RentRocket

RentRocket: The New World of Renting

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RentRocket, led by CoFounder and CEO Klara Flisnikova, joins StartupYard as a member of Batch 8. The team behind RentRocket comes from Zonky, the Czech peer-to-peer lending platform that pioneered the concept in Central Europe.

What is RentRocket? It’s more than a real-estate platform, or a property management system. Flisnikova intends to digitize the rental process from end-to-end, allowing property owners to list properties, screen and manage tenants, and handle all aspects of the transaction in one place. To do that, RentRocket is starting with a simple core value proposition: an easy to use, effective screening tool for prospective renters, that provides a reliable history of an individual, and ensures that they are trustworthy and capable of keeping commitments.

RentRocket is currently in the final stages of development for its public platform, which will launch in the coming weeks, and be available to landlords in the Czech Republic as a first step. Klara will pitch RentRocket at StartupYard DemoDay Batch 8, on November 22nd, in Prague.

Get Your Ticket For Demo Day!

 

I sat down with Klara to talk about the thinking behind RentRocket, her experiences as a landlord, and how she founded her first startup:

Klara Flisnikova, RentRocket

Hi Klara, tell us a bit about yourself, and how you came up with the idea behind RentRocket.

My dad was in the construction business since before I can remember, and I grew up around the construction sites. To see things always under construction and undergoing massive change, I think, gave me insights into the hidden workings of the world around me most kids don’t experience.

Later on my family acquired some properties in Prague, and when I moved to Prague for university it became my job to take care of them. Having grown up around this business, I could see right away that the property management companies and real estate agencies my parents had used were not providing a lot of value. I got rid of them both, and started renting the properties out myself.

So I learned the hard way, and met lots of different kinds of people in the process. Many of them nice, some of them not so much. One of the things about being a property owner that you don’t realize at the beginning is that it’s a very personal thing. You deal with people’s homes and their personal circumstances. You see things others don’t see, and you deal with people’s problems, including the ones they don’t show to others.

 

So RentRocket is based on your experiences?

Definitely. Property management is a business, but it’s also very personal. It is the renters home, but your property – that is a situation ripe for conflicts. You see people’s bad sides as well and I began to wonder how to fix this. So I started to choose my tenants more carefully, evaluating them and setting the right expectations from the very beginning. There is nothing worse than a promise you cannot keep. This is a business I think a lot of tech people don’t understand the way longtime owners do.

That’s why RentRocket is focused first on establishing a basis of trust between renters and owners. That basis is in data: letting owners and renters both know that their agreements are on a good footing, and that both parties have a good background, and can be trusted. We do that right now by providing background checks of tenants, but in the long term, the qualities of the owners are also very important. Good renters deserve good landlords, and vice versa.

After university I went through KPMG to Zonky, still renting in the meantime. At Zonky I worked as a data analyst and was responsible for reporting. And it hit me, that the process I used for tenant selection is totally similar to loan approval. The same data that affects someone’s credit obviously also affects their ability to pay rent. In the US and other countries, credit checks are standard for renters. Bad credit is a big problem.

At Zonky I also met Petr, without whom I absolutely couldn’t build RentRocket. Petr and I worked closely while analysing data flows in the backend systems at Zonky. And one day I told him about my project, and that I would like to finally launch it. He immediately took interest and I knew from my experience, that he is hard worker and someone I can trust. When I proposed the opportunity to join Startupyard he did not hesitate to jump on. And here we are.

Petr Vlcek

 

We struggled together for a long time to come up with the name RentRocket. What about the name really appealed to you, and told a story about what you’re doing?

Finding a name was really hard for me, because originally I thought I was good at names and that creativity will solve everything.

But being realistic, real estate is an unbelievably crowded space. There are all kinds of services, good and bad, and it’s very hard to differentiate. So we came up with more than 100 names, and checked the viability of all of them.

I wanted something that would not be too closely connected with flat or homes. I also wanted to highlight our scientific approach and the new sort of renting experience we want to promote. That’s why chose to be a Rocket. RentRocket!

 

You mentioned you were a data & reporting manager at Zonky before founding your own company, how did that experience inform what you decided to do with RentRocket?

Zonky was totally the most challenging, complex and enriching experience I could get and perfect foundation to start my own thing. I learned so much about product creation, leadership, development, customer service and much more.

Working with so many hard working people, together with Lucie behind the wheel setting up a truly motivating atmosphere, was an amazing journey. Also the way the whole community was created – the honesty and transparency – is something I would love to replicate in my own company.

You could literally see people became so engaged in creation of the platform, that it became a part of company culture to cooperate on the development with the most engaged ones. That culture as it was developed at Zonky is a big influence on me now. The whole grand idea of “from people to people” really came true in that sense.

RentRocket, StartupYard

In a two-sided marketplace, companies tend to focus on one side or the other: Renter or Tenant. What is your focus, and how did you conclude that it’s the right one?

It is always a chicken or egg question, right? But if you look at companies who do it well – such as Airbnb or Uber – they always start with supply – eg. homes or cars. You start with the scarce side of the marketplace, try to get on board early adopters and build a critical mass of supply. Once you reached your critical mass you may focus on pairing up the demand.

We have to think about how different stakeholders in the property market are motivated. Renters have more short-term motivations, and owners think more long-term. So long-term is where we need to be first.

 

You mentioned how crowded the market is. Airbnb, other short-term platforms, not to mention agencies and management companies. What is different about your approach? What do you see as your competition?

You are totally right, but I am glad that so many players are doing well in this market. It proves that there is a lot of demand for better solutions. We are rather at the beginning of big changes, than at the end, in my view.

The rental market is still very unstructured and uncultivated, in the Czech Republic especially, compared to western markets. That is probably true of many regional markets that are not under the same pressure as bigger cities like in New York or London. Still there are problems, but there are also more clear expectations from all sides. In smaller markets like Prague, it has not been really systematized.

RentRocket, StartupYard

 

Our goal is to completely digitalize the rental process. Moreover, there is a lot of potential to be unlocked once you’ve done that.

Of course I am aware that companies such as Ulovdomov or Flatio could be our direct competition, but I think that maybe we can help each other too. They solve slightly different problems, and like many players, they see their value in short-term problem solving. We see our role as a long-term value creator.

On the other hand, I am not so keen to work of rental agencies – our traditional competitor. . But even here, I see a chance for us to have an impact. My aim is to bring the best service possible to our customers, whichever way they choose to manage their properties.

 

What have been some of your direct experiences with being a landlord, that have most informed your decisions about RentRocket, and what the company focuses on?

As I mentioned previously, I’ve had some pretty tough experiences as a landlord.

The flats not being returned in a good state, flats deserted in the middle of the rental period, and I could go on and on. The first aim of RentRocket: to stop that situation from happening from the beginning, by helping landlords pick tenants they can trust.

As they say, some people always have a story about why they can’t pay, or why damage isn’t their fault, or why they need to leave suddenly, or whatever it is. All this sparks frustration and anger on both sides. What I learned that most of these situations could be prevented – either on the owner’s side by better screening, or on the tenant side by better education and communication.

 

Most renters and landlords have their own horror stories. What is your worst story about being a landlord?

The worst one comes from the times when I started with property management, and this particular tenant was supplied by an agency. One of our flats was devastated by a Great Dane, which was regularly left by its owner in the flat for days. It was horrific, incredible cruelty for no reason I could ever understand. Why have a dog if you refuse to take care of it?

Anyway, you would not believe how hard it is to get the competent authorities to do something about it. Once the flat was opened by the Police and Vet Administrator, the dog was not there anymore, the flat was totally wrecked, with crazy holes scratched on the inside of the door. Total disaster, complete reconstruction was necessary.

 

Which types of customers are you interested in addressing in the near-term? How will you reach out to them and engage them now?

At the beginning we are focusing on semi-professional owners; those who already have some experience with renting, and to agencies which want to do a better job on tenant selection.

What is important to us is a close connection with our customers, especially now at the beginning when we need to establish ourselves and gain the trust.

We plan to exploit our networks first, get feedback on our product and then continue accordingly with long tail user acquisition. We want to build a sustainable, long term business that can be replicated in other markets.

