StartupYard FastLanes 4 Companies from Bucharest

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As part of our 6 city StartupYard FastLane tour, we visited TechHub Bucharest last week, “FastLaning” 4 companies, which is more than in any other city but Prague..” StartupYard has now FastLaned 15 companies in 4 cities, with two more cities, Krakow and Warsaw, coming up.

TechHub is an international ring of startup incubators, whose mission is to help startups “start up faster.” The space they have recently occupied near the center of Bucharest is perfect for startups. It’s compact, but with a comfortable atmosphere, and plenty of space for events, meetings, and work.

Energy And Atmosphere

Just as we had encountered in Kosovo and Bulgaria in the past few weeks, there is a very positive creative energy among Bucharest’s young startup community- a sense that anything is possible, and that growth and dynamism in the tech industry is just getting started.

There was also a healthy variety to the pitches we heard, and the founders we talked with while visiting over several days. We heard pitches in e-health, gaming discovery, fintech, e-commerce, and IoT, among other domains. Each of these ideas was original, and not a local “me too” version of a popular global product. Of the entrepreneurs we talked with, most had a global focus, or at least an eye towards international markets, which showed that Romanian startups are gaining the confidence and the appetite for the world tech stage.

“Cheaper,” is not the Pitch

A pleasant surprise for me on this tour has been that “the cheaper version of X” has not been included in any of the pitches we’ve heard throughout Central and Eastern Europe. A stereotype of only a few years ago, that this region produces cheap knock-offs of popular concepts, banking on the lower costs of development and deployment to compete with international products on the local level, seems to be fading quickly.

The region is of course still cheaper to develop in and represents a strong pool of low-cost talent for western companies, but the startupers we’ve met this year are not as interested in carrying over this mentality into their startups. Instead, they’re focusing on the quality of their products, and their ability to compete head to head in the global market on innovation and creativity. There are probably still many local clones, and they have their place, but significantly, these are no longer the companies coming forward to apply for StartupYard.

It’s Still All About Communication

George Dita, of TechHub Bucharest, who has also invited StartupYard back to participate in HowToWeb’s Startup Spotlight in November, made an interesting comment while we chatted about the local startup scene. “You can see this progression from West to East,” he said: “If you start in the US, or UK, the sales and communication skills are the strongest, but as you move East, that goes away. In Eastern Europe, technical talent is incredible, but sales and marketing are missing.”

This observation has matched our experience so far, but that is in itself a great opportunity for StartupYard. We can act as a gateway for the amazing talent and the ambition of Central and Eastern European startups who lack the background, culturally and experientially, they need to compete with other global players. We see ourselves in that role even more these days, given the success of TeskaLabs, a StartupYard company that was recruited in TechStars London while still attending our program.

As we say, you can teach an engineer sales, but it’s much harder to teach a salesman how to think like an engineer. Startups in Central Europe have tech talent coming out of their ears. The only barrier to competing in the west is confidence and competence in communicating, and selling their ideas. We hope to continue replicating successes like TeskaLabs in the future.

We think it’s very important in today’s startupland to have sales and marketing as fundamental part of the team and the company from day one, but we can work with teams that need to foster that part of their business into something that really performs. They only have to get why it matters, in order to learn how to do it. That is a transition we have seen happen with startups from this region.

What we see, time and again, is entrepreneurs who can’t communicate their ideas effectively, but more and more, we see that they are aware of this, and are working hard to get better at it. That tells us that there are many exciting things coming up from Eastern Europe in the future, and we’re excited to be in the middle of the transformation.

StartupYard FastLanes 2 Startups in Sofia, Bulgaria

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This week, StartupYard director Cedric Maloux and I spent two days in Sofia, Bulgaria. This was stop number 2 on our 6 city tour of Central Europe for StartupYard FastLane, which kicked off in Prague this month. We visited Kosovo last week, and we have now FastLaned 11 companies so far. This was my second visit to the Bulgarian capital this year, and as before, I was not disappointed by the local startup scene.

