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. 🙂

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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.

SentiSquare: Big Data Means Big Mistakes for Brands

Last week, I sat down with Founder and CEO of StartupYard 2014’s SentiSquare, Josef Steinberger, to talk about how the company took 3rd place among 72 challengers at the UPC: Ignite innovation competition, and what SentiSquare has been working on since leaving the accelerator last year.

sentisquare-logo Hi Josef, how have things been going with SentiSquare since you left StartupYard in 2014?

Wow, has it been 18 months already? We have been quite busy, and we’ve signed a few really high-profile clients, including Nestle and T-Mobile in the Czech Republic.

Our most exciting recent news is that we took 3rd place in the UPC competition: Project Ignite, which is for the best tech entrepreneurs in the country. We took 100,000 CZK (about 4,000 Euro), which we plan to use on further development of the SentiSquare service.

How did you get involved with the UPC contest?

Stanislav Rejthar, our financial director, is quite well connected to business in Prague, and he found out about the competition, so we decided to enter. There were 72 projects in the 1st round, with 30 semi-finalists, and 11 finalists. Five finalists passed to finals from the Facebook voting and 6 were selected by jury. And we took third place overall.

The first place winner, this is a bit funny, but they are actually working on turning pig-dung into water and other nutrients. So we got beat by pig shit :laughs:. But we were really happy with the results, and the upside is that UPC has expressed a lot of interest in working with us going forward.

Can you talk a bit about how you can help companies like Nestle, T-Mobile, or UPC, without talking about the specifics of those clients?

Sure. What we do, as you know, is a sentiment analysis across the whole web. This means that we are able to tell our clients in good detail, what their customers are talking about, and how they feel about those topics and specific things they discuss. We get this info from social media, forums, websites, and comment sections that number in the 100s of thousands and more.

So, for example, we are able to tell a large name brand that is about to launch a marketing campaign based on a specific topic, what people are already saying about that topic, and the feelings of consumers related to that topic. And we can give this analysis in much more detail than simply: “good or bad.”

In fact, one of the reasons we start working with the brands even before the campaign starts, is that we can help them to shape the nature of the campaign to get a better response. We can tell them what their consumers are likely to respond to, and it works.

Can you give me an example of how that works?

Yes. For one client, we worked with them on launching their company blog. This was a pretty large brand. They wanted to launch their blog in the new year, attracting people who were interested in new year’s resolutions and this kind of thing.

So, the company had a list of topics that they thought people would be searching for on Google, which they could take advantage of by writing about those topics, in relation to their own products. What we found, though, was that there were a number of topics being discussed quite a lot related to new year’s resolutions, but involving topics that were not included in the campaign’s key word targets. It happened, however, that these topics were very relevant to the company, and that PPC prices for these search terms were a very good value for the price.

So we were able to identify, among the company’s core demographic, a topic that was not being served, and allowed them to have a very good search position for those terms.

We did more than just help the company understand what people liked and didn’t like, but also things that the company had no idea they were talking about at all. That was a big advantage for them and they saw the results in their search traffic and ROI for that campaign.

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Click to learn more about SentiSquare

Are big brands surprised by what you tell them?

All the time! Marketers and managers like to have very clear and precise information, that they can sort of divide into yes/no decision processes. So, for example, they want a clear yes/no answer to the question: “is my campaign working?” But what we are always showing them is that these questions are more complicated than they want to make them. And in that complexity lies a lot of opportunities that are not being taking advantage of.

For example, a big brand might say that a campaign is a “success,” if people are talking more about their brand after the campaign than before. That is easier to measure also. But campaign managers can’t tell whether people are talking about the actual messaging of the campaign. They have to assume that more people talking about the brand or product means the messaging is working, but it might not be. Even if they use simple positive/negative sentiment analysis, they can’t tell why people feel positively or negatively. They can’t tell if the message is working as intended.

We can help brands determine if people are talking about the messaging that the brand is using, and this can give a much better sense of whether the campaign is a success. We can also do pre-analysis to understand whether the intended audience will be receptive to that message, and if not, to what messages they might be more receptive.

How do big brands currently determine what their campaign messages should be?

It’s mostly about intuition. Some big companies literally have someone going through thousands of customer posts on social media and forums, and trying to glean some kind of insight about what customers are interested in. So it is possible to get a subjective, intuitive sense of what is important to your customers. But it is very difficult to get an objective, provable figure to support that intuition.

On the other side, it is relatively easy to analyze the sentiment of your brand’s audience in positive/negative terms, but that doesn’t help you at all to understand what your messaging should be. Even positive/negative terms are super-subjective. They are down to culture, to context, to the type of person talking, and the person they are talking to. A human can recognize sentiment when we see it, but it is much more complicated to see sentiment in the aggregate. It is very easy to think you understand it, when you really don’t.

We are providing a kind of intuition engine. It has the reach of a large scale data tool, but it can provide the subtlety in insights of a human.

So you help companies to avoid false positives in sentiment analysis?

False positives or also completely wrong assumptions about data.

There is a really funny example we experienced recently. We were doing analysis of the wine industry. The customer had already had another company scrape a large amount of data including basic search terms, such as the word “wine” and its variants in Czech. They wanted to see what kinds of wine people were talking about in a one month period. So far so good.

Now, you can do a broad sentiment analysis based on positive or negative keywords, and give some impression of whether people have good or bad associations with certain types of wine, right? Well, not in this case. Our analysis was able to show that a huge amount of this data (about 80% actually) was totally useless. Why? Because it wasn’t about wine! It was about cars.

Cars?

Yeah, cars. The data scraping had caught a lot of information about VIN numbers (vehicle identification numbers). It had also scraped a lot of information about Vin Diesel, the actor. Wine, in Czech, is written as vino, or vin, or some variation. So without our analysis of what the subjects actually being discussed really were, the client might have made a lot of really wrong assumptions about what people feel about different wines. You think a lot of people like red wine, but they really like red cars! Or maybe they say they love wine, but they are really fans of Vin Diesel movies.

The data would be worse than useless. It would cause you to make all kinds of wrong assumptions about your audience.

But we were able to pre-process that data, and make the final data set much more valuable for analysis.

You said earlier that you can give more than a black and white look at customer sentiments? How do you do that?

There are a few ways.

One of the problems with sentiment analysis for large amounts of written text, is that there are a lot of positive and negative keywords mixed together. It doesn’t make sense just to count them up, because the actual construction of thoughts is not so binary.

So what we can do is to provide a sense of the intensity of sentiments overall. Is a customer generally happy, or generally unhappy? A customer can use a lot of negative words, but still be mostly satisfied with a product. Some people just enjoy complaining, and a brand shouldn’t count that person as an unsatisfied customer. So we can provide this shading of sentiment by intensity.

There is also aspect based sentiment analysis. This is the analysis of not just a brand as a whole, but as related to specific aspects of the brand and its products. Maybe people love a brand, but they have negative sentiments about its prices. Or the opposite can happen. Maybe they love the functionalities, but hate the color. By combining these insights, we can present a much more realistic picture of a customer than simply: like/dislike.

How are you different from other monitoring services like BrandEmbassy (also a StartupYard Alum)?

BrandEmbassy provides monitoring of keywords, which allows service representatives to see live conversations on social media and elsewhere. The big advantage for them is that they can route those conversations to the appropriate person on their team and engage directly with the customers.

