What’s a Pain Point? A Guide for Startups

What’s the pain point? That’s a question we end up asking all the time during the first month of mentoring at StartupYard. And this round is no exception.

Every year, we begin the first month of the StartupYard program working on Product Positioning and buy personas. An essential element of this is “the problem” that the startup is solving. That problem can be surprisingly tricky to identify.

Here, I’ll talk about identifying problems, or “pain points,” and how to think more deeply about them.

What is a Pain Point?

At the root, a pain point is something that a customer is aware of (if you’re lucky), and which bothers them. It’s a problem waiting for a solution. “I can’t do X,” or “X is stopping me from doing Y.” Pain is something you react to- it’s something you try to stop happening.

Pain points can be big or small. If the customer base is big enough, and the technology simple enough to use, the pain point can be very simple. If the customer base is smaller, and the pain point much bigger, the technology to solve it can be more complex.

Anything from: “It takes too long to order a pizza,” to “I can’t accurately predict machinery failures in airplane engines.” StartupYard has accelerated startups working on both those pain points. One is a simple problem everyone has, and one is a complex problem only a few people have.

Addressing the Real Pain

One of the most common issues with startups’ early attempts at positioning, is making the “problem” too self-serving. For example, if you’re making compression software, then the problem would be: “people don’t have good compression software.”

But that ignores the fact that people already use other solutions, and getting them to switch would involve solving a still deeper problem. What about their current solution is bothersome enough to change? The first round of positioning often breaks down to: “this product is for people who don’t have this product.” True, no doubt, but also not very compelling.

Pain points can be tricky to identify, because they don’t always reflect exactly what the startup thinks of itself as doing. The above example is useful: a company that is working on compression may see themselves as “providing compression software.” But the customer may not be looking for compression software. The problem isn’t “I need compression software,” but rather, “I need to send files faster,” or “I need a better storage system.”

pain point, startups

One of the exercises I do with startups is to ask them to imagine positioning for basic tools everyone is familiar with. What is the positioning for a drill? It becomes obvious that “this drill is for people who need drills,” is not complete enough. In fact it misses the point entirely. “This drill is for people who need to make holes,” is better. Better still might be: “this is for people who can’t make many holes quickly and easily.”

This process forces the startup to stop thinking in their terms, and start thinking in end-user terms. Founders think about market opportunity, about technology, and about finding efficiencies– as well they should. Still, the question of what pain point they address must be raised. “I can’t technology,” is not a pain point. Nobody sits down and googles: “how to find efficiencies.”

Ok, maybe they do, but it probably doesn’t lead to a lot of sales. A startup can do a lot of cool and far out things with technology, but if it doesn’t solve a clear pain point -the instantly identifiable reason why the customer needs the product- then it won’t get very far.

Cost is Not Everything

A favorite mentor at StartupYard, Ondrej Krajicek, says that he wants to hear one of two things from every startup he meets: “can you save me time?” or “Can you save me money?” In a word, this is “cost.” Every second of every day costs you something, either in time, or in money.

Initially, it’s typical for a startup to begin with the assumption that the pain point is cost of some kind. Every company, and every consumer, wants to save cost. But there’s something incomplete about this as a starting point.

There are many, many ways to save time and money. The very specific reasons why a company or a person would want to save time on one particular activity, or save money on one particular cost are very important. Nobody sets out at the beginning of the day to “save time and money,” even though that imperative may drive many of their individual decisions.

The customer always has other goals in mind. And higher costs can be justified if they help meet some of those goals. If there’s a thing most customers, consumer or corporate, hate just as much as high costs, it’s missed opportunities. A tech startup can focus on either cost or opportunity, or both.

Cost is always material to new technologies. Either the pain they solve is great enough to justify spending more, or the customer is willing to endure a particular pain, because the solution is not yet worth the cost. But here lies an important point: costs do not always have to go down. Particularly with new technologies that create new value and opportunities, the attraction may be great enough to justify higher costs, either in time or money.

Everybody Hurts

pain point, startups, StartupYard

Identifying pain points is not just about semantics- it’s not just rephrasing the problem to make it sound like something a customer cares about. The customer has to actually care, and you have to show them empathy. And pain points are unique to each customer- you have to find ways of helping customers to see how a product solves their own pain points, and not just the broad ones you claim to fix.

And there’s only really one way of doing that- it’s shutting up and listening to the customer. As the folks over at Gong have shown with real data, more sales happen when the prospect, and not the salesperson, does the majority of the talking.

This is because a salesperson is limited in that they don’t know what’s most important to a particular customer until the customer identifies that problem themselves. This can only be encouraged by asking questions that reveal sources of pain for the customer.

Think back on that example about pizza delivery. You could explain to an office manager about how DameJidlo (our alum), or FoodPanda, or Deliveroo works, along with all the many benefits. But that office manager might never have a need for food delivery in the first place. Or they might feel perfectly happy with their go-to delivery options.

It’s only by talking through the customer’s routines, and their current outcomes, that you might reveal pains they aren’t considering. Maybe people complain that the delivery isn’t fast enough. Maybe it’s too expensive. Maybe the variety is lacking, and there have been complaints. Your product, in this case a food ordering and delivery platform, solves many pain points aside from the ones you assume are most important.

We actually practice this kind of selling on a regular basis, even if we don’t realize it. Have you ever explained to a friend or family member about how awesome a new technology really is, only to hear the response: “yeah, well I just prefer what I have right now.” Frustrating! But that’s not because they’re stupid or because they don’t listen. It’s because they haven’t heard anything that speaks to a real, urgent need from their side.

You can practice this kind of thinking by asking the person how they use the current solution they have. You’ll find, as they talk more, that there are indeed things that bother them, and things that could use improvement. Put enough of those together, and the new solution starts to look more attractive.

Shut up and Listen

Everybody Hurts, as the song goes. The question is how, and why. You have to talk to your customers to find out. There is no shortcut.

Try some of these open questions, starting with “how” or “what”:

what are you trying to accomplish?

What’s the core issue here?

How does that affect things?

What’s the biggest challenge you face?

How does this fit into what the objective is?

How does this affect the rest of the team?

What do your colleagues see as their main challenges in this area?

What happens if you do nothing?

What does doing nothing cost you?

You’ll find, most likely, that the customer knows very well what his or her problems and pain points are- although they may not think of them as problems. A problem that doesn’t seem to have a solution isn’t a problem at all- it’s just an aggravation. So showing a customer that a problem exists means getting them to acknowledge pain, and then to understand the solution.

Listen, and most of the time, the customer will tell you.

partnerships

How to Spot a Startup Tourist

Applications for StartupYard’s second round of acceleration in 2016 have closed. Now, we dig into applications, looking at ideas, founders, and how founders talk about and express their ideas.

What we find is always enlightening, but also always an evolving challenge to parse and process.

The Idea vs. The Team

As I’ve written about before, it’s very hard to tell a lot about the scope and clarity of an idea from a narrowly focused written application. An idea that seems obvious might not be; an idea that seems obscure might in fact be a game changer. On the other hand, it can be easy to tell a few specific things about a person.

The way people talk about their ideas can reveal things about them as people. Is the person funny? Are they self-aware? Do they project confidence? Do they display arrogance? These qualities can be recognized in the way a person writes, and in what they choose to say.

But ideas are different. They are open-ended. They bring up questions rather than answering them. Great ideas are not always obvious at first glance, but can become “obvious” over time, after deep reflection and interaction. There is always a danger that a mentor projects their own hopes onto startup founders; thinking they can shape the team around their enthusiasm for an idea. That can create a disconnect between the motivation of the mentor, and the motivation of the team itself. Success and successful mentorship really ends up being about the quality and (forgive the cliché), passion of the team.

Startup Tourism

So what is a Startup Tourist? Put simply, it’s a person who wants to have a startup more than they want to actually do whatever it is that startup does. Startups, if successful, grow into regular companies, with all the responsibilities and daily obligations that come with them. Tourists aren’t interested in that type of success. They’re more interested in the status that running a startup confers on them– the appearance of success, more than the substance behind it.

Experience has shown us that some amazing startups don’t seem that amazing on paper. The passion may be obvious, but the idea itself may not be. Having difficulty expressing what you do, doesn’t mean you don’t know what you’re doing, though. And a big part of our job is to help square that circle, and make startup founders good at talking about their work. We always have to keep that in our minds when reading applications: lack of clarity is not a killer, but lack of passion and sincerity are.

Tourists Can Be Great Communicators

We’ve reviewed, collectively, around 800 applications for StartupYard within the last 3 years. The vast majority of those are clearly not a match for us. Most are poorly presented, and probably also not very well developed ideas.