From our FastLane event at Vivacom Art Hall, an exhibition and startup space which has been built in the former headquarters of Bulgarian Telekom, the former state telecom company, we selected two teams to join the StartupYard FastLane. These teams will now skip the first 2 steps of the StartupYard selection process, and they’ll have a much better chance of being among the startups that reach the final interviews with StartupYard.

StartupYard has never taken a team from Bulgaria, so we were somewhat unclear on what to expect from startups in Sofia. Chris Georgiev (@chrisGeorgiev), of Imagga and StartupBG, who organized the event and helped attract the startups we chose told us that local startups were “a little spoiled,” due to fairly good access to local programs like incubators and grants for startups.

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Still, we were very impressed with the startups that pitched us, and we noted how friendly and open the attitude of the crowd was. About 60 local startupers and entrepreneurs showed up to hear the pitches.

What Pitching is Really About

During this tour, and throughout the 2 cohorts we’ve done, we’ve noticed a pattern that helps us identify really interesting founders.

First of all, the idea that the founder is pitching really doesn’t matter much, when it comes to which founders stand out. Of course we want to hear pitches that are about tech products, but beyond that, there is no keyword or area that is more likely to make a startup interesting.

Sometimes you hear that a space, like security, is “hot,” and there are a lot of companies being funded, but really, it’s just that there are a lot of problems in that space to solve, and so there are a lot of pitches about products in that space. Some are good, many are not.

So if it’s not the idea that is most interesting, what is it? For us, it’s about the founder’s ability to communicate his or her solution to a real problem. If a founder can do that in a way that makes the solution seem obvious, even inevitable, then that is a very interesting founder indeed.

But we don’t expect founders to be born with those skills. We only expect them to be able to learn them, and grasp their importance.

That’s why during our tour, we are meeting with as many of the teams as possible before the pitching events, to give them individual training on pitching, and to watch how they react to our input. The founders who can implement simple feedback into their pitches, and improve dramatically over the course of a single day, are the types of founders we want to work with.

The results are pretty surprising. In Sofia, for example, one founder, the rare business oriented founder with a lot of experience in marketing and communications, at first approached the pitch training with some obvious confidence. He knew sales, so this was going to be easy. But as we worked through his position statement (the core of the pitch) it became clear that his sales skills weren’t translating to pitching as he expected.

What impressed us about that founder, and the reason we FastLaned his startup, was that he took that experience, and built on it, delivering a far better pitch than he had started with. What is often surprising is that after only a few hours of work, founders who were hopeless at explaining their ideas to others can become so much better at it. We might not end up taking that startup for any number of reasons, but the reason won’t be because we don’t understand his idea.

At every one of these events so far, people who have attended pitch training with us have told us how much it helped them to really understand how to communicate their ideas. Imagine what 3 months of acceleration can do.

After all, as founders, this would be their daily job in a successful company. It’s more than an exercise- it’s what they will have to do in order for the company to grow. Talking to investors, hiring new people, and signing new clients, is all about making them believe in what you’re doing. That’s all about pitching. So we look for founders that can embrace pitching, because it will be central to everything they do going forward.

This also confirms a suspicion we had last year, that we had rejected many applications that might have been very good startups indeed, simply because they weren’t yet able to relate the ideas in a clear and persuasive way. That shows that a tour like this one is probably more important than we even suspected.

This reaffirms how important pitching events can really be. We can’t tell, from a written application, if a founder has the ability to grow in this way. Some really don’t. Others surprise even themselves.

The most interesting founders, in my view, are the ones who can grasp the underlying importance of the exercise- which is to define, in as simple and complete a way as possible, what their company will do to benefit the world. It’s not about the ideas being presented, but the ability of the founders to communicate to people they don’t know; to bring themselves to the level of their audience, rather than to find an audience that is already at their level.