What we do is the eagle eye view of all those conversations- we can tell companies what the totality of all those conversations really means. So it has a bigger effect on a company’s overall communication and branding strategies, whereas a company like BrandEmbassy helps a company to improve its small-scale interactions with individuals.

What are your plans for the near future?

A big request is for our system to be available in real time. This is something that we really want to develop more in the near term. Having the ability to see the conversation changing online at every moment, and being able to understand how people feel about things from day to day, is an important thing for big brands.

As conversations online get only more numerous and also more specific, the job of keeping up with that volume is getting unmanagable for the biggest brands. SentiSquare can provide a pulse of conversation that really provides valuable insights, even in the day to day. Brands can use SentiSquare to get an evolving list of important keywords that are related to their brands.

That list changes every day, but currently it takes a long time for that information to filter into a brand’s messaging. Given the prioritization on the topic or opinion level, brands can quickly get a gist about the actual situation The speed is important, because all the brand managers are busy people. We can make them more responsive to the conversation of today.

We want to change the way people look at sentiment analysis. Things are not black and white, positive and negative. Somebody says something is “big.” What does that mean? It’s not good or bad in all cases. Nothing in discourse is cut and dried, and all sentiments have levels of intensity.

Our clients usually want black and white answers. We have to educate our customers about the danger of viewing their brands in this way. The magic answers that big data is supposed to provide can easily be very wrong. And we can help companies identify opportunities they are ignoring, because they have been addicted to this positive/negative polarity.

StartupYard’s Viktor Fischer on Quitting Your Job, and Overcoming Fear

Hi Viktor. You’ve had a really interesting career, co-founding Innovatrics a decade ago, and most recently becoming a junior partner with McKinsey and Company. Can you tell us your personal story as an entrepreneur?

Hi Lloyd – sure, thanks for having me.

When we founded Innovatrics in 2004, I had no clue how to build a business. We created a software development kit around a fingerprint algorithm, put it online and waited to see who would buy it. When after 2 weeks no-one replied, we started to think about who might be the customer, what were their needs, what was the right product, what was the right pricing, and how we would sell it.

Early on we copied competition (copying is good), and negotiated licensing deals with major biometrics players such as Bioscrypt and CrossMatch – to survive. Over the next several years we found our niche: high-speed AFIS (Automated Fingerprint Identification Systems), defined the target customer segment. We fine-tuned the pricing and focused on the most efficient marketing & sales channels. Last year Innovatrics won Deloitte Top 50 in 2014 for its 344% revenue growth and last week was designated IT firm of the year in Slovakia. I am congratulating the team for those fantastic achievements.

After 5 years at Innovatrics, I decided to pursue an international MBA to grow my network and then entered McKinsey. Surprisingly, although McKinsey works for corporates, it follows a very entrepreneurial way of working. Projects (called “engagements”) are delivered by small teams (2 to 3 people full-time supported by experts and senior leaders), who work by quick iterations with the end product in mind (similar to “scrum methodology”). There is flat hierarchy and even junior members are encouraged to disagree with the most senior partners.

Aside from consulting, you are also an active angel investor. How do you pick your investments?

I only have 3 criteria: First, would I be a user of that product, and would I be excited to use it? This is my way of validating the value proposition.

Second, I need to know the management team, and have them be introduced by a person I trust.

Third, I need to have the knowledge I can use to help the startup. In broader terms, anything commercial, and in narrower terms, anything related to defining value proposition, validating product/market fit, modeling financial plan, raising funds, orchestrating B2B sales, or expanding internationally.

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Fischer chats with fellow StartupYard mentor Ondrej Bartos at a StartupYard event

Have you ever broken one of those rules? If so, what was the result?

Yes, sometimes an edge in 1 or 2 criteria can balance-out the 3rd criteria. For example, recently I invested in MPower Financing via Angel.co. MPower provides loans to US university students coming from ethnic minorities.

Although I would not be a user of such a product, I like the mission of the company: I believe funding should not be a barrier to education. And I know the founders really really well (both CEO and CTO are my MBA classmates).

You recently left McKinsey to open your own club/bar, and focus on startups. What motivated the move? What will your club be like?

:Laughs: how much time do you have? I can talk for hours about this.

I think we do our best job when we do something we love (call it passion). There is one way that really worked for me to find that out: Think that tomorrow is the last day of your life. Really. Then imagine:  If that was the case, what would you truly like to do today?

My answers were: A) go for a drink to a nice place with friends, and B) help startups grow. So I left the corporate job and bought an old but legendary nightclub called Meloun. The idea is to create an ultra-lounge like we all miss here in Prague. An exclusive place with great drinks and great music for a fantastic night out. It will be kind of a secret place so I cannot say more about it at this stage – sorry!

To help the startups, I am becoming more engaged with the teams, helping where necessary depending on the stage of the company, and more engaged with the local entrepreneurship community (including Startupyard).

Can you tell us the story of your favorite investment, and, if you have one, your biggest investment mistake or failure?

I don’t have a favorite investment – all my startups, those I invest in or simply advise are like children – no one is preferred.

Failure? Probably those I decided to pass on (yes, I’m thinking Gjirafa), or those where I miss the team’s engagement. There is nothing more demotivating than a non-motivated team. There are two mindsets with which a company is created: either to be a lifestyle business, or to build a company changing the world. There is nothing wrong with either of those. But it needs to be clear from the beginning to the team, the investors and the advisors.

You are an active StartupYard mentor, and you hosted a workshop with us this year. What motivates you to work with startups in your free time?

My sole motivator is to help startups avoiding mistakes I made. Whether it is in their value proposition, defining a target customer, pricing structure, international expansion, or even personal work-life-balance and facilitating discussions between shareholders. I have scars on my back in all these areas. I want to help people avoid getting a divorce, arguing with business partners or putting thousands of work hours into a feature that is not needed.

Do you believe that successful Czech entrepreneurs like yourself are giving enough back to the startup ecosystem in terms of attention, mentoring, and investment?

First of all, I am Slovak. Just kidding, I miss Czechoslovakia and I believe the countries together could again reach the 10th place in industrial production they had in 1938 – although in different industries :laughs:.

It will not happen however without the government’s support. When founding Innovatrics, we received around 150 thousand Euro from the French government to get us up and running. Although there is a risk to receiving government funds (often startups use that funding to delay product introduction to the market), there is an improvement in Government funding: the Czech government spends ~2% on GPD on R&D and Slovak government spends ~1% on R&D versus the US ~3%.

I know I am not answering your question, but I don’t know yet whether local entrepreneurs are helping enough. I know some of them invest through [prominent venture firms] Credo and Rockaway, or directly, and they mentor via Startupyard. But I don’t have a benchmark. It would be great to compare for example the amount of Czech angel and VC funding to overall angel and VC investments in the UK, and US, but I don’t think there’s a clear benchmark.

What is a piece of advice you find yourself giving over and over again to startups? What is the hardest piece of advice for startups to really listen to?

Overcome fear. Often I see startup entrepreneurs doing what is easy: sitting behind a computer developing the next feature set.

Call a prospective buyer or an expert to get early feedback. Find an expert via LinkedIn. Send the deck or a link to the demo and set-up a call. There are plenty of people out there who would help you. Doing it you have nothing to lose. Not doing it, you lose the opportunity to score your first customer or a future team member.