Connect with Klara on LinkedIn

 

Looking toward the future, how do you see RentRocket’s path forward? Will you focus on certain types of markets (like cities), or go instead for geographic regions with similar legal systems and traditions?

Definitely I see RentRocket as a purely online service focused on medium-sized to big urban markets with an excess of demand, which will allow us to expand rapidly.

Once we reach a critical mass of users and learn how to acquire a meaningful share of the Czech market, we would like to try other cities in the CEE region. Still, our ambition is to be global, and available in many markets.

Cracking how to win over a single market is a key thing. There is no global leader in long-term rental “proptech” the way there is in transportation or short-term rentals (Uber, Airbnb), and I think this is because it is a more complex day-to-day problem. Airbnb’s big innovation was the way it allowed people to discover destinations, and management was an afterthought to that. It was about opportunity, not necessarily long-term thinking.

Our focus is on great management experiences from the beginning, and long term value.

 

What has been your experience at StartupYard? How has your view of your business changed during the acceleration process?

Startupyard is the best kickstarter ever for a startup.

We joined StartupYard with just a small team, and our ideas. The accelerator focuses you, gives you a mission and puts you in the flow of building your company. The mentorship is a big challenge, but it makes everything about what you do more urgent and more clear over time.

The accelerator is a very tough experience, and there are a lot of moments where you question yourself and what you’re doing. But I think we have become stronger, and we have moved much faster and in a clearer direction than we could have done alone. I have found the mentoring and feedback to be motivating. Hard work pays off, and here you definitely work as hard as you can.

 

If there is one piece of advice you would give to landlords, and one to tenants, what would that advice be, and why?

To landlords: Choose your tenants wisely, you would not marry someone after a blind date, so why should you sign a year long contract with someone you see for 15 minutes and know nothing about?

To tenants: Know what you need and want up front, be open and honest about yourself and your requirements. Be realistic about what you can afford. Landlords will totally appreciate that.

Actually this part about honesty and transparency goes both way. If you are honest, not greedy, fair, and vigilant, then you will be fine most of the time.

 

How can potential customers start using RentRocket today?

Customers can sign up for our service through our website www.rentrocket.io. I personally will contact them and see how we can help. Right now we are testing the first version of the product, therefore we offer more personal service and on-hands approach.

We are looking for people who are ready to help us get the service just right, and want to be part of a new way of managing and renting properties. It’s just the beginning!

 

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Steel Mountain

Introducing Steel Mountain: A Digital Guard Dog for your Connected Home

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Steel Mountain is not your grandpa’s anti-virus software. It’s a new way of looking at digital security for connected homes. Today, internet connected devices are proliferating in the home, and with them, opportunities for breaches of privacy and digital theft. Steel Mountain’s flagship product, Secaura, will attach directly to a home’s wifi router, and provide comprehensive protection against attacks anywhere on its network, 24 hours a day, without impacting the speed of your internet connection. Best of all: it’s self-updating, requiring no intervention from the user to keep security up to date, all year round.

StartupYard recently announced Steel Mountain as a member of our 8th Batch of tech startups, with a Demo Day coming up on November 22nd, 2017, in Prague. 

I caught up with Will Butler, CEO at Steel Mountain, to talk about digital home security, and his plans for changing the standards of privacy and safety for the Internet of Things. Our interview is below:

Hi Will, first why don’t you tell us a bit about your team, how you started working together, and how you came up with the idea behind Steel Mountain?

Thomas Maarseveen and I go back seven years whilst studying engineering together in the UK. Since meeting we’ve collaborated on a number of technical projects together; websites and apps, crypto, drones, 3D printers.. We’ve done a lot of cool stuff over the years together.

Will Butler, CEO and CoFounder at Steel Mountain

The idea behind Steel Mountain originally came from Thomas’ browser-based AdBlocker not working. To solve this issue, Thomas decided to block his ads by hacking his router and filtering out the ads there rather than the end-point. This then inspired the idea of blocking digital threats at the gateway of the network- the router. The evolution of this idea was natural as Thomas and I had a history of ethical hacking and experience in cyber security and networking.

Thomas and Will, Co-Founders at Steel Mountain

What drew you to focusing on security, and particularly consumer level security?

Whilst i hold value in my security and privacy, I have always despised using my anti virus software. It slows down my PC, conflicts with other software and intrudes on my usage with annoying popups all the time. Moreover, with critical security issues fast approaching with the IoT (Internet of Things) booming, a solution is needed now.

The consumer security sector has been neglected for a long time. We haven’t seen much innovation in it for 25 years from the old incumbent companies that we all know, and with the growing complexity of home networks, we now need a new approach to deal with new threats/ That is exactly what Steel Mountain offers.

What makes the technology behind Steel Mountain unique compared to other approaches, like typical firewalls or anti-virus programs?

We deal with the threat at the gateway of the home network with a device that plugs into your existing home router. This means we do not slow any of your devices down, it requires only one installation to protect everything and can provide security for hardware devices that cannot otherwise protect themselves, like smart fridges and lightbulbs.

Back when consumers were first buying PCs, there were not many points of entry for intrusions and exploits. Hacking 30 years ago was focused more on social engineering, exploiting human weaknesses, and less on “brute force” attacks, or finding a bunch of “zero-day” bugs (bugs that no one has reported yet), and using those to compromise a system.

But now you don’t have one processor and one piece of software running in your home. You have dozens and dozens of them, all of which can have vulnerabilities. Your fridge can be hacked. Your nanny-cam can be hacked. Your electrical system, your phone, computer, TV, and video game systems. There are many points of entry, and many potential points of failure now.

Plus those failures are more dangerous than they used to be. Now everything you do is digital, like your finances and even your health. So you have more to lose in an intrusion. A digital intrusion could have even worse consequences than someone physically getting access to your home.

So if the vulnerabilities are multiplying like this, security software just cannot keep up anymore. It’s like you’re building a bigger and bigger city, and you still rely on just one policeman to catch all the criminal activity. You should worry more about what your software can’t see at all, which is what is going on in all those devices you have.

For this, you need a single security layer that stands between your network and the outside world. That is what Steel Mountain does: we are building a single defense point and channeling everything through it. That’s the only way to really provide protection today. This is like the difference between the local cops and the NSA. You need a much more in-depth security system today.

Steel Mountain

What are some of the dangers most consumers don’t really understand when it comes to home security in a connected world?

That they are currently completely exposed to cyber theft and monitoring if they have IoT in their home or even an android smartphone.

I’m not just trying to be alarmist here. It is this simple. Everything right now is exposed, and nobody, from the device manufacturers to the telcos, to the companies that provide the firmware for these devices, is keeping up with the multitude of threats to IoT devices.

You might think too that you don’t have IoT in your home, so you’re ok. But most of us already do. This technology is now in everything, sometimes whether you realize it or not. Today it’s just a light bulb or a fridge, or a baby monitor, which doesn’t seem so dangerous. But soon home electrical systems and kitchens, and our cars will be controlled this way too. So physical dangers will become more real as well.

Why do you think that despite all the publicity around high-profile data breaches and hacks, as well as digital home invasions, the average consumer is still under-protected?

The average consumer remains under-protected because current solutions are high friction and have no focus on user experience. We still see cyber-security as something geeky and obsessive, even though that idea is pretty out-of-date at this point.

It’s also about who designs and markets security products, which is to say: security obsessed people who aren’t always in touch with the average consumer.

A security product should be passive, non-intrusive and usable by anyone. Current solutions fail to make a complex security solution accessible and seem easy to install or interact with. Current security solutions always seem like “work,” but we think they should be as simple and unobtrusive as possible.

Security is traditional sold through fear mongering, and the problem in doing that is that people become resistant to it over time.

Steel Mountain Features

Even here we are talking about all the dangers, and the truth is that most people don’t respond to these triggers. What’s the lesson there? What do people respond to? 

So our view is that you have to appeal to people’s sense of responsibility and their more evolved sensibilities: taking responsibility for your family, doing your basic duty as a parent or a homeowner.