That’s ok though. We accept around 3% of all applicants, so we expect most not to qualify. And the only way a startup founder can learn is by trying, so we laud those who do apply, no matter the outcome.

What we worry about most are the “tweeners:” the ones who appear to offer a lot of promise, because they are usually very good at talking about their ideas. They have the ability to project passion, but just enough self-awareness to avoid being seen as arrogant or full of bluster. These applications are more polish than substance, but they hide their lack of substance extremely well.

As Paul Graham of Y-Combinator famously said: these are the founders who live by “the rules.” They learn the system (such as it is), and how to talk and act, in order to appear to be what they wish they were- promising startup founders. These founders often know the “rules” better than we do, and well enough to convince almost anyone at first glance that they belong, even if they don’t actually have the passion they need to build a successful business.

And that works for a few meetings. Maybe a few weeks. But eventually, the results don’t match the apparent promise, and the Tourist becomes more obvious.

One of my favorite movie scenes is from a Martin Scorcese film called The Departed (Spoilers ahead).

In the film, a police Captain (played by Martin Sheen), asks a young police Cadet and misfit (played by Leonardo DiCaprio): “Do you wanna be a cop? Or do you wanna appear to be a cop?” This is a question I would love to ask many startup founders I meet. Of course, the irony in the film is that the Captain had, moments before, congratulated a new sergeant on his promotion in the department- and that sergeant (played by Matt Damon), is a mole working for organized crime. The best of us can always be fooled, especially when we are shown what we want to see.

The dream is of course to find a founder who is really good at communicating *and* has a lot of genuine passion for their ideas. The genuine article, in other words. That’s the stuff unicorns are made of, but it is rare stuff indeed. The ugly stepchild of the unicorn founder is the Tourist- the applicant who knows how to play the game, but doesn’t know how to win it.

Spotting A Tourist

Startup Tourist

There are certain things that tourists do to tip their hand, and reveal that their motivations are more complicated than a simple passion to be great at something nobody else can or has done before.

So, here’s my (totally unscientific), list of signs of Startup Tourism. In no particular order:

  • Knows the Lingo… a little too well

Startup Founders learn about seed funds, VCs, valuation, down rounds, convertible notes, equity dilution, and the rest of it as they go along. They have to. These are things you have to become familiar with if you want to succeed as a high growth startup, but it isn’t necessarily something you need to know much about before you actually start. At the beginning, an idea and a team that cares a lot about that idea can get a startup pretty far with minimal wisdom about the intricacies of fundraising and corporate structure.

Moreover, a team that isn’t focused on these “status metrics” is more likely to be focused on what’s really important- which is building enormous value for their customers.

Tourists tend to know the startup lingo a little too well for their own good. This can reveal a focus on the trappings of success, rather than the work involved in achieving it. That’s not always true, but sometimes it is. Good startup founders can always become good at this stuff because they have to. It’s a means to an end.

A Tourist is more likely to ask a lot of intricate questions about funding and corporate structure, but to do so well ahead of the time when knowing these things is particularly relevant. The tourist is fixated on valuation, instead of value. On “benchmarks” instead of forward progress. So focused on appearing to be in control, a Tourist reveals that they are not focused on doing what their startup actually promises to do.

  • Asks “How?” Instead of “Why?”

Mentoring startups often involves throwing a lot of things against the wall, and seeing what sticks. It’s the startup founder’s job to talk to mentors, and to then try and process what they’ve heard, and find out what’s really relevant for them. That means listening to people you might not completely agree with, and then checking what you’ve heard with others, to see what they have to say. It also means listening to people you agree with, and then digging into your own reasons for agreeing with them. It’s about jumping into a swamp of conflicting opinions, and trying to make sense of it all. It’s messy work. It’s frustrating, and it needs to be.

Mentorship is more valuable when the startup founders are asking searching questions. “Why do you think we should do this? Where can I learn more about that? Who should I ask about this?” These questions produce more work for the founders, who have to follow up on what they’ve heard.

When a founder more often asks: “how can I do that?” or “How would you do this?” These are not searching questions, but rather invitations to do the founder’s work for them. They don’t open up new avenues of thinking, and are not so open-ended. It’s like the student in university who asks the professor how many pages the term paper has to be. That’s not information that helps the student perform better and be creative, rather it’s information that helps the student do what is expected. It helps you get a grade, but it will not help you actually learn anything.

A favorite professor of mine once answered by saying: “as many as is necessary.” I took that to mean that the professor would know very well whether the actual ideas a paper contained were worth the number of pages actually consumed.

Searching my memory, I cannot recall a single instance in which a founder who has gone on from StartupYard to successfully raise seed financing and build a growing business asked me how to do anything. But I can recall many instances in which those same founders asked me why they should do one thing, or another. And many more instances when they asked for my feedback on something concrete. Opinions and feedback are generative. Building on ideas and being creative are what matter. There are no gold stars, and no grades in real life.

Figuring out how to do something can be easier than figuring out whether or not you should actually do it. Founders who ask why, are much more likely to get useful answers than the ones who ask how.

  • Talks about Opportunities Instead of Challenges

A few weeks ago, I heard a very funny story about one of our investors. He was a jury member at a startup competition, which is something startup investors end up doing a fair bit. A startup had stated something like: “the market is worth an estimated $100Bn, we aim to capture 5% of that, and if we do, we will be worth over 5Bn in recurring revenues.”

That’s a pretty prototypical tourist point of view. The investor in question had his own brilliant response: “why 5%? Why not 8%? Why not 15%” The implication should be clear enough- the size of the market can be impressive as hell, but the actual dirty work of building a business is not as sexy as talking about money. If you’re focused on getting a slice of the pie, then you’re probably not thinking about building a whole new market. You’re probably not interested in changing the way things work, but rather making the way things work, work for you.

And if the thing that matters most is the market opportunity, then what are you really passionate about? If you’re smart and you work hard, you can make money at a lot of things. You don’t have to found a startup to do that.

The founder that is fixated on market opportunity is less likely to be laser focused on creating value for the people who will actually pay for whatever they provide. That focus on creating inimitable value is everything to a successful and disruptive startup. It’s not about trying to grab a piece of an existing market, but about creating a new market nobody else is aware of yet.

Much more interesting are challenges. What does the market not yet provide, and why is that badly needed? Why couldn’t the market provide it before now? What problem is just waiting to be solved? Disruptive startups tackle the status quo, and change the way people and businesses and the world around them works on a more basic level. They make things that are not just faster and cheaper and prettier, but actually different.

I see this problem as one in which the startup founder is too focused on what they think investors want to hear. They will say their market is growing, and hope that the mere implication of opportunity is justification enough to get funding for themselves, regardless of what they’re actually doing.

When making a case for itself, a startup can be much better served by talking about what hasn’t been possible before, than about what has already been accomplished by others, or things that would happen whether the startup existed or not. Yes, for example, the mobile gaming market may grow by 40% in the next two years, but that’s an argument in favor of investing in that market, not necessarily for entering that market with a specific product. The product itself needs to make sense, and the fact that it’s an expanding market is, perhaps, a bonus. 

Yet I hear this justification thrown out at virtually every pitching event I attend, over and over again. “The market is huge, and we’ll be a part of that huge market.” Yes, and?

  • Puts Their Fate in the Hands of Others

It can be as simple as this- a Tourist is a startup founder who is waiting for something. Waiting to get into an accelerator. Waiting to attract a VC. Waiting to quit their job. Waiting to be noticed. Waiting for the magic bullet.

This is part of what makes selecting startups so hard for an accelerator. We want people who are ready, but not people who are waiting. We ask startups when we first interview them: “What will you do if you aren’t accepted here?” The Tourist will answer: “I’ll try again,” or “I’ll apply to another accelerator,” or,  “I’ll stay at my job for now.”

A startup founder who is passionate about what their doing, and really believes in it, is more likely to say: “I’ll just keep going,” or “I’ll think about why I didn’t make it, and decide what to do next.” The genuine founder is already thinking ahead of the next failure, looking for the next challenge, and not waiting for success to strike them.

Soldigo, StartupYard

Meet Soldigo: An SY 2015 Alum with a New Brand

This week, on our trip to Romania, I caught up with one of our favorite StartupYard Alumni, Mathe Zsolt-Lazlo, known to us as Zsolt, founder and CEO of StartupYard alum Soldigo– formerly known as Shoptsie.

Soldigo has changed their name, but they’re still the amazing team they were when they joined us at StartupYard. I talked with Zsolt about what’s been going on at Soldigo since they left StartupYard last year:

StartupYard, Soldigo

Hi Zsolt, first let’s address the big question: your company has a new name: Soldigo. How did you pick the name, and why did you decide to rebrand?