Sometimes it feels  the hardest part for startups is to listen. Whether the founders are really able to listen, hear, reflect and incorporate the advice is what I am looking for during interviews.

Your career has been split between The Czech Republic, Slovakia, France, and recently Switzerland. How do you view the development of startup culture and investments in these different regions in recent years?

I cannot compare yet. But what I really like about the investment culture in other countries is the humility with which the investors and advisors help the entrepreneur. An entrepreneur is the shit, and our only mission is to help her succeed while increasing her self-confidence. Not the other way around (ie beat her idea and her self-confidence to death).

Are there things that bigger economies like France could learn from the startup and investing cultures in Slovakia or the Czech Republic?

I like how some of the local VCs really help the entrepreneurs think about the business during the investment process. They help to define and validate the value proposition, set up pricing, create financial model, key KPIs and develop a first 100-day plan. This process is beneficial to both parties and if I were the entrepreneur, I would embrace it fully.

Andrej Kiska recently told me in an interview that Czech (or Central European) investors are not as conservative as their reputations suggest. Do you agree with him?

I agree that the mindset is changing. That’s good. From my experience however, even as recently as the Webexpo couple of weeks ago, I noticed some investors using traction as their investment criteria (quote “For us to invest, you need to have customers. At least one.”) I think people should be the first criteria of choice and overseas that is understood.

What about StartupYard makes you keep coming back? How do you hope to have an impact on us as and our program?

This comes to my 2nd passion: helping startups grow. StartupYard is the largest local accelerator. Still however, some people do not know it. David Semerad from STRV mentioned during his talk at Webexpo that “YCombinator is like StartupYard but million times bigger”. I would like to help StartupYard bridge that gap, by making connections to  the international market stronger and by voraciously helping startups export. If we’re Czech only, we will not be successful and our startups will not be successful.

Amit Paunikar: On Product Management, and Owning Failure

I caught up with popular StartupYard mentor Amit Paunikar this week, to talk about the subject of his appearance at WebExpo, where he will talk about one of his passions, Product Management.

Paunikar has been a pioneer and evangelist in the area of product management, working with Google, Yahoo, and MarketShare. He has been a software engineer, a startup founder, and a StartupYard mentor, and is currently a product manager for Skype in Prague. He will speak at WebExpo, in Prague on the weekend of September 19th.

Q: Hi Amit, you’ve had a storied career, working for Google, Yahoo!, MarketShare, and co-founding your own company, MediaStudio. Can you tell us about your career journey?

Paunikar is a native of Mumbai, lived in the US for many years, and relocated to Prague 3 years ago.

An American educated in Mumbai and Los Angeles, Paunikar founded MediaStudio, and has worked for Google, Yahoo! and now Skype. He has lived in Prague for 3 years.

I grew up in Mumbai, where I did my undergraduate education in Computer Science. After a short stint in Citicorp, I moved to Los Angeles for my Masters in computer science. I spent 15 years in California after that, working at big and small companies including stints at Google and Yahoo! before taking the entrepreneurial path and starting my own company.

Early in my career, I switched from Software engineering to Product Management, which defined and shaped my career journey immensely.

Tell us more about your transition from engineering to product management. Why did you do it?

My first job as a product manager was with a company that made a hardware/software product, a networking gateway, that allowed users to access public wifi and wired networks.I was a curious engineer, but a lot of my questions were of the following type: “why are we doing this and not that?”, “why are we approaching this market and not that?”, “who is our target customers, what are their core needs?”  

Since I didn’t know a good way to get these answers, I would be quite vocal during company-wide meetings. After one such meeting,  the CEO of the company called me in, and said: “you have a lot of questions about things that go beyond engineering. Why do you need this information and whose job should it be give you that information?”

I told him that having this information would help engineering design the correct solution, get their “why’s” answered and instill a sense of ownership and accomplishment. I didn’t have a good answer of whose primary job it should be fill this gap, but when he offered me to step in and fill the role. So I filled that hole that existed for me as an engineer- someone who could from the connection between customers, sales, BD and engineering. Soon that role morphed into product management as we know it.

What originally drew you to the Czech Republic, and what makes you stay here?

It a combination of serendipity and need. At Mediastudio, we built a web-based video post-production platform with complex tools that dealt with image processing, waveform analysis and rotoscoping. We found most of these highly skilled engineers in Ukraine and Bulgaria. It made sense for me to move close to my engineering team. Also, my wife, who I met in California, actually grew up in Prague. So it was a 2 for 1 that I could not pass on.

Since moving to Prague, I have immersed myself into the startup ecosystem as well as have had a chance to interact with small and big companies. Prague and CEE has great engineering talent, but generally lack the product management function. This is an interesting challenge to solve and contribute to. In addition, Prague is a wonderful place to live!

As a popular mentor at StartupYard, you’ve long been an advocate for the idea of Product Management. Why is this such an important topic for Czech startups?

 

Product Management is an important discipline. While Product Management is one of the pillars of most companies, big and small, in Silicon Valley, it is sorely missing here in Czech Republic and in CEE in general.

In his seminal article, Marc Andreesson says the most important thing for a startup and companies is product/market fit. Product/market fit means being in a good market with a product that can satisfy that market. Creating a product that can satisfy a market requires companies to thoroughly know its customers. The primary job of a Product Manager is to be the customer advocate within the company.

Without a customer advocate, even the most brilliant engineers and companies end up creating products that no one wants to use, or worse, end up becoming engineering shops that provide their expertise to others. For a startup ecosystem to excel, just having amazing engineers is not enough. We need a good combination of functions that make a company successful, we need amazing designers, marketers, business dev, sales and good product manager. I feel product management is severely underrepresented in Prague and CEE in general.
What would you say makes a product manager different from a project manager, a UX/UI designer, or any other position?

Product management is an interesting discipline. It is very critical function, yet you cannot learn it in schools, nor are any Product Management degrees are offered in mainstream universities. Most of the product managers I know have learned it on the job. They come from various backgrounds. I have seen designers and project managers transition and become great product managers.

I like to think of product managers as people who take the ultimate responsibility for the failure of the product. This might seem to be a pessimistic view, but there is a lot of depth involved in thinking about it this way. As a PM you take responsibility of everything. You don’t have the liberty of just thinking about what to build, why to build, how to build, how will it look like, etc. you have to think about all the questions above and more.

As a Project manager or a UX designer, you can limit yourself to just a couple of these questions.

If the product fails because there’s no market, or because the technology doesn’t work, or because the product/market fit does not exist, or the design is bad, then that is the product manager’s fault. You’re not in charge of sales and technology, or design, but it is your job to make sure that the people who are doing these have everything they need to get their job done right.

What kind of a person is best for that sort of position?

Good PMs excel in empathy, know how to keep an eye on the larger picture and just into details as needed. As a PM you have to be able to make sure everyone knows what to do, but not necessarily know to do it.

I can’t sit with a designer and tell her how to design something. But I have to be clear to her about what we are designing, who we are designing it for and what functions it should provide.

PMs have to be comfortable with unknowns and uncertainty. They need to have the drive to make sense of seemingly unrelated things and have a good grasp of multiple faculties. PMs should be the “tip of the spear” that heads into chaos and leaves a cone of understanding and calm behind them.

