicks. There’s no real flash. The founders, too, are practiced and calm. Everything goes according to plan.

Our thesis at StartupYard, when it comes to pitching, is that your plan better be exciting and game-changing, because trying to spice it up after the fact is putting lipstick on a pig. The drama is not in the performance, but in the story itself. If you hone in on a real, emotional storyline, involving real human beings and real world customer pain, then the pitch doesn’t need bells and whistles: it’s made of gold already.

 

Beeem, StartupYard

Meet Beeem, A Website for Every Thing

Google is betting on beacons. They aren’t the first, but this time it’s with a twist. It initially struck us as odd, that though beacons as a concept have been around for a long time (Apple launched iBeacon in 2013, and we even accelerated an iBeacon startup back then), we had very rarely seen any really practical use case for them. Apple treated iBeacon as a bit of a novelty, failing to establish an attractive platform for developers, or to educate the public on how beacons could be used.

That’s changing– beacon technology may finally be getting its day in the sun. The proliferation of bluetooth enabled smartphones, and the rapidly dropping cost of the physical hardware mean that sooner rather than later, beacons will be an integral part of our experience of the world around us. Google calls it the “Physical Web,” and evangelists inside Google see it as tomorrow’s answer to the disconnect between in-person activities, like shopping, visiting a museum, or taking public transport (or parking… yes even parking), and our lives on the web.

Meet Beeem, the StartupYard 2017 startup that is looking to bring the Physical web to your smartphone. They’re doing it with a “WordPress for the physical web,” a platform that allows pre-configured beacons to broadcast the URL of a microsite which can be launched by anyone nearby using Android or Google Chrome, on any smart device. Beeem helps businesses, event spaces, and others to create web-apps and pages that connect their in-person customers with their web presence, allowing for smart enabled storefronts, content, interactive display ads, customer retargeting online via Facebook and Google, and even payment systems.

Beeem.co, StartupYard, beacons

 

With Beeem, a restaurant could easily allow customers to order electronically, without having to wait in line, or a museum could do away with expensive audio-guides in favor of a web-app. An electronics store could allow customers to order and pay from the aisle, rather than lugging their purchases to the counter, and cities could eliminate pay boxes for public transport or parking. To Beeem, the Physical Web means is a website for every thing- the opportunity to create a web presence for virtually any physical object or location, with a central content management system that allows a beacon’s owner to easily configure the web experience it provides.

I caught up with Ferenc Brachmann, CEO and Co-Founder of Beeem, to talk about the Physical Web, and his young company:

Hi Ferenc, how did you come up with the idea for Beeem?

I think this story is going to sound very familiar to anyone who’s ever started a startup, really. I was at a Metallica concert in 2014. I’m really into thrash metal music. Anyway, at the concert, they had a voting system, where fans could vote on their favorite songs, and the band would play them. Pretty cool.

But here’s the thing: they asked fans to vote via SMS. In 2014. To this day I remember seeing the message to vote in an SMS, and looking down at my pimped up new phone with a quad core CPU and 1 GB of memory, and realizing there was something very wrong here.  And that got me thinking a bit.

Beeem, StartupYard, Central Europe Accelerator

Co-Founder CEO of Beeem, Ferenc Brachmann

Of course, the concept of using the internet to interact live and in person was not new at all. But the fact is that there were essentially two approaches, neither of which work incredibly well. Either you could create your own app or website, and populate it with interactive widgets and forms (and face all the challenges of compatibility and scalability that entails), or you could use a platform designed specifically for the kind of interactions you want, and get everyone to use that.

Metallica could do an app, but then everyone would have to download it and it would still have to connect with something on their back end. Using SMS was the platform solution. It could easily have been some other web service, like Google forms, or one of a hundred voting platforms. It works, kind of, but it leaves a lot to be desired.

For starters, Metallica can’t turn around and leverage all those people who voted via SMS to come to their next show or buy an album. What can they do? Spam them with SMS messages? That won’t work, and it will be really expensive. They don’t own the channel they’re using in that case. The telco owns SMS, and charges a lot to use it despite it being decades old. They’re a gatekeeper.

