StartupYard Alum Gjirafa.com snags $2 Million Investment From Rockaway Capital

StartupYard is very excited to be able to announce a day we have been anticipating for some months. It’s now official. Global investment firm Rockaway Capital has invested $2 Million in StartupYard all-star Alum Gjirafa.com. The investment is aimed at growing the Balkans’ internet economy, and making Gjirafa, which is based in Kosovo and Albania, the regional leader in search, ecommerce, and online advertising.

Read the Story on TechCrunch.

Mergim Cahani, Co-Founder and CEO of Gjirafa, joined StartupYard as part of our 2014 cohort, and has continued to stay in close contact as a mentor and advisor for our startups. Rockaway Capital is also a StartupYard investor.

Mergim Cahani Gjirafa Investment

The investment follows Rockaway’s aggressive moves in European e-commerce investments of recent years, and it follows earlier investments in Gjirafa from angel investors, including Yandex’s Esther Dyson, Credo Ventures Partner Ondrej Bartos, and Roland Berger Managing Partner (and former StartupYard Mentor in ResidencePhilip Staehelin. Gjirafa secured its first angel investments while attending StartupYard.

This new capital will allow Gjirafa to expand more aggressively in the Albanian speaking regions of the Balkans. The deal also calls for Rockaway to commit considerable resources to bringing other internet properties to Albanian language audiences and businesses, building up the internet economy in the region in partnership with Gjirafa.com.

Gjirafa plans to advance Albania and Kosovo’s first native AdNetwork. They will also introduce e-commerce into the region, where the majority of people own no credit cards, but where the internet population is mobile-first, with over 50% of internet traffic going to smartphones. 70% of the populations of Kosovo and Albania are under the age of 35, presenting a huge capacity for growth in e-commerce and advertising going forward.

“This investment is more than just a bet on the explosive growth potential of the Balkans’ internet economy,” noted Gjirafa’s Founder and CEO, Albanian native Mergim Cahani. “ It’s going to help us accelerate that growth by bringing online services to the region that have never been seen here before.” Cahani has built the search company into a fast-growing organization, boasting 650% growth from late 2014, over 10 million searches executed, and over 1 Million visitors in the past 10 weeks alone.

“This is a clear validation of the potential we have seen in Mergim Cahani and the whole Gjirafa team since we invited them to join StartupYard in 2014,” said StartupYard Managing Director Cedric Maloux. “It’s also a vote of confidence in the StartupYard community and program. This is a smart bet for Rockaway, and a big deal for every day people and businesses in Kosovo and Albania.”

The StartupYard Startup Reading List

If you follow us on Twitter, you probably know that StartupYard is constantly sharing great content with our followers. Internally, we also keep a “reading list” of  items we think our startups should read before, during, or after the program. This is the StartupYard Startup Reading List.

With a new acceleration round beginning next week, we thought we’d share the list we’ve compiled. It’s organized into Collections, Launch, Sales and Conversions, Retention, Growth, Marketing, and Free Stuff.

Under each item is a short extract from the link. If an extract wasn’t available, we added a short summary. Enjoy!

-The StartupYard Team

Collections:

http://startupstash.com/

40 categories of curated tools and tips for Startups. A must have.

http://marketingstack.io/

28 categories of curated Marketing advice and tips. A must have.

Launch

Quick and Dirty Guide to Launching your Startup in 2015

There are plenty of blogs out there that talk about paid advertising, social media, offline distribution, content marketing, SEO, SEM, e-mail marketing and so on. But I will be focusing on actionable items you can do to get your first 1,000 users in a weekend’s time and with less than $500 of investment.

16 Startup Metrics

We have the privilege of meeting with thousands of entrepreneurs every year, and in the course of those discussions are presented with all kinds of numbers, measures, and metrics that illustrate the promise and health of a particular company. Sometimes, however, the metrics may not be the best gauge of what’s actually happening in the business, or people may use different definitions of the same metric in a way that makes it hard to understand the health of the business.

The apps that help you bootstrap | Highfive

Wouldn’t it be nice to have a business idea today, and have that business up and running tomorrow? With today’s apps it’s totally doable.

Sales And Conversions

Complete SAAS Guide to Calculating and Optimizing Lifetime Value

Getting new customers is good. Keeping a customer and getting them to continue paying is better.

Conversion Optimization Psychology

Why are contrasting buttons effective? Why should you use 1st person CTA wording?Why (and when) are trust symbols effective?

Conversion Rate Optimization: Startup Growth Lessons

Some call it – *cough* – growth hacking. Others call it optimization. But what we’re all talking about, really, is crazy smart, innovative, results-driven, product-focused marketing that has an outsized impact on your company’s growth and bottom line.

Retention

Hooked Retention

How GrowthHackers(.com) Uses “The Hook Model” to Foster Incredibly High Member Retention

Why You Need Cohorts to Improve Your Retention

You need to dig deeper into your app using a method called cohort analysis. That’s how you’ll identify how well your users are being retained and the primary factors that will drive growth for your app. Here’s how the most experienced and analytical product people like Siqi go beyond your standard cohort analysis to do it.

Growth is Good, but Retention is Forever: 500 Startups VIDEO

A video from 500 Startups on Retention, and why it is eventually more important than growth.

Growth

The Ultimate GrowthHacking SourceBook

30,000 words of modern-day growth hacking strategies for the discerning SaaS growth hacker.

SaaS Metrics 2.0 – A Guide to Measuring and Improving what Matters

This article is a comprehensive and detailed look at the key metrics that are needed to understand and optimize a SaaS business. It is a completely updated rewrite of an older post.  

43 lessons growing from $0 to $1+ million in revenue, twice

I realized the other day that we’ve grown from $0 to $1 million with two separate products (HelloSign and HelloFax). This happened a long time ago, but I was recently reflecting on the lessons.

Growth Hacking:  VIDEO, Neil Patel

Pierre Lechelle: Growth Hacking Strategy

When thinking about Growth, most people think about CRO (Conversion Rate Optimization) on the ToFu (Top of the Funnel). They don’t really understand what is the power of Growth.

How segment models growth for two sided marketplaces

Frameworks help us organize and understand the world, and data helps us stay focused and monitor progress. So, it’s no surprise we use them both to help us project future growth and figure out how to hit our lofty goals.

Build a Growth Machine Like Andy Johns

Andy Johns has had the good sense to ride not one, but FOUR rocket ships. He has been a key member of the growth team at…

13 Growth Hacking Techniques You Can Apply Right Now

Growth hacking is the idea that an entrepreneur can take a clever non-traditional approach to increase the growth rate and adoption of his or her product by ‘hacking’ something together specifically for growth purposes. Most startups find themselves facing the same problem: they build a product that no one ends up using. Say you have…

Video: 10 Habits of High-Growth Startups by Sean Ellis – GrowthHackers

Sean’s talk at the DEMO Traction Conference.

The Ultimate List of B2B Growth Hacks

Marketing

How We Addressed our Main Content Marketing Pain by Outsourcing to Freelancers

Today I’d like to share with you one of the biggest marketing struggles we experienced at Ivalua, the previous company I worked for and where I handled Marketing for over 2 years: content creation – and how we overcame it leveraging freelance writers.

Why You Need to Create a Content Marketing Strategy
The most popular digital marketing mantra in recent years has been “Content is King”, and while the mantra itself may be a touch overused, it is by no means inaccurate. Now more than ever it’s incredibly important to create a content marketing strategy and make it your your own unique content marketing strategy if you hope to drive traffic and boost brand awareness from online channels.

Persuasive Writing Techniques
Design, SEO, and advertising can only get you so far. If you want to accelerate sales online, you need persuasive copy. According to Harvard Business professor Gerald Zaltman, 95% of our purchase decision occurs in the subconscious mind. Most marketers ignore how our brains work and fight against human psychology.

SEO Tools

153 succint reviews of SEO tools, by Brian Dean

Paddle: App Marketing Ebook

Paddle’s guide to app marketing explores the techniques developers can adopt to drive more downloads and grow their apps.

The science behind killer landing pages

A great list of the essential elements of a landing page, and why certain types of things work for conversion.

ViperChill’s Private Niche Project

A fascinating, if amoral, view of online marketing and networking building

What Startups Need to Know About Content Marketing

With content marketing, you can educate and engage potential clients while differentiating your company and positioning it as an industry leader.

The definitive guide to lead generation Facebook ads

In marketing, lead generation is the generation of consumer interest or inquiry into products or services of a business. For the purpose of this article, lead generation refers to the generation of consumer interest. A list of qualified leads is a priceless asset for your company. It’s cheap to build and works great for every kind of business, including “boring” B2B companies.

CopyWriting Tips

  • Which words do you choose?
  • How do you frame the offer?
  • How can you sell without appearing sleazy?

5 Smart Ways To Use Retargeting To Drive Leads In B2B Marketing

Creative ways to use retargeting ads to improve lead generation. Learn how B2B marketers target site visitors based on funnel stage, industry and email contact information.

How to Win Trust from Google and Rank Well

If your website isn’t trusted by Google, you’re basically consigned to the lowly, deep dark depths of search results pages ten and onwards.

A simple SEO guide in 2015 (Infographic)

Is SEO really a harder game to play as KunoCreative’s Dan Stasiewski put it in this excellent SEO guide infographic?

Investment

A map and List of Investors in Europe

TechStars created a map and list of 300+ investors who routinely invest in Seed, Series A or Series B rounds raised by European startups. All in all, it totals about €15 billion worth of funds.

Amy Guttman: Don’t write business plans: Advice for startups from one of silicon valley’s top seed investors

1. Don’t write business plans; instead build prototypes & test them with customers.

2. Don’t create five-year revenue projections; create 12-month expense projections.

3. Do create marketing plans, but focus on unit economics and metrics/analytics of:

a. what customers cost to acquire,

b. what products cost to build/deliver,

c. how much customers generate in revenue and when

4. Test and iterate on your assumptions — turn your business plan into a business metrics dashboard of KPIs, and continue to measure and improve every week.