Moreover, developing a killer pitch is an exercise in self-examination. Do you really believe in this solution? Is your approach really as simple and as beneficial as you’re claiming? Or is it difficult to talk about because it’s not as easy as it should be? In the process of developing their pitch, founders have to address those questions over and over. Ultimately, if you can’t find some way of selling your ideas, maybe they aren’t good enough to sell yet.

A founder who is humble and self-aware, and also confident enough to address these problems head on, and solve them, is an ideal candidate for StartupYard. The idea can and will change, but the person doesn’t change as much. If they aren’t flexible and self-aware when they start, there isn’t much we can do to make them more flexible and self-aware at the end of the process. We can foster good habits, but it’s much harder to kill bad ones.

More than anything, I see the failures that we have had at StartupYard have been connected with this. The idea was good enough, but the founder wasn’t flexible enough to adapt it, and make it really great. On the flip side, our biggest successes in the last few years have been from founders who could accept change, and were not afraid to question themselves.

We talk about “passion,” quite a lot. Passion is essential. But passion doesn’t mean blind belief. It means commitment, and ultimately, the willingness to do what is necessary to succeed. Often, when we hear: “I will do whatever it takes,” what that really means is: “I will do whatever it takes, except changing my mind.” But that last part- the willingness to adapt, is really the only thing that accounts. It’s the only thing that separates most entrepreneurs from the great ones.

The opportunity to really see what passion means to these founders, on an individual basis, has made this tour worth our while so far.

StartupYard Fastlanes 2 Companies from Kosovo

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Call it tiny, but don’t underestimate the young republic of Kosovo, where StartupYard managing director Cedric Maloux and I spent two amazing days and nights last week, meeting startupers and young people who are full of energy and promise for the future. Here are a few of the takeaways:

A Beautiful Place to Visit

Set aside your assumptions about the Balkans. While Pristina, the capital, doesn’t have the hallmarks of an old European city, with ancient gardens and cathedrals, or many quaint old cafes on stony streets (streets that aren’t paved are dirt tracks), it has its own kind of weird beauty. The city is a mix of the not-so-old, and the brand new. A crazy quilt of apartment blocks, avenues, standalone restaurants, and gleaming hotels.

We were told during our visit that remittances from the Albanian diaspora are one of the main sources of capital in the country. That money is proof of Albanian and Kosovan success around the world, and a sign that Kosovars and Albanians, by and large, are committed to returning home. You can see the effect of capital returning to the country: new construction is everywhere, and restaurants and cafes have sprouted on every street. In just a few days, we met dozens of people who had been educated outside the country, run successful businesses and made money- and all had come back.

Kosovo, perhaps surprisingly, considering its history of ethnic conflict, is rated among the freest and most equal nations, particularly majority Muslim nations. Over 95% of Kosovars are counted as Muslims, and yet the country is officially secular, with freedom of religion upheld for all.

Young and Hungry

With an average wage of just 300 Euros a month (Kosovo uses the Euro, although it is not a Eurozone country or even a member of the EU), the country’s standard of living is obviously lower than in the EU. There is also a massive trade imbalance, with the country importing far more than it produces.

But that situation has been improving, with 5% growth in GDP per year between 2003 and 2011. The private sector, virtually non-existent in 1999, has grown steadily. We encountered a strong sense of optimism from the entrepreneurs we met, mostly at ICK (Innovation Center Kosovo), a non-profit business incubator which is funded by the Norwegian Embassy, among other benefactors.

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The country is also young, with the fastest rate of population growth in Europe, at 1.6%. This demographic pressure, plus a high rate of unemployment, means that many young Kosovars are experimenting with new business ideas, and looking to bring foreign capital and foreign business into the country.

A Lot to Learn

Cedric and I had lunch with Driton Hapciu, an ICK Board Member, and Renaissance man in the Kosovan tech industry. An electrical engineer by training, Hapciu was among the first to found an IT firm in Kosovo, long before the country formally existed, back in 1994. He pursued Peace Studies in Norway, and now, he says: “I’m just here to help.” He talked about the need for practical business experience and programming skills among young Kosovan engineers, who are educated heavily in math, but leave university with few real job skills.