How has the position of product manager evolved since your time with Google?

A lot has changed in the past few years. Startups and smaller companies have a lot more tools available now that were once reserved for the biggest companies. With cheap cloud computing platforms, the cost of building products has come down significantly. A lot more processing power is available and so is the ability to create and analyze lots of data.

All this changes how product managers act. They can now market worldwide, launch fast, collect and analyze vast amounts of data, make data driven decisions and course correct. Product Managers also have lot of tools and resources available at their disposal. A growing list of well respected VCs, product managers, authors and bloggers are writing a great deal about Product Management.

Defining roles and areas of responsibility for a growing team is one of their most challenging early tasks for a startup. What are some of the mistakes you most often see in this process, and how would you correct those mistakes?

It depends on what kind of a startup it is. An enterprise startup will have a different composition as compared to a consumer startup. The key is to have a core set of people who have varied experiences. If you are an experienced founder that you have a leg up compared to someone who has never started a company. In any case, it is important to seek counsel, have strong advisors in the area and learn from existing companies in the area.

One of the biggest mistakes I have seen is that companies close themselves in, start developing the product based on a hypothesis and keep at it. They never go out and seek validation from customers and users. No matter how small the startup, it is important to have a line of communication to your customers. Another mistake is to now have engineering and process discipline. Startups have to be designed from the ground up to be scalable. Scalability as an afterthought can be very expensive.

So every startup needs

  1. A customer advocate function – these includes responsibilities like understanding the market and customer needs, establishing a sales channel and continuous business development
  2. A technical advocate function – this includes responsibilities like engineering discipline and technical excellence

Do you think that organizational structures and awareness of new working methods have improved in the worldwide tech ecosystem since you started as a product manager?

Yes definitely. As a I said before, I started before MySpace and Friendster, before Napster and Skype and definitely before AWS (Amazon Web Services). It’s now easier than ever to start a company. If you wanted to start a company back then to do something meaningful, you had to start with thinking of physical storage location for your specialized servers. Now there are cloud service available for not only computing, storage but all kinds of functions like monitoring, email, authentication, etc.

There is freedom to try out a bunch of stuff and fail quickly. Startups are making bigger and bigger bets. Backed by technology companies like Uber and AirBnB are disrupting centuries old industries, companies like Cloudera is venturing into and disrupting space reserved for the likes of IBM and Oracle.

This is the cloud era, but 15 years ago most of this would have been unfeasible. Companies just didn’t have the elements necessary for such broad missions. And because of that, people are changing as well. Nothing seems impossible, today a 20 year old out of school can think about disrupting really well established industries and get funded to do it.

Co-working: the Future of Work? Our Interview with Prague’s Node5

StartupYard’s connection with Node5 dates back to the founding of both, in 2011. Born as an incubator/accelerator program, Node5 and StartupYard quickly split into two separate programs, with separate investors.

Node5, founded by Lukas Hudecek (an original co-founder of StartupYard) became an open co-working space, with a mix of public and private offices which companies and freelancers, as well as startups, share. The space offers a dynamic and social workplace for people who would otherwise be working in small teams without large offices, and is a cost-efficient solution for small companies who would like to offset and share some of the costs of running an office, including reception, food and drinks, meeting spaces, security, cleaning, and other services.
Last year, StartupYard returned to Node5, launching a new partnership, and making some of the accelerator’s resources available to members of the Node5 community.

Node5 is conveniently located near Andel, in Smichov, part of Prague’s “Silicon Valley” district to the west of the city center.

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You can read about Node5 on their website, or tweet to them @TheNode5

Hi Petra and Lucas! First, give me some background on yourselves. How did you come to work together?

Petra: I’ve stood on my own feet since the age of 13 and the rough struggle of everyday survival made quite an “iron lady” out of me. I learnt to go and achieve anything in any profession, and make money for the next day under any circumstances. This heartless method helped me quite a bit  when I decided to set aside my university studies and enter the tough world of PR, marketing and sales in which I founded a company, later sold it and used the money to move to Amsterdam to finally pursue further self-development.

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Petra Koncelikova managers Node5, and a team of between 5 and 8

Time spent in Holland was quite therapeutic, and an eye opener. I created a local business- a leisure programme for hard working women which kept me financially independent. But more importantly, it taught me to love and respect myself as I grew alongside my business.

I met Lukas through a friend of mine while still living in Amsterdam. Meeting a businessman who cares more about helping others than making money was in my world just as much Sci-Fi as flying a rocket to Mars to shop at a Bio market. We had a couple of discussions and after a while it turned out we complemented each other in many ways. Particularly in business matters.

We found each other pitching in where the other got stuck. His philanthropy and my rigid attitude proved to balance out perfectly and after just a couple of months, real results showed and it’s kept rolling ever since. We make money and do good at the same time.

Lukas: Being thrown into world of entrepreneurship since the early stages of life, I had my ups and downs starting a couple of companies.

 

Lukas Hudecek, founder and owner at Node5

Lukas Hudecek, founder and owner at Node5

I started a computer hardware store and B2B platform for local computer shops, a creative agency making websites in FrontPage 97, a hardware manufacturer of heavy-duty wifi routers for rural areas and finally, a retail shop for home automatization systems. I raised capital for future endeavors by employing myself in companies as a developer, one of which happened to be Skype.

After a while I thought it would be great to share my experiences with others, and so I started to support younger entrepreneurs by organizing events and hackathons. Those efforts turned into founding StartupYard, where I had the amazing chance as CEO to put our first batch of eight companies through the 3 month program. I founded Node5 soon after.

The two most significant events in the existence of Node5 were when we became break-even in February 2014, and when I decided to hire Petra and make her my General Manager. She proved yourself ever since, and as an extra bonus I’ve gotten a couple of lessons on how not shoot myself in a foot.

What problem did you originally hope to solve by opening Node5?

Lukas: When I was with StartupYard, companies were missing two things especially. A venue and community. Node5 was exactly this, just without the acceleration program. When we started, we thought using London’s TechHub franchise was the way to go, but later we decided to stay independent. It looked like a crazy decision back then, but worth it because now we have the venue, community and accelerator under one roof with complete independence.

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This is simply something neither Node5 nor StartupYard would have been able to achieve on it’s own at this scale. And that infrastructure was something I’d originally been hoping to solve for companies like we use to be in the beginning. The time is now.

Was there a model that you followed when you founded Node5? How have the space and business diverged from your original vision?

Lukas: As we were in close talks with TechHub during the early stages of Node5, we knew some of the essentials. We knew some basics about community and real estate business around this type of work. Even though the purchasing power in London and Prague differ greatly, we saw an opportunity in combining community and real estate in a nearly non-profit business to engage talent in an equity-based program, to slingshot ready made entrepreneurs out to the world.

But I was thinking about Node5 from the wrong angle at that point. Very soon we realized we are unable to pay for Node5’s operations costs with equity, so we started looking for stronger monthly revenues. In Feb 2014 after a long hard 2 years, we became break-even strictly on the real estate and space rental business side.

At that point, we had something of an appetite to crank up the old acceleration program too, but then StartupYard fortuitously returned [StartupYard was located elsewhere from 2012 to 2014] and did a fantastic job on the last batch. I would say that this helped us to properly realize Node5’s original vision for the first time.