5. Don’t run out of cash. Check your monthly burn rate, cash in the bank; figure out your remaining runway and try not to get below six months of cash.

The Guide to Finding an Angel Investment

This guide is indispensable for all wanna-be Business Angels and those entrepreneurs seeking Angel Investment! It contains best practices and practical tips culled from Busi- ness Angels around the world. It is a must-ready, easy-to-read, and great-read for all those private investors interested in playing a major role in the early-stage investment eco- system and those entrepreneurs interested in attracting Business Angel Investment.”

– Candace Johnson, President, EBAN (Europe)

Horror Story: How to Build a Unicorn From Scratch and Walk

A cautionary tale about keeping your priorities in order as a startup founder. Great read!

Social Media

15 New Social Media Templates to Save You Even More Time

Our best list of social media templates for scheduling, organizing, analyzing, and sharing better and faster than ever before.

80 Twitter Tools for Almost Everything

Twitter is chaos, but in the midst of this beautiful mess is a ton of data that if you can understand


What You Need to Know About Open Graph Meta Tags for Total Facebook and Twitter Mastery

Marketers create a lot of content. Yes, content is king, but a king is powerless without followers. So, what’s the first thing that comes to mind when you want to reach a broader audience with your awesome new post?


Facebook Data Study Insights

The Facebook pages that are doing wonderfully well with likes, shares, and comments on their posts have so much to teach about new tactics and worthwhile strategies. Our friends at BuzzSumo analyzed 500 million (!) of these Facebook posts, and we’ve learned some amazing takeaways that you can implement on your page today.

Free Stuff

The Design Freebies List
Free Stock photos

A collection of sites that offer with-attribution, or free to use images for your startup. Always check the terms on individual sites before using an image!

https://blog.bufferapp.com/free-image-sources-list

https://www.pexels.com/

Meta-Search for GNU Public and Free Stock Images

Patrick Riley, of the GAN, visits StartupYard

Last week, in a private meeting with StartupYard mentors and team members, Patrick “Pat” Riley, CEO of the GAN (Global Accelerator Network), hosted a Q and A, and presented GAN’s vision of the current and future landscape for tech accelerators worldwide.

IMG_2866

Riley presents to StartupYard Mentors

Riley, who began his startup career at a startup helping hospitals and medical centers to provide affordable medication to underserved communities, joined TechStars as Director of Business Development in 2011, launching the GAN the same year. Today, the GAN spans 6 continents, and includes over 70 selected accelerators in over 100 cities. The GAN is a selective network of accelerators, including the top 3-4% of accelerators worldwide, that together have accelerated 2500 companies in 4 years, together raising nearly $1 Billion in financing, and creating over 11,000 new jobs.

Gan_infographic copy

Pat visited StartupYard’s homebase at Node5 Thursday, meeting with half a dozen StartupYard startups.

 

Here’s what he had to say about central Europe as a whole, and about the startups he met:


“Central European startups are incredibly unique. They have very strong technical skills, the wherewithal to think about other markets on Day 1, and a laser focus on building products that solve a personal problem. We’re also seeing groups like Microsoft set up their development shops in Central Europe because of how inexpensive salaries are in the area – and startups are taking advantage of that as well.  Because of all of this, we’re seeing the Central European startup scene evolve and develop in very positive ways.

At the same time, there are headwinds facing these startups. First of all, capital is scarce. In the entire Czech Republic there are just a few early stage venture capital firms [ 2 of which, Credo Ventures and Rockaway, are both StartupYard investors]. For a country of 10.5 million people, there is a giant opportunity for greater funding sources.

Secondly, cultural, linguistic, legal and market differences plague many Central European startups. Starting in another neighboring market isn’t anywhere as easy as doing business in another state in the United States. That neighboring market in Europe is a completely different country with different currencies and regulations – making it very difficult to set up shop easily.

Third, while not all Central Europeans are this way, many are missing the “sales” side of their business. I heard over and over again how a customer’s problem was going to be solved technically – when in reality the tech is amazing– it’s the presentation that is lacking.

What many European startups are missing is the ability to sell their product well. During my meetings with startups, I asked many of them what was the vision for their startup, with the answer typically being around how the product has some cool feature. To sell investors, customers and partners, Central European startups need a vision about how they’re going to change the world – and why anyone should care about their startup – because unless you sell me on your vision, no one else is going to.”

 

The Need for More Institutional Investors

During his presentation at Node5, Riley mentioned the increasing role that accelerators have played in recent years as drivers of investment. Considering that startups have an average lifespan, according to Riley, of a little less than 8 months, early stage investment is one of the most common points of failure for startups across the board.

Former SY Executive in Resident Phillip Staehelin

Former SY Executive in Resident Phillip Staehelin

Riley discussed efforts that other accelerators, like Y-Combinator and Techstars, have made to bridge this gap in early financing, either by increasing the availability of convertible notes for companies who attend their programs, or by creating follow-on funds for their own startups.

Shifting Roles of Accelerators

Riley also discussed the shifting roles of accelerators on an east to west axis. Accelerators in Eastern and Central Europe continue to function much as those in California and Western Europe have for over a decade, as nurturing environments for entrepreneurs to grow their networks and experience level, as they test out and perfect their products and go to market plans.

StartupYard mentor Amit Paunikar

StartupYard mentor Amit Paunikar

But as accelerators in the West have matured, and competition has become more fierce not only between startups, but also between accelerators (as well as now between accelerators and other early stage investors), they have also continually provided more funding, been more selective, and offered less and less in terms of the kind of support that accelerators had been known for offering. Workshops, training, and team building have been reduced in favor of more intensive mentoring, and more focus on pitching and business planning.

This confirmed the experiences that Ales Teska of TeskaLabs, one of our startups from 2015, described in making the transition between StartupYard, and TechStars London. Riley pointed out that in countries with fewer institutional investors, and less “startup IQ,” awareness of how to work with and deal with startups is still a major roadblock to success, for which more “hands on” accelerator programs are still needed.

The Role of Mentors

According to data the GAN collects, up to 90% of startups accepted at accelerators are recommended by members of the accelerator community, particularly by active mentors. This again confirms our experience at StartupYard, where many, but certainly not all of the standout applications have come from personal referrals.

Introducing StartupYard Portfolio Manager Jaromir Beranek

We’re pleased to introduce Jaromir “Mirek” Beranek, the latest member of the StartupYard team.

Mirek joins us as a full time team member and Portfolio Manager. It will be his responsibility not only to keep track of and stay in contact with the startups we have accelerated in the past, but also to advise and consult with startups during and after our program on matters of finance, financial reporting, and investment planning. Mirek will also manage StartupYard’s own budgeting and contracts with incoming startups.

Jaromir studied International Management (CEMS) at the University of Economics and Law at Charles University in Prague, taking exchange semesters in Management at the University of Cologne and Law at NOVA Southeastern University in Ford Lauderdale. In 2011, he joined Telefónica’s Aspire Graduate Program and spend the following three years on different assignments in finance, strategy and marketing in Prague and Munich. Mirek is also a veteran of Wayra CEE, the Prague-based branch of a global accelerator network, where he took care of financial matters and portfolio valuation.

I caught up with him this week to talk about his new position with our team:

Hi Mirek, welcome to StartupYard! What makes you want to work with startups?

Let’s put the question differently: What makes you not to want to work with corporations? Then it would be much easier for me to answer: the corporations I have worked for are incredibly slow, most negotiations are very political, middle management often lacks both education and capabilities, no one outside the board has the authority to decide anything and many colleagues felt demotivated and transmitted their foul mood to others, including me.

I simply had to find a different place for self-realization where I could use what I had learned and make some impact. Luckily, the opportunity came at the right time and it was quite easy for me to get used to this Brave New World. First it was Wayra and now it is StartupYard. Of course, even startups can be slow, incapable and helpless at times. But in general, I feel that on this side of the fence I can see results quickly while having fun and doing the work my own way.

Can you tell us a bit about your background in the corporate world?

Being an alumnus of an international management program, I was almost pre-destined to be successfully lured by a corporation once done with the university. And I really liked it at first.

Having gained some internship experience from the time of my studies, I suddenly felt like I became a true member of the big world consisting of huge buildings with shiny glass façades. I wanted to work on interesting projects and be seen. But instead I found myself sitting behind a computer screen all the time and there was no one who would care.

Thus I started learning and learned quite a lot from finance, marketing and strategy. But the frustration began to snowball gradually. Once back from my foreign placement in Munich, I somehow resigned myself to it, and kept on going to work just to make money and make sure I have enough free time to do what I like most. All in all, it hasn’t been a very shiny experience, and now I know for sure that if I was to return to a corporation, I would have to design my own role first and have at least some executive power.

What made you want to become a member of the StartupYard team? What do you hope to accomplish here that will have a lasting impact?

Well, because you are all very nice guys in the first place, that’s an easy one! But seriously, people always make a huge impression and here I felt we would fit well together. Next, I wanted to follow up with my previous work for Wayra and give an afterlife to all those beautiful charts and models I have built. 🙂

cukrou__i_vol._3__15__720

Talking about my footprints, I want to make our financial reports at StartupYard more user friendly, both for us and the investors and then, hopefully, help create a solid and trusted alumni pool where investors could come and pick from them– sort of plug and play. Nice and neat.

And one more thing, I want to help build a strong community around StartupYard so we are heard and seen and more talented entrepreneurs join our acceleration program.

What do you think are important qualities for someone working in accounting, and financial control?

Clearly, to be a good financial controller you have to develop some kind of affection for numbers and tables. It’s definitely useful if you have strong computing skills and can visualize graphs and models you want to build. Analytical thinking is definitely an asset if you want to work with the results further and reflect them in your business.

When it comes to data collecting and work with excel, you have to be patient and thorough but at the same time be determined and know how to make the others give you all the information you need. If you work often with invoices and paperwork, it’s also quite important to be well organized and remember all due dates and deadlines.

You’ve been brought on as Portfolio Manager for StartupYard. How can StartupYard improve our support of alumni?

