Deaf Travel, the last of the StartupYard Batch 9 startups to be interviewed, is our first non-hearing team in the program. They are a team of Deaf entrepreneurs who have dedicated their careers to building up the Deaf community, both online and offline. Their mission today is to create an online platform and community focused on helping Deaf people to enjoy travel and adventures with the same depth that hearing people enjoy.
They are doing this by bringing together public attractions and organizations, with the worldwide Deaf community, and offering them a space where the needs of Deaf tourists can be met with Deaf-friendly video content, interactive maps, and other features that make foreign travel enjoyable and interesting. I sat down with CoFounder and CEO Jan (Honza) Wirth to talk about his team’s vision for the future of Deaf tourism and the internet. Here is what he had to say:
Hi Honza, first of all we should acknowledge that there is someone else in this conversation, Tim, your interpreter. As a deaf person, what do you find most challenging about communicating with hearing people?
Most hearing people have many misconceptions about the Deaf. They think we have less intelligence or skills and feel we can’t do many things, such as drive a car, work, etc.
These misunderstandings stem from the communication barrier we have between hearing and Deaf people. If we had a common language, then many of these false ideas would solve themselves. Hearing people can learn sign language, but a Deaf person cannot learn to hear! As a Deaf person, I deal with these barriers every day.
One of the ways we can solve this is through interpretation. In fact, what many hearing people don’t realize is that interpretation in our own sign language is far superior for Deaf people than simply reading. Written and spoken languages, such as English or Czech, are native for hearing people, but they are always second and third languages for Deaf. I can write and read in English and Czech, but for me that is a very different experience than it would be for a native speaker. Writing is the same: we must translate our thoughts into a foreign language in order to write. Thus even in writing, an interpreter is very helpful.
I use different methods to try to break through the communication barrier. If I have to communicate about something very important like a mortgage, legal issue or a job interview, then I use an interpreter for clear understanding for all. In common interactions like a restaurant, ticket office or a shop, I can use gestures and writing back and forth. It is for deeper discussions that an interpreter becomes essential to bridge the divide.
How did you come to found DeafTravel, and why is a for-Deaf, by-Deaf travel platform so important to the Deaf community?
I have been dedicated to improving the Deaf community my whole life. I am the founder of our first community center in Prague, called Znakovarna. This is a place where Deaf and the hearing can gather to discuss new ideas and learn from each other, and support each other and the community. We host seminars, talks, and other Deaf-oriented events. Deaf Travel is one idea that comes from seeing what Deaf people talk about and what they really miss in the market, which is a way of getting this Deaf-friendly experience wherever they go.
Nowadays, smartphones are common within the Deaf community and they have a huge positive affect for us. Such technology and the ecosystem of apps allow us an equal footing for chatting and staying in touch with our friends and family via video, or text. We can use our native sign language to make quick interactive video chats. We can even use some interpreting services via our mobile phones, which opens doors that have been shut to Deaf people until now. It is a great time to be alive.
But mobiles haven’t solved all the everyday barriers for us. Yes, the tech is amazing, but they aren’t the ultimate answer for the barriers we have, especially when we travel. In the USA, the benefits for the Deaf there have skyrocketed, but these don’t spread worldwide for various reasons.
One of those reasons is that European and worldwide Deaf communities have many sign languages, just as hearing people have many languages and cultures, and so there are always added challenges for smaller Deaf populations to find content in the sign language which they use every day. Those of us who travel, especially in Europe, learn International Sign System (IS), which is not an actual language but follows the rules of most sign languages and uses signs from various sign languages.
Let us not forget, even when a Deaf person does understand multiple sign languages and written languages, this does not change the fact that other Deaf may not have those skills. Hearing and sighted people take the internet for granted today. You can Google anything, and find whatever you are looking for. But how does one “Google” content which is in a sign language? How does one tell Google the signs they want to search? Of course these functionalities are not available.
Think of it like this: imagine the internet was only in Chinese, and to use Google, you had to learn how to read and write in Chinese. Not impossible! But very hard, and very unnatural. You would not find the internet so useful if the only way you could communicate and consume content was in a language that is not your own. Thus, Deaf people are discouraged from creating and sharing content, because other Deaf people cannot find and use that content very easily. It means that for many purposes, the internet as you understand it is beyond our reach.
On the close horizon, we have newer tech, virtual reality (VR) and artificial reality (AR), that has great potential for us all. For the Deaf it could mean even better access to information, because we are such visually-oriented people. VR/AR means more access to interpretation and visual information displayed in a Deaf-focused way.
Still these technologies are yet to become reality. We want to begin to change that, and we understand that the way to do it is to begin using what we have to solve the problems of Deaf travelers. Deaf Tourism is on the rise, and we can feed and encourage this with content and a community in the format that Deaf people will really be able to use, and ultimately contribute to themselves.
Our platform can give deaf travellers access to information equal to hearing travellers, just by using the smartphones or other devices that Deaf people already have. It’s a visual platform, using maps and images to help Deaf travelers find content focused on the sites they are visiting. Eventually, we will be able to provide a forum for the Deaf to create and share relevant content, based on real world landmarks, much in the way that Yelp, Google, or Facebook function for hearing communities today.
Many of our mentors and investors have been surprised to learn about the difficulties that deaf people have with getting information in a format they can use. Can you talk about why reading and writing are such a challenge for the deaf?
There are two main problems that are caused by many forces, socially, economically and politically. In addition, these problems are worldwide in varying degrees.
The first is that education for the Deaf has been historically lacking, sometimes pathetic, and often downright horrible. For most of history, we have been treated as mentally disabled by society, because people did not understand that we can learn and think just as hearing people do if we are educated in a way that makes sense for us.
The curriculum in most Deaf schools is not the equal to the what is taught in hearing schools. As well, the Deaf students who are sent to the hearing schools do not always have a quality interpreter. These same students also have less socialization with their hearing peers, since the language of the hearing school is spoken.
The second problem in both of these types of schools is that the teachers usually don’t know the students’ native sign language. Which means the student is using an interpreter, or even nothing in many cases. The student is simply expected somehow to adapt. Most deaf schools in the world focus on making the students learn to speak, and the actual education is dismissed as less important. This is sad, since teaching speaking to Deaf is rarely successful or needed.
This is treating the Deaf as if their goal in life should be to compensate for their lack of hearing. I think that’s just silly. I wish to live in a world where the Deaf are treated as different, and not as disabled. We can teach and learn from each other, and we have rich cultures and languages to draw from.
As I think the StartupYard team have learned from us during our time together, we can share our ideas and our dreams with a little shared effort. The Deaf have much to offer and indeed to teach the hearing, just as we have much to learn.
Let’s talk more about Deaf Travel: what does the solution look like today, and how can people use it?
Our first focus is on proving the value of Deaf content for travelers. We are doing this by focusing on getting landmarks and tourist locations and attractions interested and involved with the platform. This means creating content focused on these locations, that the Deaf can use in place of guided or audio tours, and also content that the Deaf can use to do their travel research, such as deciding what monuments to visit, and even finding Deaf-friendly services in the destination city or country.
This means a Deaf tourist can experience the story of the site in his own native language without being dependent on others. The Deaf tourist today has little freedom of action or choice in making travel decisions. If we do not depend directly on others to help us plan and navigate a trip, then we still must face a lack of depth and context in what we see and experience. Tell me how many times you would go to the cinema if the sound was always turned off? That is the experience we face almost everywhere, and the worst outcome is simply that we choose not to go somewhere new.
We want to create a way for Deaf people to enjoy traveling, and also a reason for Deaf people to travel and experience more. If more content and services exist and are accessible for Deaf people, then more of us will travel, and so even more demand will arise for these services. We want to prove now that such a demand does exist and that it will grow when attractions and cities invest in building up their ecosystem of Deaf resources.
What do you want Deaf Travel to be a few years from now? How will Deaf people use it in their daily lives? (note: talk about tripadvisor, Yelp, deaf reporting, etc)
It’s simple really. We envision individual Deaf travellers accessing our platform of videos via our Deaf Travel App. Similar to the services of Tripadvisor or Yelp, our app will be a community of amateur and professional deaf video “reporters”. Each reporter will upload their videos to our server and the community can search for, watch and review individual videos and locations, based on visual maps instead of text search. They will be able to use it in their daily travels at locations around the world.
The key is to create this connection between the “local heroes,” and the travelers. You can be a local hero in your home town, who makes videos and helps visitors, and you can benefit from the work of your fellow heroes around the world when you travel. You can also create content as a traveler, aimed at your own community, who may also travel to the same places in the future. This new online community platform will also be a place for promoting Deaf-owned or Deaf-friendly companies, Deaf events, interpreting and other services.