Hi Lloyd. Indeed, we went through a rebranding so Shoptsie is now Soldigo. We got so many contradictory suggestions, many people told us we should change it and just as many said they loved the old name, but in the end we decided to change it after all.

As a result of many long brainstorming sessions we came up with nearly 100 new names. We did some research and because there is a lack in terms of .com domain name availability, we gradually reduced this number and arrived at Soldigo. We chose this name because it is short and sweet, in tune with the trend and somewhat catchy. Soldigo stands for “go with the e-selling flow”. It is intelligible in multiple languages and evokes optimism and fun.

What have been some of your biggest milestones since leaving StartupYard?  

Soldigo, StartupYard

Zsolt pitching Soldigo at StartupYard’s 2015 Demo Day

I believe our biggest milestones since leaving StartupYard were finding the right teammates and creating the new version of Soldigo. In our industry, technology and business development are often inseparable from one another and this is why we decided to change the platform to an improved version of itself. The new version of Soldigo is more intuitive, easy to use and fully supports the needs of small and medium businesses.

What about your biggest challenges?

Our biggest challenge and joy is to meet the needs of our existing and potential customers who are just as eager to perfect their online stores as we are to improve our service that allows them to do just that. We plan on introducing social selling and create a new plan called Marketing that will offer great marketing solutions for optimized selling.

Tell us what’s new in Soldigo. What are some of your newest features, and what have been some of the biggest changes to the product?

To meet all of our customers’ needs and requests, we added the following amazing new features and updates:

– we improved the product upload as well as the image upload features

– we enabled the possibility to add subcategories

– connecting the store with blogs is also possible now

– we re-thought the Designer and therefore the store owner will have more freedom with it, more customization options (possibility to add background images, more control over coloring the store, possibility to change font types and sizes, so an overall bigger freedom to be creative when it comes to the store’s look and feel)

– new server makes it all work faster and better

You’ve recently expanded your team. Tell us a bit about that process, and about the current state of the team.

The process of recruiting new team members was quite long since we had to make sure that the person joining us represented the same values and had the same goals and was enthusiastic enough to step out of the “8-hours-of-work-a-day” frame of mind.

We created a friendly work environment that is not about long hours but rather about focusing on work when needed and make it efficient. So we looked for people who fit into Soldigo’s team spirit and drive. While developing the new version of Soldigo, we expanded the team with a senior developer and a sysadmin. At the moment the Soldigo team is made up of 5 people.

Looking back, what has been one of the most important lessons for you and the Soldigo team coming out of StartupYard?

The most important lesson after coming out of StartupYard was to “get out of the building”, to engage with our customers and to allow their needs to shape the direction of Soldigo. We are constantly attending as many handcrafters’ fairs and exhibitions as possible and we aim at maintaining a constant contact with our existing customers.

You’re currently focusing on growing your userbase. What are some of the main challenges in doing that, and where do you hope to be in the next year or two?

That is correct. Since we finished the development of the new version of Soldigo, we are focusing on growing our user base. The main challenge of doing this our lack of experience in the marketing field.

Over 6000 customers are using Soldigo currently, of which 12% are generating an average 20-25 sales per day. To grow the number of our customers, we created a marketing strategy, both online and offline, but since we are not experts, we saw that we need help in this area. At the moment we are working with two really good marketing agencies and we got a lot of help from the StartupYard mentors.

The next two years are crucial for us. We want to put Soldigo on the map of the e-commerce world with hopes of it becoming one of the best solutions in helping small and medium size companies to succeed with their online businesses.

How have your ambitions for the company changed since you left StartupYard? Have you revised your vision in a significant way

When we arrived at StartupYard we wanted to reinvent the wheel and we felt that Soldigo was meant for everyone. We were really clueless in how to channel our ambition to get results.

What we learned there is that targeting everyone at the same time is really impossible, and so we chose a niche that would focus our energy in a more targeted way. Our vision became clearer and Soldigo became more consistent, in brand image as well as brand strategy.

We have an open call for Startups closing on September 30th. What would you say to a startup that’s thinking about applying to StartupYard?

I would say that applying to StartupYard was hands down one of the best things we did as Soldigo. It has taught us everything we know today and, most importantly, that you can achieve many things if you have a good team.

It gave us an immense perspective on where we were and also gave us a direction for the future. It was an amazing learning experience that truly defines us to this day and we felt really honored to be mentored by such incredible mentors.

I believe that StartupYard is an amazing platform for startups to grow and to learn and to find their true calling, so startups, do yourselves a favour and apply, asap!

9 Things Not to Do When Talking to Investors

[Updated August 2016] We talk to a lot of startups, and we’ve talked to a lot of investors too, particularly since we published this piece way back in 2014. In that time, our portfolio companies have raised upwards of 4 million Euros, and many of the tips we’ve given them have been refined through their experiences, and our own.

You can now apply for StartupYard Batch #8.

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

 

 

We’ve seen people make every single one of these mistakes, and we’ve made some of them ourselves. Live and learn. So here, updated for 2016, are 9 things not to do when talking to investors.

9 Things not to Do When Talking to Investors

Talk About Exits

Perhaps your dream is to found a startup, get some investment capital, pump up the valuation for a nice fat IPO, and blow town with a suitcase full of €500 notes, headed for a major tax haven. A noble dream, to be sure, but not one that inspires a great deal of confidence.

9 things not to do when talking to investors

Your investment opportunity sounds lucrative, if a little violent…

 

No, investors like to see that the stake you keep in your newly minted company is going to keep you properly motivated. And motivation is more than dollar signs: it is derived from satisfaction with your position, passion for your product, camaraderie with your team, and, of course, also money. So focus on those intangibles that you have that will keep your business moving forward. Don’t count the profit that someone’s investment is going to bring you, when you leave them holding the bag in 2 years. That’s not nice. And as the old adage goes, no investor wants to give money to a company that needs the money. They want to give money to a company that can use the money well.

Investors don't want to give money to a company that needs it. They want to give to companies who… Click To Tweet

Be Oblivious and Don’t Listen

In StartupLandia, obliviousness can be a good thing. Who would start a company like yours without being at least somewhat unaware of the potential drawbacks, the sleepless nights, the stress, the headaches, and the thought of near certain failure? Obliviousness can preserve your sanity while you attempt to do something that most ordinary people consider to be basically insane.

The thing is, while that kind of youthful naiveté can even be attractive to investors, it so often comes with a far less attractive trait attached: you don’t listen. Investors at least like to think they have some advice and experience you can learn from. Certainly, they want to you to fully understand what taking their money entails, concerning your responsibility to them and to your company. So you need to listen carefully to what investors say.

You don’t have to follow their advice, and you don’t have to take their money, but you do have to listen- now, and into the foreseeable future, until such a time as your leadership and the product you make have proved themselves repeatedly.

Ask for an NDA

Don’t ask for an NDA. You’re probably not working on anything sensitive enough to warrant this annoyance to an investor. I’ve written a more extensive piece on this, and you can read more about it there. But really, unless you’re dealing with technology so sensitive and valuable that some level of paranoia is truly healthy (cure for cancer, for example), then an NDA is not going to do anything but waste time.

Don't ask an interested investor to sign an NDA. It's pretty much never worth it. Click To Tweet

Say: “I have no competitors.”

We’ve all heard this: ‘if you have no competition, you have no market.” Besides, if your product asks for anything from a customer, be it money, time, or attention, you are by default in competition with all of the other things a customer could be doing with that money, time and attention. All businesses compete for customers. If they don’t, they aren’t businesses at all.

No, more often saying this is actually saying that you haven’t thought much about your market, your users, or your potential challenges. This past week, I ran a product positioning workshop with all of our startups. I asked them to position themselves against competitors based on relevant vertices for their market. The values on the X and Y axis are less important than the insight the teams can derive from comparing themselves to other businesses in the context of customer needs, wants, budget, or other factors. For example, a graph might look like this:

9 things not to do when talking to investors

Your graph has impressed us. Would you like that money in a suitcase, or do you prefer a novelty sized cheque?

As I noted, the values on the vertices can change to fit your market situation: is it about price, or time investment, or is it about the annoyingness of ad-support, or about some other value on the Y axis?

The X axis is also dependent on the market needs. But a successful business needs to find a suitable position graph that places their product somewhere that the competition isn’t competing well. In the above graph, the competition can offer good quality, but at the price of convenience. So my product has to be convenient and high quality. That is my market opportunity.

This sort of position graph also helps illustrate your market strategy. You wouldn’t market yourself as top-shelf quality if a competitor already holds that reputation- your quality would be a help, but it would not be enough to justify your product. If you can’t find a graph that shows a worthwhile market opportunity in concrete terms -something nobody and nothing else yet does well- then you may not have a viable product idea at all.