From my experience, whenever you leave an organization you have been a member of for some time, you tend to lose interest in a few years. Therefore, we need to communicate with our alumni more frequently, tell them about all important events but most importantly invite them for at least two community events every year and make sure they really come and talk to us.

However, this is only possible if you can offer something valuable. In our case, the key should be our contacts to investors and continued mentoring and business consulting. On the other hand, we shouldn’t promise what is impossible – there should be realistic expectations set from the beginning and a mutual relationship of trust. Eventually, I would like to make the StartupYard be seen as a “safe harbor”, a place where all alumni may come to for a piece of advice, sympathy and also a friendly kick if needed.


How do you envision your role with the incoming startups in 2016?

I could be talking about my big dreams and great ideas but the truth is that my role at StartupYard was defined quite clearly. Therefore I know that I will be responsible for a successful and timely negotiations and contracting in the first place.

In order to avoid the nightmare scenario of not having signed one or more contracts by the end of the acceleration period, I have to meet our new startup co-founders very early and build relationships with them. Then, hopefully, they will be also open to share their financials with me, which I need to work with not just to establish business value of the portfolio but also to help them set realistic goals and secure financing under fair terms.

To sum up, I would like to be a partner to them and make sure they make the most of their business.

On this topic, in your experience, what are some of the most common and problematic mistakes that startups make when it comes to their accounting and financial practices early on?


The biggest mistakes some of the startups make is that they completely give up on planning their revenues or only do a few “pro forma” tables.

I agree that it might be difficult to predict your business development if you have just started but it tells a lot about your level of competency and trustworthiness to potential investors. Also it helps to give the starting business some direction.

Another common mistake is that startups tend to rely heavily on first investment prospects based on initial meetings with potential investors or even only on declared interest. It’s important to realize that negotiations may last several months and if you aim too high, you may easily run out of cash and make a fool out of yourself. That was just to name a few common mistakes, but I could continue for hours and I don’t want to be evil! :laughs:


What are some of your hobbies and interests outside of finance and startups?

Most of all I love hiking in the mountains and outdoor sports. Usually, you would find me running, roller-skating, biking or skiing in the winter. Less than I used to but I still play drama with my friends in a student artistic group OLDstars. I also used to play music quite a lot before: clarinet, saxophone, guitar and a bit of singing. Over time, I started to prefer going to theaters and concerts as a visitor, having realized that I will never be as good myself.

Two years ago, I meet a group of very interesting and active people in Vacation School Lipnice, who organize one or two week experiential courses and workshops for groups of people across generations. There you learn by playing games, discover new things about yourself, fight your fears and make new friends. I would like myself to organize a course like that to promote political and journalistic engagement among high school and university students.

Last but not least, it’s also worth mentioning that my friends and I write a blog about Prague confectioneries www.cukrousi.cz.

7 Things the Government Could Do For the Startup Ecosystem

We talk to mentors, investors, entrepreneurs, and startup founders on a daily basis at StartupYard. Just last week, we hosted an in-depth discussion with Ales Teska, of TeskaLabs, who recently moved his company to London, about the Czech startup ecosystem, and how it compares (or doesn’t) with its London counterpart.

We’ve also hosted several interviews recently with StartupYard mentors and investors such as Andrej Kiska and Ondrej Krajicek, that focused among other things, on the impact that government policies can have on the startup ecosystem.

We often trumpet the benefits of doing business in the Czech Republic, and those benefits are very real. A low cost of living, low cost of doing business environment with a high number of skilled IT workers and engineers makes the Czech Republic competitive in the world of startups.

But good enough, for us, just isn’t good enough. Here are a few ways we think we (and other startup ecosystems) could do better through smarter government.

Starting Off Equal


Here we’re going to take the long view, and look at Europe as a whole. While, as Andrej Kiska pointed out in his interview with me in July, incorporation may be relatively easy in the Czech Republic, from his perspective as a partner at Credo Ventures, that doesn’t mean that the current regime is encouraging people to start new companies.

Incorporation may be easy if dealing with corporate structures is your day job. But entrepreneurs are engineers, artists, artisans, and inventors. They are not lawyers or accountants, and most aren’t even sure of which kind of lawyers and accountants they might need to hire to get the job done.

Incorporation in the Czech Republic still takes time, paperwork, signatures, notaries, bank accounts, identification, and in-person visits to various offices and departments. Contrast that with founding a company in the UK, where the process is fully electronic and fully supported by Gov.uk, or even better, founding a company in Estonia, a world leader in digital entrepreneurship innovation, where it takes literally minutes to have a company off the ground.

An entrepreneur in Estonia is already off and running for virtually no cost, while one in the Czech Republic is waiting for a criminal background check, registering a trade license, paying for notaries and articles of association, waiting in line at the bank and many other details, and spending about 30 days (minimum) and over 1,000 Euros for the privilege of doing all that.

In startupland, the costs of failure determine our appetite for risk. We should be taking more risks, more often, and we should be minimizing the costs of failure.

A Europe-wide, single framework for starting a business should be created to allow companies in any European country to start businesses in a single legal environment, in as short a time as possible. The system should be flexible enough to allow different companies to operate under the laws of their respective countries, but simple enough to allow anyone to start a business anywhere, whether or not they are a citizen, or even a long term resident of that state.

Estonia has proven with its digital residency program, that a paperless bureaucracy can better adapt to the needs of the modern digital economy. We need such programs Europe-wide.

Investor Incentives

Startup ecosystems depend upon and thrive on the investments of angels and VCs who are aware of the risks. We have talked here often about the risk aversion of Czech investors, who are reputed for their conservativeness. While that may only be partly true, it is no secret that the Czech Republic does have a smaller volume of such investments than neighboring countries like Germany, or France, even accounting for their larger populations.

We need to encourage investment in riskier ventures like startups, by offering a combination of tax incentives and government backed investment matching programs for startups and their investors to take advantage of.

This year, StartupYard has taken advantage of FiWare, an EC grant program which has allowed us to tie our recommendations for the allocations of grants to the success of individual startups raising money after our program. Through this program, we were part of the fund that helped raise 337K Euros for TeskaLabs, the fastest raised pre-seed funding round in Czech history. Our ability to help TeskaLabs meet their immediate needs, grow their sales pipeline, and become a more attractive opportunity for private investors.

The Czech Republic, along with individual municipalities and regional authorities, should replicate that success by funding grant programs that go directly to startups, by supporting existing venture capital deals, and make them even more enticing to investors.

The prevailing system forces startups to seek grants alongside private investments. But as Ondrej Krajicek detailed in his interview with me recently, this is the wrong way around:

“It happens to us from time to time as well that companies approach us with projects that don’t really need our involvement, but need a corporate partner for government funding. I don’t accept these sorts of arrangements as a rule.

We have projects at Y Soft that also seek public funding – I find myself in an awkward situation thinking: how can we differentiate as a real project with these projects designed to get funding? We are a real project, not one designed to meet the specifications of a grant, so we ironically have less of a chance of getting the funding for that. And that isn’t the way it is supposed to work.” – Ondrej Krajicek, Y Soft Ventures

The government should not be in the business of deciding which startups deserve investment capital. That produces companies that get investments because they’re good at convincing the government to give it to them, not convincing customers to buy from them or real investors to invest in them. Instead, the government should support qualified investors by giving them incentives to invest, including matching funds on all their startup investments.

To push new investors and high net worth people to invest in technology, startups should be classed as a special investment category, and investors should be allowed to deduct their investments in startups from capital gains taxes.

Social and Employment Incentives

As Ales Teska noted in his talk with us at StartupYard FastLane last week, a startup founder can expect to spend most of his or her time during the company’s initial growth phase, in hiring new employees. The Czech Republic is not lacking in talent, but startups have few competitive advantages against big employers who can offer not only competitive salaries, but also benefits.

The government should incentivize startup hiring by making it easier and less costly to leave the corporate environment, and join a startup. It can do this by subsidizing the costs of health and social insurance for startups hiring their first employees, within the first few years of operation.

This would allow startups to cut the costs of hiring, and pass the savings on to their employees, and it would discourage small companies from only hiring “sole trader” contractors who subsidize their own social and health insurance, and have little to no job security. Today, a large number of small companies abuse the Zivnostenski List (Sole Trader) system, because the costs of hiring employees directly are prohibitively high.

Welcoming Immigrants

The Czech population has remained virtually steady for over 50 years, while the population has continued to age. As is true in many developed European countries, the Czech birth rate dropped below replacement rate (the rate at which the population has enough children to replace themselves, about 2.1 births per couple), in 1980, with the average lifetime birth rate reaching a low of 1.13 in 1999, and rising slowly to 1.53 last year.

At current birth rates, without an increase in immigration, the Czech population could fall by as much as 30% in the next 30 years.  Up to 100,000 fresh immigrants might be needed every year to keep the population steady at the current level, and avoid a demographic and fiscal crisis. Meanwhile, Czech government policy has been lax at best about confronting future challenges.

Shamefully, The Czech Republic waited until only last year to amend its citizenship laws to recognize Czech-born foreigners who had lived their whole lives in the Czech Republic as deserving of automatic citizenship. Before that, 2nd and even 3rd generation Ukrainian, Polish, and Vietnamese residents were not necessarily eligible for citizenship in the only country they had ever known.

In addition, today, a foreigner’s time spent as a full-time student in the Czech Republic counts at only half the normal rate when it comes to qualifying for permanent residence. At the same time, foreigners who study in the Czech language attend university for free.

This means that the Czech Republic is financing foreign students to get university degrees, and then discouraging them from staying and contributing to the Czech economy by becoming permanent residents. This is not only unfair, it is idiotic. Foreign students are exactly the people we need in our workforce.

The government should abolish immigration laws which limit the eligibility of foreign students to obtain permanent residency and work permits after receiving university degrees in the Czech Republic.

Currently, fully half of medical school graduates in the Czech Republic emigrate every year. Figures aren’t available for IT workers, but the numbers certainly high.

Accelerators in the US, not a country where immigration is easy, manage to get visas for their visiting teams within about 2 weeks. StartupYard averages 2 months. In addition, companies incorporated by foreigners face a never ending string of pointless administrative challenges.