You lock your doors and check for mold and termites in your home, so the same logic should apply when you’re securing your network as well. It just has to be part of the basic package of having a safe home. Like child-locks on your medicine cabinets, or having your chimney swept once in awhile. It should be that simple.

So, people make a lot of these basic decisions without thinking too much. Do I buy the regular power strip, or the one with a surge protector? Our responsibility, as a security company, should be to make that decision obvious, and then to follow up on that, and make it simple enough that people stick with it.

Why do you think design is so important for a security company?

We are selling peace of mind, and in order to do that, convenience and user experience is imperative. True peace of mind in our case means you never need to think about it again after installation. (If you don’t want to.)

There is an interesting balancing act in designing something that should be easy to use and to forget about, but is also mission critical for your safety. You have to kind of make it visible, but at the same time non-threatening and friendly. This is why our approach is to create a kind of friendly hockey-puck type device that just sort of sits there and says: “I’m here… everything is fine.”

It’s sort of like something between a smoke detector and an Apple TV. It isn’t daunting or flashy, it’s just there, it’s solid, reliable, always on; nothing to worry about. In some ways this is just applying the same approach to digital security as has existed in physical security design for a long time. Simple, subtle, but not a toy.

You were previously located in Virginia, outside Washington DC, which is a natural hot-spot for digital security products. Why choose Prague and StartupYard as your next home?

We moved back to Europe because we saw an opportunity in the market. Europeans, generally speaking, are more privacy aware. That has been shown very much in the way regulations have evolved in Europe, now including the GDPR privacy regulations. People value privacy, and see it much more as a basic necessity than in other places.

Right now in the US, you have companies like Amazon convincing their customers to put cameras in their homes, so the company can literally watch their homes and their delivery people can enter people’s homes while they’re gone.

That is pretty surprising to many Europeans (and many Americans too). Maybe I’m crazy, but I don’t think Europeans will widely accept that kind of sacrifice of privacy in their homes for more convenience. I hope that they won’t, because it sets a scary precedent for the risks we’re willing to take with our personal security.

But also, Europeans understand that big companies are going to try to compromise our privacy even without us realizing it. These companies would like to listen to everything we say and watch everything we do, because there is money in that. But European culture more or less believes that the welfare of society is more important than the business benefit of intrusive tech.

That is why companies like Facebook and Google have so many more challenges in Europe with regulations and oversight, because they take that kind of thing much more seriously.

The reason we chose StartupYard is because they have a very relevant network which we are currently leveraging. We couldn’t be happier here.

As I don’t have to tell the Czech people reading this, Prague has a long history of security engineering and cyber-security businesses like Avast, AVG, Cognitive Security, etc. Czech businesspeople understand security and take it seriously, which makes our lives easier, and provides more opportunities.

Plus, Czechia has a global reputation for security knowledge and prowess. We have definitely seen that this is based in fact.

What would you say is the most important thing you’ve learned in your time at StartupYard? What was your hardest lesson? Have you grown as a company and as founders because of that experience?

This is my first company. Obviously, you have ideas about how easy it is to make deals, and negotiate with people based on your common interests. When you really believe in your ideas, it feels like you can convince anyone you’re right.

One thing I’ve really appreciated in the process of mentorship at StartupYard, and then talking with corporations and partners about future plans, is that corporations are not one entity at all. They are a collection of different power centers and objectives, mixed with a lot of personal and political motivations as well.

When you start meeting with these companies, you realize that you have a lot of work to do to show many different people that it is in their interest to help you. Having people sponsoring you in a corporation is great, but it only takes one person in a position to block you, and you’re stuck.

As a startup, you move fast every day, and you don’t ask for permission. That’s how you build something new and different, but at the end of the day, people from the older world of business have to buy into what you’re doing. You have to respect the fact that these people have been in the market much longer than you, and they know a lot of things about it that you don’t.

I hope, and I think, that we have become more humble in that regard.

What can we expect from Steel Mountain in the near term? When will people be able to buy your products and use them in their homes?

Steel Mountain will be making it’s flagship product, Secaura, available for pre-ordering from March 2018. Subscribe to our website and we will keep you updated.

We have many details to take care of between now and March, and we are tackling the complex process of manufacturing and distributing the hardware, as well as maintaining the security service that comes with it.

Our aim is to be a part of people’s homes for the foreseeable future, so it’s critical that we build everything now on a solid foundation. Security and privacy is very dependent on trust, so we are building partnerships with trusted companies that have a good track record of delivering on their promises.

rebelandglory

StartupYard Partners with Rebel & Glory for Post-Acceleration Marketing and Sales Program

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StartupYard now accelerates between 7-10 companies every 6 months. And yet our team has remained the same size.

Unlike other accelerators, which have often expanded quickly to cover more of the lifecycle of a tech startup, or more markets, StartupYard has chosen to focus primarily on what we do best, and to keep doing it better. We find promising startups, we accelerate them, and we help them navigate post-acceleration life, until they don’t need us anymore.

Bringing Big Guns to StartupYard Alumni

But we are not enough. Our startups are operating at the cutting edge, and need big guns when it comes to communicating and selling their new approaches to big problems. Even the best ideas don’t sell themselves: they have to be backed up with experience, with a network, and with a deep talent pool.

Imagine if every startup that deserved the help of a pro business partner actually got it. Today, a needless gap exists between those startups that deserve help and can’t afford it, and those who can.

At the same time, Rebel & Glory is eager to apply their talents and knowledge to cutting edge technologies, and cooperate with promising startups. As the CEE region continues to lag behind in terms of access to marketing and sales talent, companies like this can help bridge the gap between early/growth-stage startups, and those with the money and connections to attract top global talent.

Our startups are a special group, hand-picked and proven to be risk-taking, ambitious, hard-working, and smart. So to us, providing the opportunity for our startups to take advantage of the talent and experience at Rebel & Glory, something outside startups do not have the opportunity to do, is a natural step.

Rebel & Glory will give StartupYard companies access to talent that normally only big companies can afford.

Rebel & Glory’s Exclusive Post-Acceleration Program For SY Alumni

For these reasons, StartupYard is announcing an exclusive partnership with the cutting-edge creation group Rebel & Glory. The partnership will allow exclusive access for our portfolio companies to packaged services from Rebel & Glory, spanning every aspect of branding and marketing strategy, content creation, and advertising.

Rebel and Glory

Rebel & Glory will offer StartupYard companies 3 key services: product development, branding and digital marketing, and talent delivery. Thus, not only can a StartupYard company work with Rebel & Glory to build its brand, but it can also explore new product opportunities, and gain the talent necessary to execute ambitious plans.

“We Exist to Build A Bright Future for Brands”

Rebel & Glory’s special expertise is high tech digital content design and creation. They are deeply experienced in creating powerful, appealing brand and product stories supported by top-notch creative work. Some of their business partners have included Nissan, Lufthansa, KB Bank, and Regency.

The agency also does amazing post-production work for film and television, as well as online advertising. They have a showreel on their website.

What is Good Storytelling? (Part 1)

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First: What is Storytelling?

There’s no single compact definition that can cover every modern use of the word “story.” You may think of news articles, or children’s fairy tales. You may think of “user stories,” that product designers use to figure out what to build. You may think of a novel. In fact, most stories have common characteristics: characters, settings, plot, conflict, and an ending.

But in talking about a “brand story,” or a “cultural story,” or a “life story,” we are really discussing a specific kind of story: the “Mono-myth,” also commonly known as a “Hero’s Journey.” At the heart of what we call “storytelling” in the modern world, you find this core structure:

The world’s oldest documented story is The Epic of Gilgamesh, written 4000 years ago on clay tablets. It’s the story of Gilgamesh, a God King of the Sumerian state of Uruk. He begins as a restless and foolish young man, who leaves his city behind to explore the world, faces many challenges, becomes wise, and returns home a hero, ready to lead his people.

That ought to sound familiar. It’s the basis of every epic story from the Odyssey to Star Wars.

The Hero’s Journey works incredibly well at persuading audiences because it is a simple and flexible vehicle for conveying the human experience. It speaks to us about our experiences in life, by recreating those experiences, only with more flair, more danger, and bigger stakes.

The Hero’s Journey

Pick a big successful brand at random. Recall what you can about their “story.”