Tl;dr: If you can’t be better, be cheaper. If you can’t be better or cheaper, then you’re going to need a very good market strategy.

Don’t Have a Plan to Use The Investment

One VC I spoke to recently put this problem in terms of ambition. Wanting investment doesn’t make an entrepreneur particularly ambitious, except in the sense of possibly being greedy. Instead, a poorly laid or incompletely laid plan for go-to-market based on a number of possible investment outcomes is a sign that you don’t really care enough about your product and its future. If you did, you would have plans for any contingency, including a way to bootstrap your product.

Approaching investment this way, with an eye towards showing investors exactly what their money is going to do, also gives a founder much more leverage. It is a much more attractive argument to an investor that a founder *could* launch without his or her support, but that this support would only stoke the fire of success further. Being dependent on investment means being dependent on investors, and few investors want a founder who can’t stand on their own. This means being responsible, and having a solid, and detailed plan for how you would use money invested in your company.

In “A Unified Theory of VC Suckage,” which I recommend as good reading, Paul Graham theorizes that VCs suffer from perverse incentives to invest too much money into startups that don’t need it, and can’t properly use the investment. What can make such a situation doubly more dangerous (and frequently did in the late 90s and in the 2000s), is that founders also believed that a bigger valuation was actually going to make them rich. Which it did, at least on paper. This has caused more than a few companies to IPO when they shouldn’t have, and to crash spectacularly. It has also caused many worthwhile projects that needed much smaller seed-funding to struggle to get it.  But having a plan for what to do with the money you take in will show an investor that you’re ready for a big investment, or for a smaller one.

A high valuation does not make you rich. It makes you accountable. Click To Tweet

Project Your Growth Based on a Similar Product’s Success

Everyone knows a “me too” product when they see one. A “me too” market strategy may be no better than that. The old saying: “if it was easy, everyone would do it,” finds a perfect fit here. The success of another product, and that product’s similarities to yours, doesn’t mean much to the success of your product. Investors invest in people, just as much as in products, and execution, despite what we hear in the news, is 10 times as valuable as innovation for any company in the long term.

We often hear about innovation in the media, as if it were the sole distinction of success in technology. In fact, that isn’t remotely the case. While big companies that innovate create magnificent splashes and sell lots of their products, it takes just a bit of scratching at the surface to discover that the majority of that success is ensured by a strong execution of whatever plan the company has. That was as true a century ago for the Ford Model T as it was 10 years ago for the iPod. As true for Microsoft as for Facebook. These companies were not creating products that hadn’t been thought of before. But the background processes that they put in place to execute, reliably and efficiently, won them their market positions over time.

Think the Investors Must Be Smarter Than You

Our director Cedric Maloux told me a great story about an idea he had way back in 2008. He wanted to form a company to develop and market casual games for the newly launched iPhone. This was a market at that time, was worth much less than just a few years later. He discussed his idea with a VC he knew and respected, and the VC advised. “Video games need to be immersive and mobile phones don’t give this experience. Nobody wants to play games the way they used to [with the GameBoy],” the investor argued.

Cedric believed him and gave up on the idea. And today, the mobile games sector is worth 28% of the games market, according to ISSU. The market is worth some $13 Billion, which makes it bigger than the entire music industry. Growth in this sector has yet to slow since the release of the original iPhone. Investors are not necessarily visionaries.

Don't confuse smart money investors with visionaries. Click To Tweet

Last month, Techsquare hosted a meeting with StartupYard and another local accelerator. Its director and host listened to pitches from their startups, and from ours, and nearly without fail, addressed every single team with the same feedback, in sum: “I knew some people who tried what you’re doing. It didn’t work.” Experience is doubtless valuable. But failure in the past is in no wise a predictor of failure in the future. If that were true, the world would not know of most of the revolutionary products it has encountered in the past 30 years. Virtually every single one of them was tried without success, usually long before they were tried and succeeded. Listening to negative feedback like this is good. Letting it stop you is a shame.

Don’t Be Ready

Be Prepared. Always. Having and being prepared to share your financials, your projections, info about your team and your market is essential.

You can’t just chat up investors as a means of figuring out what they want to hear- that’s not the way the dance works. Your vision, your plan, and your goals are what the investors are buying into, so if you try to sell them their own ideas, they’ll know you don’t have a plan you really believe in. Having that plan, and sticking to it, only changing it for strong and valid reasons, is key to getting the right investors involved. So you need to be ready for what the investors might ask of you.

Luckily, there are plenty of investors who will tell you exactly what they would want to see from a potential investment. A great example is our own investment partner, Credo Ventures, and their own Andrej Kiska, who shares excellent tips on exactly that topic. He lists the number one failure point for startups as not building business forecasts ahead of a funding round.

in Kiska’s words:

The most frequent reason I hear for not building a model is that it is either too difficult or it just doesn’t make sense. But that makes me wonder what would happen if your startup will run into challenges that you consider too difficult or your market will desire a product you don’t believe makes sense and don’t bother to test it.”
 

There’s another pretty full-proof way of finding out what investors want to know before the meeting starts. Ask them. If the investor is a serious person you might actually want to cooperate with in the future, then they should be invested in you doing a good job, and making the best possible impression. The investor has a boss as well, in many cases, and needs to find justification in talking with you, just as you need to find justification in talking with them. So ask what they expect to find out from you, and plan accordingly. There’s no secret handshake. No checklist- every investor is different, and it’s ok to seek guidance.

Talk to the Wrong Investors

This seems basic, but it’s a mistake a lot of people make. You should know which kinds of investors you want to talk to. Don’t talk to a growth fund if what you need is seed money. Don’t talk to a VC firm unless you’re ready to do due diligence. Don’t talk to an Angel unless you’re looking for an Angel style investment. Each type of deal has its place, but not all money in investment is created equal. Each type of investment carries its own advantages and drawbacks, and you shouldn’t waste your time talking to investors who don’t have experience with companies in a similar situation. Andrej Kiska also has a lot to say on picking the right type of investor.

StartupYard, Ondrej Krajicek, Y soft

Ondrej Krajicek of Y Soft Ventures: Celebrate Results

Ondrej Krajicek is CTO of leading printing hardware/software development company Y Soft, and a prolific mentor and presence on this blog. Earlier this year, we featured Ondrej’s interview on education and entrepreneurship in two parts.

You can read them here:  Make Failing Legal in the Czech Republic, and Density Doesn’t Equal Cooperation.

“We Need to Celebrate Results”

I caught up with Ondrej one more time recently to talk about his takeaways from StartupYard’s most recent cohort of startups, many of which have been in the news recently. Here’s what he had to say about that, and about what Y Soft is doing in the area of innovation and startups:

Hi Ondrej, you’ve just met with another cohort of StartupYard companies. Did anything surprise you?

Neuron Soundware and NeuronAD pop into my mind first. Generally I have been positively surprised by overall quality and diversity of all startups in this cohort. Yet again, each team had something unique and intriguing. I had quite interesting discussions with the guys from Boatify and I check their progress every now and then. Quite a niche market, but interesting app. I also enjoyed meeting other StartupYard mentors, Node5 tenants and it was also nice to meet some people from the previous cohort.

What do you see as some of the biggest challenges facing this latest group?

Productization and monetization. It is one thing to have a technology, a prototype product or proof of concept, and another thing to turn it into a product. I am an engineer, and I used to look at productization (the activity which turns software artifacts into software products) from a purely technical perspective. Yet this is mainly about the non-technical things. Do we have everything we need to support our salesforce? Can we support the product and help end users to work with it? Do we have a clear value proposition?

We still do not do productization right at Y Soft and when we feel we have it all, we discover a few more things we need to do for our partners to be comfortable selling our solution. Most startups have the comfort of selling to the end customers directly, which in one way is easier because you only have one line of customers.

Indirect business is about taking care of your entire sales channel and to deliver value to all of its parts. However, this is what we believe in and it also enables us to do more ethical business. We do not compete with our customers for one as some of our competitors do. Anyway, if you are struggling with productization, take a deep breath and work on refining your value proposition. Why should they buy?

One simple advice: you have a good value proposition if it’s short and can be translated into money saved or more money earned by your customer.

There were some teams who were struggling with engineering as well, and I believe that this is an indication of how difficult it is to get good engineers these days. I feel a bit embarrassed as a Czech to welcome a passionate team from abroad and tell them that they most probably won’t find skilled engineers here.

You mentioned to us that Y-Soft is expanding its cooperation with startups and investments. Can you talk about what the company is doing in this area, and what its goals are?