We need sensible but aggressive programs for attracting and retaining talent.

The government should also create special entrepreneurial visa categories for startups that are capitalized, and which choose to base their operations in the Czech Republic.

Hiring foreign workers should be getting easier as the population ages. Not harder. With the Czech Republic’s low unemployment, more skilled workers are needed to meet the needs of the digital economy.

Education and Language

Speaking of education, here is a point where the Czech Republic remains fairly competitive. There are a large number of high-skilled and medium-skilled IT workers, engineers, and programmers leaving Czech educational institutions and seeking jobs here and abroad.

While English fluency is stronger among IT workers than the general population, it remains significantly weaker than in the same population in Germany. As a whole, this country rates a score of 57.42 on the EF English Proficiency Index, ranking 19th of 63 countries ranked. That is better than Spain, South Korea, Italy, Slovakia, and even France, but we still lag behind Germany (at no. 10), Estonia (no. 8), Poland (no. 6), and all the Scandinavian countries (which occupy all the top 5 positions).

English proficiency is a key determiner of economic competitiveness. The Economist calculates that a second language (other than English) contributes to as much as a 4% rise in lifetime earnings for individuals from Britain. Though no comprehensive studies exist, some evidence suggests that English fluency for non-native speakers can increase individual earning potential by more than 30% on average. In the IT field, that number is bound to be even higher.

The Czech system should take cues from the most successful European education systems when it comes to English. Ample evidence shows that early childhood education in languages is vastly superior to education in teenage and early adult years. Denmark, the highest rated country on the EF index, begins compulsory English education at the age of 6. In addition, children’s programming from Britain and America is not dubbed, as it is in the Czech Republic.

In addition, there is little overlap in the Czech higher education system between engineering and hard sciences, and soft sciences like economics, business, psychology, and communications. American entrepreneurs benefit from a liberal education system, in which graduates are required to gain a rounded education to complement their specializations.

In California, for example, engineering students are explicitly exempt from the state cap on enrollment length in state universities, meaning that engineering students may seek complementary degrees in any subject offered. There is no need even to apply for enrollment in these programs as an engineering or computer science student. As a result, a majority of undergraduates in California now attend university for 5 years, and most now gain two undergraduate degrees.

Czech undergraduates should be encouraged to seek multidisciplinary degrees that bridge engineering, computer sciences, soft sciences and the arts. Entrepreneurs need to be well rounded in all these areas in order to compete internationally.

Legal Incentives

I touched earlier on the costs of starting a business in the Czech Republic. These costs should be zeroed out, and incorporation should be liberalized to allow anyone to start, and shut down a startup quickly and easily.

As Ondrej Krajicek noted on our blog earlier this summer: “[In the Czech Republic] failure equals punishment. When you fail and your project goes bankrupt, the state punishes you and the society punishes you. Instead of appreciating that you tried and failed, you are the one who’s bankrupt. Moreover, you cannot even establish new business for some time, not to mention the social stigma.”

Czech banks still practice the blacklisting of corporate officers who shut down companies and cancel corporate accounts, making it more difficult (and expensive) to found new companies. This practice should end, and the government should encourage banks to work more openly with small businesses and startups.

In addition, the Czech Republic should stringently avoid such anti-investment policies as Spain’s recent proposed tax reforms, which punish investors and startups that expand abroad by making them pay capital gains taxes on their market value, even when that position is not liquid.

Business and Political Culture

As Red Herring wrote last month about the Czech ecosystem, and the role of the government in supporting it, there is little practical support coming from the current government. There was not much anyone could say on the Zeman government’s behalf. Contrasted with Slovakia, and President Andrej Kiska’s bullish view of startups and innovation, the Czech government seems positively old-fashioned.

The Czech finance minister, Andrej Babis, recently attended the Czech Invest trip to Silicon Valley with startup alum Vit Horky of Brand Embassy, and our own Philip Staehelin, Exec in Residence at StartupYard in 2015.

This was a bit of an about-face for Babis, who famously called startups and small business development “ cliches and bullshit,” (in Czech: “klišé a kecy”), in an interview last year. He called for Czechs to focus on traditional, established businesses.

This rank of old Czech businessmen see startups as full of hobbyists and tinkerers who are long on ideas and short on real business solutions. That might have been true in 1992, but meanwhile, the Czech Republic has spawned Seznam, a one-time startup that now competes head-to-head with Google for the Czech search market. And we need not even mention Avast, AVG, SocialBakers, Apiary, or a dozen others. They were all startups once.

This is disappointingly myopic, but not atypical for a Czech politician, who sees the contribution of startups as secondary to those of large industries like heavy manufacturing, mining, energy production, or even tourism. But it’s wrongheaded too.

The startups ecosystem breeds innovative new solutions that can transform whole industries. Startups work best on the bleeding edge of innovation, and can afford to take risks and make predictions that large businesses can’t. A healthy national economy requires a healthy, competitive startup ecosystem.

Would Babis welcome a DropBox, a SoftLayer, or a SendGrid in the Czech Republic? He would have to accept that these billion dollar companies started out as “cliches and bullshit,” as all startups inevitably do.

The Czech Republic needs wise leaders who lean into the future, rather than dismissing the work of startups and innovators in this way. Politicians who are not captives to traditional business interests will see the potential for Czech startups to achieve success on the world stage. We need the government to take the startup ecosystem seriously, as its counterparts have done in Berlin, London, and Washington, and wake up to the 21st century economy.

Ondrej Krajicek, Part 2: “Density Doesn’t Equal Cooperation.”

On Wednesday, we started a two-part interview with popular StartupYard mentor and Y Softer Ondrej Krajicek. Here is part two, where Ondrej dives deep into the systemic issues he sees in the Czech approach to entrepreneurialism, education, and government policy surrounding business.

Check out Part 1: “Make Failing Legal in the Czech Republic”

What do you think investors in Central Europe need to do more (or less) to improve the startup ecosystem here?

I understand that I am always talking about this mysterious thing, this “added value” when there are so many bright ideas and it is so difficult to get an investment, isn’t it? It is quite common for VCs in the USA to provide recruitment / head hunting, i.e. to hire key people for the startups, provide financial governance, etc.

So we are not inventing the wheel, we just need to follow its tracks. As there is no VC training out there, I hope that more people who became successful with their own companies will contribute by becoming investors and telling their stories.

We as a community of investors in the Czech Republic need to focus on delivering value; not just money. This is what we are trying to do with Y Soft Ventures and fortunately, there are others.

StartupYard is based on delivering value as an investor. From the feedback I have from some startups, the best thing about StartupYard is that it delivers “a hell of a ride”, shows tens thousand of things to the startup teams in a very short period of time and by doing this, creates awareness.

We, as investors, shall also strive to build a community. To communicate, cooperate and co-invest.

Are there political, social, or educational reforms that you would like to see in the Czech Republic to improve the prospects of entrepreneurship and the tech industry here? What would they be?

Well, we really need to increase the speed limit on D1 and stop putting money in speed traps. Seriously!

Well, the Czech political and business climate has its strengths and weaknesses, that’s no surprise.

Take the cost deductible research and development for one (“double deduction”). It is quite an easy and accessible system, but on the other hand, will become more interesting once you are able to generate profits and start paying taxes. After that, this can substantially help you to reduce your corporate income tax.

Accessible education, including university education is another one. I really like the direction towards inviting students from abroad to study here. And open borders with Slovakia. Many talented people from Slovakia end up here, because they had the opportunity to study. These are two positives I can mention off the top of my head.

There are many things I see that must change. This can be a topic for a blog post or an interview on its own, so let’s mention several of the biggest issues I see:

Failure equals punishment. When you fail and your project goes bankrupt, the state punishes you and the society punishes you. Instead of appreciating that you tried and failed, you are the one who’s bankrupt. Moreover, you cannot even establish new business for some time, not to mention the social stigma.

1. Czechs need to acknowledge that there are foreign languages. Czech content should be in Czech, but unless we stop stubbornly translating foreign content (movies, books, TV programmes) into Czech, we will always be strangers in a multicultural world.

2. Difficulty of establishing a company and becoming an entrepreneur. Czech society is still not used to entrepreneurs and does not appreciate them. Being a founder of successful business, you are still envied or despised rather than celebrated. Even some politicians still live in the past and call small entrepreneurs and small companies parasites.

3. It is still too difficult to establish a company and even more difficult to hire employees. I believe that in many cases, our social systems drives employers (not just startups) against creating new jobs instead of motivating them to do so.

4. Czech Republic lacks an explicit strategy on investments in terms of research, development and education. Let’s face it, we are a small country and we should really think twice about where we put our money and resources in terms of funding research, development and education. We need to be conscious about where our strengths are, decide on where we want to lead and put money in it.

Today, when you increase or rather cut budgets for education, the cut usually impacts all fields of study, all departments proportionally. This has a negative impact on everybody, the students (they cannot take this into account when deciding what to study), the schools (they cannot make long term decisions on where to invest for growth) and the employers (they cannot be sure that they will have enough good employees with potential for growth).

When a company is considering whether to bring their R&D operations to the Czech Republic, they have no guarantee they will have enough educated specialists in the future. Sustainability, or the lack of it is one of the main effects of our current education policies.

How would you like to see the Czech government distribute money more efficiently?

The real problem is that they follow the same pattern in terms of subsidies as everybody else. Make a call for projects, then wait. Companies and schools put together artificial projects, many of them are designed only to get the money. They should consider acting more as investors, or in empowering more investors to guide public money by co-investing.

Like StartupYard has been doing with the FiWare program from the EC.

Exactly. And I’m sure you see your fair share of projects that are only designed to look like they are worthy of funding, even though they don’t represent a real need or a real passion on the part of their owners.

It happens to us from time to time as well that companies approach us with projects that don’t really need our involvement, but need a corporate partner for government funding. I don’t accept these sorts of arrangements as a rule.

We have projects at Y Soft that also seek public funding – I find myself in an awkward situation thinking: how can we differentiate as a real project with these projects designed to get funding? We are a real project, not one designed to meet the specifications of a grant, so we ironically have less of a chance of getting the funding for that. And that isn’t the way it is supposed to work.