Deaf Travel will be supporting the community so that the community will support itself. What do you think happens when one restaurant in Prague becomes known internationally as the place to be for deaf visitors? I can tell you: it will be very successful, and this will allow entrepreneurs from the deaf community and from outside it, to explore new opportunities. It is a big, untapped market that is still invisible to most people.
How will Deaf Travel deal with the complication of having many different native sign languages that travelers know?
Yes, many people think that there is one universal sign language, as I mentioned. I’m not sure why! I mean how would you get people in every country to agree on one language when each culture is different? Yet people think we Deaf could do this ourselves.
Each community in each country has its own natural sign language which is connected to that culture, as all languages are. After all I am a Czech man in addition to being Deaf. I need a language that fits with this identity, and it is the Czech sign language. Each sign language has different dialects as well, just as spoken languages do.
How do we solve this situation of such diversity?Deaf Travel will use video reporters in each country to have that local sign language in the videos there, in addition these videos will have a second communication mode called International Sign System (IS). This fills the function that English fills for many international travelers.
Not everyone knows IS, but most Deaf tourists have learned it by travelling and meeting other Deaf in their travels. IS was developed by Deaf in the European region where many languages and cultures converge. It uses the basic visual grammar, syntax and structure that almost all sign languages have. It then adds clear vocabulary from various sign languages. It is not a pure language, but a good method for everyday communication.
Today you’re looking for tourist attractions to join you as partners to create quality content for their deaf visitors. That is hard to scale. Over the long run, how do you see the platform being monetized and growing as a business?
As I just mentioned, the community of travel vloggers and reporters all over the world will add to our video library quickly.
A traveler in Peru and a traveler in Germany could upload their videos during the same week, but from different trips, and thus we’ve increased our library by several short videos in two different countries in the same week. Those videos will be catalogued and tagged on the appropriate map for that region. The map with these pinpointed videos will be the growing visually searchable platform for other Deaf travellers.
Understand that the Deaf community is small and news always travels fast within our network. Awareness of Deaf Travel’s platform will equally spread like wildfire, because Deaf travellers will be eager to add their own amateur travel vlogs to the database alongside our professional ones to share their experiences, good or bad, with the community. Everyone has a need to communicate and to help each other. You just need a way to do it.
These videos will be accessible for free or for a monthly subscription price for our full-length professional travel vlogs. In the world, there are approximately 466 million Deaf and Hard of Hearing. 70 million of those use a native sign language, for those who do not, we will offer subtitles as well. So, the market potential is great and will sustain our mission of supporting the community by tearing down the travel communication barrier.
You’ve been our very first Deaf founding team at StartupYard. How has the experienced matched up with your expectations? What have been the biggest surprises?
Overall, the experience has been amazing. There were a few moments when things did not click with us, but I’d say 99% of the people we met and worked with were great.
At first, I was truly shocked that we were picked for StartupYard. I didn’t think there would be much interest in our project. Then after meeting so many mentors and EVERY one of them showed interest in our vision, our motivation increased exponentially. We now feel like we really have something that will make this dream of barrier-free travel a reality.
Perhaps I did not have enough faith in hearing people to see the potential that we see in this idea. However I have seen that this is a problem anyone can understand, and it has been wonderful to see that others who have not experienced these same problems can deeply empathize with it.
As the StartupYard team have told us many times, what we do must become somehow obvious on first sight to people with no experience of the problem. That is something I think we have accomplished and it is really exciting to be able to open people’s eyes to it.
What kinds of partners and potential clients are you looking to talk to right now, and what’s the best way for them to start cooperating with Deaf Travel?
That’s a great question. We’re looking for well-known tourist destinations that attract thousands of tourists every year. The kind of places that are famous and have a very interesting story to tell, like cities such as Prague, castles, zoos, museums, and other such attractions.
Lesser known sites are also of interest to us, because our mission is about equal access to information for our community. It is our way of supporting the social and civil rights laws in place now. We don’t want to be dependent on others to provide these services. We know what we want and need. The world has provided us with the political backing, and we want to partner with those who support this vision too.
We don’t need people to see this necessarily as a charitable or humanitarian activity. It is an opportunity for Deaf and hearing people to fill a great need that exists and to build new businesses and provide all-new services. Invest in serving the Deaf community and we will vote with our money just as everyone does.
Thus if you are a forward-looking institution or a business, that can see a great opportunity to lead the pack and be a magnet for Deaf tourism, then we want to talk to you. If you are an adventurous Deaf person who wants to serve the Deaf community, or an entrepreneur who wants to explore a new market, then we want to talk to you.
In a StartupYard batch full of unusual companies, Turtle Rover, led by CEO Szymon Dzwonczyk, has arguably turned the most heads so far. That’s because everywhere Szymon goes, a little robot follows him. Its name is Turtle, the brainchild of a global award winning robotics team from Wroclaw.
Turtle Rover, is like a Raspberry Pi for mobile robotics ideas. A robust, open-source platform on which makers, product designers, and creatives can build the robot of their dreams. Whether it’s photographing wildlife in South Africa, inspecting industrial pipelines, or performing on-site mobile video surveillance, Turtle can be adapted to almost any conceivable need. Fresh from a successful Kickstarter campaign, Turtle’s next move is an open-source platform where developers and others can share ideas and designs for new components and programs for the machine.
I sat down with Szymon this week to talk about the project, nearly 5 years in the making, and find out why prototyping mobile robots is his way of changing the world for the better.
Hi Szymon, first of all, everybody wants to know about the super cool award-winning robot you’ve designed and built. Can you start by telling us how it works, and how it was created?
Actually my first big robot success was Scorpio from Wrocław University of Technology. The robot was built to take part in University Rover Challenges ran by The Mars Society. As a team, we designed, manufactured and then operated a 50kg remotely controlled rover with a payload specialized for life and geology sciences related to space exploration. It was a prototype on which we could test new technology and the team skills with a real goal of preparing the concepts for future manned exploration of Mars.
In 2013 we won 2nd place in the World with Scorpio 3 and in 2014 we were first in European Rover Challenge with a team run by me. We won the challenge designing a robot that gave totally new direction to the topic, we were so ahead of the competing teams all over the World that they needed to raise the requirements of the Challenge in the following years.
The spiritual successor of Scorpio that our customers and mentors are seeing now is called Turtle. The technology is really different, but it comes from the same urge. He’s a little less aggressive, a lot more friendly, and much lighter and more agile. Turtle is built as the culmination of what we learned making Scorpio, and it serves as our base for future development of mobile robotics hardware and software.
Your team is from an academic background. What inspired you to turn to business to make Turtle a reality for consumers and businesses?
Academia is a wonderful environment for experimentation and ideation. However it just lacks the agility and ultimately freedom of business. When you sell something, it really has to work.
It really hurt me and the team that we couldn’t easily check all the ideas and concepts we had came up with for the rover. If you imagine, to change even the simplest interface feature, you needed to convince at least 2 engineers to spend their time and effort for the sake of checking your concept, that most probably won’t work anyway. This is all being funded by someone you have to justify everything to, and you sometimes don’t have that justification. You can’t always just “play,” and find things that work by accident.
After leaving the University I worked in a car brake manufacturing company where I coordinated a process of implementing new products and moving a BMW brake assembly line to China.
Maybe working outside of academia for awhile woke up my mind to the idea that I could take control of my own future, and I could do this on my own terms. That was a liberating realization, and we haven’t looked back! Last year we ran our first successful Kickstarter, which we are now delivering to customers. We sold about 100 rovers, mostly to makers and enthusiasts, but from all kinds of different backgrounds. Each has their own ideas about how to use the technology, and we’re learning a lot from that.
We have so much know-how that we, as a team, gathered during these years of working on the Rovers, that we could never just split ways and forget about it. The idea of allowing people to iterate and prototype with robotics was born then and part of the team reunited with Turtle.
Turtle is much more than a simple rover, isn’t it? Can you describe the ecosystem of products and customers you want to build? How will Turtle enable people to invent new use cases and grow new businesses?
Turtle Rover is a tough, resilient rover chassis that is suited to extreme environments, and is easy to combine with a huge variety of other components, so you can make a Turtle into anything you can imagine, as long as there is hardware and software to support it.
That’s what you can see on our site as a tangible product, but Turtle Rover is a lot more than that. What happens next – after you get it, is the main feature we offer.