This issue bothered me for a while, until I went on a trip to South Korea, and had an eye-opening experience. In Korea, mobile internet penetration is basically 100%. It’s everywhere, and it’s fast: you can get a strong connection even in the middle of the Busan Fireworks Festival, which means that there are about 1 Million other people around you in a very small harbour also connected to and using the same networks.

And yet there too, companies like Apple, Google, and Facebook function as the “gatekeepers,” just like the telcos formerly did in the days of SMS. And like the telcos, these big tech companies aren’t necessarily the best medium through which a live venue or a business could communicate with its customers. Their value propositions are all different, and none are a good fit.

WIth Apple, you need an app. That’s a lot of time to download, install, and log-in, not to mention the limited storage space. Google has the same problem with Android apps, or even with search, which requires you to search for the business you’re looking for, only to end up on their website, which is unlikely to work well for communicating with a business then and there.

Facebook is slightly better, especially with their focus on messaging and pages but even there, you don’t have real control over your own audience as a business. And people still ultimately have to actively find you there to connect to you.

So that’s a long story to say: Beeem is the answer to all that. It’s a way for businesses to connect directly with their customers, and to have complete control, without having to rely on any one of these other platforms where they can’t be in control. And it solves the problem of scalability and repeatability that a lot of businesses have, which is: maintaining a web presence takes a big commitment of resources to stay up to date. With Beeem, that part is all taken care of – you’re left just to worry about what you show your customers, and not about which platform to use, or whether your technology is up to date. The future of apps is no apps. No downloading. No waiting. The Physical Web is there when you need it.

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The Future of Apps is... No Apps. via @beeemapp – a Website for Every Thing. Click To Tweet

Or…

 

How is your team uniquely suited to taking on the status quo?

After my trip to Korea, I came home and shared my frustration with my friends Norbert and Peter. Norbert is the owner of a  software company  with a ton of experience, and Peter is the brains behind  the biggest e-learning platform in Hungary. I knew they were just the right guys for the job, so we formed a team, and we’ve been working together now for over a year.

Our team is ideal, I think, because we all really love thinking about these very complex problems of how people use technology, how businesses use it, and how the system in general fails to really reconcile these two sides. Once you start looking at some of the behaviors businesses and people have adopted to communicate, it’s really bizarre.

Beeem Teeem

For example, you walk into a store -let’s say an electronics store- and you find an item you think might be the right thing for you. Does this part sound familiar? You probably pull out your phone, a computer more powerful than the sum of all the world’s processing power combined 20 years ago, and you… Google it. You Google it. And Google may or may not tell you what you need to know about the product. Maybe it even offers you a better price, and it certainly shows you ads from the store’s own competitors.

Do you think that makes sense to the store, which is bearing the cost of stocking the product, that its customers can walk in, Google something, and order it for cheaper somewhere else? There have even been movements to ban use of the Amazon barcode reader in stores in the US because of this problem. People would “shop” in stores that they never bought anything from, and Amazon would benefit from the capital costs that the in-person retailer bore to keep the store open.

That’s ultimately bad for the consumer and for the business, because in the end, the platform is going to win that battle. Cheaper is cheaper. Our team is genuinely committed to reversing that problem, and giving in-person retail a new and unbeatable advantage: which is a direct line to a customer who is interested in something right here, right now.

We need in-person retail. The social aspect of shopping and dining will always be important. Perhaps now more so than ever.  But these businesses need new tools to fight the battle with the big platforms. That’s what Beeem is all about.

Where do you see the biggest impact for this technology in the next 1-3 years?

I haven’t touched much on what Beeem actually is, so I’ll talk a bit about that.

Beeem is like wordpress for the physical web. The physical web is something that will continue to grow in importance in the coming years, as physical beacons (using Bluetooth), become ubiquitous and cheap. What these beacons do (at least right now), is very simple. They can broadcast a very basic URL. A physical web beacon is detectable from any smart device with Bluetooth, and will continue to be integrated deeper into our devices both on iOS and Android work.