Where is the real Bureaucratic problem? On the EU level, or with the Czech government?

Well, here is where I see the issue generally, whether it is the EU level or with the Czech government. We have a lot of skilled people, willing to work. But we have a structure and system in place, and that structure and system is not necessarily designed to allow people to work on what matters most. There are inherent flaws in redistribution – it’s always messy.

I don’t expect that the EU or a local government can suddenly change that system. I would just like to see a bigger amount of money utilized in new ways and with different approaches.

Back to my list:

5. All the time, the government, the state-run institutions focus mainly on bringing big investors to the Czech Republic without caring much about the companies which are already here or which may grow here. This is becoming absurd.

When I discuss this with some of my friends or colleagues who work for some of these big investors, they make sad jokes about how difficult is the position of local companies compared to them. It is important to bring investors, but never stop focusing on whether they bring value or they just seek cheap labor.

I have heard the argument, that investment incentives are equally accessible to everybody. That is true on paper, but in reality, do you think that a small Czech startup can achieve the same level of access to public funding as a big international corporation? I am not refering to anything illegal, the small startup simply has neither the experience nor the manpower to do that.

6. And subsidies. Don’t get me wrong. First I need to say, that Y Soft implemented a few successful projects funded from subsidies and received funding for that. We invested a lot effort into it and the system supported is when we needed that support. Despite that, I think that just giving money to anybody who asks for them is not generally good enough. Those who award them should behave more like investors, looking for companies which can be worth it, which have growth potential and will bring jobs and taxes in the future.

In regards to how the Czech government invests in the Startup ecosystem and in education, what kind of specific investments would you advocate, and why?

Education is something very close to me. I take it as one of my personal missions to change the way IT is being taught here [in the Czech Republic]. I spent 8 years in academia, and for me that’s still a big part of my life at 34. We really should think where we want to go as a country, and choose a direction.

The UK, the United States, even South Korea manage to do that, and for such a small country as the Czech Republic, it makes sense to make these decisions: ‘we will invest in this, and we will not invest in that.”

There are so many projects and new companies in the IT field, not just here, but everywhere. As an industry, I think, (pure) software-only IT is losing the potential to generate value over time, which is why I advocate for combining software and hardware. But even more, we as a country have to support engineering, material sciences, geology, and resource and energy management as new fields of endeavor.

In the last 15-20 years, IT has had a lot of traction – also here. But the people in these other fields have hardly lost focus. Quite the opposite. We should make these other sciences more visible, and the government should focus on encouraging more investment and more study in these fields.

So you want the Czech Republic to look more like California or Israel, then just Silicon Valley.

Exactly! Everybody talks about how we have to replicate Silicon Valley culture. It’s funny because when we say that, or try to do that, we are completely missing the point. What I see when we try to replicate Silicon Valley culture, is that we take a few companies, we cram them into a small space, and we simply believe that density equals cooperation. Do we work according to the right principles and values? What do we contribute to the system? Are the startups staffed and surrounded by people in a culture of cooperation? Do they understand how cooperation will benefit them as an industry? We don’t know, or sometimes, we don’t care.

The Valley is a mix of a highly result-oriented culture and an almost communist approach to contribution to a common good. Ideas, technologies, and people as well. We don’t have that approach to the way we work or the way we think, and until we do, we are not going to replicate that kind of success.

And people forget that Silicon Valley culture of today is based on the publishing industry that was there before IT.

Yes, and Steve Jobs learned a lot about bringing aesthetics to IT from the publishing industry, precisely. You have to have a long-standing culture of sharing and changing. You can’t manufacture that. And it is difficult to replicate.

I am not saying that we should stop caring about business models and just help each other. This is not the way how the Valley works. I am pointing out that we have the opportunity to build our own culture and we should take inspiration not only from them. Valley culture is to be admired because they are able to sustain business results with pervasive cooperation.

You mentioned also that the Czech economy is dominated by foreign investors who may be looking for cheap labor rather than new ideas. How can local players like us (StartupYard), do better to improve this situation?

Not sure if dominated is the right word. But they are here and we should learn from other industries. How many manufacturing plants have been opened and closed already because the investors moved further to the east for even cheaper labor? And we see it in the area of software development as well.

On the positive side, having a high demand for people in software engineering lowers the risk for people to establish startups.

It happens with StartupYard quite a bit – many of our companies are transitioning from consultancies or outsourcing, to making their own products. They are going from steady sources of income, to bigger risk propositions.

Yes. On one hand, it’s good for you because it decreases the risk in entrepreneurship. They can always go back. But on the other hand, it’s bad for the same reason.

It’s all about the amount of real value we are generating here. How we are (not) learning the real craft. When an investor comes here looking for cheap labor, do you think that their products will be designed, that important decisions will be made, or market investigations made here? No. The project managers will be somewhere else.

They’re looking for coders and laborers, and they are looking for quantity, not quality. They are not looking for creators. This doesn’t help us to grow as a nation, because we aren’t learning product management, or marketing. We aren’t learning about customers. You must have experience with this at StartupYard as well.

Yes, that’s a big part of our work as an accelerator.

It’s not about that we don’t want foreign investors. We do. But when I see the news, every time a Czech politician wants to look sophisticated, he talks about attracting foreign investors. But what about the local companies? Tools are available to the investors which are also available to local companies. We can do the same work that they do, for the same customers. But we think they’re somehow naturally better at these things outside pure development.

We both know companies that are bringing really interesting projects to the Czech Republic. But many of them are just seeking cheap labor. What a local player like StartupYard can do, is not necessarily (just to) get bigger, but really promote how important these small local companies are for the Czech economy, and for our future as a country. We have to own our own ideas in the future. We can’t just work on other people’s.

For politicians and big players, it’s too intangible to understand – too fine-grained to grasp. So we need to explain and be patient and promote how important this process [of developing our own products] is. When they start to listen, then we need to talk about how the government can support it.

Like with new education, immigration, and employment policies.

That’s exactly what I was thinking – particularly about education. Our open borders relationship with Slovakia for example.

There’s a big difference between people who come to study, and those who come to work, generally. I don’t like to categorize people so strictly, but there’s a difference between someone who comes to get their education, and a person who only comes here to make a living.

School influences our thinking and our values. A person who comes here at an early age learns how to work in this culture, and how to improve it as well. Plus, they have a very positive influence in challenging and bringing new ideas into our culture, through our native students, which is very important. It introduces healthy competition, new ideas, diversity, and new talent. It also brings new perspectives and shapes our students, making them more open to new ideas and cultures.  

Of course, If you are used to travelling for your work, it needs to be easy to do in the Czech Republic. We have to be welcoming to people who find this a good place to work, but we need to encourage even more people to come and be educated here as well. When you decide to study here, it’s much more difficult to do, and the most motivated people decided to do that.

So I’m very glad that we provide the same conditions for foreign students to study here as we do for our own citizens. Well, those who don’t understand Czech still have to pay for teaching in English, but even that is changing and will change in the future. Education accessible under the same rules and conditions for all who qualify. That’s the right thing to do.

6 Entrepreneurs’ Blogs We Keep Coming Back To

We read a lot at StartupYard. In fact, if you were to visit our offices at the co-working space Node5 (and here we are defining offices in the loosest sense possible, as we don’t even have chairs that swivel), you’d likely find Cedric or me reading something or other.

When the accelerator program is running, we’re usually too busy to do more than browse headlines, or steal a moment to tweet something, but when our startups aren’t here, we’re busy reading. Occasionally, one of us might remove his headphones and say: “hey, did you see this thing about…” at which the other will interrupt to say that of course he had.

Given how much is available, it can be difficult to tell what’s really worth reading. With blogs especially, so much of the attraction is not in what content or news is covered, but rather in the personal appeal of the author- the way the person thinks, as much as what they say. Reading a strong personality can be a brilliant way of resetting and challenging your own thinking. Could I be more like this person? What would this person say about my situation? These are helpful thoughts to have as an entrepreneur and a startuper.

We read more than just these blogs, but one of our rules in narrowing this list down was to provide a list of bloggers who are dependable, experienced, post fairly regularly, and are not as interested in news as in deep thinking about technology, business, and the future. In short, these bloggers write out of a passion for their subjects, and not a need for attention.

So here then is our list of 6 entrepreneurs’ blogs that we come back to week after week: 

@AndrewChen

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Andrew Chen is probably most famous as a blogger, but his blog, which features nearly 700 essays, many with original research on the topics of mobile products, user growth, and retention, is one of a kind. It’s probably the best blog I read on a regular basis, and certainly the most quotable. If there’s an issue that one of our startups is encountering when it comes to marketing, there’s probably a relevant post on @AndrewChen.

Chen has a habit of creating and defining very sticky and useful terms, which he self-references within his essays. Over time, as you read his work, you become familiar with the way he thinks, and can follow his logic from one topic to the next, gaining context with each click. This also allows you to get lost in his little universe of ideas- which is not a bad place to spend some of your time.

It’s hard to pin down a few favorites when it comes to Chen’s blog, but I’ll name a few essays I refer to often:

Why Are We So Bad at Predicting Startup Success?

Anyone Can Start A Groupon: And Other Startup Myths

After the Techcrunch bump: Life in the “Trough of Sorrow”

The Law of Shitty Clickthroughs

Minimum Desirable Product

Paul Graham

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You probably know the name. But do you read his essays? Paul Graham is the infamous founder of Y-Combinator, who had his first high-profile success with the sale of his web-store creator ViaWeb to Yahoo! (later to become Yahoo! Store) for 455,000 shares of Yahoo! stock.

Graham is now best known for his work with Y-Combinator, and for his writing, which includes 3 books, and a handful of essays every year, any one of which would make the common blogger jealous for their popularity and influence.

Over the years, Graham has honed his blogging craft over time to reflect his work. These days, his essays usually hover around a central thesis which he elaborates on from personal experience. Unlike Chen, Graham focuses less on data, and more on ways of thinking and behaving which he believes to be ethical, fair, and workable for his readers.

