Why You Need a Sales Oriented Co-Founder

We already talk a lot about what Andrew Chen calls the product death cycle. The viral chart was created by David J. Bland, but the concept is familiar to many a startup mentor and investor alike. We see it all the time, and no matter how much we try to inoculate our startups against it, its pull is about as powerful as the dark side of the force. It looks like this:

product_death_cycle

Simply put, people like doing what they know. And engineers are good at solving engineering problems. The narrative for many successful startups also appeals to builders and tinkerers. Ultimately, we like to think of all the greatest startups and tech companies as successful because of their innovations, not because of timing or clever business decisions.

And it’s true that the most successful startups listen carefully to what their customers want. Slack has been a recent test case of a company that is totally focused on delivering exactly what its customers need, and innovating as fast as possible to provide it.

But that only works at the beginning. Early adopters know what they want, and can push you to create a product that is a killer app for them. Later, when more passive adopters are looking for the next obvious solution, your product isn’t necessarily going to be made for them as well. Great startups realize this, and begin the work of convincing a new market to use their products.

In the worst case scenario –and this is one we’ve seen personally more than once– a startup doesn’t even listen to the customers at all. When the product fails to sell or to increase its traction on the market, the founders just innovate new features anyway, hoping that the next feature set will magically do what none have done before, ignoring the fact that their market focus hasn’t really changed at all.

This is all to say, that the very best startups don’t just listen to what their customers want. The very best startups find out what their customers will pay for, and then provide it.

Customer Acquisition-Built In

Troy Henikoff, Director of TechStars Chicago, often says, loosely quoted: “If you hire a salesman to go out and sell something, and he can’t, you fire him. But if a founder goes out and tries to sell, and can’t, you change the product. It’s fundamentally different when the founders have customer acquisition built into their DNA.”

At StartupYard, we have continually had it reinforced to us, just how important this is. After taking on teams because we absolutely loved their vision, their products, and the team themselves, only to see them fail because they simply weren’t willing to be sales-oriented, we’ve learned to be wary of even those companies we are very attracted to initially. No product sells itself, and ultimately, we can’t be in this business for the love of products alone.

A team that is applying to StartupYard asked to meet with me this week. Aside from the fact that I love to see a team so keen, I could tell right away that this was a team that understood customer acquisition. They ostensibly wanted to meet with me to find out more about our program, but it became immediately clear that they were trying to figure out how to get into the program; what they needed to do to be sure they would be accepted.

I don’t mind that in the least bit. Of course, our job is to make sure the team isn’t just saying what we want to hear, but that is the job of any accelerator. The startup’s job is to say what we want to hear, *and* to have it be actually true. So I told them what they could do between now and the evaluation period, which is to prove that they can get customers.

They may not be able to sell anything right now, but traction with customers can come in a lot of ways. Will people sign up for a waiting list? Will they meet to discuss their needs? Will they consult on your product ahead of the launch? Will they recommend colleagues to do the same? There’s a good reason that “talk to 50 potential customers” is such oft-cited advice for startups. You can’t help but learn something by doing it.

And if the startup comes back and says: “well, we talked to 50 customers, but only a few said that this is something they would pay for,” then I would wait and see how they had reacted to that news. Did they find out what the customers were willing to pay for?

Having a Customer Acquisition Focused Co-Founder

Every startup is going to find one or two channels that work best for customer acquisition. The problem is that they will likely not be the first couple of channels the startup tries. An initial strategy may work, at first, for a while, but eventually, the startup is going to have to pivot to something else in order to grow.

Or even worse, a startup may have initial traction because it has a really great product. Then when that traction starts to flatten out, the startup thinks that the problem is that the product isn’t great anymore. In truth, that initial burst has just taken them as far as it can, and it’s time to try something new.

We often get the startups that don’t have a customer acquisition focus, but who did get lucky with some early traction, because the product is really fantastic.

I think back on one startup we worked with. They had a freemium SaaS product that was very popular in app stores, and they had had to do very little marketing to grow into the hundreds of thousands of downloads, and tens of thousands of active users. That’s fantastic. That’s part of why we took that team. And their product is really great. Truly.

But when that growth stalled, this was a team that had never even considered putting together a simple email marketing campaign. They hadn’t been concerned at all with customer acquisition or retention; they couldn’t even tell us their retention numbers. When growth slowed down, they started working on the product again- but lightning doesn’t always strike twice. The app’s initial popularity doesn’t ensure it can continue to grow beyond a certain number of users.

And what we often see is a founding team where nobody is responsible when that happens. This means that everyone on the team can take responsibility for their successes (and they do), but none have to take responsibility for the failures when the product stops selling.