Chances are excellent that it is a “Hero’s Journey,” following the same pattern laid out 4 millennia ago in Gilgamesh. McDonalds has its Ray Krok, Apple has its Steve Jobs, and Microsoft its Bill Gates.

Not coincidentally, there are movies about all these characters, and they are all Hero’s Journey movies. The appeal of this story is so great that it is virtually synonymous with storytelling in film.

Within each of these stories is a familiar narrative: a misfit, naive and ambitious, confronts a cruel world, fails, grows, and finally succeeds. That is the simple core of every human story, and thus, every company story as well.

Qualities of a Great Story

Now we know what a story looks like. So which are the specific qualities of a really strong story? What makes this overall structure work best? Here are a few things I think are essential in a good story:

Great Stories Have Human (imperfect) Characters

Great stories appeal to the listener by being, essentially, about human nature. Great heroes are appealing because of their humanity, and not because of their power.

 

The 2010’s Most Popular Hero

Think about why people love Batman, or Iron Man: it’s because they are flawed human beings. It is the human experience to face moral tests and temptation. Thus, a story in which good and evil are too easy to separate is a story without any moral tension.

For Example:

You may have at some point spotted this meme making the rounds on Facebook. It’s got enormous viral potential, which is why it has been shared so widely (by both those who find it hilarious, and those who take it seriously)

It’s also a great example of bad storytelling.

In this story, we are presented with two characters in conflict: one entirely sympathetic and brave, the other entirely unsympathetic and cowardly. Thus, the point of the story, or the moral, is never in doubt. While the story creates suspense by making it unclear exactly what will happen, it creates no suspense over what the story thinks should happen.

No one in the story learns anything. No one changes as a person. One wins, and the other loses, but nothing is different at the end.

Great Stories Are About Change

I attended a panel on startups by the renowned actor Kevin Spacey this past weekend. One phrase above all stuck out to me as an example of how he sees storytelling. When asking a founder a question about his motivations in business, the founder responded: “Well, that’s complex.” To which Spacey responded: “Go ahead. Be complex.”

People are complex. So stories must also deal in moral complexity. They must give the heros and the villains an “arc.” As in Gilgamesh (or any epic story), the hero must fail to become wise. A villain must experience pride before the fall. Otherwise, nothing has changed.

Take, for example, this highly compelling commercial from none other than Budweiser, simultaneously America’s best selling, and worst tasting beer:

This is practically the definition of a Hero’s Journey. A young man with a romantic vision leaves home, only to find that the world is harsher than he expected. Enduring many trials, he finds help in unexpected places (the black man on the river boat). Having grown through his experience, he reaches his new home ready to accomplish great works: in this case, brewing beer.

This ad was seen as shockingly political (released weeks after the 2016 US Presidential Election), but it was also very successful. And that is because it is a real story, not just an ad.

It seeks to reframe the story of Budweiser, “America’s Beer,” into the story of Americans themselves, where they come from, and what they should believe in.

It also presents a coherent moral argument: that adversity makes us stronger, and that perseverance leads to success.

Importantly, neither of the two main characters in the story (America, and Budweiser himself), are either purely good or evil. Budweiser shows hints of arrogance from the beginning, before becoming wiser, and America shows signs of openness, even after initially seeming a cruel place indeed.

The story is about these characters changing together.

Great Stories Are About Conflict

As we’ve now seen, conflict is essential to a powerful story.

Conflicts in stories boil down to need. Human beings and societies have competing needs. How those needs are addressed, and which needs win out over others, are key elements of a story.

Convincing an audience that one need is greater than another is vital. Otherwise, why should a person pay attention to your story? It involves no consequences.

This is a video I often use to talk about bad storytelling. It’s a coca-cola ad from the early 1980s, when Coke was getting its ass kicked by Pepsi’s brilliant marketing.

But what’s not to love? Sunny day, happy people, soccer for some reason, and everyone having a “Coke and a smile.”

This ad was a failure, along with much of Coca-Cola’s marketing at the time. There is zero conflict in this story. And because there is no conflict, there is no identification of any urgent need. Do I need to have a coke on a nice day? It seems these people are having fun, regardless of what they’re drinking.

Brands routinely fail to introduce real conflict into their product and brand stories. Here’s a more recent example:

 

There’s a lot wrong with this ad, but the most important problem is that the conflict it presents is false. We see trials and struggles for the hero, but we are told at the end that there is no solution. And instead we should just buy a car. It’s insulting.

Cowardly marketing and bad storytelling happen when we refuse to acknowledge that our customers are people with their own problems. They aren’t just people out in a park having a perfect day, ready to jump at the chance to buy a coke.

They won’t automatically feel better about themselves just because someone tells them it’s ok to buy a car. Even if that car is the best car ever. They have other needs as well- more important ones.

Coke actually learned that lesson. Here is a typical ad from more recent years:

Here is conflict. Suspense! Competing needs and wants. And the brand in the story is associated with wisdom, with the setting aside of personal enmities in favor of love.

That’s a great story to tell. It appeals to people as they are: always in conflict with themselves, and always unsure of what is right.

Creating and Resolving Conflict

How do you make your story real to other people? You do it by making the conflict real to them. By showing them how the conflict in your story should matter to them.

This is also where a lot of startup stories fall apart. They make the mistake of thinking that making a good argument is the same as actually persuading someone. But it is never enough to just be right. The person has to believe you’re right.

In the next post in this series, I’m going to talk about how to identify parts of your story, as a founder, as a company, or as a person, and bring out the hidden conflicts that will help you relate that story, and make it matter to other people.

SY Alum Decissio Uses AI to Accurately Predict StartupYard Investments

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You may remember Decissio, a Batch 7 StartupYard alum that has been working on the “Jarvis for Investment Decision Making.” Earlier this year, the company announced its kick-off product, an intelligent dashboard for VC investors and Accelerators to evaluate and monitor companies they invest in.

Decissio aims to go beyond a typical investment dashboard by combining up-to-date company data with complex big-data based probability models and machine learning algorithms, helping investors to continuously evaluate their investment decisions.

As Decissio and founder Dite Gashi continues to gather data and build the company’s flagship SaaS product, they have focused on piloting their approach with small controlled experiments.

One such pilot has been in partnership with StartupYard. Decissio’s Mission: to process all of StartupYard’s applications for Batch 8, our latest batch starting next week, and deliver predictions on their success based on a variety of factors, including written applications, founder profiles, founder/market fit, and the current state of the company.  

Dite Gashi

Dite Gashi: Founder and CEO at Decissio

The numbers are in on this pilot, and they’re very promising. We’re not ready to stop reading applications or doing our own research just yet, but we’re now confident that Decissio can be a big part of making our application process better, fairer, and more efficient.

The following case-study is a co-production of Decissio and StartupYard, written by Dite Gashi, and Lloyd Waldo. A more detailed write up and analysis will appear shortly after publication at Decissio.com. For more info on the technology and related work, please visit Decissio.com.

Warning: This post is long and contains big words. Skip to the bottom for a bulleted Tl;Dr 

Good Small Decisions = Big Positive Outcomes

The StartupYard application process doesn’t happen all at once. It involves a long series of smaller decisions. Does a startup have a unique idea? Does it fit into our mentor group and experience? Do the founders have enough experience? Is there strong competition in the market?

Some decisions are even more granular: did the founder answer questions thoroughly and clearly? Were they responsive in detail?

Small details often reveal big trends. But a human mind isn’t set up to think in that direction. We aren’t programmed to carefully add up small decisions to make big ones. Enter Decissio, whose mission was to apply a machine-learning approach to small decisions we make in the application process, not to override the judgement and experience of our evaluators, but rather to augment it with important insights.

StartupYard Alum Decissio.com uses #AI to accurately predict future StartupYard startup investments... Share on X

The Framework

An application to an accelerator consists of a relatively small data set. We have a written application, founder profiles (on LinkedIn), sometimes a website, and whatever has been written about the company online.

Rarely do we have hard financial data on the companies, in some cases because there is no company in existence, and so the founding team has no financial data to look at. Nor do we have much access to the IP teams are working on. We have to rely on what founders say, and what they have done in the past.