We’re here to give you all the support needed during your prototyping process, so literally you don’t need to be a rocket engineer to build your own robotic solution. We’re addressing innovative people all over different industries: agriculture, cleaning, inspection, security, and much more. The idea is to provide you a place to become creative when thinking about concepts with no need of reinventing the basics that normally take the most of the time and effort.
In a way Turtle is like an accelerator for your robot. With Turtle you can do 2 years of prototyping and testing in 2 months, and in 3 months, have a product ready to go into production that works. Imagine how many great ideas are lost in the development process when there is no simple way to test and iterate them.
Turtle as a product provides you a simple plug & play robot capable of working outdoors, but moreover as a community and platform, it provides you access to all the developers and businesses eagerly developing this new techology for their own purposes.
Instead of having a bunch of robot projects all solving the same problems independently, we want to solve these problems collectively, and enable companies and individuals to create advanced functional robots fast and reliably.
You launched a successful KickStarter campaign last year. Can you tell us something about the people who pledged, and even about some of the live use cases you’ve already seen for the rover?
We found great supporters on Kickstarter. We’re really greatful to them for believing in us and our vision.
The platform really surprised us with all the help and attention we’ve been given during the crowdfunding campaign. We have 96 backers, mostly individuals who plan to experiment in their own areas: gardening, cave exploration, photography and education.
On top of that we have several universities researchers who ordered the rover. They see the idea of accelerating their work convincing enough that they bought the rovers even from their own wallets. Then, the thing that really shows Turtle is not only about ideas and concepts – a couple of the rovers will be used in businesses: pipeline inspection, wildlife photography in South Africa, or even the European Space Agency research.
The amazing variety of uses surprised us, and helped us realize that we were not just building our own dream, but helping others to build theirs as well.
There are plenty of robots like Turtle on the market today. What makes your core technology unique and special? What can Turtle do that nothing else can?
Turtle is the first affordable robot on the market that allows you, as an individual or even startup, to prototype in your environment. No other platform offers this flexibility and speed, at any price.
Keeping software and hardware open-source is really important to us. The rover is designed to be sturdy, waterproof and to be used in outdoor activities and tough environments. Turtle doesn’t end there though, we address your ideas all the way from concept-proofing, prototyping and getting to the market. And with that, we’re open and transparent so you can rely on us all the time.
Imagine being able to go from the drawing board of a new robot project, right into prototyping without having to look for engineers, without having to solve any of the problems that a mobile robot base requires you to solve. You just get it, and a huge range of modules that can be attached and software to make it work.
Our job is to help our customers create the perfect robot for them. That’s what we love to do, and building a community to help them do that is a big part of our vision.
Tell us more about who Turtle is for, in the near term, and then later on when you have a working platform with a range of add-ons and options. Who will buy it in the future, and how will it be used?
At first we will continue to focus on makers and developers, essential people who will help us designing new add-ons depending on their ideas. We plan to open a marketplace for add-ons giving you the possibility to not only buy the rover, but also buy functionalities of your choice. Robot arms, cameras, sensors, even delivery boxes for example. Anything that can be integrated onto the rover can be an add-on, software or hardware.
Just as smartphones have their appstores, robotics needs marketplaces that are set up with interoperability as a priority, with open source software so that you can plug and play, or dig in and design something custom for yourself.
For makers – we’ll open Turtle to be as 3d-printable as possible, so it will be you, who will be able to manufacture the robot. The ultimate goal is to accelerate the process of implementing robotics in real-life use-cases and business uses, meaning that finally individuals and SMEs won’t need teams of genius engineers to autonomize outdoor tasks in their work. See a need for a robot? Design it, prototype it, and deploy it in no time. No engineers needed.
You mentioned that you want to pursue distributed manufacturing and open source the project. How will this be accomplished? What will Turtle be as a business when most of the manufacturing is open sourced?
Most people see robots as hardware products, but in reality – rovers are more about software and implementation, the actual machine is just the tool that the software uses, the way you program it. So in that sense, we look forward to a future where we don’t have to directly supply the machines, but can focus on maintaining a wide range of interoperable and complimentary add-ons and software packages that enable people to get their robots to actually do things.
This is the thing. Right now robots are “cool,” and like any new technology, they will only be cool, and not really necessary, unless there is an ecosystem in place that makes them an easy and even an obvious choice for implementing new ideas. A robot to perform road maintainance or cleanup, or nature photography, or even farming sounds nice, but it has to be built by somebody, and programmed by somebody.
Those barriers keep these ideas from being tested and adopted more widely. You see that the majority of robotics projects always remain in the testing phase. That’s where we don’t want robots to live anymore. Now they should live in implementation.
It’s the community we build around this technology, who will find the best use cases and customize the robot add-ons for the job to be done. Turtle will act as a provider of the prototyping platform and a marketplace where you, as a developer, will be able to show your work and monetize it in the real use-cases. The distributed manufacturing method will allow us to focus more on the functionalities that matter and not the basics – being the manufacturing and assembly.
That’s the exact mindset we want to show the people within robotics. Stop testing! Start building.
You’re the first pure robotics company to join StartupYard. What led you to that decision, and how has the program lined up with your expectations?
After a successful Kickstarter campaign and Indiegogo sales, we lost focus on what the product is really about.
To be honest, we’ve never had the focus as we didn’t have any experience in business building. Funny enough, we fell victim to the same mentality we are trying to solve with Turtle. Endless tests, endless ideas and prototypes.
We assumed that if it’s us who have the prototyping issue, then most certainly – there’s more us in the world, so in that sense I guess we thought the idea would sell itself. But it did not, as you might have guessed.
But it’s not that easy. We joined StartupYard to gain that business focus and to formulate a real comprehensive vision for what we’re doing. In that respect the move has been a real success for us.
How can people get their hands on the Turtle Rover now? How can developers and idea makers start working on the Turtle Rover platform?
The robot is available on the Turtle Shop, where you can get your rover with a 2-3 month delivery time.
We still need to catch up with the orders from Kickstarter and then will stock up to be able to deploy the robots faster. Developers can meet us on GitHub and, I’m revealing a little secret, will be able to join Turtle Challenges – hackathons that we’ll start in the next months. On top of that, as a developer you’ll be able to get 3D-printed parts and build within the Turtle Community right away with minimal upfront costs.
Our aim in the next year or so is to make getting a rover into anyone’s hands a lot easier, and start to become a real marketplace of ideas for makers and business-minded technologists who have an idea they haven’t been able to prototype yet, because of cost or a lack of the right knowledge and experience.
If you can imagine a use for a tough, sturdy rover with flexible programming and extensibility, then we’ve got just the thing for you.
Over 25 million people in the UK alone are classified as “financially vulnerable,” often crushed with debt and in fear and confusion over their options. Elifinty is for people who see no way out: a financial AI that offers custom, pre-approved financial solutions for your unique situation, including charitable options and debt consolidation services.
Maysam Rizvi is CEO and Co-Founder of Elifinty. Coming originally from the UAE, he was raised in the UK, where he began his career in banking. Maysam realized following the financial crisis of 2008, that his true passion wasn’t banking, but helping those who banks were unable to help. He founded Elifinty to help the financially vulnerable become a functioning part of the financial economy again.
Hi Maysam, first tell us a little about yourself and how you came up with the idea for Elifinty?
I’m an ex-banker with about 15 years experience in various institutions doing Risk, Investment Banking etc. with senior positions in United Overseas Bank and JP Morgan.
If we want to say “when it all started,” then it was when I was in Iceland in 2007/2008, recovering funds for my banking institution during the financial crisis. I saw first hand the impact of the financial crisis on individuals and businesses. The financial contagion that spread from Iceland and other countries around the world consumed institutions, weakened governments, and shook the foundation of our society at the time.
There I was trying to collect on these debts we knew the debtors couldn’t pay back. It was mad. We had irresponsibly loaned this money, and they had irresponsibly spent it, but somehow our responsibility was overlooked, and we were the victims. Meanwhile these people ended up with less than they started with, and the banks ended up getting even richer.
It was a really painful time for me. It didn’t feel good to do that work. We protected our balance sheets, we blamed others, but I couldn’t sleep. I had a suspicion that if we should blame anyone, it might be ourselves.
I spent years researching and understanding the challenges faced by individuals in debt, and how the banking system as a whole was part of the problem. I started to feel I couldn’t go on doing what I was doing, and ignore the damage the system was causing.
Currently, 50% of people in the UK are classed as “financially vulnerable.” That is about 25 million individuals and there are similar statistics across Europe and in the United States. And I’ll note, that this vulnerability across half the population has persisted despite basically 80+ years of barely interrupted growth in economic productivity and overall societal wealth.