There is little we can do to help startups like this one find religion in the form of focus on customer acquisition. It may not be in their DNA. But if you’re an entrepreneur who is just starting to get the idea that your awesome product may not be quite enough to take the world by storm, take heed: build your founding team, your company’s DNA, with customer acquisition as a focus.

If given the choice between two companies, one of which is comprised of engineers who have hired a sales or marketing manager, and the other with a sales oriented co-founder, we would nearly always choose the latter.

Engineers build. And they make So partner with a sales focused co-founder who will live and die by the numbers (users, engagement, sales, churn) that an engineer doesn’t want to focus on, and has the power in your organization to force changes when those numbers aren’t good. You can’t outsource something that needs to be central to your mission. You need customer acquisition at your core, and you need a sales oriented co-founder.

Are Startup Accelerators Useful?

This is an abstract of the talk I gave during the last WebExpo Prague on how startup accelerators can be useful for entrepreneurs.

I have an idea!

This is how it always starts. You’re alone at the terrace of a cafe gazing into the void, thinking. You’re having a conversation with some friends or acquaintances. You’re reading an article about a current state of affairs and suddenly, out of nowhere, it hits you. Hard. You’ve just had the-best-idea-in-the-world. Ever.

This is going to make you rich and famous! How come nobody before you had thought about this? The more you think about it, the more excited you become and the more in awe you are of your own awesomeness. Congratulations. You’ve just joined the horde of entrepreneurs who have had that moment of grace… but what should you do first?

Forget about it.

You know the statistics: more than 80% of new companies fail in the first 12 months. Some might even argue that up to 95% of startups fail in the first 2 years. In other words, you have almost no chance of success.

Therefore, when that genius idea hits you, the first thing you need to do is to kill it. Convince yourself it is a bad idea. Yes this is hard. Obviously you’re a smart person, so it’s not like you expected to come up with a bad idea. Try harder.

If you really can’t convince yourself that your idea is a bad idea, then talk to your friends and beg them to convince you it is a bad idea. Don’t be defensive; on the contrary, listen to all their objections meticulously.

If you can’t convince yourself it’s a bad idea; if your friends can’t convince you it’s a bad idea; if your grandmother can’t convince you it’s a bad idea, then and only then, act on it. Obviously you don’t want to spend the next 5 to 10 years of your life pursuing a bad idea. That would be a total waste of your time and talent.

Positioning, Positioning, Positioning.

Now that the world is waiting to see your idea become reality, you are going to have to convince a few people (co-founders, first hires, investors), by explaining to them the why’s and who’s and how’s of your venture. You need to be able at any moment, under any circumstances, sober or drunk, to position your raison d’etre. The best way to do that is to spend some time working and polishing your product positioning statement. Make sure it flows and can only generate Wow’s in your audience’s mouth.

Should I apply for a startup accelerator?

At some stage, you’re going to have to ask yourself this question. Accelerators have now been around for 10 years and it’s very likely you will find one in a large metro area not far from where you are. Is it worth it? Should you apply to one of them, a few of them, all of them? I get asked this question often, and so far my answer has always been the same:

Should I maximise my chances of success?

Remember the statistics: you are more likely going to fail than succeed. Therefore instead of wondering if you should apply for an accelerator, try to figure out a strategy on how to beat the odds of going under. One of the ways is indeed to go through an acceleration program like the one we run here at StartupYard. So far 60% of the companies we have accelerated in 5 years are still running. Compare this with the previous statistic on failure.

So put that arrogant, know-it-all attitude away for a moment and think about what you would need to make your startup a success. As it turns out, your chances of success are much higher is you are accepted to an accelerator.

Nothing replaces experience.

Participating in an accelerator is not like attending a school. You won’t be treated like a kid- quite the opposite. By joining a mentor-driven accelerator like StartupYard, you will, in a very short time, meet with an impressive number of other entrepreneurs, corporate people, and professionals who not only are going to be excited about what you are doing (this is why they are mentoring you), but will also help you a lot by digging into their own experience. You can learn a lot by yourself, but you can apply more focused knowledge by relying on the experience other people have. For that an accelerator is extremely useful.

Nothing replaces personal contacts

Whether you will be looking for clients, partners, or investors, you are more likely going to succeed in meeting them if you are referred by someone else. Here again, an accelerator, armed with its network of partners and mentors, will help you meet the right person in the right organisation in less time than it takes to send a cold email. For that an accelerator is unbeatable.