Hapciu was also among the very first mentors to advise Mergim Cahani, in the earliest days of Gjirafa before the team joined StartupYard, and became a growing force in the Albanian and Kosovan tech scene. Every entrepreneur we met knew StartupYard because they knew Gjirafa, and most were eager to follow the search company’s example.

Small Fish Attract Big Fish

One gets the sense when talking to Kosovan entrepreneurs, that anything is still possible on the Albanian web. Basic services that Europeans and Americans take for granted have not been implemented yet. Online payment systems, e-commerce, online advertising, and marketing are in their infancy. There is not even a dominant platform for business listings in the country, and until the advent of Gjirafa, there was no online access to the country’s 100,000+ bus routes and other transport information.

I meet with a Kosovan startuper to talk about his project.

I meet with a Kosovan startuper to talk about his project.

Indeed, we were understandably skeptical when we first heard the pitch for Gjirafa, a “Seznam for the Albanian Web,” but meeting with tech entrepreneurs in Kosovo, one can see that these deficiencies also represent enormous opportunities. In what other country in Europe can a startup reasonably hope to become the gateway to the web for the next generation? That position is filled almost everywhere, by the likes of Google, Facebook, or other global players.

Their entrenchment also means that few companies seriously challenge them to keep innovating in smaller markets like Albania and Kosovo- I think this is why Google has ignored the region until now. And competition on the local level is of course good. Just ask the Czechs, who, thanks to Sezam.cz and its serious challenge to Google’s dominance, benefit from the fight to win market share with better products, faster speeds, and more alternatives. Google is rumored to spend more on development per user in the Czech market than in any other market in Europe. That’s no accident.

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Cedric Maloux gives his pitch training workshop.

With plenty of room for local growth, startups in Kosovo hope to prove that their innovations can compete on the global stage. While many of the entrepreneurs I met with during our 2 days there were eager, they were often naive about the demands of the global market. Instead of innovating around a single vertical, trying to solve a single real problem, many presented amorphous business concepts that incorporated many different solutions for a whole host of issues.

This is not surprising, given that they’re dealing with a market in which there are no dominant solutions for many common problems. How can a startup based on retail operate in a country where e-commerce has almost no penetration? And what good is an online media business if it doesn’t have an ad-platform that can support it? The temptation is to try and re-invent e-commerce and advertising in order to have a market to serve. My hope is that players like Gjirafa will be able to provide a sort of guiding light for other local startups, encouraging them to work in narrower verticals, and providing a broad basis for the growth of online business in the region.

So keep your eyes on Kosovo.

Photos thanks to Innovation Center Kosovo (ICK)

Amit Paunikar: On Product Management, and Owning Failure

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

So every startup needs

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

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

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

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

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

7 Things the Government Could Do For the Startup Ecosystem

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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.

StartupYard FastLanes 7 Companies From Prague

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Last night,  7 startup teams pitched StartupYard in front of an audience of about 70 visitors at Node5.

An Intro From Cedric Maloux

The event kicked off with an introduction from Managing Director Cedric Maloux, who told entrepreneurs in the audience: “If you have an amazing idea for a startup… kill it!”

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He went on to say that only great ideas which refuse to die and never go away, are the ones entrepreneurs should choose to work on. If you can’t find a reason why your startup idea won’t work, and neither can your friends or anyone else you consult, then it might be something that will succeed.

Cedric introduced the StartupYard program, and talked about our application process, which we share with a syndicate of 5 accelerators in CeedTech.

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FireSide Chat with TeskaLabs

Ales Teska, Co-Founder and CEO of TeskaLabs, sat down with me to talk about moving his startup to London and attending TechStars, as well as raising 337K this year.