Y Soft Ventures is focusing on startups combining hardware and software. Internet of Things and Industry 4.0 if you will, but I am not known for liking buzzwords. Anyhow, we have just finished investments into Lumitrix and GreyCortex, both exciting additions to our portfolio. My colleagues also would not forgive me if I did not mention that they are still looking for investors into our first fund, so feel free to get in touch and invest ;-).

In general, we are focusing on companies where we have added value with our know-how and services as Y Soft. Y Soft Ventures is a gateway of sorts, providing funding and access to Y Soft resources, be it our corporate network, R&D, product design, manufacturing or finance. Good thing is that all the people you can engage with are still doing it and are not “consultants.” Our engagement towards startups is quite serious as we are now considering where to grow, having 6 companies in portfolio (I know, we are a small fund) and we are already concerned about our capacity to sufficiently engage with all of them.

How does Y-Soft position itself among other large Central European and Czech investors?

 

Startupyard, Y Soft, Brno

Y Soft is located in Brno, the second largest city in the Czech Republic

 

Early stage investments, product development, hardware and software with global potential, great teachable team, no bullshit and focused on results.

As this is the typical cliche, let me elaborate on what “results” means. I have been thinking about the Czech startup scene and our portfolio (albeit quite small) and I believe that we – as in we as a startup ecosystem – need to change our direction. Startup community is growing in Europe and especially UK (which might be leaving or not leaving EU) and we are progressing on the road to replicate Silicon Valley success. I strongly believe that we should stop replicating the valley and start building a mountain (or whatever). Because we are not doing it right and to a large extent, unless we are able to change our DNA and culture to the one they have, we will never make it right.

Take the famous fail fetish for instance. Chris Burry, one of the mentors at CET UCB told me: if you do not have enough customers willing to pay you for solving their problem, you don’t have a company, you have a hobby well paid by investors.

In other words. In Europe, we give awards, organize showcases, get togethers and do hackathons, we celebrate entrepreneurship, but we do not really celebrate results. And I would like to point out, that results are sold products, services delivered and money earned. Or another way how to put it as my colleague, Milos Sochor says: investment is not revenues. Sadly, there are so many startups who do not realize the difference.

We need to stop celebrating failure, and start celebrating success. @ondrejkrajicek Click To Tweet
If you want to replicate something from the valley, let it be this. 3 out of 4 startups fail, most of them during their first year of existence. If you dare to get a desk at a incubator, you have to deliver every single month, sometimes every single week. If it’s not revenues, than it is users, subscribers or connected devices. Quantified metrics which can be straightforwardly translated into revenues. If you fail, no hard feelings, you can try again. But do not stall, there are five people waiting in the queue for your desk.

And no, investors do not love previous failures. Investors like success, like anybody else and if you say otherwise, you are not fit for a startup. Failure is only good if it’s fast and leads to improvement. The challenge is that acknowledging failure is the hard part, but living the improvement is even harder. To me, Embracing Failure is about Lean Quality Management and the Deming wheel says Plan-Do-Check-Act, not Plan-Do-Like-Boast! That is another reason, why we are focusing on smart money – which is in general another buzzword, but for us, it means that we focus on delivering services to startups, connecting them with YSofters, not (just) money to spend.

So please, let us stop celebrating red numbers, losses, zeroed balance sheets and failed deals while repeating the how-cool-is-to-fail-again mantra. Let’s celebrate customers, revenues, break even events and self-sustained growth, to set the right example. And I cannot wait to see Pioneer Awards for making company self-sustained and profitable, not for making fuzz in media.

And by the way, it is not just me saying this. Many Entrepreneurs yet have to realize that it is very different to spend hard earned money and to burn investments.

I agree strongly with this sentiment. I was in Berlin recently, where there are over 200 coworking spaces and incubators, and seemingly anyone can subsist for a long time this way with no results. Do you think incubators are doing more harm than good at this point? How would you flip the model to focus on progress and success?

From my experience with incubators, I would refrain from generalizing. However, I believe that it is about motives and business models. Is the business model of an incubator to generate revenue on rent and services? If that is the case, then the incubator has no motivation to push for growth and economic success, they are happy to be full, regardless of who is there. Or let me use this – probably stupid – parallel: I have been in an incubator as a newborn kid myself, but for two weeks, not for 12 years.

The part of the solution as it works in Sillicon Valley is the demand. The demand there is so high, that most incubators or coworking space can securely make a living and be strict on their tenants at the same time. This probably would not work here in Europe as in many cases, the critical mass of starting companies is simply not there.

What happens when incubators would generate revenues on exits, i.e. participate as shareholders on successful companies even after these companies outgrow the incubator? This sounds like a dream of course, but with significant cash flow issues – the incubator is often not an investor and needs to generate short term revenue.

Is an incubator a viable commercial concept on its own? Or is it better a better fit for mixed sources of funding, such as having large companies as investors, as a result of joint effort of universities and corporations or as part of being a venture capital or private equity fund itself. Cash is king and unless the source of cash are successful startups generating profit, this will never change.

So long story short, incubators should become accelerators of failure and seek independence from rent/service revenues generated on startups. Seek (co-)investments, partnerships or other sources of short term revenues.

Y Soft has been working on some interesting new products in 3d printing. Can you talk a bit about that?

 We have integrated the be3D team (welcome on board guys!) and recently launched our flagship (literally). A 2 meters high FDM printer for industrial prototyping called DeeRed 2. I love the beast, customers, such as automotive companies, use it for parts prototyping and design studies. It has also quite a few innovative things inside and we have patented some of them.

Patents are still quite a controversial issue for us and as the field of 3D printing is heavily patented, we have no other choice than join the club and patent our inventions as well. As well as many companies, for us our portfolio of patents is mainly a defense mechanism against trolls. We do not expect to chase our competitors, unless we face pure plagiarism. I am not particularly happy to work with patents, but it is necessary.

My recommendation to some of the startups, like NeuronAD in StartupYard was – if you believe in your genuine idea, you should patent it soon. Patents are assets and if you manage to have it granted, this will increase your value in the eyes of investors, because it may be a proof point of what you have. Not that all patents make sense, you still need to read through :-).

However, I still need to say that I strongly believe that in the fields with such a short innovation loop as IT, patents are hindering innovation.

Back to the 3D printing though. We strongly believe that 3D printing is not about devices, but about vertical integrations. And it is starting to show up in the market of entry level printers. Everybody likes them, but not everybody buys them. That is why we have created eDee, a 3D printer for education connected to SafeQ, our enterprise office workflows platform. And we will continue in this direction even further, but it is too soon to disclose more.

You’re very focused on education, and specifically changing the education system in the CZ. What have you (Y-Soft or you personally) been doing lately to that end?

 It has been my personal mission to change how IT is taught here in the Czech Republic. However everything is evolving and so did my mission as well. Let me say that I strongly believe in the potential of the Czech Republic to become an economy based on high added value, not low staff costs as it is perceived now. If you have software companies coming here because for each headcount fired in the US they can get three open here and still save, you know that it is not sustainable. And yet, that’s what we are still encouraging as a country.

So I would reformulate my personal mission to support and perhaps drive refocusing on added value in the IT sector here in the Czech Republic. Good thing is that this mission is highly aligned with what Y Soft needs and does. Education is still a huge part of it, but a wise man asked me one day, to what end do you want to improve it?

We have two great assets here in the Czech Republic which we need to learn how to utilize to improve. The first one is our education and academia, the second one is basic research. We have fields with great traditions, be it engineering, chemistry, physics, mathematics or computer science. I strongly believe that time has come to formalize the role of companies in the education system and take them seriously. It can no longer be managed by schools and the Ministry of Education themselves, because they miss one crucial thing: the customer. How would you run a company without talking to your customers?

However, companies need to respect the culture and principles of education and academia. And if they do, they might get a chance to influence the curriculum, participate in teaching of the practical courses and make sure that the students are much better prepared for what they need them to do. Universities still do not accept the fact, that they cannot understand what the industry needs and why and they should start to listen to their customers.

The role of the government is crucial in this. First of all, they need to establish conditions encouraging this dialog by changing the education system funding to focus on quality and return of investment. This country cannot grow its GDP by having more librarians or painters. Not that these should not exist, but we all need to make sure that we have enough engineers, designers, chemists and mechanicians. And this is not about universities only, the same applies for secondary and vocational schools as well. The government needs to talk to the parents to explain where the future is and what fields have the biggest potential to grow and prosper.