I realized as I got to know the banking world that debt had played a key role in making the economic miracle that the world now enjoys. But there is a dark side, and it is found in that half of population that many of us would rather ignore. Still, debt breeds instability and ultimately suffering, when it is not managed responsibly, and when debtors are not treated humanely.
The idea for a solution in the form of an app came together with me and my co-founders just sitting around a table talking about these problems. Our experiences and expertise along with the learning we’ve had about the financial crisis and the banks role in that crisis, led us to realize that if anyone was going to try and solve this, it should be us.
For those of us who have never had subprime debts, can you describe the kinds of people who have these debts, and what some of the conditions are?
In our research we’ve seen a number of factors that can put you on the path to financial vulnerability. One major misunderstanding is that a financially vulnerable person is a poor person. While this may be true, a financially vulnerable person is someone who might be impacted by a small event that can, for example, increase their expenses by £100 and they have no mechanism to deal with it.
Being financially vulnerable means not being resilient: not being able to keep going in the face of even a minor difficulty. Many people have their finances like a house of cards. One blow, and it all comes down fast. Debt makes that process even worse. Perversely of course, lenders punish those who have difficulties paying their debts by giving them higher rates of interest, creating an incentive for some lenders to create more bad debts, and keeping bad debtors from becoming good debtors.
Some of the reasons for becoming financially vulnerable are:
- Lack of financial understanding. Financial education is the number one factor. People generally get stuck in difficult situations because they are choosing the wrong financial products for the wrong financial situations. Consider the person who bought a car using a credit card, credit card interest is typically over 20% compared to a car loan of 5-9% per annum. Worse yet, credit card companies actively encourage this type of behavior by offering rewards for taking on this kind of debt.
- That leads to having high cost credit. These range from 20% APR credit cards to your payday loans that typically have interest rates over 1000% per annum. Individuals having high cost credit are stuck in a downward spiral, constantly losing the battle to financial survival.
The simple fact is that many people are financially vulnerable simply because they lack sufficient “social capital,” to ask for and receive the appropriate kind of help. These are people who feel intimidated by walking into a bank, and who may lack the self-confidence to assert themselves over multiple interactions.
If you walk into a bank and ask for a loan, you must answer questions. You must then gather certain documents which you may not understand. You must then return and get a decision. Many people don’t have the nerve for this, and fear a negative outcome.
Meanwhile, a short-term lender or even a loan-shark can makes the process of getting a payday loan very easy indeed. Walk in with a paycheck, walk out with a loan. The customer sees an immediate response, and feels immediate relief.
Payday lenders know this. They listen to a customer’s problems and offer real solutions. Their customers don’t feel judged or shamed for being bad with their money. Though the customer may not be taking a deal that is good for them in the long run, they really are solving a short term emotional pain and crisis. That is powerful competition for a traditional bank.
You’re targeting people at risk of default and bankruptcy. How do you work with that type of consumer? What are some of their unique problems?
Most importantly, we need to work with these types of customers in as humane a way as possible.
Banks and subprime lenders both have motivations which are fundamentally misaligned with their customers when it comes to debts. It’s this: to a bank or a payday lender, a person is a number. A big bank wants to get an “underperforming” customer off their balance sheet, and a payday lender wants to get a cash-cow at high interest onto theirs. Getting people out of debt is not really in either’s interests. Banks want people who can comfortably pay, and short term lenders want people who have no choice but to pay them.
This is where we stand: between two industries who either don’t want to work with at-risk customers, or do want to work with them, if only to take advantage. Our aim is to turn these at-risk individuals into healthy members of the economy who have healthy levels of debt, and the ability to pay it back.
We’ll do that by bringing a hybrid and gamified approach to each individual at-risk consumer. Do they need cash flow management? Debt forgiveness? Restructuring? We can use open banking data and a network of charitable public organizations to catch these people who are grinded between the gears of banks and payday loans.
Banks will tell you, and with justification, that they do test many tools to help their customers become better credit risks. But a bank is a big organization, and it’s primarily focused on its bottom line, at the end of the day. They would like for their customers to be more financially healthy, but they are not able to focus on these customers. Rather, they are incentivized to get rid of them.
Elifinty aims to work with both charities and banks to stabilize and improve the finances of “bad debtors.” How do you see your future relationship with these institutions?
The UK already has a well-developed network of private and public charities that do things like rent-support, utilities, income support, and debt forgiveness as well. There’s a big range of them, but because of the nature of their work, they are most often focused on particular localities and specific cities. Their reach is limited in that most of their funding does have to go to doing what the charity promises.
We absolutely need these charities, but they are not able on their own reach the people who need their help most, before the biggest financial and life damage has been done due to financial struggle. Often these charities step in when families are already splitting apart, when drug addictions may be involved, and when people are at a particularly low point. We want to help charitable money reach people before their lives are truly cracked open, and get them the right help before that happens.
For charities, we can digitize their services and get them to the right people earlier, when it has the maximum impact. This helps them help more people, and it helps them show their funders that they are making a difference, leading hopefully to more funding.
Elifinty can streamline their enrollment processes so they can access a self-managed portal that stays in the charity’s control, and not ours. Far from replacing charities, we’re going to give them the tools to make a bigger difference.
On the other hand, we will be working directly with banks too. As I said, a bank’s focus in getting bad debts off the balance sheet. We will be able to help them do that in a way that serves the customer’s interest as well. The truth is that such bad debts are typically bundled and sold off to debt collectors or debt investors, often for a small percentage of the total amount, with the bank taking a loss, often over 80%.
In the future, Elifinty could function as a marketplace for that debt which favors the organizations that have the most human practices in debt collection or reconsolidation. For example, a debt collector who runs as a non-profit organization, looking only to cover its own costs, or a charity that buys debt in order to forgive it.
Collectors and debt aggregators today can be incredibly aggressive, intimidating, and heartless. They rely on consumers not understanding their rights and feeling afraid of the consequences of non-compliance. We want to break that whole industry, and make this kind of abuse a thing of the past. We want to convince banks to work only with collectors who stick to an ethical and humane system.
That won’t be easy. Regulation in the US is practically non-existent, and almost totally uninforced in this market. In the UK, things are better, but abuse is rampant. Still, we believe that offering a better way can show the financial world that we don’t need to stoop to these evil tactics to have a fair and equitable society that takes personal responsibility seriously.
Why are there not more stringent controls on the types of debts that consumers can get themselves into? What would you advocate for in terms of regulatory or legal changes to the current system?
As I said, the market is not unregulated now. The problem with debt is that fair or unfair, there will always be those who have the skills and the knowledge and the luck to make it work no matter their financial situation. Then again, there will always be those who get into trouble, even if they are relatively lucky, and not necessarily dim or stupid either.
When the economy is growing, it just gets easier to get credit, and as a society we accept that this means that some of the money will find itself in the pockets of people who shouldn’t have it. It’s only when there’s an economic downturn that we turn the screws on these people, and make them pay for their mistakes. That’s something I learned in my years of banking: those who are blamed are often those who we should have considered more carefully to begin with.
One the great mistakes, I think, that occurred during the Great Recession of 2008 was that politicians got so focused on saving the banks, they didn’t think about what would happen to all those people who the banks had lent money to. Rather than forgive their debts and clear the bank’s toxic balance sheets that way (which is what I would have preferred), the governments instead injected even more money into the banks, and left the banks still to collect on the outstanding debt they had foolishly created themselves.
In that way, the banks got paid twice during the last crisis, and the debtors paid twice: first by losing their homes and their savings, and then again by having their tax money go to keeping the banks liquid. Many people from that period have never recovered- and this is not even to mention that nothing has fundamentally changed. We still have a massive pile of debt at the core of the world economy, and no real way of paying that back.
I do believe that initiatives like PSD2 and GDPR are causing some needed disruption to this cycle. Giving outsiders in the financial industry like us an ability to compete on a level with banks is going to bring more customer focused solutions to the debt problem, and I think that’s a great thing. I also think GDPR can go a long way to cutting down on the bad actors in debt collection, and it will force banks to be more transparent about what kinds of people they are contracting with to collect debts. This can’t happen in the shadows anymore.
We are a part of the Open Banking Consumer Forum, which advocates for a code of conduct for finance companies, to try and protect consumers from becoming essentially a source of funds for bad actors. I believe PSD2 and GDPR on the whole are going to help that mission.
How exactly does Elifinty’s technology help its users to make better decisions and stabilize their finances?
Two important aspects. First: predictions. We are able to use PSD2 Open Banking data and customer supplied data to predict the likelihood and the size of a potential financial disaster for an individual, and we are able to then put that person in contact with the right solution or service for dealing with that problem, even before it becomes really serious.