We’re not called an accelerator for no reason

Ask any alumnus of a world-class accelerator, and they will tell you how invaluable the new contacts and knowledge they have gained in such a limited time are. 3 months is very short, but during these 3 months, you will be more exposed to the market than you could be when going it alone. This will help you to either fail faster, because if you are going to fail you better fail fast, or reach new KPIs faster. For that, an accelerator is where you should be.

Money is irrelevant.

Some startups I meet with are in the market for accelerators, comparing them based on the amount of funding they offer. This is probably the biggest mistake a startup can make when deciding on an accelerator, because the value of such a program is not in the amount of money they will give you. In fact, some of the best accelerators offer less cash than the less famous ones.

The value is in the network, the management team, and the calibre of the mentors, but certainly not in the tens of thousands of euros you will receive. Anyway, if your project and team are right, and the accelerator is doing its job, you’ll get the funding you need after the program. If you are only looking for cash for a few months, then an accelerator is not useful.

Married until the end.

In exchange for your participation in the program, you will most probably be asked to give up a small percentage (usually up to 10%) of your company. This is actually a good thing! Don’t view this as a loss. Making the accelerator a minority shareholder means that they now have a vested interest in your success. That’s not negligible.

In turn, this vested interest means they will probably do whatever is in their power to help you after the program is over. Down the line, they might be able to unblock a situation when you are stuck on a business deal, for example, and it’s in their best interest to do so. The success of early stage startups can depend on the influence of its investors. For that an accelerator is extremely useful even after the end of the program.

Don’t live in regrets.

“We would not be where we are now if it was not for StartupYard”. This is the typical feedback we hear from our most successful startups, and this could also be you. But don’t fool yourself. It is actually pretty hard to be accepted in an accelerator. Less than 3% of companies who apply are selected and, at a time when everybody wants to hear about your traction, being accepted to an accelerator is a clear sign of traction.

I meet tons of smart, seemingly ambitious entrepreneurs, with great ideas. Sometimes I invite them to apply to StartupYard. I even encourage them to join any accelerator, because I know what it can do for them and their young company. But when I hear “well, I’m just not sure right now,” I back off. I can’t sell a startup on its own chances of success. The drive to succeed, and the willingness to take a risk is a necessary part of your success as a startup. We can’t give you that, and we won’t try.

But I can tell you this: I’ve run successful (and unsuccessful), startups for 20 years, and I did it in a time when accelerators weren’t a thing. I would have killed for a chance to join one back then, so my advice to all those young Cedrics out there is this: go for it. As a founder, you will have a lot to lose (sleep, reputation, money, hair) but your startup has everything to gain.

7 Things the Government Could Do For the Startup Ecosystem

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

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

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

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

Starting Off Equal


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

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

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

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

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

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

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

Investor Incentives

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

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

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

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

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

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

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

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

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

Social and Employment Incentives

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

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

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

Welcoming Immigrants

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

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

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

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

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

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

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

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

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

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

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

Education and Language

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

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

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

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

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

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

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

Legal Incentives

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

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

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

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

Business and Political Culture

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

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

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

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

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

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

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

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

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.

Node5_square_500-2

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?

vit-horky-1

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.

Screenshot 2015-07-13 11.38.23

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.

Don’t Be in the “Startup” Industry

This week, Cedric, our Managing Director, asked my opinion on an article that appeared on Medium last month by Arthur Attwell. Attwell shut down Paperight recently, and it’s an emotional post about some of the mistakes he thinks he’s made, but also on the industry he has chosen to inhabit. He’s not done with startups, but he’s done with “the startup thing.” The conferences, the competitions, the startup media, and the accompanying apparatus that is designed to funnel investor money through startups, into the hands of people in the know.

“What do you have to say to that? It reminds me of some of your opinions as well- maybe there’s an article there?” Indeed Cedric, there is an article there.

The Startup Industry

Attwell makes reference to the “startup industry.” That is the endless and sometimes bemusing list of events, conferences, competitions, breakfasts, lunches, brunches, innovation slams, hackathons, and every other possible flavor of sponsored, packaged, pre-digested infotainment that startups are sold as steps on the ladder to success.

My own feelings on this subject are mixed. I’ve been to a lot of conferences. Cedric’s are much stronger- maybe because I still feel I have a lot more to learn about the industry in general. But I often wonder what startups are doing there, particularly when they’ve already been funded, and when their customers are not the event’s audience.

Either a rave or the Slush conference in Helsinki

Either a rave or the Slush conference in Helsinki

Worse still can be pitching competitions, where again, startups are not necessarily pitching to an audience that is as interested in their products or them, as they are in seeing whether that person will fail on stage. Admittedly, I have rooted for startups to fail at pitching competitions, either because I didn’t like the idea, didn’t like the person, or for some other reason. I have never been inspired to help that startup achieve anything.