On the business side, what has proved to be the hardest part of running a co-working space? Has anything surprised you?

Petra: Running a co-working space of this size and form proved to be slightly schizophrenic, because you are internally dealing with different types of businesses and professions in a team of 3 – 8 people max. A thousand square meters require constant maintenance. We keep that space up and tidy 24/7. There’s always something going wrong, somewhere. You have to do not just your promotion but also promote your partners. You’re a salesperson, project manager, event coordinator and HR, all at the same time having only 24 hours in a day.

You have to deal with smaller unreliable service providers since we don’t reach wholesale quotes. Its hard to describe the hustle we arein when we have to find an alternative so our clients won’t spot the difference. Fair usage policy is NEVER fair enough. You always step on someone’s toes and your good intentions usually interest no one.

Sometimes we help enthusiasts to throw their own gig to support their community, while planning events 6 months ahead in the background just to try hold still on a tight schedule. We have this policy to do our best and always walk the extra mile for our clients. But we can’t fit it all in all the time, and there’s always something we miss. It can be pretty frustrating!

Lukas: I’ve been surprised by the diversity of core tasks that are essential to running a coworking space. On a daily basis, we bounce between being a catering firm, an event production company, and real estate and business consultancy agencies. Each of these functions require a great deal of brain cycles on its own, so it’s hard to keep them profitable and running.

It’s like running four companies simultaneously, and that is really the hardest part. I wouldn’t be able to handle it without the great team Petra has put together. Running a coworking space isn’t exactly the easiest job ever, but what is?

Are there some success stories from Node5 that you’re particularly proud of?

Node5 and StartupYard cooperated last month on PragueHacks- including over 80 local programmers.

Node5 and StartupYard cooperated last month on PragueHacks- including over 80 local programmers.

Lukas: I think that I am speaking for my whole crew when I say that there are many successes our members achieved over the time we’ve been here, but I’d rather spotlight something else I am proud of. That’s the current state of our startup infrastructure and its ambitions. I am proud of all those 2-4 year old companies that still push forward like crazy! I am amazed how many failures were forgotten over the past months and years. I am sure that if there is anything like the Czech Startup community, it has never been better. I am proud of what we have achieved together over these last couple of years.

Do you see this or other alternative work spaces as a viable path for a larger part of the workforce in the future? If so, what are its main advantages and disadvantages?

Petra:  Well as a former freelancer I’ve tried it all. I worked in a co-working space back in my early days, and I didn’t find it that awesome. But it was still better than being at home, where I either worked too much or not at all. Efficiency was quite arguable.

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The open workspace at Node5

When I founded a PR agency with 10 employees, renting A-class office space in the city center, it was great at first. But every time we got stuck on something we had no one to turn our heads to. No doors to knock on. If there had been something like co-working for marketing agencies back in the days, I’d probably let the nice office go at least in a first 1-2 years of our life. Having like-minded people around means having opponents for your ideas all the time. It’s resources you could often use when you’re short handed or worse, when you have too many people. Just a simple coffee at the bar could save you hours of work. I see Node5 members get together everyday and I see them creating things, companies and values, helping and supporting each other. I find it simply priceless.

Lukas: There was a study by DeskWanted in 2013 saying that demand for shared workspace rises by 89% as the independent workforce hits 1 billion. There’s no current number of how many coworking spaces are there but back in the 2013 the number was 2.500 coworking spaces around the world. There are activities such as remoteyear.com showing us, that people like to work not just independently, but also remotely. The same signal we’re getting from big corporations who sends their small teams to work from Node5 remotely and independently from the rest of the company departments. Working in shared workspace isn’t for everybody, except it is 🙂

What’s in Node5’s plans for the next year or so?

Petra: We were working extra hard in the past four months on event production to earn some extra bucks that will allow us to refurbish our residential area, to provide much better working conditions for our residents and bring back a high level of comfort. Other than that, we are also working on a couple of business deals that will provide our members certain perks, that’s something we’ll be releasing soon so you have to wait for that!

Lukas: Recently, we faced a hard decision whether to expand to upper floors to ramp up our revenues, or improve the comfort in the current setup. We’ve chosen improvement and are currently undergoing reconstruction in the residential space. This will provide our members with more privacy for salespeople, more meeting rooms, leisure room, various options of privacy in coworking space and more.

Additionally, what we might be looking at from the longer-term perspective is a program for further support of companies after graduating from acceleration programs, and on growing the real-estate in size and level of quality, as well as range of provided services . We hope our team will help us to build it up for an interview next year.

Vit Horky of Brand Embassy: “Making People Happy”

One of StartupYard’s earliest success stories, Brand Embassy is an innovative, rapidly growing company, tackling “social customer care,” and customer relationship management.

Using this plug-and-play cloud solution, large and small companies can communicate directly with their customers via popular social media channels, like Facebook and Twitter- channels that are increasingly favored by customers looking for the convenience of chatting via social media, and looking to avoid playing email and phone tag with slow and unresponsive customer care teams.

I recently spoke with Vit Horky, Brand Embassy’s co-founder and CEO, about the history of Brand Embassy, what the company is doing today, and what their future plans look like.

How did you and Damian Brhel, the other co-founder, start working together?

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It’s a funny story that starts off in Bageterie Boulevard on Vodickova [in the center of Prague] more than 10 years ago. I was looking to hire a developer for Inspiro Solutions, a Prague-based digital marketing agency I founded in 2004, and I didn’t even have an office to hold interviews. Even though Damian was only 14 at the time I didn’t let his age overshadow the interest I had in his CV. We met, we hit it off and decided to work together on a project. One project led to another and eventually led to Damian being appointed as Technical Director of Inspiro Solutions. He was a far superior developer than the rest even though he was outranked professionally and in terms of age.

Founders Vit and Damian. Photo by Libor Fojtik

Founders Vit and Damian. Photo by Libor Fojtik

I guess it’s also worth noting I was only 17 at the time. So a teenager managing an even younger teenager!

What are your professional backgrounds?

I’ve always been interested in entrepreneurship. When I was 12 years old at summer camp, and a temporary vegetarian, I would take the steak that was part of the canteen lunch and re-sell it to kids who wanted more. I guess that’s where it all began!

By the time I was 17 I founded my first company, Inspiro Solutions, which has since become one of the leading social media agencies in Central Europe. I diversified my company portfolio by launching Inspiro Creative, a software distribution company that became a Gold Partner of AVG Technologies and has served over 10,000 customers since that time.

After several years on the agency side of things, I was fed up working on other people’s projects. I wanted to build something that served a real purpose, that had meaning. It’s that desire to do more than just marketing campaigns that really pushed us to launch Brand Embassy in 2011.

As for Damian, he’s a bit a Mark Zuckerberg :laughs:. He didn’t go to university because he simply didn’t have time – he was already pursuing his dreams. Damian is self taught and has been doing development projects by himself since his early teens.

The agency world was heavily focused on the domestic market, and project driven. Damian wanted something that was more product driven with a global scale that could actually have a positive impact on the way people communicate. Both on the same page, we made a successful exit to focus on the launch of Brand Embassy.  

When Brand Embassy first applied to Startupyard, how did you envision the product and future of the company?

We went to Startupyard with a product that was a combination of software and people. Brand Embassy 1.0 was split between the software and the actual service – rather than focusing on selling the power of the technology, we bundled this with providing actual customer service for brands that didn’t know how to manage social customer service.