What I am doing in this sense is that as a representative of Y Soft, I have finished my first year as a chairman of the IT Committee of American Chamber of Commerce in the Czech Republic [StartupYard is also a member]. My first goal here is to create a platform of like minded companies to create a platform to talk to universities and the government. AmCham is well suited for this as it is as an organization not involved in our Czech politics. It is above and beyond, focused on bringing best practices from the US to support business here. I managed to put together a good team of different IT companies and formulated a short strategy for the next two years, but it is too soon to see specific results.

I see the problem existing in two horizons, +5 and +15. The +5 horizon is about focusing on Universities to deliver change in five years. My objective is to improve the quality of the average graduates. We only have so many the best ones and we need much more. We need to make sure that the average candidate on the market is well prepared with moderate growth potential. Today, I often meet fresh graduates who do not know what is the worst case time complexity of quicksort and that is scary. For the record, it is O(nˆ2) and depends on the choice of pivot in relation with the input sequence.

The second +15 horizon is about opening the Czech education system to foreigners, focusing on basic and secondary education and helping parents and children to decide where to invest their lifetime. There is much more and I am still processing it. So maybe next time…

You told us that Y Soft continues to run its manufacturing operations in The Czech Republic. Why is that so important to the company?

Yes and we will plan on expanding our manufacturing operation here. The most important factor is flexibility. Having the manufacturing under our roof and close enables us to adapt and provide our services for prototyping and small-volume manufacturing to other companies. We provide our manufacturing capacity to our startups and at least one of them is already using it, with more to follow. On top of that, we have really learned our lesson how important is to keep R&D, product design and manufacturing teams close and talking. Otherwise, quality plummets and CoGS skyrockets ;-).

Quality, availability of skilled workers and short manufacturing cycles are also important reasons why we are doing so. Four years ago, we have faced the difficult decision whether to move to the cloud and stop doing hardware or whether to bet on it and expand in this direction. We have decided to stay focused on HW as well and then the Internet of Things hype came, so it was not a bad decision.

Yes, We Still Need Accelerators

a few weeks ago, I was in attendance at Pioneers, in Vienna. It’s a great conference, and there were quite a few really interesting startups on display, including several of our own, like Claimair, TeskaLabs, and Satismeter.  What’s more, it’s the right kind of conference for startups. Why is that? Well, as we’ve talked about in the past, there are a multiplying array of “startup industry” events out there, many of which deliver little benefit to actual startups.

Pioneers though, is pitched at investors for its exclusivity. Startups not only have to be selected for the Pioneers top 70, but they also attend for free. Investors, rightly, pay for the event, and for the opportunity to talk with so many promising founders.

There are a lot of VCs at Pioneers, and that’s a good thing. But there were few accelerators, and I think that’s a shame. Here, I’m going to talk about why I think so, and why we still need accelerators.

VCs and Backwards Goals

Part of going to Pioneers, for startups, is identifying fundraising goals. These are included in the company descriptions, and used to match startups with investors at the event. Fine so far.

Most startups, knowing that the event is aimed at tech VCs, say they’re looking for anything from 1 to 5 Million Euros. The average seemed to be about 1.5 Million. While it’s generally true that VCs want to invest in specific ranges, at specific stages, the truth is that most of the startups who are asking for those amounts don’t actually need the money right now. But in order to appeal to as many as they can, startups try to optimize their “ask,” before talking with the investors.

Instead of assessing their near-term business goals and funding needs, and narrowing their focus on a specific type of investor, they’ll craft a pitch for investors that portrays them as emerging companies that are “months away,” from a breakthrough advance that will turn the industry on its head.

The customers are just waiting to buy. The specific market need is a foregone conclusion. So really, in their imagining, it’s just a matter of the VC believing in the long-term prospects of the company and its industry, and assuming that the money is going to help them ride out their short-term challenges.

It’s a case of “get the money now, and figure out how to grow after that.”

It Doesn’t Work That Way

tumblr_inline_o34qwjbIs71qkpo71_540

In order to paint rosy pictures about the future, founders tend to make startlingly bold predictions about their ability to do things that literally no one else has ever done in business.  A new technology is new; and proving the market need for it is really at the heart of what an early stage startup should focus on. When I hear from a startup that their new technology is going to “change the way that X does Y” (eg: doctors diagnose cancer, or manufacturers bill distributors, or parents teach children), the first question I ask is “does X really want to change the way they do Y?”

Maybe they do. But then again, maybe they don’t. Maybe they do, but they want to do it in a completely different way. Maybe, maybe, maybe. Startups assume that investment is going to paper over those questions.

Ironically, VCs seem to operate according to the exact opposite assumption: a company that needs their money is not a company they want to invest in. Ideally, they would only invest in companies that have already proven they can make partnerships and sell, and the capital they receive will go mainly to doing more of what they already do well.

In effect, venture capital is an accelerant, not a fuel source. Startups treat it as a first step, when really it’s somewhere near the end of the process.

Why It Happens

Why then the disconnect? I think there are two problems:

1- Founders have been convinced that the “funding gap,” between early stage investors, -like business angels- and VCs is an artifact of the business; a bug rather than a feature. They become persuaded that they need to conform to what VCs expect, because VCs are too rigid, and need to have items checked off their list in order to invest. If they just tick the boxes, they’ll get the investment.

It doesn’t help that in some overheated markets, that’s really true. Some startups do seem to raise investment by ticking the appropriate boxes at just the right time.

But in reality, the funding gap is there mostly because it’s a bad idea for most investors to get involved with a company that doesn’t have product market fit, but wants to commit  significant time and resources to developing new technology.

Simply, too much money at the wrong stage can be a bad thing. It can encourage a startup to build up technical debt without solving key issues of market fit. The funding gap can keep that from happening, by making it harder for startups to raise money at the wrong time, or for unsound reasons.

2- VCs are not always motivated to tell founders about these concerns. They stay positive and encouraging, in case the startup suddenly proves it can really grow.


I can’t say how many times I’ve talked to a really impressive startup team, with really impressive technology, who are having problems raising money, and don’t know why they can’t. Investors seem impressed with them and their tech, and yet they don’t pull the trigger on investment.

“Everybody really likes it, and we’ve had really positive feedback. Some VCs are very interested in what we’re doing.” Of course they are, because why wouldn’t they be? But eyeing someone in a bar, and marrying them are two different things: startups can easily fall into the belief that “interest” equals “appetite.”

The Rule Book is No Good

Knowledge about the “startup industry,” and about investors has grown among startup founders. They’re now able to suss out and learn about the way VCs work, and the way they make decisions.

I was recently handed, at another conference I will not name directly, a literal book called the Startup Playbook. This kind of thinking predominates among people who neither invest in startups, nor run their own. 

My belief is that this leads some founders to the mistaken conclusion that because they understand how VCs work, they can therefore get investment from VCs.  However, the fact that a startup understands a cap table and has a clear idea of the kinds of things a VC invests in does not mean that they can get that VC to invest in them.

And this is where accelerators still play a vital role. There are plenty of stars in the tech industry who are simply unaware that they are stars. Because they play by the “rule book,” that everyone is increasingly aware of, they may forget that the rules don’t have to apply to them. And accelerators are, at the core, about breaking the rules.

We Still Need Accelerators

If you compare accelerators with other investors, we should look like odd ducks. We shouldn’t behave according to typical patterns. Because our appetite for risk should be unusually high, our tolerance for uncertainty should also be commensurately wide. Open questions, to us, should be good things, and sure things, less interesting.

That approach can really help startups to focus on doing what they do best, which is solving problems no one else knows how to solve. Where a lack of certainty may be a negative to a VC, it is ideal for us as a starting point. Uncertainty is something you can work with, and something you need in order to be truly unique. You have to question everything, and be questioned on everything.

Founders usually seem to expect an accelerator to behave the way a VC would: to be encouraging but vague. But more often than not, startups in the situation I’ve described end up expressing a sense of relief after a meeting: “I’m so glad we talked about this. I never get feedback that’s so direct.”

This is part of why VCs look more and more to accelerators to be the first movers in new market categories, new technologies, and new business concepts. More and more, our own contacts in the VC world turn to us not only for opportunities to invest in startups, but also to steer startups in our direction, hoping that the accelerator will be a proving ground for the team, the business, and the technology itself.

Attending an accelerator is not for every startup, but it is increasingly becoming a badge of confidence that VCs are looking for. And every year, we see VCs paying closer attention to our program, and others like it, to gain insights and opportunities they can’t get anywhere else. 

 

Salutara, StartupYard

Salutara: Your Health Matters

Salutara is a full-service online platform for medical travel.

Every year, 11 Million people seek medical procedures that are not accessible or affordable in their home countries. With Salutara as a trusted advisor and intermediary, patients can search and compare clinics, arrange procedures, plan, book, and pay for a whole trip in one place.