And while prizes are often involved in competitions, the terms involved in those prizes are rarely that attractive. A $500,000 “prize,” especially for a startup that can actually win that prize (meaning they’re good enough to beat up to a hundred others at the same competition), is not necessarily something that a good startup wants, particularly when there are better investment offers already in the offing.

At Slush 2014, for example, one of the finalists for the half-million euro prize stated flatly, when asked how he would use the prize money, that he wouldn’t take the prize, because the terms weren’t favorable enough, and he had better offers. That’s not that uncommon.

That’s the same sort of strange logic that Hollywood stars or famous musicians sometimes talk about: once you’re rich and successful, everyone wants to give you things for free. If you’re good enough to win a 6 figure pitch competition, you can probably land a far better private investment already. So what’s the game really about?

The TechCrunch Bump and the Trough of Sorrow

Andrew Chen famously wrote about the phenomenon of the TechCrunch Bump and the Trough of Sorrow. Namely, that the publicity associated with the “startup media” and acclaim in the “startup industry,” doesn’t actually translate to real success. It can help you land a few early investors, maybe, but it won’t actually make your product anything that your target users want to actually use, much less pay more. However, as Chen points out, far too many startup CEOs think that the name of the game is to become successful at being a startup, and so follow all the wrong signposts on the route to that goal.

Used for educational purposes: you can find the original at Andrewchen.co

Used for educational purposes: you can find the original at Andrewchen.co

And that route is expensive. There is unquestionably an industry of bells and whistles that is selling things to startups that they should, if they’re competent, confident, and energetic enough, never actually have to pay for.

The whole structure of startup conferences is weird. And the structure reveals the primary motivations. Conferences that charge startup founders to attend, while letting the press in for free, make it clear where their priorities lie, and it isn’t in helping startups.

While investor passes are often more expensive than entry-level tickets for entrepreneurs, the money is in up-selling the startups to tables, booths, and other “opportunities,” that are of questionable value, while the investor passes will in reality find their way into the hands of investors who get deep discounts off the sticker price.

If you are a non-funded startup struggling to survive, you should not have to pay to attend a startup conference. Full stop.

We Can Be a Part of the Problem

And we’re a part of this as well. Recently I was invited to speak at a local event where Startups from this region will pay up to 160 Euros to hear me and a list of interesting people speak. I know that part of what they’re paying for is the opportunity to meet me (and people like me), and pitch me their ideas. Which is a shame, because if any of those people emailed me, I would gladly meet with them for free.

All the truly valuable partners, investors, and friends of our organization that I’ve met and seen at conferences would do the same.

The thing is, I’m creating value for this event by being there, and making it possible for the organizers to profit from my presence without paying me- and the money is coming from startups who can probably ill-afford to waste money on hearing me talk about anything.

Meanwhile, I’m getting a lot of value out of this event for free. I’m speaking, which means I’m helping the StartupYard brand, and I’m getting a look at all the startups in attendance. I am the real customer for this event- everything has been tailored to suit my needs.

There’s the notion that you’ll “network,” at such events, and like Attwell, I’ve had limited success in doing this. If networking is about building relationships with people who have a common interest, then success would be defined by the number of working relationships that have come out of conferences. I have made a few of these, and I value them, so I credit the allure of conferences in allowing that to happen. It’s not a lost cause.

But again, the people who I’ve gone onto having a very productive relationship with from conferences were at the conferences looking for me, just like I was looking for them. So the conference was a *really* expensive way of meeting them, considering our shared interests.

I still see some value in a certain type of tech conference, particularly ones like this Sofia’s Bulgaria Web Summit, which is run by StartupYard Mentor Bogo Shopov. There, the startups paid a nominal fee, there was little window dressing, and the speakers were by and large not investors, but real thought leaders and passionate advocates for new types of ideas.

Likewise, I attended Howtoweb in Bucharest in 2014, and was delighted by the fact that the organizers brought mentors in to do actual mentoring with real startups- all of whom paid very little to attend. Mentors were not there for their own ego-stroking purposes, but to meet and engage with interesting young people. I loved it. So good conferences are certainly possible.

Things have also changed for the good in other ways. The famous flap over Demo, for example. In 2008, disgusted with Demo’s practice of charging startups up to $2500 to pitch their startups on stage at their popular events, TechCrunch founder Michael Arrington scheduled TechCrunch 50 at exactly the same time, and offered startups the opportunity to pitch for free. TechCrunch would charge investors to attend the event. One needn’t now ask which side won that argument- TechCrunch now possibly runs the biggest startup pitching events in the world.