What we do, is help businesses to leverage that technology, by sending anyone within range of that beacon to a web-app that is set up under the complete control of that business. We provide the content management system that supports that web app, and provides the business with easy drag-and-drop tools to build the app that suits their business most. We can support virtually anything a smartphone can do, including easy stuff like messaging, video and audio, and even payments, but also complex things, like live interactive programs and even games that combine the real world and the web.

Ultimately, even beacons themselves will not be that important. Anything electronic will be beacon. A phone, a watch, and soon even a clothing tag can broadcast it’s own webpage, broadcasting useful content and services tied to that object specifically. Soon, you’ll be able to “search” the physical web that is around you, and interact directly with every day objects using your phone, or your watch, or maybe VR glasses, or something else entirely.

That’s why Beeem is an App for Every Thing. Because in the Internet of Things, nothing is very useful unless you can easily and seamlessly connect to it and tell it what to do, or ask it to help you. Beeem allows a business or a venue, or anyone, to target their messaging directly to individuals around them, with customized services, made only for them, based on past shopping habits, or location, or many other factors. It could be kind of like the advertising seen in the in movie Minority Report [starring Tom Cruise].

Do you worry about what this means for privacy?

I don’t. But not because I’m not concerned about privacy or about issues of space and invasive advertising.

The truth is that visions like that in Minority Report tend to get the general idea (ads that talk to you as an individual), but they get the execution all wrong. The truth is that people’s standards shift over time, and technology and business have a way of fitting into new standards as they evolve. For example, I very much doubt that businesses would be successful if they shouted at their customers in the way that ads do in many dystopian future films. In reality, we find that as advertising becomes more targeted, it should become more useful, and the need to be aggressive or “salesy” should actually diminish.

Annoying marketing is also inefficient marketing. It spoils the customer experience rather than giving the customer something they really want. The physical web allows online interaction to be much more efficient, and much more relevant to the customer. Nothing you don’t need- everything you do.

Ultimately, the best form of marketing and advertising is the kind you don’t even consider marketing and advertising, because it gives you exactly what you need, when you need it, and never offers you things you don’t want. We don’t consider the signage inside a store to be advertising, because we choose to see it. The same will be true of the physical web: we will be asking for this information, just as when you walk into a restaurant you are, in a way “asking” to be seated and served.

Let’s talk about some of the use cases right now. What can people do with the physical web and Beeem today?

As of today, you can create a fully customized web-app that your customers can access directly from the notification screen on  their Android phones, or via Google Chrome for iOS. We expect that support for the physical web will soon expand in all Chromium browsers (Chrome, Firefox, Opera) and we see hints that other browser vendors will soon join the list.

Beeem, Product

Businesses, venues, or public spaces like museums and libraries can today create pages for visitors, gather instant feedback or field questions, share content like videos and images, and also receive content from visitors, such as visitor photos or other media.

We will soon be adding e-commerce to this mix, meaning that business can direct customers, with only a single tap on their phones, directly to the portal to purchase items from the store. This could be applied in all manner of environments, from sports events to public transportation. No searching, no downloading- just tap and go.

Those are a lot of diverse and complex areas. Where do you want to focus first, and why?

We’ve been focusing on live events like trade shows, sports, and conferences, because that’s often where the early tech adopters are. There are a lot of people with open minds, and strong incentives to be unique in their fields, so we are targeting hobbyists and geeks to really get a sense of how our customers will use the platform.

In order to scale, we’ll need eventually to shift focus to businesses and use-cases that will be easier to apply to a huge number of customers. Things like retail-location web-apps that let people buy on their phones instead of waiting in line, or restaurant apps that let people order on the go. To accomplish that, we are looking at a mix of online marketing, and cooperating with resellers who already provide payment, IT, or web services to these kinds of customers.

What do you see as not really working in the current status quo?

Well, the status quo certainly works for the gatekeepers. Their ad revenues are built on the lack of penetration that businesses have among their target customers. But ultimately, it just doesn’t make sense for consumers to be directed to 3rd party platforms that aren’t controlled by the companies they are actually doing business with.