But a bunch of small data sets together make up a bigger data set. Decissio examined over 1300 previous applications to StartupYard, along with the rankings our evaluation committee has generated, and used that data as a benchmark for incoming applications.

They found a number of statistically significant trends in that data. Startups that were successful as applicants to StartupYard could be ranked point-by-point, according to the following framework:

  • A Completeness Score: how thoroughly the application is filled in, and with how much quality information.
  • Effort Score: The quality of the writing in the application, particularly the responsiveness of answers, and the scope and variety of detail provided.
  • Relatedness Score: how closely a founder’s profile and experience matches the content of the application
  • Founder Linkedin Score: The completeness and quality of a founder’s LinkedIn profile
  • Media Mentions: The number, quality, and sources of mentions of the company or product online, along with sentiment analysis
  • Money/Work/Revenue Generated: The ratio of previous investments and time spent on the project to real revenues (if any).
  • Spell Check

Believe it or not, Spell Check is powerfully predictive of application quality. Note to founders: always use Spell Check.

The Analysis

This is where the historical data from previous StartupYard applications comes in. While it’s not very useful to directly compare older applications to newer ones, because the topics and ideas in them are often so different, it is useful to weight the importance of the different factors in the framework according to their impact on previous decisions.

Furthermore, the final analysis includes proprietary algorithms by Decissio that can dynamically weight the outcomes for individual teams, based on cross-referencing between different data sets. For example: Decissio’s AI can adjust its expectations for the Effort Score, if the founders are experienced in marketing and sales, or have no such experience. Thus each team is examined according to its own merits, and not an evaluator’s less informed expectations.

As “calibration,” or maintaining consistency and fairness of scoring across a large number of applications is a significant problem with humans, Decissio can re-calibrate an evaluator’s judgement to keep them from penalizing teams for the wrong reasons. As the standardized testing field has long known, human scoring can be so inconsistent that a significant amount of scoring time (even up to half) must be devoted to calibration in some cases.

Since our evaluations involve multiple rounds with a Pass/Fail outcome, each examining more and more detailed information, highly predictive models can be built for an application that will make it through round 1. A less predictive but still strong model can be built for round 2, and a much less accurate, but still useful model can be built for round 3, and so on.

The chart below shows overall predictiveness of the approach over multiple rounds. StartupYard uses a “first past the post” system of ranking, where the ranking cutoff for each round is smaller. This means that in round one, 70-80% of applicants are rejected. In round two, just over 50% of the remaining applicants are rejected, and in round 3 (which are day-long in person interviews), only 20-30% are rejected.

Decissio False Negatives

None of Decissio’s bottom-ranked 63 startups were ultimately selected, meaning that virtually all of the first round of evaluations could be handed over to the AI, leaving a much smaller pool of applicants to evaluate, and allowing the human evaluators to use a much lower cutoff, in a smaller, better initial pool. In this scenario, only 20% of human evaluated startups would need to be rejected in the first round.

We would expect false negatives to rise, as Decissio gets only one pass at the data, and with each round, human evaluators gather more data, which causes their behavior to diverge from the model.

For example, if use of Spell Check is 90% predictive of the Pass/Fail rate for round 1, it may be only slightly predictive of the success rate of round 2, and by round 3, it may lose its predictive power altogether. By the time an application involves a detailed look at a founder’s CV, and personal interviews with that person, other factors can arise that vastly outweigh any minor inattention to detail, like spelling.

Or the predictiveness curve can go in the other direction as well, with certain data only gaining predictive power in later rounds. Media mentions may have a low predictive power in the earlier rounds, and become more powerful later on. This can be because a company with a low early round score for Relatedness or very high Money/Work/Revenue ratios, can have many mentions in the media, but also fatal problems in their business, team, or technology. Thus, hype is not strongly predictive in Round 1, but by Round 3, it becomes a major asset to an applicant. Once all other factors are examined, media exposure becomes an affirmation of market fit, demand, or interest.

How Well Does This Work?

Decissio’s Success rate in the first round of applications (the on-paper evaluations), was 73%, far exceeding random chance. The accuracy dropped as expected in subsequent rounds where evaluations focused on personal interviews, from 50% in the 2nd round, to 20% in the final round. Still, this means that exactly half the time, a startup that passed the first interview with our selection committee was predicted to do so by Decissio, based only on their written application and profile.

There are two ways in which this kind of analysis can be useful. Either it can be used to identify applications that have a high likelihood of success, or it can be used to filter out those with the lowest likelihood of success.

Decissio Picked the Top 2 Ranking Finalists

We don’t have enough data to be able to confidently say that an application will definitely fail. However, on the opposite side of the scale, the results from Decissio’s analysis did correctly identify StartupYard’s two highest human-ranked finalists, and placed both in its own independent top ten prediction.

Decissio Picked the 100 lowest-rated applications with 89% Accuracy.

Still, the most immediate benefit of Decissio’s approach is in the earliest rounds, where pass/fail decisions are by design based on less human-focused information than the pass/fail decisions in later rounds.

This theory holds up with Decissio’s results: their bottom 100 applicants in this pool of applications (out of around 130), was 89% accurate, meaning that only 11% of the time, we determined a startup to be worth advancing, while Decissio did not. Clearly, in terms of identifying a lack of potential, Decissio’s approach is already very effective.  

Further mining of the available data could produce a much more precise prediction. For example, by analysing co-founder and founder/investor fit according to the work histories and digital footprints of both can theoretically yield very reliable predictions of compatibility, which in turn raises the chances of success or failure for a startup.

These factors would require a different kind of data to solve; a kind of data we don’t collect systematically right now. But this kind of approach, which treats people as nodes in a system that has its own features beyond those of individuals, has been deeply developed already, particularly on the level of enterprise management consulting involving things like the Meyers-Briggs Type Indicator Test.

It may prove true in the future that a set of personality tests of some kind are more predictive of success in a particular accelerator program or industry, than the content of an application, though we don’t know what that test would look like, or how it would be used.

SY Alum Decissio.com predicts first round StartupYard application decisions with 89% accuracy, picks two finalists. Share on X

 

Potential Applications:

Time Saving

Decissio was able to predict with strong accuracy (73%), the likelihood that a startup would make it through the first round. This means that evaluator’s mental resources can be focused more on rounds in which more human-level data is being examined, particularly personal interviews and meetings.

An evaluator can spend relatively less time making early-round decisions, because Decissio can compare cursory evaluator consensus to its own scores, and “call out” the circumstances in which these do not match for further study. There is less of a chance that a good application will be “overlooked” in this way– a constant fear among startup investors dealing with many applications.

Bias Reduction

While a human with experience can “skim” an application and be able to tell it isn’t strong, that subjective evaluation is highly prone to error and internal biases. Very poor spelling could cause a human evaluator to give up on an application, whereas an algorithm might see past this issue and find more value in the startup than a person would look for.

This process could also serve as a check against more latent biases, such as gender, age, nationality, and sexual orientation. While it’s difficult for a human to differentiate between their instinctive reactions to people based on conditioning, and their objective evaluations of people in a professional context, an algorithm can demonstrate more consistency in that regard. Biases can’t be eliminated even this way, but they can be better controlled.

Thus, Decissio can be a check against the human decision making process, enhancing it without replacing it.

Fighting the “Best Horse” Problem

Decissio’s approach can also serve to fight the “best horse” problem, whereby a candidate with a strong outward appearance can advance well into the selection process without revealing sometimes severe deficiencies.

The best horse problem is one of reinforced selection bias. Imagine you have 10 horses, and you send them all running around a track. Then judging by the outcome of the test, you give special care and attention to the fastest horse, believing that it above the others has greater potential as a champion.

In this way we sometimes pick winners for all the wrong reasons. The horse to finish first can finish first for a number of reasons not having to do with potential as a racehorse. Cheating for example, or luck. Likewise, the last horse around the track can be the one with the most future potential.

In our application process, a very strong written application or interview performance can mask a basic weakness in the founding team’s experience or ability. It’s only much later that these weaknesses reveal themselves in a lack of tangible results from the company.