The Moth Trap

Cedric describes the “startup industry” as a “moth trap.” You know those lamps that lure moths to them in order to zap the life out of them? That’s a bit harsh, but it can be accurate.

With so many attending startup events hoping to make breakthroughs with their startups in terms of investment, hiring, or partnerships, the expectation levels are often over-hyped. It takes a lot of work to turn even 2 or 3 contacts from a conference into something that might eventually move the needle at your startup. It takes a lot of false starts and false friends to find those people who are really going to make a difference for you.

Worse yet, startups show up at these conferences with unreal expectations about what they’re going to get out of it- to the point that they ignore real opportunities when they’re presented. I’ve talked to more than one interesting startup that has paid for a small space at a large conference, that has not been funded, and invited them just to apply to StartupYard, even if they don’t see themselves moving to Prague.

For an application that takes maybe an hour of a startup’s time, we offer the option of real funding, and a real direction for a young startup. Few apply, and the more they’ve paid to be a part of the conference, the less likely they are to apply. It’s as if when I mention that we offer funding and a program that’s designed to help them make real progress, they have been conditioned not to believe me.

It’s as if they think that because they have a few pieces of swag, t-shirts, and a rollup so that they look like a startup, and have had conversations with investors (and only conversations), that they would be taking a major step down to consider submitting themselves to anything resembling a reassessment of their priorities.

They have been conditioned to believe that their goal in life is to land a big funding round, and that giving up 10% of their company (which is worth exactly nothing until someone invests in it or it makes a profit), in exchange for real, tangible help in moving forward will be a hinderance when it comes to future negotiations, rather than a net gain.

As I’ve mentioned previously, and as has never failed to amaze me, I have heard from startup founders who have never raised money, that our terms are too steep, because “a VC told me that we could get a valuation of X Million Euros.” You could, if that VC invested in your startup. But they haven’t. And the notion that you’re going to get an investor at that valuation at a startup conference might be a little unrealistic.

In fact, I know a few VCs who might look down on the fact that you’ve paid for swag and a conference booth without signing a real live customer. These people are smart, and their job is making money. They will be looking at your traction, not your logo.

But still, the conference environment is like the California gold rush of 1849. The people who made money then weren’t the prospectors (the startups), by and large, though a few of them got filthy rich. The people who made the steady money in the gold rush were selling the shovels and the whiskey. Or in today’s terms, the metal water bottles and the keychains.

In that environment, we sometimes feel like the guys who walk around offering to lend the prospectors our heavy excavation equipment, and help them dig for gold, and being told that 10% of the loot is too high a price to ask, given what treasures might await. Keep shoveling.

Attwell blames himself for being a moth to that flame- falling for the adulation of the “TechCrunch Bump” rather than focusing on his startup. He’s right to blame himself, but he’s also right to blame the industry for perpetuating the myths it does in order to sell the show, and perpetuate its own legends.

Breakthroughs are not magic, and they don’t happen accidentally. And it was with not a little irony, I thought, that the speaker line-up for last year’s LeWeb conference in Paris was a parade of people who all said more or less the same thing, to the point of it being a sort of idée fixe for the whole conference: “this is not magic.”

There were more presentations about failure at LeWeb last year than there were about success- at least that was my impression at the time. There was an overtone of exasperation with the magical thinking that has been associated with startup culture in recent years, and this manifested as a pragmatic appeal to the people in the audience to be a little more grounded, and to understand their own limitations.

Summing it Up

In a brilliant essay, Paul Graham (of Y-Combinator) wrote last year about the problem of “startups,” with respect to our education system, and our business culture. He points out that education teaches young people to fulfill adult expectations, not to fulfill their own passions. Education and work is a game with rules, and can be won if you know how to game the system. In the same way, we teach young people to “do startups,” according to a paint-by-numbers system, rather than encouraging them to follow their passions in any way that might work: “It’s not surprising that after being trained for their whole lives to play such games, young founders’ first impulse on starting a startup is to try to figure out the tricks for winning at this new game.”

He goes on: “Since fundraising appears to be the measure of success for startups (another classic noob mistake), they always want to know what the tricks are for convincing investors. We tell them the best way to convince investors is to make a startup that’s actually doing well, meaning growing fast, and then simply tell investors so. Then they want to know what the tricks are for growing fast. And we have to tell them the best way to do that is simply to make something people want.”

We can see in this a horrifying regressive cycle. Successful startups all make the same “noob” mistakes that unsuccessful startups also make. Only when they become successful, the lessons of their failures are always forgotten. They had swag, so you have to have swag. They won disrupt, so you have to win disrupt.