We’re able to see which customers are at risk of taking bad loans, or who are already beginning to follow the ‘death spiral” of unpayable debts, and arrest that spiral with a quick intervention. Customers may not even need drastic help if they come to us in time.
Beyond that, we are able to use our app to help change the customer’s behavior and thinking about their debts, offering strategies and even tricks to get them out of debt faster. This could be done with or without an outside partner- it would depend always on the persona and the nature of their problem.
We also have some exciting ideas about how we can use debt forgiveness as a kind of motivational tool. Imagine if a person’s debts could be reduced simply by that person meeting daily spending targets, or committing to certain changes in their financial lives? We could bring debt from 100% collectible to only 50%, or 30% or all the way down to zero. All it would take would be the customer committing to changes that make them a better financial consumer, and a charity or investor interested in helping people turn their finances around.
In this way, our hope is eventually to have an end-to-end turnaround process, taking a person who is unfit for the banking system, helping them alter their behavior and gain knowledge and wisdom about finance, and eventually getting them back into the financial world as a productive and contributing member.
Where do you see your features and your main customer base a few years from now? Who will be your key competitors then?
For the near future, we’re focusing on simple aspects of a person’s financial life, like grocery shopping, utilities, car loans, insurance, etc. We will allow our users to save money on these kinds of things in order to improve their financial health. Then slowly we will be rolling out cooperations with charities and other services to tackle the hardest-to-solve debt problems.
My wish is that in 10 years, there won’t be a need for us on the market, because banks and other lenders would have become ethical and human centric. I have hope that we can do that, but I am also a student of history. I sense that our work may not be done in my lifetime, but I want to get started now making finance fairer for all of us.
You joined StartupYard a few months ago. How has the experience stacked up against your expectations and preconceptions?
We thought StartupYard would be like any accelerator. However we were not quite prepared for what it really is. It’s an intensive experience, meetings with 120 mentors over 5 weeks, with a huge range of varying feedback and advice that we had to somehow bring together and reconcile.
That really forced us to stand up and work on our pitch and our value proposition in the face of so many possible objections and problems. At the same time, we got so much support in everything from developing our content and messaging to our design and our management and financial planning that we just didn’t expect to get.
What I love about it here is the sense of urgency you get to accelerate your business. You have to be on your toes and you have to always drive towards your goals. The bad part is missing my family as much as I have. I tell myself it’s for the greater good, but that’s a big challenge for me starting a business. My family is a source of strength.
Why is helping people to get out of financial trouble so important to you? What about the current situation keeps you up at night?
I’m from the UAE and despite what you may think about the country based on movies and TV, with the riches and excess, our family were always focused on helping people as part of everyday life. Our culture before the crazy economic changes in past decades was nomadic, and while we have been in fortunate positions our people were very dependent on the kindness of strangers. We still are in many ways.
I think this is why my Icelandic experience was so profound for me. I couldn’t reconcile how I could do my job, that I knew wasn’t helping people, but really hurting them. In those days I had trouble waking up in the morning and going to work.
Recent events have also convinced me that many of our problems as a global society come ultimately from us not being focused on the human beings who make society work. The UK is a rich place, by historical and current world standards, and yet so many of its people struggle so much day to day. That just doesn’t make a lot of sense. Whether your a socialist or a capitalist, you can’t argue, based on the available evidence, that having half the population under constant pressure is conducive to real economic productivity.
I’m afraid that my children will grow up in an unjust society and despite their own position in society they will not be able to reconcile what I teach them with the harsh realities of life. That’s why I’m doing what I do.
What kinds of partners are you looking to connect with following the StartupYard program. Which existing players can most benefit from working with you to solve the subprime debt problem in the UK?
We’re looking for team members who want to go with us on this journey, and believe in the right of what we are doing. In terms of banks, the big 4 in the UK are Barclays, Lloyds, RBS, and Santander, and we will be looking to connect with all of them.
Credit unions and credit union associations like ABCUL will also make great partners, so we are looking for ways to connect with them.
Charities are a big part of our plans, so we are very open to partnerships across the UK financial charity ecosystem. Anyone can contact me directly at email@example.com, or on twitter @elifinty, or visit our website: www.elifinty.com
Sales Trainers know the value of real world experience. But how can they provide it to large groups of trainees in a limited time? Mindbox VR, a StartupYard Alum, has the solution, and any sales trainer can use it today. Peter Tomasovic, CEO and Co-Founder of Mindbox VR, is a StartupYard alum from Batch 8, focusing on a VR solution for sales and customer service training. Mindbox started out as a tool to help mental health professionals treat the symptoms of phobias, such as a fear of heights, or of insects, using VR simulations as a form of immersion therapy.
During the StartupYard program, the Mindbox team hit upon sales training as a novel use for their VR technology, which allows non-programmers to quickly and easily create scenarios for sales and customer service training sessions. The biggest advantage of using VR for these purposes is that it simulates a real-life experience, and can also be used to generate statistical data that sales trainers can work with to improve the performance of trainees with time. Plus, MindboxVR can be used to train many people at once, and even after the training for skill reinforcement.
I talked with Peter this week to find out how MindBox got to where they are.
What have been your biggest challenges since the StartupYard program? How have you solved these?
Our biggest challenge has really been to find out what our customers really need from Mindbox. Separating the “nice to have,” from essential is super important to be able to deliver something that works on the first try. Our customers don’t always know exactly what will be the most necessary features, because most have never used this technology before, so it’s a process of discovery for all of us.
When we were at StartupYard, lots of companies wanted to work with us on the process of validation and experimentation, but in the end they want to have a useful delivered product, so you have to get it right.
Another challenge was to hire new people versus do-it-yourself. When we counted costs for new people, onboarding, learning them technology, understanding product specification, we decided to develop the first version ourselves and use external experts only when solving specific problems or for feedback. This allowed us to move more quickly short term, but it will be a challenge then to scale up the team and delegate when demand is increasing.
How did you arrive at the set of features you have now, and what do you plan for the next iteration?
For the current set of features, two sources of information were most important:
- companies and training agencies (customers)
- our advisors
In the case of potential customers, the Pareto principle worked for us. We met with lot of companies, 80% of them gave us “standard feedback” and lot of brainstorming, which was mostly distracting. The other 20% gave us what we have now – a set of features, idea of the scenarios that could be interesting, company use cases. And what is important, is that we are still in touch with these companies and they are now strategic partners.
It is a learning process to understand which prospects are going to be your real customer, and which are going to distract from the development process. We are still learning this.
Our advisors gave us key support here. During StartupYard we met 3 great people, Serge Dupaux, Jana Zurkova, and Silvia Pánková – experts in the fields of HR, business development and sales. We have regular meetings, we had a one day workshop, where we defined a customer journey with the key product features, etc.
For the roadmap and next iterations, we have a set of features from meetings with companies or analysis of competition. But most important for us is to make pilot implementations and find out which features are really crucial. That is the reason we are right now focusing on selling and looking for partners.
What kind of people can most benefit from MindBox VR?
MindBox VR is like a swiss knife for every sales trainer in customer service, product training and sales training.
Unlike most training solutions, MindBox VR is about interaction and immersion. It allows a trainee to interact with voice and reply to a virtual customer. The physical act of doing the interactions repeatedly is many times more effective than just listening to a speaker or reading about the techniques.
Once a training program is created by a sales trainer in Mindbox VR, it can be started on any Android device, but also in a VR headset. Currently we are supporting mobile VR headsets like Gear VR or Google Daydream. This makes it really easy for a sales trainer to deliver their program with whatever equipment they or their clients can afford.
If you want to train customer service, you can prepare a training where virtual customer asks you typical questions. They can be standard, like questions about warranty, transport, returning product. Or the can be more “tricky”, like “This product is very cheap. Isn´t it a fake?”. The trainee has to reply to such questions. The mix of standard and non-scripted interactions helps employees to internalize the company policies and best practices, and to be more comfortable in unexpected situations.
So why should a sales trainer use VR instead of more traditional methods?
The key is repeatability and a systematic approach. We all “know” how we would act in some hypothetical situation. But in actual truth, we don’t really. When you are in a real life scenario, there are a million complicating factors to consider, so having the learned experience is the best way to help people be prepared. However, simulations using real people are often less realistic. Co-workers know each other and are often friends. Co-workers want to help each other, naturally.
When you do play-acting in sales training, the situation is never the same for each participant. It might work for some, but not for all. VR allows us to replicate a specific situation very precisely, and apply systematic testing and feedback on performance. The human approach is still critical, as we are talking about soft human skills, but VR can support this with a data driven approach on top. We don’t want to replace trainers or in-person training, but to augment it with easy-to-use software tools.