Startups can and do advance very far in accelerator programs while still lacking the core abilities and disposition needed to thrive. It can take a long time to recognize a fraud or a fish out of water.

Creating More Useful Feedback

Another thing this big data approach can solve is the information problem. What happens frequently with accelerator applications, as we suspect happens in many fields, is that successful written applications contain a near-perfect mix of description and data. Something like the “golden ratio” often described in mathematical analyses of artworks and natural proportionality.

The human mind likes a certain level of balance in the information it receives. When a person writes, they tend to favor either information or analysis, but only experienced writers know how to mix the two into pleasing and easy to read narratives. It’s a problem even good writers frequently struggle with. 

Too much writing about ideas, and the application seems too “light.” Too much data, and it seems too dense or too technical. In formal writing analysis, this formula is often used to describe balance between facts and ideas, where the value a is descriptive and creative writing, while b is supporting data and factual information. Those familiar with the classic “5 paragraph essay” often taught in schools, will recall the same proportionality. About 3 parts of persuasive writing, for every 1 part of factual basis. 

This type of training is not universal even among professionals, which sets up an arbitrary test of writing skill that may not be as relevant to the outcome as we tend to believe. If our job is to train people how to be better entrepreneurs, then we fail at that mission from the beginning if we can’t differentiate between someone who deserves our help, and someone who doesn’t.

By offering feedback on the strength of an application according to the above mentioned metrics (Completeness, Effort, Spelling, etc), Decissio could potentially improve the chances of failing applications where the main problem is poor writing.

An opportunity to improve an application is also an opportunity for us to see value where it is hard to spot. Telling an applicant that their application is failing because of style and substance can help those applicants to better express themselves, and thus deliver us more opportunities to find quality teams.

Conclusions

StartupYard and Decissio pilot project shows that AI assisted investing can improve results quickly. Share on X

The results of this pilot clearly show that there is great potential in enhancing our decision making process with machine learning and data analysis.

We are not at the point where we’re ready to let a machine determine our investment strategies on its own- the way machines already do some forms of investing without human inputs.

Unlike an investor in securities, or a high-frequency bond trader, an accelerator’s main advantages are as a first mover. We invest in companies that don’t exist yet, have limited information on their markets, and have a limited history, or no history. So we invest in people – and people are inherently hard to quantify.

Our anecdotal experience of meeting teams in person *before* evaluating their applications, consistently reveals that the application process cannot identify many important personality traits. For an accelerator, success comes only when we are right about a trend, and a particular person, at just the right time.

So employing an AI powered decision-making approach cannot mean abandoning the unique advantages we have: the ability to see things others don’t see. Expertise (and hard work) is still the core of sound early-stage investing, but AI can help us to focus that expertise on the “creme de la creme” of potential investments.

It can save us from becoming jaded by the junk applications that routinely swamp our inboxes.

A startup is not an individual, it’s a team. And it is not in our interest to arbitrarily eliminate applicants who are not good at writing applications, or have other deficiencies more visible on an application than in real life. However, it is in our interest to conserve and spend our resources (including our time and energy), where the potential for gain is highest. 

This approach can benefit higher-dollar investors too: later stage investors have many of the same problems accelerators have, but on a different scale. A Seed or Series A investor makes decisions involving 10-50x more money than any single investment from an accelerator, and they also receive more requests, on average, than a small accelerator does.

Currently the most obvious and most immediate advantage of using Decissio’s AI is for very early stage investors with many applicants, such as government innovation programs, and big accelerators like TechStars, Y-Combinator, and 500 Startups. 

Tl;dr:

  • StartupYard alum Decissio analyzed our past applications over a 6 year period.
  • Decissio used this data and their own AI to predict which applications to StartupYard would succeed.
  • Two of their top 10 picks were also StartupYard finalists
  • They accurately predicted the bottom ranked half of applicants.
  • This approach can be used by accelerators to:
    • Improve applications overall
    • Save time on the poorest applications
    • Reduce systemic biases
    • Get better information on applicants
  • Decissio’s AI could be applied to other early stage investors, such as Series A and Seed Investors, or to large accelerators, particularly Tech Stars, Y-C, and 500 Startups.
  • At the end of the day, AI will help early-stage investors to get better information, and spend more time focusing on the human-focused side of their work.

4 Ways to Never Fail a StartupYard Interview

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The 17th century French poet Boileau famously said: Ce que l’on conçoit bien s’énonce clairement, Et les mots pour le dire arrivent aisément. Or: “An idea well conceived presents itself clearly, and words to express it come readily.”

Or to put it bluntly: An idea isn’t any good unless it can be explained to someone else. If there were one piece of advice I could drill into the head of every brilliant startup founder I’ve met in my career, it would probably be just that.

But since we have some time, I’m going to go deeper. Here is:

How to Never Fail at A StartupYard Interview 

StartupYard will begin interviews for Batch 8 next week, and in the meantime, we thought we would share with them (and you), 4 key strategies that any startup can use in an interview with us, or any investor, that will help them never to fail.

Now, this advice is not going to win you an investment 100% of the time.

Investments are complicated, and they involve the needs and priorities of multiple parties. A perfect meeting might not produce an investment for a million valid reasons. But I can guarantee that if you follow this advice well, you will not fail to give your best possible impression to an investor.

Follow this advice, and you will not fail for stupid reasons.

1. Answer Questions As They are Asked

Simple and yet incredibly difficult for many people. Answer a question as it is asked, not as you would like it to be asked.

Did someone ask you a question to which you can say Yes or No? Then say Yes, or No. Then explain your answer. If you’ve never interviewed someone, I can let you in on a secret: it is very obvious when someone does not want to answer your question.

It is also very annoying.

And this produces the world’s most frustrating non-answers to simple questions. The below example is not fiction:

    • Are you making any revenue?
    • Well, we only launched about 6 months ago, and we have been focusing on making partnerships with relevant partners who are going to help us scale to our target market, and define the right sales strategy while getting early feedback from customers.
    • But are you making any revenue now?
    • Currently we are in beta and we are talking with a few clients who are ready to become paying customers once the features they need are fully implemented.
    • Are. You. Making. Any. Revenue?
    • No.
    • Thank you.

We don’t ask trick questions. What would be the point? And yet this behavior is widespread among startup founders. It is a learned behavior that must be slowly and painfully unlearned.

We want to know about what we’re asking about. So don’t try to give us the “right” answer. Just give us the real answer. What do you think is worse, us hearing that you aren’t making any revenue, or us leaving the meeting thinking you’re not even capable of answering simple questions?

And the real answer can contain the same information. Just in a slightly different format:

  • Are you making any revenue?
  • No. But we have a few customers who want to pay us as soon as we have the right features implemented. We only launched 6 months ago, and we’ve been focusing on partnerships.
  • Ok, who are these customers, and what features do they want?

Now we’re getting somewhere. And it was so easy! Now we can move to more important questions. This is a real conversation.

If the purpose of an interview is to exchange information and to assess a relationship, we would much rather spend our time doing that, than trying to decode cryptic phrases and hints.

So answer the question.

2. Win the Argument: Lose the Interview

It might be in school where people learn that an impressive, intelligent answer to a question is necessarily the longest and the most complicated one. It might also be in school where we learn that the one who speaks last has won the argument. We probably learn that from watching our teachers. But are these really good lessons?

Among the worst qualities we observe in some founders is the need to triumph, rather than to persuade. But winning an argument is different from convincing someone you may be right, or that you at least know what you’re talking about. Winning is not the goal here.

Trust your interviewers to see you as a human being, and they will like you for it. Treat them as human beings, and they will love you. But make the interview into some sort of contest for control of the subject matter and the upper ground, and they will end up wanting to get rid of you.

So communicate. Don’t argue.

What’s the best answer to a question you don’t know how to answer? Try: “I don’t know.”

You might be surprised how much investors will respect a founder who is not afraid to admit they don’t know everything. In a room full of smart people, there are always going to be things you don’t know that others do.

When answering a question, watch the interviewers, and if they seem ready to speak or unsure what you’re saying, ask them: “is this answering your question?”