9 out of 10 contact center agents are only trained to receive or place phone calls, while 68% of customers prefer to use channels other than phone. With this in mind, Brand Embassy kept a part of their “agency” background, if you will, to help assist brands that simply didn’t know what do with social customer care – from both a technological and staffing perspective.

Then and now, the vision remains “making people happy.” Better customer service as an industry standard means better service for you, me, your mother, your brother, your friends and your colleagues. Delivering happiness through better customer service, via our technology, is still our vision.

How, specifically, did those plans change during and following the accelerator?

During the period Brand Embassy was with Startupyard, the mentors we connected with pushed Brand Embassy to focus on product and scalability. They taught us to look further down the road and think about how we could eliminate the “service” or “human” part of our offering and focus on the technology.

The networking opportunities that we had, from conferences in London to introductions to some of our first clients in our home market, were irreplaceable.

How did Brand Embassy gain its first large investment?

We closed a $1 million seed round investment in February 2014 from two venture capital funds, Rockaway Capital and Spread Capital.

While the investors saw the connection and potential between social media and customer service, I learned that they were more interested in investing in people they believed in rather than the business. They viewed social media marketing software as direct competition to overcome. When in reality, the solutions and reason to invest – from a client’s side – in various technologies is very different. Brand Embassy is first and foremost built for customer service, not marketing – while the opposite can be said for “social media marketing” solutions.

Now, our investors have become convinced by both the capabilities of myself and Damian, as well as the product itself.  

Here’s a look at our growth to prove that point:

Revenue:

  • 300% YOY revenue growth for 3 consecutive years

Global expansion

  • 2013 client portfolio: 80% domestic / 20% foreign
  • 2014 client portfolio: 80% foreign / 20% domestic

Telco Market

  • late 2011: first telco client (Telefonica O2 CZ)
  • By 2012: all mobile operators in the Czech Republic
  • By 2014: global market leader in social customer service software for telco


Company Growth:

  • 2012: 5 employees
  • late 2014: 15 employees
  • mid 2015: 30 (doubled)
  • 2016: still hiring!

Can you share a few case studies and testimonials about Brand Embassy?

Sure! A recent case study showed that O2, one of the Czech Republic’s largest Telco operators,  reduced response time by 70% and increased customer satisfaction by 90% using Brand Embassy. O2 fundamentally improved their “guru” concept with Brand Embassy which put customer service and knowledgeable agents at the forefront for their marketing campaign. They were able to change their brand reputation and position themselves as a responsive company that actually listens to their customers.  

Dusan Simonovic, Social Media Specialist at O2, CZ said: “Brand Embassy connects all our social channels into one space with efficient team collaboration and good workflow for providing fast answers. Flexibility with customization is also a great benefit”

We also received this glowing testimonial from Phil Wilson, Social Media Communication Manager at Vodafone UK: “We’ve seen a major change in the way our customers want to communicate with us. They demand more than just marketing on social media, they want customer service. We believe it’s our job to deliver that exceptional service. That’s why we’ve invested in customer service technology from Brand Embassy, and together we’re well on our way to achieving our goals.”

Brand Embassy was also named a top rated enterprise social media management software by TrustRadius.

Has hiring been a major challenge? How has BE gone about hiring new people?

Yes, it’s been a challenge, but we are progressing.

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We doubled the number of employees in the last 6 months and are still actively hiring. We have a brilliantly diverse workforce across commercial, product and marketing and operations.

Our team of 30, all in Prague, now cover 8 countries including USA, Morocco, Uzbekistan and The Philippines. We’re like a mini United Nations here!   

Historically, we were focusing on hard skills and number of years of professional experience. We found that those people didn’t necessarily have the cultural fit or drive we were looking for. We had to part ways with some very talented people because of this disconnect.

We learned the hard way that it’s more important to find people who are a great company culture fit than those who have x years of experience with x,y,z skills. We want to be happy with them and we want them to be happy with us.

Brand Embassy has a unique brand story. How did that develop?

There are two reasons why we have the “Bee Story.” First, it’s because we don’t want to be another boring software company. The Bee Story helps us add some coolness and fun to our messaging and branding. It also helps us stand out in the crowd, as more than just a software company. We are a breath of fresh air in an otherwise pretty stuffy market.

In addition, the Bee Story helps us explain the benefits of integrated customer care in a very intuitive way. We found that we needed a strong analogy to help describe the importance that efficiency and a clean process have in digital customer service. Bees are fascinating creatures that work in an intelligent hive. That’s just what Brand Embassy aims to be. Our approach, then, is analogous with a natural one that is inherently easy to understand, when you think about it.  

What are the significant challenges of selling your solution to small and medium sized businesses?

A challenge we faced in recent years was the inability to service our smaller clients and offer a solution that fit their needs and budget. They wanted us and we wanted them, but we simply didn’t have the resources to work with them and enterprise clients were prioritized.

Only a few weeks ago, we launched our online sales channel (self-service) and we already have plenty of SME clients starting with Brand Embassy every week.

They are all small business and agencies from around the world.

We see big potential in small e-shops and small business owners who must effectively manage their impatient digital customers too. Especially for e-shops whose customers are 100% accustomed to doing things online. They shop online, they want customer service online.


Along with the introduction of our online sales channel, we are introducing a package for these SME’s that starts at $39 / user / month.

Which competitors do you see as vying for the same core audience as Brand Embassy, and why is BE a better choice for your core customers?

There are many solutions that claim to provide social customer service, however, they usually fall into one of two categories. They’re either legacy solutions that have added social as an add-on, but they are difficult to use because handling a public inquiry on social media is something completely different from receiving a phone call.

Or, they are marketing-first solutions designed for running campaigns and building online communities, but can’t handle high conversation volumes and are generally managed by people who have many other responsibilities outside of customer service.

We fill the gap, offering solutions that are built for social and customer service specifically, handling high volumes and making social customer service smart and enjoyable both for the customers and agents.

For Brand Embassy, it’s not only about social media customer service. It’s about unifying the entire customer service experience across all digital channels.

We’ve increasingly seen that non-loyal Zendesk clients from Central Europe are coming over to Brand Embassy. They’ve been using Zendesk out of necessity, but it’s too complicated and it’s not built for social media – social is just an add on to a more traditional help desk solution. It lacks efficiency – everything other than email is a plugin. Brand Embassy has these digital channels built into the core of our platform.

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.

Ondrej Krajicek: Y Softer and StartupYard Mentor, Part 1: “Make Failing Legal in the Czech Republic”

(This is a two part series. Click here for Part 2: “Density Doesn’t Equal Cooperation”)

Ondrej Krajicek, one of StartupYard’s most popular mentors, serves as Chief Research Officer at Y Soft Corporation and Y Soft Ventures. Y Soft is a global leader in print management systems, and has also branched out into 3D printing. In addition, through Y Soft Ventures, the company has begun to support and invest in startups in its field as well, investing in Czech startups Comprimato, and OrganizeTube, among others.

Ondrej, when he visits StartupYard at Node5, can often be seen animately drawing on a flipchart. He’s the sort of person who can find passion for almost any subject, and when he’s talking with startups, there are few who can match his skills as a mentor.