Karl Marx once wrote of something said by Hegel: “all great world-historic facts and personages appear, so to speak, twice.” Marx comments: “He forgot to add: the first time as tragedy, the second time as farce.”

The axiom has often be applied to geopolitics or to cults of personality (Marx was applying it to Napoleon and his nephew Napoleon III). But it can as easily be applied to generational differences.

Every generation makes its own unique mistakes; generating its own unique tragedies. But there were reasons to make these mistakes- they were made in the process of trying to accomplish something new and different. The next generation repeats the same mistakes again, but this time only as a matter of form; only because that is what is expected of them, with no sense of the purpose behind them. Tragedy becomes farce.

That’s why we exist- just like Y-Combinator. That’s what keeps us relevant. Because at a good accelerator, and we try to be the best accelerator we possibly can be, with the best and most engaged mentors we can find, mistakes are things you learn from. And they don’t have be your mistakes- they can be someone else’s. They can be ours.

Failures are productive. We are here to make sure that our startups are not slaves to fashion, but are remaining true to themselves as they grow. That they are being realistic, and honest with themselves.

We naturally want to be like the people who we idealize as models for success. But people are very bad at recognizing what matters when it comes to repeating that success. So you get entrepreneurs who dress like Steve Jobs, or think that the habits and peculiarities of successful role models are the “trick” to being as successful as they were- rather than the more common sense reasons like hard work and some good luck.

You make life about becoming something, rather than accomplishing something, and no matter what else you teach people, they’ll focus on the appearance rather than the reality. In our attempts to be the things we think we need to be: “entrepreneur,” “startuper,” “winner,” we end up betraying the things we care about. Or worse- we don’t even pay attention to the things we actually care about, because they don’t have the caché necessary to turn us into something others will recognize and respect.

An unfortunate part of this business, and we’ve seen our share of this at StartupYard, is that many of us are pretenders. That’s not a bad thing. That’s nobody’s fault. A person can be a pretender, and find their true passion later, when they’ve exhausted themselves or gotten wise to the game and stopped playing it. That people pretend is a sign also that they are seeking something they recognize as valuable.

I would in fact posit that the existence of the StartupLand circus and the attendant conferences, seminars, events, and other time-wasters, is an indication that there are enough really passionate people circulating in the tech community to sustain such high numbers of pretenders and play-actors. If there wasn’t anything real, the whole thing would eventually collapse under its own weight. It still might, but at the core, I see more genuine innovation, energy, and passion now than I did when I started working with startups.

And while I see a self-adjustment in StartupLand may be in the air- a common feeling that the game has gotten old- I also see that most of the startups we work with recognize the real work that remains to be done.

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”

Czech Out the Tech Scene: Our SlideShare on Startups in the Czech Republic

More and more often these days, StartupYard gets similar questions. What’s going on in the Czech Republic? Why should startups move there? What’s unique about Prague, about the Czechs, and about the current ecosystem? What about investors? Can a startup get funded in the Czech Republic?

Well, we’ve taken it upon ourselves to answer those questions, and a few more. So here is our slideshare: “Czech Out the Tech Scene,” a brief guide to the Czech Startup Ecosystem.

This is a work in progress. Think we missed something? Got something terribly wrong? Great! Let us know by tweeting @startupyard, and we’ll make it right.

Meet the 2015 Startups: BudgetBakers, Stress Free Mobile Finance

BudgetBakers came to StartupYard with a unique problem. With a popular and highly rated app on the GooglePlay store, in many ways, they’d already won the “Game of Startups.” But like many startups, the growth hadn’t translated to profitability yet, and the popularity of their app, then called Wallet, hadn’t translated to the number of paying users they’d need to keep growing as a business.

Honza and Martin at StartupYard

BudgetBakers Co-Founders Honza and Martin at StartupYard

Beautifully designed and expertly constructed, the software immediately caught our attention. The team too, co-founders Jan Muller Martin Jiricka, were eager to take the next steps. Here’s Jan “Honza” Muller talking a bit about the BudgetBakers journey, before and during StartupYard:


Q: Hi Honza, tell us about BudgetBakers. Why did you choose to tackle the problem of personal finance and budgeting?

bb-highres_1024

A: Well, it all started 5 years ago. I just wanted to learn how to develop for Android- at that time it was a really new platform.

Also, I wanted to make an application for my personal use, to track my finances. I called that original application Wallet. Through the years, the application has become more and more popular, and more complex. It’s coming soon to iOS and a web app, and is already on android (the Android app is still called Wallet for now).