There will soon be 5 billion smartphones in the world. Having a handful of platforms funneling all the traffic and keeping all the advertising revenue just isn’t right, or fair. Facebook and Google, as they grow in dominance, can demand more control over what businesses do on their platform, when it should be the opposite.

Beeem, StartupYard

That forces businesses to play the game of Google or Facebook, instead of focusing on what they do best. It encourages them to be more like others, and less like themselves. And that ultimately costs consumers money. If you can spend your marketing budget more efficiently, and target it at the right people, then you can provide a better service at a lower cost.

We’ve seen this all before in the history of the web. Apple and Facebook could be seen as some later version of Prodigy or AOL – closed systems that wall off huge online communities. Facebook wants people to spend time on Facebook. Not go somewhere else. They want to scoop up all the customers, and control the whole experience of the web in order to make money, just like Prodigy and AOL wanted to before Netscape. The World Wide Web, at least for a while, stopped companies like AOL from doing that. It offered a variety and authenticity a single company couldn’t.

Mobile has given companies like Facebook and Google, and especially Apple, a second shot at end-to-end control of our online experience. They want us to stay in their worlds, and not create anything outside of them. But hey, that’s just not right. I believe it isn’t the way forward for business, or a healthy open society.

Where do you see Beeem in 5 years time?

Powering this revolution of direct, instant P2P communication between everyone and every thing. We aim to be significant in 5 years time, hopefully working towards becoming a global infrastructure provider.

How has your experience with mentorship at StartupYard been? What surprised you?

The mentors have truly been amazing. I personally never thought that you can put such a strong team of mentors together in the CEE region. Out of the close to 70 meetings we had, we had over a dozen fantastic meetings.

A lot of names come to mind but what has really blew my mind is that several mentors have reached out to us afterwards to recommend us or to get more involved in what we’re doing. That really showed me they take this seriously.

I’d like to specifically mention [Former SY Mentor in Residence] Philip Staehelin, [Longtime SY mentor] Tomas Riha, [Springtide Ventures] Karel Tusek and [Axa Insurance CFO] Sebastien Guidoni who all went out of their way and did things that we really did not expect from a mentor.

How has it been for you at StartupYard?

We got accepted to another accelerator in the region, but we decided not to go. We met Lloyd Waldo in Vienna at the Pioneers festival. We had a really good talk and he kind of sold me on the idea that the program here is good. Later I met Cedric Maloux in Budapest and at that time I realized that the program is probably going to be very good for us. Especially because all of Beeem’s co-founders own companies and know business, it’s just that we’ve never owned a startup before.

The startup mindset is all about scaling. It’s about repeating something millions of times. We wanted to get out of our comfort zone, out of our country where we know the market. Even though I had high expectations I think that this program is just spot on. The depth of mentors here is surpassing even my really high expectations. I think Lloyd and Cedric and the gang have their act together. They know how to put you in difficult spots, how to challenge you without you ever knowing about it.

Think pricing

Startups: It’s Time to Think Pricing. Here’s How.

Out of 7 startups that joined us just a few weeks ago for StartupYard Batch 7, only 2 are currently selling a product to real customers. Those 2 have just a handful of customers each. Most of our startups are very early stage; you have to have something to sell, before you can sell. But it surprises many of them how early it pays to think pricing. 

While we expend days and weeks and months of effort discussing features and USP, design and everything else, it’s surprising to me how difficult it really can be to talk to startups about pricing. Talking about pricing is kind of hard. People don’t want to think about it. They panic at the thought of raising prices, and they cower in fear of having prices too low. It can be a rollercoaster.

Of course, pricing is a sensitive subject. As Tom Whitwell writes in his insightful medium piece on pricing psychology, “Prices are a shortcut to our most sensitive emotional responses.” Pricing is a deeply primal part of consumer psychology, and as Whitwell shows, leaves consumers surprisingly, sometimes shockingly, susceptible to manipulation or suggestion.

I suggest you go and read that piece: The First Rule of Pricing,  to find out why. I’ll wait.