Moreover, sales trainers can set keywords in conversation – critical words that must be said by the trainee when replying. Practice makes perfect, is the saying. Most important about training with MindBox, is that the trainee has to speak, and really answer questions. It’s not just a dumb script, but a simulation that feels real, and that can change according to what the sales trainer plans.
This way, you are not developing only knowledge (like when he is reading or watching a slideshow) but also skill, because you have to think about the information in a sentence and actually come up with the right answer for that specific situation.
After the training, trainers will see statistics, reports and complete transcripts of communications with customers, so they can deeply understand what is working, and what needs more work.
Are you looking for funding or more partners? Who should contact you?
We are in touch with some VCs and investors, but for them it’s most relevant to have traction and signed contracts with customers. That’s especially true because this technology is so new to the market, and the market has to be proven.
Therefore most important for us right now is to acquire more early customers and partners who want to really improve their training processes and be among the best in the industry. We have an open beta version, and sales trainers can start training from day one.
We also have 2 example trainings, which a trainer can easily adjust for company needs and start training quickly to see the results. The most relevant first contacts are HR people responsible for corporate training, learning and development, as well as independent professional sales and customer service sales trainers. Heads of sales and those in charge of personal development programs will also find a lot of value in what is available today.
StartupYard is Looking for Founders!
Are you a startup founder ready to accelerate your business with CEE’s best network of top mentors? StartupYard’s Batch X Open Call has started.
Our focus this round will be on Automation, Blockchain, and the Future of Work. If you’re working on a hard problem involving Machine Learning, IoT, Identity, Payments, Security, or Decentralization, then we want to hear from you. Find out if StartupYard is your key to a big future.
StartupYard is a member of The GAN, the Global Accelerator Network. In order to be a member (for which only a small number of accelerators qualify), you absolutely must be a “founder friendly,” investor and organization.
That sounds very nice, but most founders don’t really know what it means. It sounds like something any investor can tell you: “hey, I love founders!”
First: What Founder Friendly Does Not Mean
Last year Aaron Harris over at Y-Combinator (a notoriously founder friendly accelerator), wrote a short but sweet blog post about this. He’s talking about VCs, but much of the same applies to seed-level investors. The upshot is as follows:
Being founder friendly doesn’t mean being nice all the time. It doesn’t mean us giving you whatever you want, or acceding to every request you make. It does not mean having a cool, fun office.
It definitely does not mean doing your work for you. Sorry.
Not to be all patronizing about this, but some of those things aren’t necessarily good for you, even if you would like them. We want our startups to be challenged, and we want to bring the most value we can to them. That means our role can’t be as your helicopter parent or security blanket. We have to treat people as what they are trying to be.
The 4 keys to Founder Friendliness
I like Harris’s description of the keys to founder friendliness, so I will borrow from his list and expand it A founder friendly organization should be:
Let’s break this down a bit more to get at what each of these qualities really means. |
Honesty : Telling the Whole Truth.
We often talk to startups about the world of difference between “being accurate,” and “being clear.” In many respects, this is like the difference between “being truthful,” and “being honest.” Truthfulness, like accuracy, is critical, but honesty is a deeper quality still. Honesty as an investor is not only refraining from lies or refusing to mislead someone. It is also a commitment to making sure that founders clearly understand the truth, and have all the information they really need to make the best decision for themselves.
One of our mottos here is “it’s your company.” It’s always a founder’s responsibility to understand the difference between what an investor wants, and what they know themselves believe is best. However, an honest investor is very clear about what motivates them to give that advice. If we advocate something because it is in our interest as investors, we must be clear about that fact.
On the same token, honestly demands an investor speak up in the interest of a founder, even when the investor has no clear financial incentive to do so. This is what might drive an investor to speak up against a deal that might make them money, because it would unfairly impact the founders of the company.
Balancing your own interests and that of founders is tricky, but early stage investors simply cannot afford to look out only for themselves. Our ecosystem is just too small, and it can’t support predators.
2. Transparency: Actively Raising Awareness
Sometimes when someone tells you they are being “transparent,” what they really mean is the opposite. Simply giving someone information when they ask for it is not real transparency.
To be really founder friendly, we have to be actively transparent, meaning that we need to be informing our founders of issues that may affect them in the future, before they have to ask us. We need to be actively checking that our founders understand our decision making process, what we are doing, and why we are doing it.
One way many investors fail at transparency is actually by trying to be a bit too nice. Investors can confuse founders simply by refusing to say no, even when they have decided to pass on something.
As Riz Virk put it in Hackernews: “If a VC hasn’t given you a term sheet, or isn’t constantly following up with you about the next step to get a term sheet, then they’re not that into you.”
Unfortunately this level of transparency about an investor’s own position is common. It is easy for investors to be nice, but it is a true kindness to a founder to be transparent. An investor who can say no, and clearly state the reasons why, is of infinitely more value to you than one who can’t be bothered to tell you they’re not interested.
I know from personal experience that transparency is sometimes painful. Still, since becoming a part of StartupYard selection committee for each round about 3 years ago, I have personally given feedback on the reason for a rejection to every single founder who has asked for it.
For my trouble, I have been called names, I have been ridiculed for anything from my appearance to my nationality, and I have even been told that I will be “crushed because we will rule the world,” by one particularly disturbed would-be founder.
However, what I have overwhelmingly found despite that, is that founders benefit from the transparency, and some of them thank us and remember us well long after we have parted ways. You cannot buy that sort of good will.
3. Responsiveness: Treating Founders as Customers
The VC Fred Wilson recently wrote about starting a VC firm in the 1980s, when capital was hard to come by, and VCs were treating their investors like VIPs, catering to every need. Wilson saw the drawbacks in that approach: LP investors want returns, and returns only. He wrote:
“When we started Flatiron Partners in the mid 90s, I told my colleagues that our customers would be the entrepreneurs and that I wanted to treat our investors as our shareholders.
That was a novel idea at the time, but I have advocated for it ever since and I think it more properly captures the relationship that the best VCs have with their portfolio companies today.
Our portfolio companies are our customers.” – Fred Wilson.
StartupYard isn’t a VC, but we have a similar outlook on our relationship with our startups and investors. The investor is not the customer, and even though we don’t work for our startup founders, and they don’t pay us, we dedicate ourselves to being of use and benefit to them as much as possible.
An early stage investor just cannot afford in most cases to throw their weight around like a majority stakeholder, or a large investor in a public firm. We have an outsized influence on the development of our startups and founders, but we also have an outsize ability to run those companies off the rails if we don’t focus on understanding them, and making them work on their own terms.
This is why founder-focused mentorship and guidance is a bedrock part of StartupYard’s program. It is essential not only to be an advocate for the best ideas, but also to help our founders find the best path forward for themselves, in a way that they can be maximally effective.
Responsiveness means listening closely to what a founder says, and observing what a founder does and how he or she thinks, to try and help them focus their energies in areas where they are likely to succeed. Responsiveness means catching a founder who is banging his head against a wall, and doing something about it to get him back on the right path.
It’s not enough to simply be available when a founder asks for something, but again, to respond to what our founders do with any help they seem to need. Many is the time one of our team has spotted a problem with a startup before they’ve asked for help. So we go to them, and most of the time, they’re relieved not to feel alone in what they’re facing.
4. Consistency: Be a Rock
Sometimes the only thing a founder needs from the investor is to be a rock. Just to stand behind them when things are going poorly or amazingly well. If everything else fails and the building is on fire, your existing investors should be right next to you; not just because it’s their money, but because they chose you, and they’re sticking with the choice.
Founder friendly investors don’t come knocking only when the startup has just announced a big success. We don’t show up just for victory laps, and we shouldn’t use our successful founders merely as examples of why we are so smart.
Being with your startups in their low moments is much more important. Having a beer with the founders when they’re getting a divorce, or when they lose an investor, or when they made a big mistake: these are the ways founder friendly investors help their founders. We want to be there for the post-mortem, and we take equal share in the failures as much as the successes.
This is not just about loyalty, but about self-respect as well. An investor who owns their own decisions, and refuses to place blame for failures completely on other people is an investor with true confidence.
When I meet other investors who badmouth their failures, I cringe. They’re also badmouthing themselves. Our failures are a result of our judgement as well as the founders we invest in.
In early stage investing, and for startup founders, there is always another day. There can always be wins on the horizon, but how we deal together with our problems is how we really build strong bonds of mutual respect.