I sat down recently with the founders, Martin Cvetler and Petr Vankat, to talk about Salutara’s current status, and future plans. Here’s what they had to say:

Q: Hi Petr and Martin! Tell us a bit about Salutara. Where did the idea for a medical travel platform come from?

Petr: I was spending my 2014 New Years in Switzerland with my girlfriend at that time who is a dental hygienist. As we were walking through the center of Thun, I saw a walk-in store saying “Zahn reisen – Dental travel” on the sign above the door. It caught my attention so I came closer and found out they were sending citizens of Thun to Hungary for dental procedures.

They organised trips specifically designed for patients with any kind of dental problem. This whole concept was taking place offline and was aiming at a very limited clientele. I thought why not do this online and globally? There is clearly a demand, with 20 million people traveling every year for treatment. That is when the idea was born.

But I put it in a drawer after my return to Prague and we started seriously discussing it in the summer of 2015 and in August we signed up for the Startupyard FastLane. And you know the story from there. We went through all the steps in the selection process and eventually made it to the accelerator.

Martin: Our first idea was to concentrate on dentistry and our first work name was “Bite´n´Chew” [laugh] Then we started to research, expanded the idea to other treatments and we just could not find a website that would be easy to use for booking a medical treatment abroad. Salutara is for people seeking quality medical care who cannot find affordable and accessible treatment at home. It’s a complicated and time consuming decision-making process, and we want people to have a way to do it all within one platform. We want to become the world’s most innovative medical travel booking platform.

 

Salutara

The Salutara Team: Martin Cvetler and Petr Vankat

 


Q: What are some of the main advantages of traveling abroad for medical treatments? What kinds of treatments are most popular for medical travel?

Petr: One of the most obvious advantages is the price difference between countries and continents.

Just to give you an idea, it is very common that patients for example from the USA are saving up to 80% of their medical costs when traveling for a hip replacement, dental restoration or cancer treatment abroad. Those can add up to huge sums- into the tens of thousands of dollars per treatment. A hip replacement in the US can cost upwards of $80,000, while the same treatment by an equally skilled surgeon in India might cost $10,000. That easily justifies the cost of going abroad.

You know, the number one cause of personal bankruptcy in the United States, believe it or not, is medical bills. That really makes no sense to me in the modern world. But where there is such a clear need, there must to be clear, easy to access alternatives.

But the US isn’t the only place with problems. Waiting times in various countries such as the UK or Poland are also a big issue, as they can go as high as months and in some specific cases including orthopedy or eye surgeries up to years.

On top of that, some countries are facing certain legislative barriers that can be seen in relation to procedures such as In Vitro Fertilisation. At Salutara, we strongly believe that every human being should have a right to access that type of treatment, and we are working hard to provide options and accessibility for all the cases mentioned above.

Martin: We want to inform and educate customers about all possibilities that the medical travel industry offers. One example is the EU Directive 2011/24 that enables all EU citizens have their insurance cover procedures anywhere within EU. Not many people know this, and not many people use it. On the other hand we want to give our clients the opportunity to choose and decide if they want to go abroad or not. They can compare both options, decide and book abroad or at home. We just want to give them the freedom to choose and a tool to make it safe and easy.

Q: What are some of your key challenges in approaching consumers? How will you convince people that medical travel is for them?

Petr: We understand from our own experience that it can be tough to even decide where to go on holiday! Is the food going to be good there? Will it be safe to walk on the streets after dark? Will I be able to charge my iPhone there and get wi-fi? Generally speaking people are not always very open to changes and exploration. Especially when it comes to something so important and precious as human health.

Certain things are easy to sell. Medical travel can be vastly cheaper, and certain treatments will only be available abroad, depending on where a patient is coming from. But it’s about more than that. A person thinking about medical travel is concerned about trust and safety, and building trust is one of our biggest challenges going ahead. People deserve their dignity in medical care, and sadly that’s not something they can always have. So we want to change the way medical care works for those who can’t now get what they deserve.

That is why we are focusing on providing top notch care for our first customers – the early adopters or ambassadors. Sharing and promoting their experience on the website as well as on our social media profiles is going to be crucial- getting the word out through people like that will open up new possibilities for people who haven’t even considered medical travel. Good word of mouth plays an important role in the process of convincing others that it is safe and supremely beneficial to make the decision to pack up a small bag and take off for a treatment abroad.

Q: Let’s talk a bit about Salutara. What features and capabilities will you launch with? Where do you see the product in a year or two?

Martin: Customers will be able to connect directly with clinics and their doctors for unlimited online consultations and price quotes. They will be able to book a treatment and pay the deposit.

Later on we want to provide the whole travel package, including flight and hotel booking. Everything in one place. A lot of patients use medical travel for sightseeing before the treatment or they stay longer after the surgery to recover and come back home all fit.

Most competitors in this market right now are focusing on connecting clinics and patients. That’s great, but we want to provide a whole experience- start to finish. That is what we’re working towards: a platform that you can use exclusively to get reputable, safe, and fairly priced treatment anywhere in the world.

There are plenty of resources now available for medical travel and for patients seeking treatments. There are great services like RealSelf, which provides a community for people to discuss issues around cosmetic surgeries. We want to provide the same value to people- a place where they can find trusted opinions and advice, and also connect with the right doctors and clinics to provide the right treatments.

Q: What will be your focus within the next year? How will you approach the market, and which segments will you focus on in order to grow?

Martin: We will launch small and lean. Just with a couple of procedures, clinics in the Czech Republic and UK market on the patient side. After we optimize our workflow and processes, we will scale up with more treatments and clinics in the same markets and then expand within the EU in the second half of 2016 and globally in 2017. We’re starting with less invasive procedures like cosmetic dentistry, hair transplantation, sleep disorder, cosmetic surgeries, LASIK (laser eye surgeries). Then IVF and life threatening diseases and their treatment like oncology.

Our dream, as Petr said, is to be a trusted platform for patients and clinics the world over- so that people will always know what treatments and doctors may be available to them anywhere in the world. Right now, medical travel is very opaque- it’s run through backchannels, and patients rarely have any sense of who they are dealing with. That’s just not good enough. Fair, open, and trustworthy markets need transparency, and that’s what we will provide.

Q: Obviously partnerships are going to be a key factor in Salutara’s growth and success. Which partners do you view as strategically important, and how do you plan to build these partnerships?

Petr:There are lots of ways to think about partnerships in our case. We believe that the first partners should be charities of all sorts. It is important to give back. And those who are in need or unfortunately suffer from a specific condition deserve our primary attention.

We would like to donate a part of each transaction to a charity of choice for each patient who uses our services. Next in line of common sense, are travel agents both in countries where our patients travel from and in the countries of our clinics. Sport clubs and associations have a natural connection to what we are doing too, especially those where injuries happen often such as rugby or ice hockey.

We encourage anyone reading this to reach out to us with partnership suggestions from their network. We want to hear from you!

Q:  You started at StartupYard with essentially nothing but an idea and a vision, and now you’re almost ready to launch. Have you been surprised by your own speed and execution?

Petr: I am personally naturally very impatient and yesterday was already too late. So until we fulfill our goal of becoming the world’s biggest platform connecting patients with clinics all over the world, and handling medical travel on every continent, I will not be satisfied with the pace of our progress. Nevertheless just being around such amazing influencers as Cedric Maloux or yourself, Lloyd, and having the priceless opportunity to consult with our great mentors helped us speed up the process a great deal. We can never thank them enough.

Martin: I will be very open here. I was a little naive a few months ago. The deeper we are in this industry the more I realize how much more is ahead of us and also what we could have done differently, faster and better. We have decided to make some compromises on the product and market entry in order to launch fast and we have a long list of updates already. The truth is we chose a very complicated product and market. And you just cannot do everything at one moment. You have to prioritize every day, stay focused but be able to pivot at the same time. All of this is very challenging but I enjoy it quite a bit.

Q: How has working with StartupYard affected the development of Salutara? Have any particular mentors had a big impact on your development?

Petr: As I mentioned above StartupYard is like a nitro boost in the Fast and Furious franchise. Being friends with one of the 2015 SY startups (TeskaLabs), we knew what we were going into and busted our bottoms to make it to the 2016 cohort, because we were aware of the impact SY had on TeskaLabs. To be specific at StartupYard you learn a great deal of skills from pitching, creating awesome landing pages to creating meaty content and to confidently ask investors for money. I am sure we will start to fully appreciate the help of StartupYard only after a couple of years from now looking back at the days spent here.

As far as mentors, the initial avalanche of heterogenous opinions and suggestions naturally creates a bit of perplexity when you want to take the advice and put it into practise right when the consultation is over. The mentoring month helped Salutara shape it’s business strategy and recognize some of the threats and weaknesses as well as strengths and opportunities.