Hello! Now that you’re back, this piece is going to build on Whitwall’s, to talk about what all that means for early stage startups, and how they should actually approach pricing their products for the first time, or through the first few iterations.

Your Customers Don’t Know What They Want (Or How Much They Would Pay)

As Malcolm Gladwell explored in his best-seller Blink, and associated Ted Talk “On Spaghetti Sauce,” it has been known in retail since the early 1980s that optimum sales results could not be achieved by finding the ideal single product and price point. For decades, product companies had been simplifying their offerings in the hopes of reducing costs while optimizing their sales around best-selling lines of products.

 

The logic was simple. The attractiveness of products could be graded on a bell curve. An ideal point was where most customers would be willing to buy, whether or not any of them were completely satisfied. Simple product lines also made advertising easier, reducing the need to target advertising to specific audiences, because increasingly, products were targeted at the vast middle of the market.

As he explains, beginning in the early 80s, big food companies, and later other product companies, discovered that this tendency to optimize around single products was hurting their profitability. Instead of selling one popular product that was a mix of the qualities most customers wanted, producers began to develop products that catered to “clusters” of customers who had distinct preferences.

Importantly, research showed that customers were not well equipped to predict what they would enjoy or what they would buy. As Gladwell notes, “For years and years, the standard practice when you wanted to find out what customers would want to buy… was to ask them.”

But customers routinely used experience as a reference point for future behavior. People are bad at imagining a future that isn’t similar to the present. Likewise, they are not good at predicting their future behaviors, because they assume their behaviors will remain consistent.

Experimental field research discovered that “hidden preferences” in consumer behavior were powerful, and almost completely unknown. By testing products with “value added” features, researchers found that price tolerance was much more flexible than previously believed.

For example, about ⅓ of US consumers enjoyed “Extra Chunky” spaghetti sauce. And yet no major brand offered such a product. Customers failed to state, when asked, that they wanted “chunky spaghetti sauce,” but experiments showed that when given the choice, they readily bought it and paid more for it.

Think Pricing

The post 80s flourishing of product segmentation was slow to be adopted for the digital economy. Driven by the technical difficulty of offering and maintaining more diverse product offerings at different pricing points, and the difficulty of marketing each individually in the online space, software and online companies often adopted the old model.

But today, tiered pricing has seen a major comeback. Customers are again comfortable with the concept applied to digital products. Thus instead of we have “9.99 for Standard, 14.99 for HD,” or the “Good, Better, Best” pricing model, in which features and functionalities are limited or exclusive to different products.  

So what does this mean for your own pricing? First, there is no optimum pricing strategy- at least not in the sense that most startups tend to think. There is no perfect price, but rather a continuum of price and feature combinations, into which most customers fall somewhere. The work of a product company is to identify where pricing and feature expectations align for different categories of customers– what Gladwell calls “clustering.”

If you aren’t consistently testing the limits of your pricing and the feature expectations of your customers, then you will likely leave money on the table. Whitwell uses the example of The Times of London. Beginning in 2014, The Times began asking customers whether they would pay X amount for different combinations of features. They produced a range of prices and feature sets, to test different “flavors,” of plan to sell to their customers.

What they found shocked them. Although a minority of their customers would choose to pay more for certain features, the actual revenue to be gained from offering those features at a different price point far outweighed the lower number of paying users. They found that customers would gladly pay up to 3 times more than they currently did to retain only a portion of the same features they enjoyed at the old price. By throwing in features that customers had not needed at lower price points, The Times had co-opted its ability to upsell those features later.

The Freemium Trap

“Freemium” is generally taken to mean a product which can be used free of charge indefinitely, but which is limited in comparison with a premium version, either in offered features, or capacity (such as storage), or in other ways.

It’s not always a bad idea to have a Freemium model. Particularly, products that provide a long-tail value that is hard to see at the beginning may have to be freemium. Most casual games use freemium these days. Dropbox is also a freemium service, which makes sense, because customers typically don’t have a need to buy up to 1TB of storage in one go- instead, they collect data slowly. Slack is another example: a small team doesn’t always need unlimited message history, storage, and all the bells and whistles on day one.