His advice is mostly practical and day-to-day, rather than technical or proscriptive. Rather than lists of “dos and don’ts,” he presents simple maxims like “mean people fail,” and “The Island Test,” which prompt the reader to consider a few basic principles of doing business or leading one’s life, and reflect on whether those principles matter to them.

Again, almost every single one of Graham’s essays have been influential in some way, so it’s hard to pick favorites, however, here is a list of some really good ones:

Why Nerds are Unpopular

How to Start a Startup

What You Can’t Say

Before Startups

Unicorn Free

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Written by Amy Hoy and Alex Hillman, founders of Freckle, a service that allows you to track your billable work, individually or as part of a group, such as a digital agency, and bill clients using the same system, Unicorn Free is a little bit of everything. Mostly, it’s a practical look at the real-life problems associated with running a small startup that has become a moderately successful business.

Unicorn Free calls itself a guide to Bootstrapping- running a startup without outside funding, but in practice it covers a big range of topics, from product development, to marketing, to copywriting. There’s a little something for everyone, and Hoy and Hillman both have an infectious energy and enthusiasm that makes them easy to read. Often, what they write is not as much practical as it is motivational. They constantly exhort their readers to recalibrate their expectations, and question their ways of doing things.

Some of Unicorn Free’s better known posts:

Why you should do a tiny product first

How do you create a product people want to buy?

Don’t Fave This Post: How to REALLY Launch in 2014

Why Blacksmiths are Better at Startups than You

NirandFar

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Nir Eyal, the author and creator of NirandFar, calls his subject “behavioral design.” His essays usually center around aspects of UX/Ui, economics, human behavior, and neuroscience. He wrote a popular book companion called Hooked, which promoted the popular “hook model,” for user behavior, and which has been lauded by Andrew Chen, among many others. Eyal also writes for TechCrunch, Forbes, and Psychology Today, among others.

Many of Eyal’s posts center around user acquisition, retention, and what he called “behavioral economics,” or the study of what people are willing to do with technology, and what they’re not willing to do. But they’re a little more “newsy” than similar pieces by Andrew Chen and others, offering more background reading, and often less of an insider view on the subjects they cover.

NirandFar is frequently just fascination to read. Here are a few examples of great articles that will get you thinking in a new way:

The Limits of Loyalty

People Don’t Want Something Truly New, They Want the Familiar Done Differently

Your Fitness App is Making You Fat

Habits Are The New Viral: Why Startups Must Be Behavior Experts

ViperChill

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ViperChill is a little different from the other blogs we usually read. Glen, ViperChill’s author and creator, has a biography that reads a bit like a get rich quick scheme. He claims to have started making “thousands per month,” at the age of 17 offering online marketing services. His posts are sometimes rambling, disjointed, or lacking in context for the casual reader.

More importantly, a lot of the activities that ViperChill advocates to its readers are, well, not always tasteful. There is much info on building link networks, building websites to cash in on consumer interest in specific subjects, and generally scheming about ways to make money online without really contributing anything terribly unique or new.

If you’ve rolled your eyes at the unavoidable noise of SEO driven websites that appear high in search returns, but read like they were written by a sleep deprived university student who was skimming a Wikipedia article, then you’ve probably run into something that ViperChill, or somebody a lot like him, has created or funded. While his more recent work has hedged towards calling an end to the SEO madness of the past, his work often reads as somewhat nihilistic in its view of the internet as a money machine, rather than something slightly more humanistic.  

Still, ViperChill offers some fascinatingly geeky looks at hardcore online marketing techniques and strategies that few marketers have time to think about. In the weird hidden world of SEO aficionados and affiliate marketers, ViperChill is a strong presence.

While most of our readers are not looking, as ViperChill advocates, to become totally immersed in the world of link-building, SEO, and affiliate marketing, ViperChill presents an insider’s perspective on that business- one many of us have to dabble in to draw attention to our real world projects. If you think you’re being clever with your Facebook pages, your adwords, and your homepage SEO, he’s being downright devious.

Some of ViperChill’s more fascinating pieces:

How to Build a Billion Dollar SEO Empire

How 3 Guys Made Over $10,000,000 Last Year Without a Single Backlink

Why Google Pushed Me to Build a (Bigger) Link Network

BothSides of the Table

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Mark Suster has sold two companies to SaleForce.com, and has since become a VC and prolific blogger. Much of the advice he offers on his blog is focused on relationships between investors and startups. Having been on “both sides of the table,” Suster offers a great deal of advice from his own experiences, particularly for startup founders who don’t know much, and are naive, about finance and investment.

Suster’s hallmark is explaining complex and dry topics in really human terms; breaking down the complex nuances of investment rounds, seed funds, A-rounds, and convertible notes into more practical exercises in figuring out what an entrepreneur wants, and whether that is aligned with what investors might want, and if not, how to pick an investor with similar priorities. You can learn more from one of Suster’s posts about any flavor of startup investment, and how it really works in practice, rather than just in theory, than you can from reading a handful of articles elsewhere.

The blog also contains some great advice in sales and marketing, but the real gold is in Suster’s practical experience with investments and the enormous amount of time he’s spent working on both sides of the table. It’s a must read if you’re thinking about raising money.

Some great advice from BothSides:

VC Seagulls

Finding and Investor Who is in Love with You

What I Would Look for in a VC, Knowing What I Know Now

Education Content Platform and StartupYard Alum Educasoft Secures Funding

Educasoft, creator of Hrave.cz and MyPrepApp, content systems for secondary school test preparation, have announced this week that they have secured a 5 figure investment from an unnamed private investor, to focus on the Czech test preparation market. We caught up with StartupYard Alum Vaclav Formanek to talk about Educasoft, MyPrepApp, and the investment process. 

So Vaclav, tell us about Educasoft since you left StartupYard.

Well, as you know, we were one of the few teams who entered StartupYard in the last round with a functioning product, and even some customers. We had been working on Hrave.cz for some time, but we were at the accelerator to build a more “global,” education product, MyPrepApp.

At the end of acceleration, we really just had a prototype, and a good sense of where we were heading next. In the first 6 weeks after StartupYard, we really had to keep working on the product, and prepare our marketing channels, Facebook registration for users (so they could sign up for MyPrepApp through Facebook), and other things that we needed to really launch a paid product. It went from an experiment to a real business in that time.

What I see as the biggest step in development since then was that we opened our CMS to partners. We want to be more than an application, but rather a platform for content creators. We aren’t the primary content creators, so we want to attract content creators by being an easy, effective platform for great educational content, that allows that content to be used by students in an effective, fun, and focused way.

We have developed some potential content partners as well, ranging from regional content developers, to one content creator who is focused on a single university. I really enjoy seeing how the product scales so well to these very different uses.  The content partners we have attracted really know good content, and they are interested in piloting the use of Hrave/MyPrepApp to publish content on their markets. These early partnerships are really important for us in validating this business model.

 

What are some of the difficulties you’ve encountered in repositioning Hrave.cz as a more global product?

Vaclav Formanek talking MyPrepApp at StartupYard Demo Day 2014

Vaclav Formanek talking MyPrepApp and Educasoft at StartupYard Demo Day 2014

Well, Hrave is essentially the Czech local version of MyPrepApp, the global product. It has acted as our laboratory, in a market we know best and can easily test in. The goal for the next 6 months for us is really to learn how to do business in the Czech Republic.

We left StartupYard thinking that MyPrepApp would be a more global product, much sooner. But we’ve learned that we need to spend more time on the local market before scaling globally. We don’t see this is a failure, but to be honest, it was difficult to convince investors that we already had a winning strategy for a more global product, and they had good points. We needed a stronger testbed for the product, to allow it to mature over a longer period. So we’re growing more slowly than we thought we could be, but this change of direction was, I think, still the right thing.

 

Was that a disappointing outcome for Educasoft?

I am a bit disappointed by this, but I chalk it up to experience. It wasn’t catastrophic for us, at all. Our future doesn’t depend on being a global product overnight. We still got to take advantage of the exam season in Czech Republic, and we are still growing. We also got to slow down and build our team more slowly, which allowed us to make some smart hiring decisions. We have recruited some great developers and business managers who we might not have found otherwise.

We got very deep into discussions with a few investors. This process really reshaped the business, and talks with investors did give us good ideas. But it took a lot of time and energy, and we weren’t able to arrive at terms. That was hard, but I’m glad we went through it.

 

Why is innovation so important in the Education field? What are you doing that major publishers like Pearson can’t? 

What I see as most important is that education has to somehow follow the trends in students’ lives. Modern students consume and interact with content in very modern ways. If the  educational process wants to be successful, it needs to be tailored to the way that people interact with the world today. That is not really the way education currently works.

Educasoft is about providing the best educational content possible to each individual student. Not all students are lucky enough to have great teachers, and we hope that technology will fill that talent gap- making good teaching available to every single student. Some teachers are fun and interesting, but some aren’t. We want to bring fun and interesting ways of learning to every student. So our goal isn’t just to reform the education system from above, but to reach students on an individual level, and then do that as many times as we can.

I think when it comes to major publishers, the difference is that they don’t see being fun and enjoyable as an important goal. They only see outcomes: students are statistics to them by necessity, but we think about our products on a much more human level. We are motivated to be engaging and fun, and we are closer to the students, making that possible for us in a way that it isn’t possible for major publishers. Agility is a huge advantage when it comes to innovating in education. We’ve done questionnaires, and they get huge response rates- 10% of our users respond. And the thing that comes out of these is that students want customized study plans, which really stears our development in a very flexible way.

The way we will find success and survive is to be accountable to the students first- not to the system that they inhabit. That is fundamentally different from how major content publishers work. It’s not just about persuading a huge district or a school to buy our content, but about appealing to each student with content that speaks to them. We can communicate also with individual teachers, and actualize their feedback in a much shorter time. So I feel that we are living closer to our students’ real needs of today. That’s not something a major publisher can do, or even has a reason to do.

Vaclav Formanek, getting passionate about education.

Vaclav Formanek, getting passionate about education.

 

Let’s talk numbers! What kind of traction does MyPrepApp/Hrave have? 