He discussed the differences between the two programs, and urged B2B businesses to base their technical operations in Prague, but considering also doing business, particularly sales, in London. He pointed to the openness in the UK business landscape to startups, and the speed of dealmaking in the city, where, he said, you can do in a week what would take a month in Prague.

Cedric introduces Ales Teska

Cedric introduces Ales Teska

At the same time, Teska noted that the StartupYard program was the perfect preparation for TeskaLabs’ move to London, and that his team would not have been prepared for the harsher TechStars environment without having attended StartupYard first.

He described TechStars as a higher pressure, “sink or swim” environment. Whereas at StartupYard, our team is here to make sure startups are making good choices, and have all the information and guidance they need, TechStars leaves teams to fail or succeed on their own- only keeping them aware of their progress.

At the same time, TechStars has a more intensive mentoring period, involving up to 7 or 8 meetings a day with mentors, nearly twice what Startups experience in Prague.

He also described the feeling of “mentor whiplash,” that his team has experienced since leaving StartupYard. Mentor whiplash, he said, is the feeling of being advised to do completely contradictory things by equally smart and persuasive mentors. “When a mentor states their opinion, it’s as a fact,” he said, “it can be very difficult to deal with all of these conflicting ‘facts.'”

The Pitches

7 startup teams pitched us last night, and we were impressed with all of them. With little prior experience, and not much time to prepare, all 7 entrepreneurs who pitch to us impressed us with their poise, and their enthusiasm.

So, without much hesitation, we agreed to accept all of the teams from the event into StartupYard Fastlane. They will proceed past the first few rounds of evaluation, and will have a chance to present their startups to our full selection committee, a mix of StartupYard stakeholders and advisors.

Here is a collection of photos from the pitching portion of the event:

What’s Next?

StartupYard will host FastLane events in 6 more cities: Budapest, Sofia, Pristina, Bucharest, Warsaw, and Krakow. If you’d like to pitch us in one of those cities, sign up using the form below, and we look forward to meeting you!

Sign Up to Pitch at a StartupYard FastLane Event
 

Update! StartupYard FastLane: Pitch Us in one of 6 Cities in September

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The time has come! Today, we kick off our 6 city tour of Central European capitals, visiting incubators and workspaces in the Czech Republic, Romania, Bulgaria, Kosovo, and Poland.

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Sign Up to Pitch at a StartupYard FastLane Event
 

Startups in these countries will have the unique opportunity to pitch StartupYard’s team in person, and jump ahead to the final rounds of selection for StartupYard 2016, kicking off in January.

After applications close November 1st, StartupYard will select up to 10 teams to join us at StartupYard 2016, where they will receive 30,000+ Euros in investment, and over 500,000 Euros in perks, as part of an intensive, 3 month mentorship based program with dozens of workshops, and meetings with scores of mentors. Our program has accelerated 35 startups since 2011.

StartupYard, Fastlane 2016

StartupYard is expecting hundreds of individual startup applications from about a dozen countries for our 2016 cohort. We work hard to make the application process as fair as possible, but that doesn’t mean that it’s a perfect process.

Through a written application, much less one of hundreds like it, it’s very difficult to judge the passion, excitement, intelligence, and flexibility of an unknown startuper.

StartupYard is forced every year to relegate the vast majority of applications we receive to the dustbin, usually without ever meeting or really getting to know the applicants. We have to make very difficult decisions about hundreds of startups, based on very little information.

We probably miss out on amazing startups every year, because we don’t have time to get to know them all.

And that’s a shame. We don’t believe that a startup’s success in our program and in growing globally is necessarily connected with their ability to make themselves sound good on paper.

The decision to accept a startup into our program can have a massive impact on their future, but paper applications can’t communicate passion, people skills, poise, and responsiveness to feedback. These are things we only learn about the relatively tiny number of startups we interview in our final selection rounds.

We owe the startup communities in the countries where we recruit a fair shot at getting our attention. So we’re coming to you.