Ondrej and I talked several times, about mentoring, investing, and the Czech tech ecosystem, in what became an increasingly long interview (our longest ever). Still, we think it’s really worth reading, so we have decided to split this behemoth into two parts. Part 2 will be posted by Friday. For today, please enjoy part one of this interview:

Hi Ondrej, tell us a bit about yourself first. What is your background, and how did you get involved with Y Soft Corporation, and Y Soft Ventures?

Pretty straightforward. I am Czech, I was born here and grew up here. Studied and worked at the Faculty of Informatics and Institute of Computer Science of Masaryk University in Brno. That is also where I had my first teaching experience, tutoring students on Object Oriented Programming and found out that I like to teach.

Later, I joined the team teaching Functional Programming at Haskell and also started two courses, which are being taught at the Faculty of Informatics to this day. Both are related to C# and Microsoft.Net platform. By the way, I have recently returned to teaching, having the opportunity to teach Software Quality at Faculty of Informatics, Masaryk University. It always feels nice to return.

I had some experiences with big companies like Microsoft, HP, but I left the university for Y Soft in 2007, never finishing my PhD (and that’s still on my TO DO list!). My background is applied Computer Science, Software Engineering and Software Architecture.

At Y Soft, I am member of company management and I have always been involved with R&D. Recently, I became Y Soft CTO. At Y Soft, I also became acquainted with Y Soft Ventures and the startup community, roughly 3 years ago.

When I work with startups, I simply sell what I know, what I have learned at Y Soft and whatever insight I might have. Don’t get me wrong, I don’t sell the Y Soft way of doing things, trying to shape every challenge to whatever Y Soft went through. Every company is unique and that starts with culture and ends with products, technology and know how. But I try to use my insight and perspective which I have thanks to this experience and I am open about it.

I enjoy building products (focusing on combination of HW and SW) which have value. I enjoy challenging myself with customer needs (fighting with my engineering inner self which knows best what the users need) and bringing developers and customers together (which is anyhow seen as very dangerous thing to do). I love diversity and working in multicultural, global environment with all the lessons it brings. And I like matching business with technology and vice versa.

And I am a YSofter.

YSoft doesn’t seem the sort of company that one would normally expect to invest in startups and entrepreneurs. What drove your decision to give back to startups in Central Europe?

I look at this as a healthy mixture of pragmatism and patriotism. Patriotism is about wanting to give back something to our country and our region and support others to live up to challenges and establish companies, turn their ideas into products and products into business. I always shared the vision of Vasek (Muchna, Y Soft founder) to give positive examples that you can build successful companies here in CEE… or die trying!

From the business point of view, we want to utilize our experience with building Y Soft, delivering HW / SW products (which the world now calls Internet of Things, IOT) and accompanying services and also leverage our global sales and support network. Y Soft is only now changing from a single to multiple product company and our affiliates cover global business worldwide, and have the capacity to cover more than just SafeQ and potential to further grow their operation if necessary. We are utilizing this internally, such as with be3D printers, a recent Y Soft acquisition. 

What are some of your favorite investments from YSoft Ventures so far, and what makes them special to you?

A: The Y Soft Ventures operation is small so far, so I can say that I enjoy working with all our portfolio companies. However, the closest to me is Comprimato, the provider of GPU accelerated JPEG2000 codecs for professional use. I like the technology and I share some background with the founders. I strongly believe in their product, but most importantly in their technology and the team.

For me, every startup can be viewed and evaluated on three levels: (current or upcoming) products, technology / know how and the team and its culture. For instance, Comprimato is very strong on all three levels and they have very sound technology and team. Besides high performance video codecs, they can deliver value in parallelization on GPUs in many different fields. 

All our portfolio companies have their unique trait. Take OrganizeTube, for example: they managed to develop a second product just by trying to solve one of the problems they had with their web portal. That is another reminder of how flexible the startup can be and that new products and services can really start as “accidents”. 

What do you see as the unique advantages and disadvantages that startups have in the Czech Republic and in Central Europe generally?

The ecosystem, or I should say the lack of it. I recently had very interesting conversation with one of my colleagues about the cost of failures in entrepreneurship here. On one hand, you have the illegal chains of companies relying on surrogates (which we refer to as white horses) and on the other, we have lots of people with bright ideas facing the big risks associated with trying and failing.

We need to support trial and failure cycle on the system level. Not only will this make startups more accessible to everybody, but also this will give a strong message to the society, where we as a nation want to go.

 I understand the protective measures which are built in our legal system, but we need to be aware that this might also hinder the creation of new companies. Startup culture is one of the strong drivers for innovation and creation of products and services with high added value. This (and I am not a macroeconomist) translates to more qualified jobs and the push for more educated people. When we combine this with the strong tradition the Czech Republic has in some fields, this might really change our economic outlook for the next 20 – 30 years.

We just need to “legalize” trying and failing.

And this is not just a legal thing. Establishing a company and going bankrupt still has a lot of negative social connotation. We as a society need to learn to distinguish whether we are looking at somebody who really broke the law or if we are looking at an entrepreneur for whom his current idea failed, but who can succeed with a new one.

As a StartupYard mentor, what were your impressions of some of our most recent Startups? Did you have any favorites? What are some of their biggest challenges, in your view?

 First of all, thanks for this opportunity. I learned a lot! My first impression, when I came for my mentoring day was “How can you do this without a whiteboard or a flipchart?” So you gave me that flipchart :-).

I spend approximately 40 – 60 minutes with each company, which is how StartupYard works and I am still in touch with some of them. Every company is completely different and I enjoy talking to every single one of them. What’s even better is that I am staying in touch with some and as far as I know, this is one of the positives that StartupYard brings. Many contacts persist and lead to long term cooperations with the mentors.

All the products and ideas I saw were interesting. I really appreciated their depth and the technology behind them. But I believe that it’s the team that’s most important and I have met great people at StartupYard this year. A lot of positive things and also much to improve and learn, but that holds for all of us. Let’s discuss some particular topics which I met with.

I believe that there were some common traits to all of the teams I have met. They were mostly in the stage of technical obsession, still trying to think about how to sell how great their technology is. Some of them were undergoing the paradigm shift from thinking inwards to outwards thinking, i.e. instead of focusing on how they solve problems to what problems of their customers they are trying to solve and why. It sounds obvious, but this is one of the most difficult changes you need to undergo in our approach.

Another important aspect is quantification. They yet have to learn how to quantify the qualities and benefits they are delivering and how to communicate this in a straightforward way. One specific example was a datasheet covering a great product with 4 pages of full text. Somewhere within, the text says that customer can integrate the technology in 10 minutes, because it is so easy to use. This is something which needs to shine on the first page, with calculated savings of TCO on a real or model example.

Forget words. Qualities, metrics and measurements, communicated in a simple, straightforward way is what works (as far as I know ;-). Your message needs to be strong and for that, it needs to be short. Even Martin Luther King’s Gettysburg address took mere 16 minutes!

 You were very popular as a mentor with our teams this year. What makes mentoring worthwhile to you? What makes it challenging?

 First of all, being 34 years old it is difficult for me to call myself a mentor or feel like one. My approach is simple, get to know them, get to understand them, be one of them and apply whatever I know or have experienced in the past.