Last week in Prague, the famous inventor, sci-fi author and speaker Ramez Naam gave a talk about one of our favorite topics: Exponential Innovation, under the auspices of DirectPeople. Ramez Naam is not only an award winning author, he is also a veteran of Microsoft, the holder of 19 separate patents, and the founder of Apex Nanotechnologies, which is the first company to create software tools for molecular design.
The partnership is fitting, as DirectPeople works with companies and startups to realize innovative new projects, building teams around new ideas and executing them for banks, energy companies, and telcos, as well as smaller firms. (Full disclosure: Petr Sidlo, CEO at DirectPeople, is our mentor, and Phillip Staehelin their Innovation Evangelist is our mentor and investor.)
The talk centered around an introduction to exponential thinking, much like those we have written before. What really stood out from the talk however, was Naam’s particular attention to the reasoning that so often fails to predict radical changes in the business and technology landscapes. As important as the exponential innovation framework is, we must put it in context with the logic that has failed to match it over and over again.
The talk was a long one, so I’ve chosen to focus on 3 key errors that perpetually lead industries as well as individuals to dramatically underestimate the effects of innovation over long periods. As Naam pointed out in his talk,
3 Ways we Fail at Predicting the Future:
First: Disruptive Innovation Comes “Bottom Up”
One of the key analogies Naam used was the broad history of world empires beginning around A.D. 1400-1500, with two key events: the European discovery of America by Columbus’s fleet, and the exploration of South Asia by Zheng He of China.
Though the two events bear remarkable similarity in their timing and boldness, there the similarities end. Columbus’s voyage was an accidental success. Attempting to circumnavigate the globe with too little food and resources, his fleet was saved by the accidental discovery of Cuba, a fraction of the total distance to his actual target, East Asia and India.
Zheng He, on the other hand, commanded the most technologically advanced navy in the world. His ships made Columbus’s tramp fleet of the Nina, Pinta, and Santa Maria look like bath toys in comparison. His expedition was well planned and financed, took much less risk, and made much more important near term discoveries for China in the form of large potential trading partners.
Yet, Columbus’s voyage set off an imperial age in Europe that lasted for nearly 5 centuries, and saw the colonization and Europeanization of most of the world. Zheng He’s 25 year exploration of South Asia and East Africa ended in the burning of his fleet, and the closing of China from the outside world for another 4 centuries.
Why these two vastly dissimilar outcomes? Moreover, why did the results of a well funded, professional, and government backed expedition (that of Zheng He), result in nothing of significance, when the poorly funded, badly planned expedition of Columbus ended in Spain’s domination of South America for hundreds of years, and Britain’s eventual domination of half the world?
Top Down V. Bottom Up:
There is one key differentiator: China’s exploration of the known world was a top-down affair, instigated by the emperor, and carried out on behalf of China’s leadership. It was essentially a government program/ Meanwhile, Columbus’s voyage was backed by Queen Isabella of Spain (after other monarchs turned it down), but she served as little more than a financier. The project was from the beginning a bottom-up effort by Columbus, and would have been doomed to failure and the death of the entire fleet, if not for America conveniently sitting between Europe and Asia. Columbus lucked into a discovery that eventually made him rich and famous. He took the key risk (with his life), and so he also owned his share of the rewards.
Again, Naam directs our attention to the effects that leadership structure had on the resulting discoveries. While Zheng He returned to China a hero, his discoveries and fleet were the property of the Emperor, who chose simply to dismantle them, rather than to take the risk of engaging with foreign trade and potentially coming into conflict with foreign powers. To China, the fleet represented a cost and risk that was evaluated based on the status quo. Since the voyage proved that China was the most powerful nation on Earth, the Chinese saw no more reason to engage with the outside world and risk their already safe position.
Stability Becomes a Liability
Columbus was in a weaker position from the beginning. So why did he win? Naam argues that it is because of the inherently competitive nature of European politics at the time. While China was unified under the Ming Dynasty for 3 centuries (from 1368-1644), Europe’s political landscape was inherently unstable, and composed of hundreds of individual state-like entities, with nobles fighting for position and consolidating control of their regions.
It was that instability which made it difficult for any one government to back Columbus, and it was the need for a competitive advantage that drove Isabella, who had only just united Spain under one ruler, to fund him. The price of not having state control of the expedition was that Columbus himself (along with the explorers and conquistadors who followed), personally profited from their efforts. A traditional of entrepreneurial exploration was established because Europe could not afford to publicly fund it.
Thus, Columbus’s voyages were highly disruptive to the established order because Europeans were desperate to gain competitive advantages over neighbors. Meanwhile China, the strongest nation in the world at the time, had no such need. In fact, quite the opposite, as opening itself to trade only served to destabilize China when it eventually did realize it could no longer afford to remain closed. It was finally Britain that forced the opening of China and established Hong Kong as its trading colony in the late 19th century.
One does not have to look too hard here to recognize the tech startup and the modern corporation. Stability for its own sake can turn to a liability over time, as hungry younger competitors adapt too quickly and are too numerous to be stopped.
Second: Exponential Innovation is Deceptive
Naam spent a lot of time covering the ways in which exponential innovations deceive people into seeing them as always just about to slow down. This is because the fundamental drivers of innovation are often mistaken as being the same as they were before the exponential growth curve took effect. He shared this graph, for example:
The graph shows a classic exponential curve in the electrical capacity of solar power from roughly 1998 to 2014, along with the World Energy Organization predictions of future growth. As is plain to see, every single prediction over 12 years shows static growth, but realigned from the new actual baseline in any given year. Every prediction is not only wrong, it’s wrong in exactly the same way.
Why would that continue to happen for 16+ years in a row? Surely someone at the WEO might notice it happening and try to figure out why?
Exponential Innovations are on a broad front:
Naam provides a partial answer in this blog post on the topic. He points out that predictions typically take a snapshot of the industry at the present moment, and extrapolate expected advances based on what appear to be limitations to growth that are non-surmountable without a step change in the technology or the underlying economy.
This works most of the time, because most of the time the specific conditions for exponential innovation aren’t met. Namely: that advances in different aspects of a technology produce feedback to affect growth in other areas. Innovation is happening on a “broad front.”
In this particular case, the reason the predictions are wrong is not because their underlying assumptions are inaccurate, but because they are about the wrong things.
For example, predictions of the slowed growth of solar energy may point to theoretical limitations in the materials being used to make solar panels. Indeed, solar panel efficiency is not growing as fast as it did in the past. Instead, as Naam points out in his post, the manufacturing methods are improving faster instead, which is compensating for the diminishing returns of material science advances.
This effect repeats itself over and over again. If it isn’t manufacturing, it’s software. If it isn’t software, it’s infrastructure changes. If it isn’t that, it’s changes in the consumer business model that accelerate growth. The growth in total wattage keeps going up exponentially because all these advances are driving each other forward at once.
Third: Exponential Innovation is Democratizing
On the last point about innovation around the economic models of new technologies, Ramez Naam took special care. He argues that exponentiality of innovation depends on the technology’s ability to be democratized over time.
In fact, in reference to solar power, he used Nuclear energy as a counter-example. Despite the enormous efficiency and effectiveness of modern nuclear power, it is failing to keep up with solar energy in the growth of its footprint. In fact it is declining. Predictions by Isaac Asimov and many others about a nuclear future in which atomic cores power watches and handheld computers, or even body implants, are now severely dated.
Why is that? Naam argues that it is because Nuclear power is difficult or impossible to democratize. Simply because of how it works, and its ability to be weaponized, atomic power must remain under the control of governments. This means that the core technologies involved with nuclear power have fewer chances to influence other areas of technology growth, and vice versa. Nuclear grows in a kind of parallel, where advances don’t greatly benefit other technology areas, and so other technologies don’t arise to create demand for new innovations.
Nuclear is not doomed because the technology doesn’t work, but rather because it can’t be enmeshed with other businesses and technologies. Like China’s great navy in 1400, nuclear is a state operation: it can’t be democratized because it is too dangerous.
If we go back to the previous example of Columbus and Zheng He, we see that a classical prediction would state that the Chinese technical superiority would allow them to predominate or to catch up quickly with the west. But what actually ended up happening was that the west innovated around the business model of exploration first, and the attractive monetary incentives led a revolution in technology that profited from the scalable finance model that colonization had created.
Consider the fate of nuclear vs. solar power in that context. Nuclear is far and away more complex technology. The only problem is that might not matter. The innovation that advances on a broad front and permeates society will win out.
By the time the British Empire came into direct conflict with China, it was the English who had developed the use of colonies as markets for their own goods, rather than a source of resources for the use of their own governments or ruling classes. Thus the English could afford conflict with China, because colonization was immediately profitable to those involved, rather than to established players only.