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Pitch StartupYard in Person: In any of 6 Cities

There will be 7 events, all in the month of September.

  • Prague, Czech Republic, September 2nd at Node5
  • Pristina, Kosovo, September 17th, at Innovation Center Kosovo
  • Sofia, Bulgaria, September 22nd  at VivaCom
  • Bucharest, Romania, September 24th with HowToWeb
  • Krakow, Poland September 29th at HubRaum
  • Warsaw, Poland, October 14th at Reaktor

How to Sign Up

Startups interested in pitching us at any of these events should sign up using the form below. Once we have verified that you meet the basic requirements to pitch us (that you are in our field, and other details), we will share your info with our local partners, and choose which teams to invite to pitch.

Sign Up to Pitch at a StartupYard FastLane Event

Even if you are not invited to pitch on-stage, this does not mean that you can’t meet us and pitch us in person. Some startups just don’t sound good on paper. That’s ok! We want to meet you, and we still want you to pitch us.

We’ll be in each city for at least a full day, providing time for you to do just that. The StartupYard team will host open hours in each of the venues we visit to give startups a chance to meet with us in person.

How it Works

StartupYard will visit 6 cities and 6 tech hubs such as incubators and workspaces (plus hold one event in our own city of Prague), where we will make ourselves available for a full day of mentoring, pitch training, and finally listening to the pitches of any local startups who are interested in joining our program and getting funded in 2016.

Local startups can choose to meet with us for mentoring and introductions, or come to pitch their startups in person, and talk to us afterwards. We will be providing constructive, experienced based feedback, in cooperation with our local partners in each city. These are not competitions, and there is no grand prize. However, they serve as an opportunity to grab our attention, as well as the attention of local influencers and investors who will also attend these events,

Those teams that impress us during this series of events will be invited to move directly from an initial application to StartupYard, directly to our final selection rounds, bypassing hundreds of other applicants in the process.

This is your chance to show us who you are.

Sign Up to Pitch at a StartupYard FastLane Event

What We Look For When Screening Applications

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 Though we receive a lot of applications at StartupYard (240 in our most recent round), that doesn’t mean that every application we receive is worth much of our time. In fact, more than half of all applications don’t make it past the first screening. 

Here, we’re going to talk about what makes applications to StartupYard successful, and what you can do to give yourself a better chance of reaching the final rounds of selection.

Completed Applications

 This seems easy enough, but it’s too much to ask of some applicants. Our first screening disqualifies any applications that are disorganized, incoherent, or incomplete. Do we ask for a team video? Did you provide one? No? Well, better luck elsewhere. The process is not that cumbersome. A disciplined person can get through our application in a short afternoon. There are no trick questions.

Global Solutions

Aside from the completeness of an application, our first screening also disqualifies projects that ignore our open call guidelines in other ways. Most often, these projects are local in nature, or they are not really “startups.”
Sometimes, we get applications from digital agencies, or people looking to found a small business, like a shop or a local service. Those may be profitable ideas run by smart people, but that’s not what StartupYard is looking for.  

It’s not that we don’t believe in small and traditional businesses. But StartupYard, our roster of mentors, and our program is designed to benefit startups that have a global potential, and are scalable on the world market. What advice and support can we give to someone who wants to open a shared workspace, or a local flower delivery company? Can our mentors help you get the best local delivery partners in a small town in Slovakia? Probably not.

And besides being accelerated at StartupYard would be a bad deal for a small business. If you want to open a shop, make up a business plan and get a bank loan like everyone else. You don’t have to run it like a startup.

Platforms Enabling New Businesses

The type of businesses we are looking for, our “bread and butter,” as we’ve put it in our open call announcement, are platforms that enable new businesses to thrive.

What does that mean, really?

Platforms like Gjirafa, BrandEmbassy, Shoptsie,  TeskaLabs, and TrendLucid, among many others, are platforms that allow individuals and businesses to accomplish things they would never be able to do otherwise. They provide more than just a service. They enable entirely new ways of doing business.