August was the first month from which we have real data. 1,100 registered users, which is 6% of the target group for Hrave.cz. 20,000 students retake maturita exams in September, and we got 6% of them, with a 2.5% conversion rate. We were hoping for better, but we learned a lot from that first push.

Now the new school season has started, and Hrave has 10-15 new users every day, about a thousand since September. The numbers are still pretty small, but we’re improving our conversion rate between visitors and registered users. We’ve been able to track our website changes and leverage them to significant increases in the conversion rate. We’ve also established a really good track record for technical issues- we haven’t missed any sales due to technical issues at all.

Visit time averages for all users was over 16 minutes since September, and we have a 40% returning user rate, which we are really happy with. What I also see as a good thing is that we’ve started learning how to study user behavior, and increase our conversion rate. We’ve established some gamification elements to sell licenses, and we’ll keep perfecting that.

We’ve also learned a lot about A/B testing for email marketing, and we’re in a much better position now. This is how lean startup methodology works- we meet every week, and we always start with 10 key metrics. Everyone in the team has to see how they “move the needle,” and influence the metrics in a positive way. It’s very motivating.

 

You recently closed an investment. What has been the hardest objection to answer with your investors? How have you solved it?

Our first investor was interested in how we were planning to succeed on the US market. That was a hard thing to tackle for us, and it led to us taking this different approach.

Our current investment is mid-five figures, and the terms were much better than with previous investors that we talked to. He really believes in us, and that has made this process relatively easy. Maybe that also means that our current plan makes a bit more sense, or is a bit more realistic when it comes to a real chance of achieving our goals.

 

Where do you see yourselves in 6 months with Educasoft?

There are 3 big goals for us in the short term. First, we are developing a “multi-player arena.” Imagine Mortal Kombat, but with a study prep angle. We think that will have great viral potential, and it’s something we are exciting to test.

Second, we want to leverage the content we already have for content marketing, to generate more traffic for our paid product. Good interactive content glossaries that are focused on explaining of key terms any student need to know to pass a particular exam are lacking in the Czech market.

Third, the tailored study plan we mentioned early. This is, I think, going to be a really killer feature. We’ll be able to convert many more paid customers if we can create an easy-to-use, intelligent test prep plan, based on actual student needs.

We also want to broaden our content base with new courses and content, including grammar school admission tests for younger kids. We are also working on a pilot program for the Polish market, because of the similarity of the test prep system there. To help us grow, we are testing affiliate marketing and content marketing strategies.

We are looking to get mid-five figure revenues within 6 months, and we have an ambitious goal in that regard. We want to nail down the Czech market fully during that time, and be in a great position to scale to nearby markets.

Ondrej and Vasek taking a break on the TechSquare swing set.

Ondrej and Vasek taking a break on the TechSquare swing set.

 

How did your time at StartupYard have a positive impact on your direction as a company?

We came to StartupYard with just a prototype and dreams. During the program and mentor sessions, we learned a lot about how to shape our dreams into achievable plans, and how to present these plans to other people in a way that makes them both attractive and realistic.

StartupYard had a very inspiring atmosphere. The fact that you’re there every day meeting mentors, who “made it” and you are surrounded by other teams who are just “making it” makes you believe that you will succeed in the same way.

 

Which of the StartupYard Mentors has been most helpful to Educasoft, post acceleration, and why?

We have been in contact with a bunch of StartupYard mentors who have been helping us with fundraising. Director Nikola Rafaj is one person who was extremely helpful and supportive for us during the investment negotiation. In the last weeks we have been consulting about investment terms on almost daily basis and I am sure It would have been much more difficult for us without him. Thank you, Nikola!

5 Months out of StartupYard, Gjirafa.com Thrives

We caught up with Mergim Cahani this week to talk about the beta launch of Gjirafa.com, the Albanian Language Search and News Aggregator that is making a name for itself in Albania And Kosovo. Cahani took part with his core team in our last accelerator round, and raised substantial angel investments for the venture, which launched in October of this year with a public beta. 
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CEO and Founder of Gjirafa.com, Mergim Cahani

Mergim! A lot has happened since Gjirafa left StartupYard 5 months ago. What’s the latest news?

Yes, we’ve been quite busy. After leaving StartupYard, we launched our private beta by user invitation only. This has really helped us to fine-tune the Gjirafa engine, and allowed us to really tackle the UX perspective and the search quality. We’ve indexed over 20 millions of pages in Albanian so far. Our staff has grown to 18, which is fantastic, because we have all the talent we need, and much sooner than I thought we would be able to find it all. That’s really exciting in itself. We get to follow our potential, just as quickly as we can. A strong group is really essential to that effort.

Finally, on October 9th, we launched the public beta. We just had a one month birthday. We are really excited. The product is full-featured, it’s public, and we’re seeing some amazing numbers. I can’t wait to tell you about it!

left: Cedric Maloux, Director Startup Yard. Right: Mergim Cahani, Founder CEO, Gjirafa

left: Cedric Maloux, Director Startup Yard. Right: Mergim Cahani, Founder CEO, Gjirafa

 

What features did you launch with?

There is the core product, which is search in the Albanian language and English, news aggregation, and bus schedules. We have over 3500 Albanian language articles per day aggregated, and we have amazing user statistics, but it’s too early to share those. It hasn’t even been a month! The bus scheduler is also a core product, and we’ve added 8,000 lines in the region, covering big cities to tiny villages, making our site the only place where this information is available online. That has really engaged people, which is what we wanted to do: give Kosovars and Albanians the rich web experience that others in Europe just take for granted.

But beyond that, we’ve brought in a couple of features we didn’t expect to have so soon, because user feedback in the private beta was so strong. This includes a weather widget with weather in 320 cities, and a searchable used-car database which is really popular.

 

How are the features being received?

What we’re finding is that there is a huge hidden demand for all these verticals. We just launched this car-search service on Monday, and already we’re seeing enormous traffic. Our CTR for Facebook ads is also tremendous. Have you ever heard of a 10% CTR? That’s what we’re seeing right now for Gjirafa.

The news aggregator has also been doing really well, particularly our algorithm based “Daily Top 3,” which we’ve proven can consistently determine the most important news of the day on the Albanian web.

Pristina: Capital of Kosovo and home of Gjirafa.

Pristina: Capital of Kosovo and home of Gjirafa.

We’re beginning to develop the Gjirafa name. We want to be known as a product made for and by the Albanian community. So we see our whole user community as part of the effort, and we’re going to be listening to them very closely to see what they need and what they want from us. People are really speaking up and letting us know that they support this effort, and they want us to succeed. It’s been amazing.

 

So the reaction in the Albanian language community has been good? What do they like about it? What do they ask for?

The first thing they like about it is that it’s their language, and that it’s an Albanian/Kosovar company. They’re really proud of that fact, and they think it’s past due, frankly. They feel that Gjirafa is theirs and they identify themselves with it – and that’s exactly what we want. We are for Albanians, and the reaction has been really strong.

Gjirafa-beta

The Gjirafa Search Service

I’ll give you a great example: One of our users contacted us the other day, and wrote “I’m checking this bus schedule, and I can see this line from city A to city B, but there must be a mistake here, because you’re missing two stops on the way.” We checked and he was right, so we wrote him back to let him know we’d fixed it. He turned around and posted our email on instagram and proudly declared that he had fixed the problem, and made the information available to the people. He was putting himself, sort of, on our team. Which I think is right- he is part of the effort.

People are even calling me on my mobile and ask me about this and that line, and about how the site works! People create videos on how to use Gjirafa and put them on Youtube. We don’t ask them to do this- they just do it. We receive resumes daily, and people want to volunteer to help us for no pay. Comments on articles about Gjirafa encourage people to use the product patriotically. People are saying: “You have to use this, and help make this work, because it is our thing.” That’s so heartwarming for us. It’s amazing.

Gjirafa-beta2

The Gjirafa News Aggregator

And it isn’t just people. Other companies in the region have also reached out, and let us know that they are on our team as well, and rooting for us. That’s so great.

 

How has your impact in Albania/Kosovo met with your expectations? Is this where you thought you’d be a year ago?

 In some ways yes, in others not at all.  We expected to have good traffic, but for the first month after the public launch, we’re on track to double our goals for total traffic.

And we never thought we would have such interest in vertical searches like cars- that was a big surprise.

Also, I didn’t expect to have such an all around well-rounded team. I thought we’d be missing a few key parts, or not be able to afford to hire the right people. But everything is now covered in terms of staff.

People really engaged more than we expected. Our research showed that 30% of visits would be mobile. But over 50% are now mobile. That changed our focus and direction. Prioritizing of new features was greatly affected by that. It is becoming a much more mobile market, and we have to focus on that. 3G is just coming to this region -I know, it’s so late!- so our services are more relevant than they’ve ever been. 4G is coming soon, so we have to be ready for that.

 

Where is the development of the site so far? What do you need to improve on, and what seems to be working well so far?

The development supports all the launch features. Fully mobile responsive. What we need to improve is our ranking algorithm. We have taken several items into consideration in ranking general search results, and now we are adding around 20 factors to take into account with ranking. Ercan for instance, the co-founder and the CTO, is working on Data Science of the Albanian Web, and this will have a big impact on improving the search results. This new ranked search will be available by the end of this month.

The general search often provides fantastic results- often better than Google in the albanian language, but sometimes it fails to provide useful results, so we’ve experienced a learning curve. We have identified those issues. Google probably uses over 200 factors in ranked search, and Seznam probably uses nearly 100. We “only” use 20 now, but you have to remember that Google has more to worry about in providing a personalized search. They have to worry about user history, location, language, and a much bigger base of data. We only focus on websites, and the content on those sites so far. It’s a smaller web, so we are starting with the brass tacks. That allows us to actually beat Google on speed, at 250 ms response times on average. We’re very happy with that figure, and it improves when many searches are occurring at the same time, so the more our index is used, the better it will be.

 

How did the StartupYard shape your trajectory over the last year?