Indeed, this innovation is what made the American revolution the opposite of a disaster for England. Because England had repurposed itself as the workshop of the world, the growth of American power and economic strength helped the British empire to finance itself through trade with America. Britain had innovated away from the old definition of an Empire through mercantilism and trade. The state did not have to directly fund exploration and colonization because it shared the profits with the colonies themselves.
The English democratized economics itself. That was the innovation. It was one China still struggles to match.
So too with solar energy: solar power can afford to compete directly with traditional sources because it brings the benefits of the new technology closer to those who will profit from it. Even when solar was not at cost-parity with traditional fossil fuels (which is no longer true), it was cost effective for those who adopted it, because they saw the benefits personally, and over the long term. The risk of adoption had an appropriate reward.
Unlike with nuclear power or coal, which require long-term up-front investments far from view of those who pay for them, solar is a source of energy consumers and businesses can own themselves. This means they’re increasingly likely to invest in it, and to see less risk in doing so. The technology is thus democratized, and suddenly it can be the basis for knew, previously unimagined products or businesses.
The innovation can be in the business model this makes possible: not always in the technologies that underwrite the growth. Exponential Innovation shifts streams and goes around obstacles, rather than charting a straight line in one area. Thus predictions from the WEO may accurately represent technological limitations, but still fail to predict growth because they are using an outdated economic model.
Is There a Better Way to Predict the Future?
On the one hand, if predicting the future were as easy as a new mental framework, then everyone would be doing it already. Yet on the other, we can avoid making the same wrong predictions over and over by paying attention to what causes an exponential growth cycle in a particular industry or technology.
One of the key takeaways for me from Ramez Naam’s talk was that exponential change occurs primarily where there are multiple axes of advance being explored at once. If one hits a wall, another can cause the technology’s adoption to grow any way. What is inherent in an exponential growth model is that growth never depends on one particular characteristic of a technology, but rather on the overwhelming incentives it creates. People want it to grow, and so it does. That was the fundamental insight of Moore’s Law decades ago. Limitations we recognize as crucial today can become meaningless tomorrow, because the incentive structure for innovation is self-feeding.
Singularity University uses a framework called the 6 “D”s (also used by Ramez Naam), namely: Digitized, Deceptive, Disruptive, Demonetized, Dematerialized, and Democratized. In broad strokes, they argue that an organization or industry becomes exponential when the following conditions occur:
- Advances are based on an already exponentially scaleable platform (ie: computing, or energy generation)
- Advances appear to be insignificant or even slow at first, although capabilities are doubling and redoubling on small scales.
- Advances begin to outperform existing solutions at sub-scale (eg: Solar vs. Coal)
- Cost falls as demand rises.
- Advances become commoditized and ubiquitous.
- The underlying technology becomes commonly achievable and can be applied anywhere.
Given these conditions, a technology may reach an exponential growth curve, and if we recognize a technology that begins to fall into this particular virtuous cycle, we must closely examine whether or not traditional predictive frameworks of the future remain useful.
Last month we announced that OptioAI, a member of StartupYard Batch 8 and StartupYard’s first Georgian startup, had joined TechStars Berlin. Techstars is the world’s largest accelerator network, with over 1000 invested companies, and $3.3bn raised over the past 12 years. OptioAI is through the first month of the program already, and will present at the Berlin DemoDay on April 19th.
OptioAI joined StartupYard with a plan to create a text-based finance management platform for millennials who weren’t seduced by traditional banking (which is to say, most of them). Today their core mission remains the same, and has evolved to become a text-based platform that “makes your money talk to you,” by connecting users with their financial data in a natural way, via voice and chat.
I checked in with Shota Giorgobiani, Co-Founder and CEO at Optio, to find out how the Techstars program is going. Here is what he had to say, this time via email.
Were you surprised to be selected for Techstars right after the StartupYard program?
The funny thing is, applying to TechStars started more as an experiment.
We’d heard how hard was to get to Techstars. Techstars does not officially publish information about the number of applications they get for every batch, but rumors say that only 1-2% of initial applicants get to Techstars and the number of applications per program can be near 1000.
Furthermore, Techstars generally accepts only 1 or 2 early stage company per batch, so it looked almost impossible right from the beginning. Our goal was to understand how the process works and prepare for the future when we would be “ready,” but as always, you never know when you are “ready” and what “readiness” means. So we ended up by being selected for Techstars Berlin, which actually is a great outcome of the “experiment!”
How does the application process work?
The first part of the selection is pretty much standard: you send your application, you are shortlisted and then have a Skype call. If you are in the final round, you are invited to selection day.
Some cities have 2 meetings with startups and some just one, but overall it’s the same as at StartupYard. The main difference is the final selection process: It’s not like a “traditional pitch” competition, or a series of one-to-ones, it’s more a face to face meeting with the whole selection committee.
We had 2 meetings, each for 15 minutes with 2 different groups. The idea of this meeting for Techstars team is to get to know the team. It’s a known fact (and it’s true not only for Techstars) that most of the time, especially early-stage startups are chosen because of the team, not because of the idea or product. And when I mention team, not only the credibility of the team is important (like how many years have you been in the industry), but also if the team can be managed and helped to make better decisions or not.
This was something we really improved on at StartupYard: how to listen and to show that you are taking questions seriously; how to engage with debate and not be defensive.
Also very important is to show what you have. No matter if it’s a working product with 1000+ users or mockups of your idea. You should be excited about what you are doing and you should naturally show this excitement. It’s even good to start your talk with the demo (and most of the time – you are asked to do so).
One last thing: 15 minutes is too short period to cover everything. You may be tempted to use up your time talking about your plans, but you should be able to cover most important topics in 2-3 minutes and move to the Q/A part, where you have a chance to show your competence, passion, vision and also show where Techstars can help you. So you should be prepared and be able to manage your time well.
For us, it was a little challenge, because we naturally tend to speak a lot about our company, and you should really train yourself to do it quickly. At the end of the day, it’s all about the match: a personal match between team and Techstars and clear view of how Techstars can help, if any of these is missing, I think you will not be accepted.
How did StartupYard prepare you for taking on this next step? What has been the biggest challenge at TechStars?
I can talk about that for hours, but to be short and clear: I think, based on our current stage, we had little chance to get to Techstars, if we had not been in StartupYard.
There are clear reasons for that: at StartupYard we learned to describe what we do and who we are quickly and clearly. This is a crucial thing, you should be able to explain in 2-3 mins why are you building the company, what are you building, how this team can achieve the goal and etc. And that’s very hard to do, it takes time and practice. Second is credibility: I think it’s very hard to get into the world’s top accelerator just by sending the application. Sure you can, but for us, at such an early stage and being from Georgia, it feels impossible.
Credibility and your network are so important, aren’t they?
Your network is your key to the world! You have to always be building it up and making it stronger.
For example, our story with Techstars actually started in Prague, in StartupYard, where we meet Techstars Berlin MD, Rob Johnson, and had the opportunity to talk with him and tell what we were doing. Rob was there because of StartupYard, so already you can see the network effect.
Rob suggested we try and apply for the upcoming program. When someone tells you that, listen to them! That’s a shortcut to being noticed among hundreds of applicants, because it comes from within their network. It comes with a degree of trust and confidence.
And believe me, if you are not already generating revenue and growing steadily and are still proving that your product makes sense, such a “shortcut” can be your only chance.
Overall, StartupYard gave us a lot of direct knowledge and experience and maybe even more importantly, wisdom, which helps us every day at Techstars.
For example, after one bloody month of mentorship in Prague, we had a very clear understanding of how the process looks and feels, how to prepare for meetings, what to expect from mentors, etc. Having that experience is invaluable when you get to Techstars and it helps you get the most out of the mentors there.
How has the move to Techstars affected your strategy going forward? What do you hope to get out of it?
The main challenges now are achieving strong product-market fit and finding a sustainable business model.
Have you made big changes in the product?
Yes, we just released an updated version and lots of changes are ahead.
We decided to focus on the simple, yet very valuable functionality of the product, so we narrowed down our long list of the feature set to something, we believe is valuable for our users on a daily basis. Still, we have to do lots of experiments and see how it goes, but we are now more solid in short-term vision and plan.
In short, we want to create a super simple tool/routine for our users, that can help them with daily money management. No long-term savings goals, no 5-year plans of repaying your mortgage – we are focusing on daily money management. Sounds simple, but as usual, the devil is in the details: if you can’t manage your daily spending, there’s no chance to solve your long-term problems., So for now, that’s our main focus and strategy.