 I always try to make things clear and be open about what I think I can help with and where I can’t. I usually do not act as filter, I rather try to generate ideas and insights and it is up to the startups to filter what they see as useful. It is difficult to explain, sometimes I fit seamlessly with the culture of a particular startup and our discussions and workshops just flow, sometimes it’s like a struggle. Being able to accommodate third party ideas into your startup is a good test of your culture.

So if I may say “mentoring”, what I really enjoy about mentoring are three things: getting to know new people / companies, the opportunity to use what I know and what I am good at to solve different problems in different domains (I have always been a big believer in diversity), and most importantly, the learning opportunity.

I have always learned a lot from any company I have met and as a mentor, I am humbled, because if I am contributing something to them, they always give something back to me – a new thing to learn, an opportunity to practice, a thinking experience a challenge to master.

 And now we are getting to what makes it challenging. Looking at it from the perspective of the startup, they do not have that much time and usually their problems are connected with a high sense of urgency, they are fighting for survival. Some of them have cash for just few more months, not more.

So the challenge is to accept the constraints they have and come up with ideas for improvement or solutions. I believe that they don’t need a mentor telling them what is right but more like a teammate who can share their story with them, even if only for a short time. Simply put, I try to treat the startups as my customers. I always ask myself, whether the time we spent together delivered some value to them and what value it was.

There are some things you need to learn as a mentor, most importantly saying “I don’t think I am the right person to help you with this.”. And if you are a great mentor, you add “and I know this person, who is great at that and I will connect you.” One thing which I admire about the Valley culture its Pay It Forward approach, meaning you help without expecting any return. Eventually, somebody else will help you in return. So I try to practice that. Not that it is easy, finding enough time.

Last but not least, everybody needs to bear in mind that mentoring has its limits. Robert Kaplan very nicely defines the quality of mentoring as being as good, as the story being told to the mentor. I completely second that.

 As a representative of an investment fund, how can entrepreneurs and startups better prepare to pitch you and other investors on their ideas, teams, and businesses? What do you look for, and what most often kills your interest in a particular startup?

 Be honest. Be specific. Tell us who your customers are. Tell us why they should care? Tell us how to monetize on it. Or tell us that you don’t know. And most importantly, be honest and specific.

 For example, this year at StartupYard, most if not all startups I have met with had nice products and sound technology and they were struggling with finding ways how to monetize on them- how to approach customers. This is fairly common. I learned the hard way that it is one thing to have sound technology, another to turn it into a sellable product, and yet another to generate ongoing business. So we mostly discussed how to turn the technology into products and how to leverage it.

 Strangely, we had just one really technical discussion. I am a software architect myself, so for me, this is very difficult. But I can share what I have learned so far.

 One last thing, very important. Please be honest and specific. Forget statements like: “My product brings new, unparalleled ways how to optimize your workflow, streamline your working process and make you much more productive.” Ask yourself: what our customer’s  specific problem? How do we want to solve it (what advantages you bring), and what benefits do we generate (specifically – numbers, figures), and why will they pay?

So be honest, short and specific.

This is a two part series. Click here for Part 2: “Density Doesn’t Equal Cooperation”

StartupYard Partner SendGrid Talks Startups, StartupYard, and Central Europe

Last month, StartupYard was treated with an enlightening visit and a full day workshop from Martyn Davies, leader of EMEA Community Development for SendGrid.

For those not yet in the know, SendGrid, based in Colorado with offices worldwide, is a nifty cloud-based email platform that allows startups as well as large companies to handle large volumes of user-interaction emails, as well as automated messages, marketing emails and more.

Anna Bofil Bert with fellow StartupYard partner Softlayer's Michael Donoghue

Anna Bofil Bert from Sendgrid, with fellow StartupYard partner Softlayer’s Michael Donoghue

About SendGrid


SendGrid helps companies of any size to ensure that their emails are timely delivered, and that their customer communications meet industry best practices. According to Martin, SendGrid now handles a hefty percentage of total email traffic, worldwide. Strong odds are that you’ve already used SendGrid extensively, even if you don’t know it.

And SendGrid is known for taking pains to help the developer community and support startups.

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Martyn’s StartupYard workshop focused on customer retention and communication best practices using SendGrid products

I met Martyn and his colleague, Development Community Manager Anna Bofill Bert, at LeWeb, in Paris last year. I was struck immediately by how dedicated their team is to educating and working directly with startups.

Not only has SendGrid offered StartupYard’s current startups and alumni a generous package of free services, but they have also offered personalized, in-depth support and mentoring for all of our members.

Martyn’s full day workshop was a tremendous help, not only to our teams, but to the StartupYard team as well. I caught up with him afterward to get his thoughts on mentoring startups, and about his experiences with Central Europe. 

SendGrid has a unique relationship with accelerators and the startup ecosystem, why do you spend so much time working with startups?

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Martyn: We were once a startup ourselves, and even through we’ve grown beyond that point now we’ve experienced a lot of the challenges that face early stage companies, so there’s a lot of advice to be shared.

We’re in a unique position to be super supportive of these great companies at a time when they need the most help, and we’re there to help them out, not just with SendGrid credit (which is a given!), but access to our network and teams of experts.

Anything we can do to help them get to the next level, we’ll do it and we encompass all that support in a program that we call SendGrid Accelerate.

What do you see as some of the biggest early pitfalls when it comes to global SaaS startups, and their community building and marketing efforts?

 Not allowing people to experience your platform, for free, quickly, and easily will be the make or break. You have to create an experience, particularly for developers that allows them to experiment in a low barrier situation, keeping that time to ‘Hello, World’ as short as possible.

There are a number of ways you can do this and it doesn’t always have to be sending a Developer Evangelist to a hackathon.

Publishing regular technical content on your blog, being very active on Stack Overflow, creating hacks that mash up your service with other great services and then telling that company about it – these are all stay at home ways to increase awareness and get people talking about what you’re doing.

As for community, you don’t have to build one from scratch if you don’t want to. Just get out there and be supportive of interesting community efforts or meetups.

If there isn’t much community in your locale, then start a meetup/group/hacking evening (anything!) and say it’s powered by your company. Watch out though, community isn’t community if you aren’t supportive, so don’t see any meetup you organise as a straight up sales pitching evening.

Several of our startups noted that you had opened their eyes to problems they didn’t know they had. Did any of our startups surprise you in turn?

We were really impressed with the SaaS concepts we were shown and just how far down the line the teams were in terms of product and traction. I’ve signed up for Testomato to use personally and we’ll be keeping a close eye on the other teams around demo day and afterwards.

 SendGrid pays a lot of attention to emerging players and markets, including the CEE. What do you see as the region’s biggest unique opportunities and strengths?

CEE is a gold mine for technical talent in my opinion. You’ve got a large amount of talented developers who came up through the outsourcing companies many larger, well known companies have used over the years. Now they’re out working on their own ideas and the technical aspects are top notch.

Likewise, what are, from your perspective, the biggest challenges that startups from this region face? What kind of help do they need most?

Breaking out of the mindset of being a CEE company is key. If you’re creating a product that works everywhere, then you’re a global company and you need to think that way. Your developer marketing, and some community efforts need to reflect that.

Introductions to people in different cities who can help out, desk space for a team member, anything that gets them out to new places when they feel they need it. That’s something we try to help with at SendGrid, we even have a desk for visiting startups to use when they’re in town at our office in London!

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!