I see everything that’s happened so far as ingredients in a recipe that got Gjirafa this far (although not there yet). They are: the market (our users), the team and the technology, and the support we received; starting and leading from angels and other supporters.

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Cahani at the Gjirafa Launch, October 2014

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The Gjirafa Team

StartupYard, on the other hand, was the secret ingredient that made the recipe work and pushed everything forward. It is like a hydrogen bond, that keeps the water molecules together. The investors and the customers are the atoms, but the bonds make them chemicals and compounds- they make them *be* something. I sincerely believe it would have been very difficult, maybe impossible, to have brought Gjirafa to where it is today without Startupyard. Without StartupYard’s management team, mentors, and the experience it brought with it. I don’t know how we’d be here.

Just one example of what we got out of it: the bus schedule idea was born in Prague, at StartupYard. It was that kind of insight into: “ok… you have a country full of customers… how do you reach them?” that StartupYard gave us. It made us believe that what we were doing was possible, and showed us the way forward.

And StartupYard was our access to angel investors, Microsoft BizSpark Plus, and the partnership with Seznam.cz, and the list goes on and on. Simply put, without StartupYard we would not be where we are today – we would be somewhere of course, but we would not be one of the fastest growing platforms in the Albanian web, that is for sure.

 

Has Google taken an interest in your activities so far? Any menacing phone calls or mysterious packages?

:Laughes: No… not directly, no. But it’s interesting, because Google does deep crawl us quite a bit, and they use interesting keywords when crawling us. We have over 6000 pages crawled, and they use random words like “barbie,” and then they index the pages, then move on to the next term – we’re not exactly sure what they’re doing. They seem to be figuring out how big we are- seeing how many pages we index. They definitely know we’re here, let’s put it that way.

 

 

You managed to hit your goals for an Angel investment round after leaving StartupYard. Are you still looking for more investment?

The most important thing for us right now, is to hit our targets, and surpass them. We’re doing that now, and the more data we collect on our user base, the better position we’ll be in to understand our own value in this market, and our future potential. That real, hard user data is going to give us a picture of our value, and allow us to show that we have traction.

I’m so grateful to the angel investors who took a shot on us this year. They’ve given us the space and time to do Gjirafa right, and we’re focused on making this a great product, with a great market potential. The more space we have to do that, the better position we’ll be in when it comes time for looking to new investments. But without them, we wouldn’t be here discussing Gjirafa.

 

You’ve had some communication from Microsoft as well, is that right? What’s that all about?

 

Yes! This was very interesting for us. We have been in contact with the Azure team from Microsoft, primarily.  We have a lot of servers with Microsoft, and that intrigued them. They wanted to know: “What is going on in Kosovo? What are you doing with our servers?”. They met us, and invited us to be Microsoft Azure Advisors, which provides us access to benefits like directly communicating with the Microsoft Azure team, and the ability to give detailed feedback and input on azure products that we need. If we see that we need something new from Azure, we can shape the development of new products to meet our needs directly with Azure. That’s been great for us.

 

You launched Gjirafa officially at a big press event last month in Kosovo. Tell us about that.

It was a really exciting day. Firstly for the team, because we saw this is a day for us. We’d gotten “the beast” Gjirafa, to the point where it was ready to be seen by the world! In addition to the marketing perspective, we saw it as a moment to be proud of our accomplishments so far. The organization of it was excellent, where the co-founder and the COO, Diogjen Elshani, with the help of the team, was able to make sure everything was going smoothly – from the invitations, the live stream and everything in between.

The event was really unique for Kosovo. For a startup in Kosovo, it was really remarkable. It made just about every TV channel, and I was doing live interviews all day on various TVs. A special was done by one channel, and we had a 7 minute exclusive on a high rated network, and we had the #1 news channel dedicate 20 minutes about Gjirafa, which was replayed for a full week. We were all over TV that week, and from that perspective, it was a huge success in getting the word out about our efforts.

Some important people also came to the press event. Diplomats and politicians were present, and some local celebrities as well. It was a really big deal, and an amazing day for the team. We really followed the launches that occur in Silicon Valley, and modeled it after things like Apple keynotes. We tried to make it exciting and not too corporate. Stay conceptual, you know? Talk about big ideas, but in basic terms. It really caught the public attention here.

 

Where do you hope to be with Gjirafa in one year? What services do you plan for the near future?

We’re gonna have several vertical searches, including cars, real estate, specific products like phones, job opportunities, and we’ll include product comparisons between sites. We’ll double the reach of our index, and we’ll have over 50 million pages available through Gjirafa. We’re also going to launch an app for iOS/Android, and that will better be able to serve the Mobile market, which is becoming dominant here.

Potentially, we are looking at a few other things like an academic search vertical, and a vertical on public government documents- business incorporation, laws, and public records.

 

Thanks Mergim, is that anything else you’d like to add?

I have a story I want to tell you! It’s a good one, I promise.

So we have somebody on the team in the role of “information coordinator.” This basically means that he actually physically has to go to bus stops and make sure that our database is correct, and that the bus schedules haven’t been changed. The Albanian government doesn’t have this information online.

One time a few weeks ago, and I swear this is true, he was doing this in a really small village, with just a couple of people in it. He walked past a couple of middle-aged people, and asked for information regarding bus station and bus schedule. “Where are you going?,” they ask him. “I’m just checking the schedule,” he says. “Oh,” says one of them, “You don’t have to do that anymore you know, there’s this thing called Gjirafa, and it has it all.” It made me laugh when I heard that one. He *is* Gjirafa, but people are already taking this service for granted. And that’s just fantastic. In my opinion, if the people treat this like something they deserve, then they will make sure that we deliver what they need from us. And that expectation is exactly what we thrive on.

 

 

What “Mentor Driven” Means To Us

What an Accelerator is For

A journalist visiting TechSquare this week asked me an intriguing question. I say “intriguing,” because as it was coming from an outsider to this business, it demanded a single answer to a question that is not often taken by itself: “what is a tech accelerator really for?” That kind of question demands an answer that applies to all parties: to the investors, to the startups, and to the general public. What do we do that adds value to the world in which we live? The answer I arrived at was this one, and I think it covers all of that: “a startup accelerator helps to manage, facilitate, and encourage intelligent risk taking.”

As Techstars has explained about their own roots, the current mold of accelerators was formed in reaction to risk aversion. Angel investors and VCs were, from about 2002 onward, inflicting far too much pain on startups to prove their worth before securing seed investments, which probably led more than a few worthy startups to stall out for lack of access to funds. The tech crash in the early 2000s had soured many investors on the market, and introduced big barriers to entry. Imagine a world in which Facebook didn’t have the money to get to its millionth user that first summer. This was a real danger at the time. But today,  a service that has added half a million users in a period of several months would be unlikely to have that particular fear. The accelerator movement has been an important part of that shift away from risk aversion, to more intelligent risk taking.

What “Mentor Driven” Means

 

 Over the past month, our teams have met with nearly 40 mentors each. That’s 40 meetings with entrepreneurs, professionals from within their areas, and CEOs of companies that have been in the position that our founders are in now. There have been so many meetings, that many of the teams have had moments of frustration with the process. One of the CEOs told me last week: “They all ask me similar questions, and I haven’t had time to do the things they’re all telling me I should be doing.”

Yes, it can be frustrating, but we also view that feeling as somewhat positive. A founder of a young company who is very aware of the potential problems he is facing is more likely to take a realistic approach to solving those problems, instead of avoiding them. He may be tired of hearing the same concerns, but he will definitely find ways of addressing them- if only so that he doesn’t have to keep hearing about them. He knows where he stands, and where he needs to be when this process is done.

Bad habits and false assumptions, when untested too long, can ossify very quickly, and poison sound decision-making. The accelerator is the antidote to that problem, forcing founders to address their toughest challenges first, rather than wasting time and money working in a market they don’t understand well enough. Constant early contact with mentors breaks up patterns of thinking and working that will lead founders wrong.

It’s About Who the Mentors Are

“Mentor driven,” means that the first steps a startup takes are in consultation with people who want them to succeed. Most of our mentors are not investors, and most will probably not end up working directly with any of our founders later on, but they are people who care about spreading knowledge, knowing their industry well, and making valuable and useful connections with each other, and with new startup founders. While basically all accelerators are concerned with helping their teams raise money at some point, at demo day, or later on, the focus at StartupYard is on giving the company the strongest possible foundation as a means to that end, and to making the company a success in general. Knowing and understanding your own industry, how people talk and behave, and how they think, are really vital elements of that kind of success.

Startups are Not in Business to Raise Money

A lot of startups quickly start thinking that they are in the business of raising money. That’s a cycle that’s easy to fall into. The second an investor wants to talk money, a founder has to completely change how he or she is thinking about the business, and fit that thinking to the way the investor thinks. If founders have conversations with investors too early in their own development, both as business people and stewards of their own companies, they can easily be taken in by the investor’s agenda, which is different, on a basic level, from their own.

A founder should be interested in his or her users, in solving problems for the people that will use their products, and in forming a company that adds value to the world in which they live. A good product or service company needs these goals above and beyond profitability in order to shape its future and give it purpose.

But an investor is only interested in realizing gains on their investments. If 1 dollar today can gain 20 tomorrow, they will invest. And likewise, if making a company stop and completely reconfigure its own priorities in order to win investment can turn 1 million dollars today into 20 million dollars next year, investors will encourage that to happen. So having a company planted on ground solid enough not to be shaken by incoming investment is very important. A founder has to have a vision of his company in 5 years. An investor doesn’t buy that vision, just the part of it that has an upside potential. We need investors to make many startups work, but that doesn’t mean investors should run startups, or tell them what they want too early in their development.

Mentoring can be a cure for that illusion. Talking to people who have taken on investments and regretted it, as well as those who have done it well and made it work, is an experience of great value to someone who has never had a conversation about money that involved more than 3 zeros.

But most importantly, mentors remind founders that their businesses have to work, not just as investment vehicles, but as *real* businesses. As I said: an accelerator is about taking intelligent risks. Putting 3, or 6 or 12 months of your time into a company is in itself a risk. So why not make it an intelligent one?

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