So much of what we do at StartupYard involves unlearning and deconstructing the behaviors and impulses that stop founders from being great communicators and effective leaders. Most of that boils down to their motivations in any given situation. What do you want to accomplish here? Do you want to win, or do you want to be understood?

So start with this simple goal in mind: you want the investors to know you. You want to get to know them. If in the course of an interview, you can achieve this basic understanding, on a human level, then you will have succeeded.

3. Look Like You Belong Here: Because You Do

My father wore a suit and tie to work for 30 years. When I got a bit older and started working, I told him I’d never wear a suit and tie to work.

What he said sort of took me by surprise. He said: “we dress according to social customs, not just to show respect for others, but also to show self-respect. We dress to show that we feel we belong.”

I still don’t wear a suit to work, because I work with startups, and nobody does. But still, I notice when a person is poorly or inappropriately dressed for any given situation.

And that can swing both ways: a guy in an immaculate 3-piece suit who wants to talk about his startup is as out of place as the guy in the bathrobe with sleep in his eyes. Neither belong in that situation. Failure to dress like you belong can show that you don’t respect the social customs of your surroundings, but also that you don’t see yourself as belonging to them.

So think just a bit about how you look. Do you look like a startup founder? If you’re not sure, you may need to think more about this. Not too much. But a little.

4. Plan Ahead: Most Questions are Obvious

Here are three things any startup investor should ask you about:

  1. What is the problem you’re solving?
  2. What is the solution?
  3. Who are your customers?

If you can’t answer these three questions clearly, and succinctly, then perhaps you don’t know the answers well enough yet.

And when you sit down to answer these questions, try and imagine an investor hearing this for the first time. What is that person likely to ask you?

  • The problem we are solving is that X can’t Y when Z
  • Why does X want to Y when Z?
  • They just do…

Oops. Do you know why your problem is actually a problem? It might surprise you how frequently founders aren’t all that sure that the problem they’re solving is even a real problem at all.

Because “answering the question,” as in literally stating the problem, is not really answering the question. The object of the question is to get a useful answer: Why is it a problem? When is it a problem? How is it a problem? What is the result of the problem?

So be ready for a follow up. It will come.

Remember, a good investor, especially at an early stage, should be evaluating your ability to think clearly, as much as the idea you are describing to them. They can hate the idea, but be impressed with the clarity of your thinking. That happens to me all the time.

We have invested in companies whose ideas we didn’t fully agree with, because they showed they could think well and be receptive. That’s more valuable than an idea you love, and a founder who can’t answer simple questions about it. In assessing which of those two founders is likely to be a success, the one who can answer questions is the one we pick every time.

StartupYard Batch 8

StartupYard Batch 8: Visualized

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Applications for StartupYard Batch 8 closed this weekend. Selection has now begun, and acceleration will kick off in September. You’ll get a full overview of the selected teams only after they’ve been with us for at least 1 month. Until then, we have some initial data to share with you. For the past few years, StartupYard has shared anonymized application data with our community, to give you a picture of what’s going on in StartupLand East of Germany.

As we did for Batch 6, and then again for Batch 7 we find it very useful now to look back on the applications, and see what’s changed this time around. Where are people applying? What are startups working on? What are the hottest buzzwords? Previous experience has shown us that StartupYard applications can be revealing about the key trends to watch for in the next 6-18 months.

Here we’ll give you a visual trip through our applications for this round, with our analysis, and comparisons with previous years.

 

StartupYard Batch 8: Who’s Applying?

StartupYard Batch 7 was the first time that StartupYard attempted two rounds of acceleration in one year. As we noted last year, the increase in frequency did not affect the number of total applications significantly.  This round, despite the open call closing just a few months after Batch 7’s Demo Day, we saw more applications even than Batch 7.

And, at least according to our initial scoring, the quality of applications has risen yet again, despite the shorter pause between programs. We expect to invite up to 30% of applicants for a first-round of interviews with our selection committee – a percentage more than double that of Batch 6 and possibly more than even Batch 7, which was a great year for qualified applicants.

This year also continues the trend of better overall match between startups and our program. Up until around Batch 5-6, it was typical for StartupYard to receive about 60% “Junk” applications – applications so bad or so disconnected from our core focus, that they couldn’t be seriously considered. This year, despite growing hype among high tech startups, junk appears to be under 25%. This is something we would have thought impossible two years ago.

What Applicants Say about Themselves:

The above is a “raw” word cloud, including the 150 most commonly used words across all application questions that involve a free-form response. In this cloud, the most commonly used words have been compressed to emphasize the secondary words, so what you’re seeing is not precisely to scale.

Still, we recognize some bog standard words that are familiar in any application: platform, product, marketing, customers, content, and people.

Here is a look at the same data, but now with the most frequently occurring words to scale:

What is perhaps most interesting here is what is not here. In previous years, certain words really stood out against others. Words like Data, Marketing, Mobile, and Platform, along with wildcards that seemed to vary by year like Advertising, Education, and Management. 

This year, there is no strong contender for the buzzword of the year, except for Customers, which is frankly odd. While the focus of this cohort is Deep Tech, and while many of the startups are dealing with AI, Machine Learning, Blockchain, Big Data, and other related issues, the applications are much less buzzword heavy than in previous years.

Why this change? We noted last year, especially during the final selection round, that many of the applicants had seemed to pepper their applications with these buzzwords in order to draw attention to themselves, even if the Deep Tech aspect of what they were doing was not central. This year, despite many companies with a central focus on this kind of tech, the applications talk about more banal issues such as Customers, Software, Product, and Service. 

Where are Startups Applying From?

The above is a heat map of applications by country. Those in the palest blue represent no more than 2 applications in total from that geographic area. It should be noted that this data is imperfect, as the question being asked is “Where are the founders located right now?” And is not a question about either incorporation, or national origin. We expect, for example, that many of the Czech applicants will have team members from other countries, and that a number of applicants will be of a different national origin than represented here.

Anecdotal evidence tells us that by asking this question, rather than “Where are you (or will you) be incorporated?” we get a better picture of startups by region, as many choose to incorporate abroad for various reasons. We also do not group startups by regional market focus for the same reasons: many would be focused on English speaking markets as a default, and a breakdown of that data would be less useful.

Here is a worldmap with all countries represented:

Here is what the location question looks like in a to-scale wordcloud:

 

As you can see, Czechia is still the heavyweight, with 30% of the total pool represented. Next are some surprises, such as Ukraine (7%), and the UK and USA (Both 6%).  Slovakia, as with the past two cohorts, is nowhere to be seen at only 3%, and unlike our last round, Hungary has also faded away, at only 2%. Romania holds at a lower than expected 4%. Bulgaria and Poland are practically absent with only 1% each.

Here is a look at the applicants with Czechia removed:

Why are we surprised? Well, for several rounds, the Visegrad 4 countries had been on the rise in our applicant pool. Bulgaria and Hungary made strong showings last year, and we expected that to continue. It has not. Instead, to our surprise, we received more applicants from the USA and UK than ever before. Is there a growing appetite in this post-Trump, post-Brexit world for the old continent? It seems that this may be the case.

In Which Domains are Startups Working?

One of the key items every year is the breakdown of “domains,” or areas of tech innovation where the startup is working. This is often somewhat different from the market focus, as startups seek to apply new technologies to old problems, or bring existing technologies into new markets for the first time.

Here is a cloud of domains for this year:

(Note: Startups that designated themselves as “other” are excluded here. Typically “other” denotes a marketplace or very specialized area of development. The total for “other” is higher than any other domain, but this does not provide any useful insight).

As you can see, IoT (Internet of Things) and Machine Learning, along with VR/AR, take the top spots this year. Analytics and AI remain important, and Security/Cryptography are also well represented. Minorities in this round appear to be Robots, and Blockchain. There were 4 applicants in Blockchain technology this year, compared with 20 in IoT, and 15 in Machine Learning.

What Applicants are Working On

Also interesting is a breakdown of what markets startups are working in, according to them.  A startups primary market, in our experience, is less important than the way in which they mix the market and tech domain. For example, AI or Gambling are two relatively fuzzy terms, but put them together, and you get a pretty good picture of what a startup is working on.