As BudgetBakers has grown, I’ve changed as well. Since I founded BudgetBakers,  I’ve started a family myself and become a dad. I’ve come to really understand the need for smart daily money management. When I quit my job late last year to work on BudgetBakers full time, that only reinforced my need for solid money management. That’s quite a motivator to get BudgetBakers right!

BudgetBakers-Fam

Honza with his partner and daughter.

As an entrepreneur working for myself, knowing how much I have to spend, and how much I should spend on everything my family needs is really important- for me and for my partner. We need a smart way to make smart decisions as a family.

People are afraid to think about their budgets and the money they spend every day. But we find that once they get going, that sense of control and security is really addictive. It certainly is for me!

When we’re growing our families and our careers, we can come to let money concerns dominate our thinking. But we don’t think rationally or effectively about our money- we just worry about it uselessly and inefficiently. I’ve come to see what we do as a way of saving people from that trap.

So that’s how BudgetBakers grew into what it is today- more than an expense tracker, it’s your personal finance assistant. It thinks about every little penny, so you don’t have to.

Q: What makes BudgetBakers different from competitors like YouNeedABudget or Spendee? Why should people use BudgetBakers?

A: First of all, BudgetBakers is not just a mobile application.

We are constructing a fully integrated platform where people can learn how to get control of their personal finances, and gain peace of mind for today, and the future.

More than that, we want to go further than just helping people to track their individual expenses and manage their budgets.

Screenshot 2015-05-15 11.46.37

Managing money is an important family priority as well, and one that people have a hard time with, especially when they’re just starting their careers, and thinking about saving for a house, maybe a car, or that vacation over the summer.

You get your paycheck one day, and the next day it seems like everything disappeared. Where did it go? That can cause a lot of stress.

A lot of families aren’t on the same page when it comes to their finances- they don’t know how much they can reasonable expect to spend every month, much less how much to save for the long term.

So we’re not only perfecting personal finance via a fully integrated web-based, and mobile platform, but we’re also building in tools to encourage couples and families to begin cooperating to manage their money more effectively.

I don’t think you need to have a lot of money to be happy, but I do know that you need to have enough. That’s where BudgetBakers comes in- our platform helps people to understand what enough looks like. Are you sure you can afford that trip to the movies on Saturday? With BudgetBakers, you will be sure.

Q: A big hurdle for BudgetBakers so far has been gaining traction with users. What are the unique challenges you face in getting people to commit to your approach and platform?

A: We have 4.4 star rating on GooglePay, and we get about 1000 new users a day. We use the UserVoice platform to keep in touch with our users, and we’ve also recently hired a new team member to help with community management, blogging, and marketing.

That said, we’ve found from the beginning that our users need a lot of convincing to really start using BudgetBakers to the fullest. It seems like a big commitment, and it seems more complicated than it is. Part of the learning curve for us, especially at StartupYard, was to see how many opportunities we truly had to convince users to stick with the program, and we weren’t converting as many as we could have.

With the help of some awesome mentors and workshops, like Bogo Shopov on GrowthHacking, and Fiodor Tonti on UX/UI, we’ve had our eyes really opened to the opportunities we’ve been missing, and we’ve seen that we have a lot more room to grow and understand our users even more. That’s very exciting.

Right now, we are working on expanding our efforts in content marketing, and community building, to find new ways that BudgetBakers can reach out to its community and offer them tips, advice, and above all encouragement to make the right financial and spending decisions. There are a lot of people out there who need a little encouragement, and we want to be the ones to provide that.

Q: What do you think are the major blockers for most people when it comes to getting their finances under control? How can BudgetBakers fix that?

As I said, I think one of the biggest obstacles we have when it comes to getting people to take control of their finances is fear. People are afraid that once they open up their finances and take a look, they’ll be shocked at what they see. Sometimes they really are!
But we find that as people use BudgetBakers, they get comfortable, and they start to really enjoy the control they have over their spending. The stress in little spending decisions can start to go away, because they have a very good sense of what they should be doing with their money.

Maybe there’s a little extra in the restaurant budget this month. Great! Order a pizza, or take your girlfriend/boyfriend to a nice dinner somewhere. That’s a wonderful feeling, to know you aren’t cheating yourself when you do that. Control of your finances can make you feel virtuous and proud, and it makes you want to do better, and set better goals for yourself in the future, to hang on to that good feeling.

People have to “rewire” a little bit to make this transition, and that isn’t easy. They have to stop being so emotional about their money, and be a little more analytical- stop worrying and start thinking. BudgetBakers helps with that switch, but it can still take a big effort.