Now as the dust is slowly settling, we are revising our notes and realizing the value of suggestions and tips we in some cases did not see immediately. To mention a few names in particular – Liva Judic helped us in the process of renaming our company, to Salutara. I cannot leave out Ladana Edwards whose persistence in support has been endless. Marketa Kabatova and her great input on Google advertising, Jeanne Trojan and her factual to the point tips on self presenting, Veronika Prikrylova, Klara Gajduskova, Karin Pomaizlova…Those are just a few, and all the mentors had something to contribute to our launch and growth, and we are super grateful for the chance to get to know them and learn from them. Thank you all, guys, you have been phenomenal! Hope we will show our appreciation by becoming the global leader in healthcare provision without having doctors on payroll.

Martin: Honestly I cannot imagine how we could move forward so fast without the support of the whole SY team, shareholders and mentors. It would be very long and painful without this.

Q: You’re currently expanding your team. Who are the kinds of people you are looking for?

Martin: Yes, we are now hiring a native English journalist/blog writer, social networks specialist, SEO specialist. Then two more coders, designer, key account for clinics and customer service specialists. We want a team of people that have drive and are results oriented. I want to also thank here Jiří, Jakub and Michal for their work, we are happy to work together.

Q: Where can potential partners, clinics, or job seekers get in touch with Salutara?

Petr: Salutara can be reached on our Twitter plus Facebook profiles and of course e-mails (petr@salutara.com or martin@salutara.com).

 

NeuronAd

NeuronAd: Ads for Everyone

Do you use AdBlock, or another ad-blocking solution? More and more, the answer to that question is yes. With the advent of adblocking for mobile, over 20% of online users now employ some form of ad blocker, and that proportion is growing rapidly.

Ads can be annoying, they often use too much data, and they can be loaded with unwanted code and invasive tracking. NeuronAd is working to reconcile the needs of online publishers, with the wishes of ordinary web users who are sick of invasive advertising on desktop and mobile. NeuronAd is a member of StartupYard 2016, and will present at our Demo Day, on April 6th.

I caught up with Karel Javurek, founder and CEO of NeuronAd, to talk to him about the state of online advertising, and his role in improving it. Here’s what he had to say:

Hi Karel, Tell us a little about yourself and NeurodAD. How did you come up with the idea?

My experience has lot to do with NeuronAD, because I’m a journalist and writer, owner of a small content website, and an entrepreneur. But i’m also a reader and i saw Adblock becoming stronger and stronger every year.

Some publishers do get a bit extreme with the number of ads on their sites, but Adblock is the opposite extreme – completely no ads. So I started thinking about that, and I realized that basically the current model of online advertising is broken.

People want content, and advertisers want impressions. But publishers have to balance these two needs, and they have a very hard time doing so. The economics of advertising are constantly pushing them to new extremes.

At some point, online ads stopped helping online publishers, and started to hurt them, and that starts to happen when the pain the ads are creating is real enough that people do something about it- like using AdBlock. And that happens essentially because the reader does not feel that their interests are aligned with the publisher. Instead, they see publishers as working for advertisers, even though they are relying on the publisher for content that they want to view.

There has to be some middle ground– a solution that can balance both sides.

Readers are ultimately the most important part of online advertising. That’s what advertisers are there for, and it’s why publishers exist. At the same time, advertising is ultimately meant to be beneficial to people. In a fundamental sense, advertising does help us to make choices about how we spend our money – and it can have a positive role in our lives.

You want to know if a product is right for you, or if something new is available, and advertising helps us learn things like that. But neither advertising nor publishing is going to work if the publisher can’t survive because half of the readers are blocking ads, and the other half are being attacked with them.

What we see today is the whole system sort of breaking down, and that’s bad for everyone. NeuronAd is set up for what I think the future of online ads is going to be– something much more sensitive to the needs and wishes of consumers.

 

Tell us a bit about your team as well. Who is working with you now? Are you looking for more people?

Right now we are about 8 people. As CEO I still do everything except programming, that is managed by the David Dutkovsky, our CTO. We are still mostly programmers and DevOps, but also one experienced sales pro from the US, who has worked more than 10 years in online advertising business, and led big teams of salespeople.

The NeuronAd Team

The NeuronAd Team, Karel in the middle.

 

Our business is strictly B2B, so we will need lot of sales help in order to expand. We are always looking for talented programmers as well. We are solving hard and unsolved problems, so it’s very interesting even from the architectural point of view.

NeuronAD defeats ad blockers. What’s the problem with ad blockers, considering that they are so popular?

The main problem with ad blockers is that they are too extreme – they block every ad on every page a user visit and usually, once a user installs them, they never uninstall them. Possibly over 20% of internet users now use some form of ad blocker, whether or not such technology is really needed to enjoy online content. In most cases, they simply aren’t necessary.

Making quality content isn’t free, and i think everyone who use adblock, knows this. Ads are  a great solution for a free internet, and they work not only for publishing, but also for Google, Facebook and a lot of other online companies and startups.

Some publishers are greedy, honestly, and they deploy too many ads, pop-ups and so on. But that in itself is an extreme situation, for which all publishers are being punished. We are trying to help conscientious publishers who display useful, relevant ads that are not obtrusive- as it should be.

Ads that are tasteful and well placed can add value to a reader’s experience. That is the kind of thing we want to support with our technology.

Can you talk a bit about how NeuronAD’s technology works? How does it get around Ad blockers?

Our solution gets around any type of blocking software in a browser- desktop or mobile – and can also get past adblocking on the network level, where it’s normally hard to do. So we can offer publishers a future-proof solution for the next generations of adblocker, not just the ones on the market today.

We do that by detecting when an adblocker is being used, and rebuilding that page with code the adblocker doesn’t recognize, delivering an “ad-lite” experience that an ad-sensitive user should find acceptable.

It’s a better alternative than, for example, barring ad-blocked users from visiting the site at all, as more and more publishers, such as Forbes, now do.

We’re building NeuronAd from the ground up, to tackle ad blocking technology where it will be two, three, or even five years from now.

We can also easily update our solution, so if there is any problem with any type of new adblocker, we will be able to patch our technology quickly, and publishers don’t need to take any action.

Will NeuronAd have any effect on website visitors who are not using ad blockers?

No. NeuronAd only affects users who are employing ad blocking technology. For typical visitors, NeuronAd has no effect on their experience, and nothing is changed at all.

Part of our mission is to change the business of online advertising by rewarding fair actors. Part of this is our firm commitment not to spy on or collect private data about site visitors. Much of what has driven people to adopt ad blockers has been privacy concerns, and with good reason. We want to encourage publishers to respect the privacy of their readers as well.

What is NeuronAd’s relationship with advertisers or ad networks?

Our backend can be connected to different ad networks and clients, so we can provide extra inventory for an advertiser, even on big websites and reaching people who don’t usually view ads.

The number of people with ad blockers grows at about 40 % every year. There are more than 200 million people with some kind of adblock installed, and that will double in the next few years. On some websites, the number of users with ad blocking software is now higher than 50%, and this puts a powerful strain on publishing as a viable business online.

How do you plan to grow in the coming 6 months to a year?

We are a global startup, and our reach is not limited by geography or language. We hope to be in the US within the next year – that’s an obvious market to tackle, and it is where much online advertising is focused.

We’re piloting the solution with a few Czech websites right now, and we hope to be serving ads very soon.

Long term, what do you hope NeuronAD’s role will be in the online advertising market?

Our goal is to make the internet a better place for all involved – for publishers, readers, and advertisers.  Publishers and advertisers can forget that readers are the real customer, so we focus on them quite a bit, providing an ad-light experience (less advertisement), more privacy (less tracking), more security (ads link check), and better performance (faster loading times, less data to download).

 

How has your experience at StartupYard shaped the company going forward? Are there any particular mentors who had an outsized impact on your development?

The experience with StartupYard has been fantastic. It’s accelerating every part of our project and we’ve had great feedback and contacts from a huge number of mentors. Every mentor is useful in some way, even if they’re from different market or segment. Sometimes even a small idea or feedback from a different point of view can shape your service or product to be much better.

 If I’m forced to name names, then Jan Urban, Andrej Kiška, Aleš Teska, and Viktor Fisher are examples of really important mentors for us. But in truth, there are many more who have played vital roles in shaping our development, and we are grateful to all of them. 

Are you currently looking for launch partners and early customers? How can people find out more?

We are looking for good partners from publishers and ad networks, that want be relevant in the future. More information is on our website Neuronad.com and you can also send email to info@neuronad.com. On our twitter page we are trying to cover new thing in the world of adblocking.