Platforms have the potential to grow into new, as yet undeveloped markets- providing technologies that people don’t know they need yet. And platforms also have more potential to adapt and grow in parallel with new markets. A game or a cool tech toy are nice, but they get old, and they are hard to revitalize once the novelty is gone.

One-off tech products are more likely to be victims of change, rather than its agents, but platforms can adapt to an evolving world.

Deep Tech, Visionaries

Maybe 15 years ago, startups were about being first. That’s not really true today. Most of the pitches we hear now are for ideas that have either been tried before, or have already become big industries.

A lot of entrepreneurs think that success is “discovering” something no-one has ever thought of before. But that’s just not reflected in the history of technology. Great entrepreneurs don’t discover entirely new things. They build things no-one has ever tried to build.

On the other hand, a surprisingly small number of inventors ever capitalize on their discoveries directly. Guttenberg, Goodyear, Turing, Whitney, Tesla, and Meucci are names most of us know. But they all died poor, seeing their inventions benefit others.

We aren’t looking for inventors. We are looking for visionaries. Visionaries see the potential in new ideas, and instinctively see how to take advantage of them.

Ford didn’t invent the automobile, he invented a new process for making them. Steve Jobs didn’t invent the phone, it invented a new way of using them. Gates didn’t invent software- he invented the market for software. Facebook didn’t invent social networks, and Google didn’t invent search.

The ideas behind those companies and their successes can’t be written down in two sentences. They are ideas about doing things differently, and doing them better. This is about ambition as much as inventiveness.  This is what “disruption,” is really all about, and it’s the ethos that will make a good idea into a great startup. 

When we say we focus on “deep tech,” we mean that we look not just for a catchy idea, or something that sells, but for the drive and discipline and depth required to execute it in a way not tried before. We look for companies that are interested not just in being in a hot market, but in doing more with their technology than anyone has done before.

This is the reason that we bet on Gjirafa, a search engine for the Albanian web, in a world where Google dominates almost every market on the planet. And why we picked TeskaLabs, even though the Czech Republic alone has two giant security companies who are working on similar technology.

 Big companies can’t move fast enough to out-think and out-innovate scrappy startups, and so great technological advances can come from unexpected and unlikely places. Those insights are the ones we are looking for.

We are interested in businesses that use technology as their unfair advantage, and can outwit bigger competitors with their mobility and flexibility, and their willingness to risk it all with a new approach.

 B2C, or B2B

Much of the experience of the StartupYard team is in B2C SaaS products, but about half of the startups in our last cohort were in fact B2B businesses.

What startups will find in our program, is a focus on positioning and growing a company that is customer focused, and has a strong focus on design, user experience, and marketing, as well as agile development and plans for global growth.

While it’s easier in some ways to grow a B2C startup on the global market, where the needs of customers are broader, more flexible, and less specific than in the corporate world, that doesn’t mean a great B2B idea doesn’t have a chance at explosive growth. While the skills necessary to run a B2C company are different in detail from B2B, the general principles are the same, and many if not most of the skills overlap.

Our roster of mentors includes many veterans of B2B startups, and corporate environments, and our B2B startups have benefited just as much from our focus on communication and marketing as have our B2C companies. 

Transactional and Subscription Models

We don’t often say what we aren’t interested in. But one thing we can do without is advertising based businesses.

Can they work? Yes. Many successful startups get a leg up from advertising, or survive on it. But advertising is a fickle beast, and unless you are able to generate millions of pages impressions per day, you’re unlikely to be interest us.

We are looking for businesses that are making something people are willing to pay for directly, through subscription or transactional fees. If your idea isn’t worth 9 Euros a month (or even .99 cents), to someone out there, then it may not be worth our time.

On the other hand, if you are building a platform that can leverage a network of advertisers, then we’re in business.