It’s hard to get someone to pay for something of uncertain value. It’s even harder to get someone to pay for something for which a ready and free replacement already exists.

But on the other hand, many, many startups who use a freemium model shouldn’t. When you provide a product aimed at customers who easily understand the value, and who moreover really need what you offer, then offering them a Freemium experience may simply be giving them a handout. And addicting your customers to the free product can make it even harder to sell the Premium version.

One of our startups, 2016’s Satismeter, experienced exactly this problem. As Co-Founder and CEO Ondrej Sedlacek told me recently:

“Switching from a freemium model to free trial and ditching cheaper plans was a big improvement for us. The truth was that people who needed our product were ready to pay for it.

Freemium ended up being a barrier to selling to some customers, because they would get used to just making do with the free version. When we eliminated our free plan, we saw only a slight reduction in signups, and we increased sales overnight. Plus, free users were ironically the most demanding for support. Paying customers invest their time to understand the product and set up the whole process to get the most value out of it”

Customers who understand your product’s value are inherently better customers in the long run. Attracting people who don’t believe in your product might be necessary at the beginning, but it should be viewed as a means to an end.

Price is about Positioning

In his piece, Whitwell calls attention to this with reference to Apple (itself discussed in another piece: Why You Should Never Ask Customers about Price). When unveiling the iPad, for example, Steve Jobs had basically two options, assuming that he couldn’t actually change the price of the product significantly.

First, he could sell the iPad as an expensive version of the iPhone (something many internet trolls did anyway), or second, he could sell the iPad as a cheaper and better version of a netbook computer. He chose the latter- making a point to talk about the features of a netbook in comparison with those of an iPad, before revealing the iPad’s original price point- at $999.

Voila: the Ipad wasn’t a very expensive phone. It was instead a cheaper and better netbook- one with all the features of an Iphone, and the power of a real computer.

In pricing psychology, this is called “anchoring,” and it’s hard not to notice once you know what it is. Retailers will routinely display their best selling items next to items which are significantly more expensive, and items that are significantly cheaper, in order to give the customer the feeling that she is getting the best deal.

Often products are offered that are far more expensive than is actually justified by features. The logic is plain enough: a few customers might buy the Deluxe Collector Edition, but it’s really just there to make the more popular product look cheap in comparison. That’s how you get a $10,000 Apple Watch, or a fully loaded Mustang Cobra. Buying the next best thing is almost aspirational- the customer is invested in a product category where prices run very high, giving them a sense that they are in the “big game.”

By the same token, restaurants may list the most profitable wine on the menu in second place, just above the cheapest wine, and just below a significant jump in prices. This plays off of a human tendency to “reality check” prices based on other available evidence. $25 for a bottle of wine seems like a lot if the options are $5, $15 and $25, but it seems reasonable if the prices start at $15, and reach over $100.

In sum, pricing can function as a way of positioning a product in the market. Too cheap, and the product may not be taken seriously enough. Too expensive, and it may flash a warning to a potential customer that the product is simply not for them.

Think About Pricing: Cost and Value

There is no formula for pricing. One of the hardest lessons that many startups learn is that the value of a product as they understand it, can be very different from its value to a paying customer.

Thus, cost and value are only loosely correlated. This is why it costs $10 to use the Wifi in an airport. The cost is negligible, but the value to a traveler is worth the price. Most commonly, startups should learn much more about their own customers, in order to understand the value of their products to those customers.

That doesn’t necessarily mean doing what your customers want. But it does mean understanding what your customer’s needs and priorities really are. Anyone who has angrily paid an obscene price for a bottle of water on a train, or for a dongle they simply must have for their Mac, knows that pricing is correlated with need.

Most importantly: think about your pricing more. It rarely fails that, when asked about their pricing, startups lack key insights that would potentially allow them to make the difference between a profit and a loss. Absent a clear picture of the value of their products to customers, startups simply guess at what people will be willing to pay- and more often than not, they guess wrong.