Q: Ease of use is also a major concern for any budgeting software. How are you planning to make BudgetBakers more intuitive and less work intensive?

A: We have a lot of plans on how to make our users more comfortable, and make the daily habit of budgeting and expense control simpler and more rewarding.

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Today we have a smart watch application which allows users to enter transactions even without taking their phones from their pockets. Also we have automatic bank statement parsing which works with a few Czech banks so far. We are working towards expanding that ability.

In the future, it’s important that we offer our users ways to integrate directly with their banks, making expense tracking practically automatic.

It’s a balance. With BudgetBakers, the value is in the peace of mind that it gives you about your finances- it reminds you to control your spending, and it keeps you honest about what you can afford, and what the best decisions for you really are. You need to engage with your budget on a daily basis, but you don’t want that to be too much work or too much stress.

There are ways that we would like to make things easier, and entering, sorting, and tracking transaction information automatically will play a big part in that.

Q: What’s your near-term strategy for growing BudgetBakers’ user-base, and how do you plan to keep new users as they join the platform?

A: Budgetbakers has already been downloaded over 800,000 times on the GooglePlay store. When we release our iOS version very soon, along with a substantial rebuild of the BudgetBakers platform, we look forward to adding a whole new group of users.

A lot of users is a great thing to brag about.

But as I said before, one of the things we really want to focus on is making budgeting and financial planning a daily routine for as many of our existing users as we can. We can still do a lot better in that area, and as new users discover the platform, they’ll also benefit from this work. If you do anything for 3 months, it can become a habit, and that 3 month metric is something we’ve been focusing on much more. Can we keep people engaged with their budgeting and financial planning for 3 months? If we can do that, the rewards to our users will extend to potentially their whole lives. We can do a lot of good with some very small, simple changes to the way they engage with BudgetBakers.

For example, a big takeaway from the StartupYard workshops, particularly with Fiodor Tonti and Bogo Shopov [ workshops on UX/UI and growthhacking], was that BudgetBakers needs to utilize the data we collect from our users, and make that part of our overall value proposition. People want to feel a part of a community, and be rewarded for meeting their financial and savings goals. Gamifying the platform and rewarding users with insights and advice is a big part of how we will improve our user retention, and help people to be more financially secure and independent.

Q: You’re based in the Czech Republic. What about the region represents a unique opportunity for BudgetBakers? What challenges does location present for the company?

A: BudgetBakers works anywhere- it works with any currency, and in about 25 languages so far. We have users all over the planet. Of course, because we’re based in Central Europe, this is where we are exploring our first corporate partnerships with banks, telecom providers, and others who can help us add more value for our daily users.

We have a large userbase in the Czech Republic, and that’s partly because of good word of mouth. It’s also because this region doesn’t have access to some of the largest competing platforms, like Mint.com, and because the market here is more fragmented, with more localized apps and platforms, tailored to specific markets.

In addition, banking and financial services are also more fragmented, meaning that building larger partnerships is a slower process than in places like the US. However we count that as an opportunity, to be the first to spread in a way that less ambitious projects haven’t managed to do.

There is no market leader in this category yet, particularly in Europe, so there is a lot of room for growth. Banks and telecoms are desperate for ways to add value for their clients, many of whom are choosing lower-cost, more mobile solutions. We are exploring these types of partnerships that add the value that people are looking for from their financial institutions, but are not yet receiving.

A lot of people (including StartupYard mentors) have challenged us on how “new” and “innovative” BudgetBakers is. There are a lot of expense trackers out there, and budgeting software is as old as spreadsheets. But you have to remember, that the mobile and financial technology that really adds value for end-users is still really new. In the context of business and government, legacy methods are fine, but users today want mobility, interconnectivity, and always-on functionalities. They want their software to work with them, not just for them. So it’s not a new idea, but it is a new way of looking at budgeting for many people.

Q: Tell me about your experience so far at StartupYard. How has BudgetBakers grown during your time here? How have your plans changed?

A:  By entering SY we had to slow down development of the new version of BudgetBakers and start focusing more on management, finances and defining the strategy that will bring us to next level.

At the beginning it was very unusual for me, because i was used to spending my whole day programming. I had to turn towards management, and that was a challenge for me. But now I have to say, it helped me to crystallize my vision in term of growth and success.

I’ve come to realize that our priority has to be our customer experience and our market strategy, instead of just building an ever richer feature set. There’s no use in creating the world’s most amazing software, if nobody is ready to use that software to make a positive impact in their lives. So we’ve had to adjust our attitude towards development, and grow up as a company and a team. That’s been an amazing experience for us, and we’re really glad we decided to do it.

Learn More at www.budgetbakers.com

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