Here finally we do see some clear leaders in terms of markets. Whereas the previous look at buzzwords was about what startups talk about generally, this is about how they describe themselves specifically. As you can see, Software is strong as ever, while Marketing and Entertainment, along with Analytics and Development rounded out the top 5.

While Marketing was the leader last year, followed by Data, this year Data is on par with other secondary terms. Again, we see a trend towards more general terms, even as startups become more focused on Deep Tech solutions. Is this because the buzzwords have become less of a selling point, and more of a central focus, such that they don’t need to be mentioned so often?

Last year, upon examining the Batch 7 data, I remarked upon the same phenomenon:

This chart looks very similar to previous years, however it is broader and less specific. Few terms, other than the obvious ones like Business, Platform, Data, Manage, and App, are given special emphasis. This is somewhat different from last year [Batch 6], in which terms like Marketplace, People, and Mobile were big standouts along with the most common tech terms like Platform and Data.

Is the way startups are describing themselves changing? Is there less emphasis now on mobile, or has it simply become an assumption that all products have mobile implications? Mobile may be taking its place alongside other words that are now seen as redundant- it may be shifting from an emphasis, to a more broad category that is easily understood, and thus little mentioned.

This year those words seem to be strongly predictive: there has been no reversion to a set of narrow buzzwords, but rather a broadening of terms used by startups to describe themselves. As the hype cycle ebbs and flows, we may now be entering a new maturity stage for startup founders as well – in which there is an increasing emphasis on basic business problems, rather than on buzzy tech bells and whistles.

Ouibring, StartupYard

SY Batch 7 Alum Ouibring Gains Investment – With a Twist

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Good news often comes all at once. Yesterday we announced that Neuron Soundware had raised €600,000, and StartupYard has raised €1 million in a record breaking investment round.  Today we’re able to announce that Ouibring, a StartupYard company (Batch 7) that helps travelers and shoppers to bring joy into each other’s lives by bringing rare items home with them from abroad, has also raised seed investment.

StartupYard, Ouibring

OuiBring Founder and CEO Joel Gordon, signing a deal with Busyman.cz

The Details

The seed investment comes from the Czech incubator Busyman.cz.

Since joining StartupYard in late 2016, Ouibring has quickly built a following of more than 60,000 Facebook fans. Filip Major, the founder of Busyman commented: “Ouibring has the potential to change the global consumer goods logistic system as UBER is changing the way people move”.

The investment will power global expansion, as Ouibring connects more of the 30 million flights carrying almost 1 billion travelers each year with shoppers all around the world.

Ouibring connects shoppers who need help sourcing hard to find products, and travelers with spare luggage capacity to create a win-win situation. On Ouibring’s platform it’s possible to order hard-to-find goods from your home country, or discover new items that travelers can then bring with them when they visit a city near you.

Ouibring, Startupyard

The Twist

Busyman.cz has acquired a minority stake in Ouibring using a digital commodity, “Crown,” which is a “non-pre-mined” digital currency.

Crown has a market cap of more than $13m USD, processes hundreds of transactions per day on its blockchain and provides powerful security features. As part of this deal, Ouibring will move its client-to-client transaction settlement onto the Crown blockchain, making every transaction easily trackable, efficient and transparent. Ouibring also aims to emit its own token of exchange on the Crown blockchain.

“Our customers care about security and compliance. Using the Crown blockchain to create unique new features will help make Ouibring even more reliable and easy to use for our customers” says Joel Gordon, CEO and founder of Ouibring.

About Ouibring:

In our interview with him earlier this year, Joel told us the story behind Ouibring as a new online shopping experience:

 

” The idea for Ouibring came from experiences gained living and working abroad for the last 15 years. The fun and excitement when a special package delivered by a friend arrives is the inspiration for Ouibring’s tagline – ‘Bring a little happiness’.

As any expatriate knows, living abroad can give you a special appreciation for things that those at home just take for granted. You look forward to that time when a friend will bring a special something you’ve requested from your home. That’s a magical feeling, as if you’re the only person in the world that has what you have. We wanted to capture that feeling, and make it something anyone could enjoy. A special moment of joy only for them; an experience no one else is having.

At the same time, we can give others the chance to make a bit of money, and reduce waste by sharing their spare luggage capacity.

One story I really like is how even a small, generic item that is plentiful in one location can provide a whole lot of pleasure and luxury when it appears in an unexpected context. When a Ouibringer arrived with three massive bags of Monster Munch Pickled Onion and delivered them to a travel blogger living in Bangkok. They really made her day.” 

Joel GOrdon, Ouibring, StartupYard

 

What’s Next for OuiBring

CEO Joel Gordon moonlights as a user of his own product: here he delivers some treats to customers in Thailand.

Ouibring has already attracted hundreds of shoppers and travelers from around the world. The company is continuing to explore alternative approaches to shopping and fulfillment for adventurous people everywhere.

So, to celebrate this big step for the young company, why not jump over and order something for yourself, or sign up to bring a little happiness into someone else’s life?

You can now apply for StartupYard Batch #8.

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

6 Years and 59 Startups Later: Here’s Why StartupYard Works

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This week our CEO Cedric Maloux and I sat down for a conversation about the struggles and the excitement of recruiting and working with amazing startups together for the past 4 years as MD, and his 6 years as a mentor.

 

StartupYard last year announced our largest fundraise so far, of about €1 million for up to 20 new startups in 2017-2018. How did we get here? What have we learned? Here are the most interesting exchanges that came out of our discussion:

Hi Cedric, every week during the StartupYard program management meetings, you ask founders one question: “What are you struggling with right now?” I think it’s fair to start with the same question here:

Sleep! [Laughs].

I have two sources of stress when it comes to every StartupYard round, and this is now going to be my 5th time going through it. The biggest stress is Demo Day. Like a parent or a teacher watching their kids take the next big step in life, our whole team works very hard to make sure our founders and startups look great, professional, in control, and ready. But when they go out on that stage, our hands are off the wheel, and they are on their own. That’s a big scary moment for me, and for the founders. I don’t want them to feel that they’ve failed themselves.

The other stress is right now. We are looking for startups, talking to startups, trying to get the right startup founders to apply for our next round at StartupYard. We will invest in up to 20 companies in the next 12 months. I am always slightly panicked at the idea that we’ll miss one, or that one won’t find us, and will miss an opportunity that can really help them to succeed in business, and hopefully in life. I get real joy from making a difference in people’s lives, so I have that fear that I won’t do all I can.

What specifically are you afraid will happen, or not happen?

We can make the wrong choices. We have in the past – though not often, thankfully. StartupYard takes a big risk in trusting people we barely know, to be strong and committed and honest and open enough to go through a really demanding experience. It is very humbling. And I know we aren’t always right about people. We invest in founders, but you don’t really know someone until you spend every day, all day, with that person. Sometimes we’re not sure, and they turn out to be just amazing. Other times we are sure, and it turns out we were off.

So I’m stressed right now about those decisions, and knowing that later is too late.

So what helps you sleep at night, knowing that you’ll never be able to perfectly predict who will apply, and how they’ll perform?

Luckily we surround ourselves with really great advisors and investors. We have a great selection committee, who really get what we’re trying to do. They serve as a check against our biases and assumptions. We have been very lucky, but we also work very hard to remain humble, knowing we will make some mistakes.

In some way, every investment decision we make at StartupYard is a bit crazy from a normal perspective. We invest our time and money into people we have met maybe twice or three times. It takes a lot of faith. Among investors, accelerators like StartupYard are the ones with the least actionable data, KPIs or traction to judge in a startup. We have to believe our hearts and our noses. We have to trust in our experience and instincts more than other investors, who can point to solid numbers to tell the story. We go on much less.

Hearts and noses?

Yes. If you’re investing in a later stage, it’s all about numbers and trends. We can see trends, but we have very little in terms of numbers. So we also have to really understand people to make the right choices. I say our hearts and our noses, because our hearts are for people, but our noses are for opportunity. If we believe in someone, and we believe that there is an opportunity in what they’re doing, then that is enough for us.

Central Europe Accelerator

What makes you particularly fitted for a role like this?

I think a person can’t imagine what it takes to go from an idea to a profitable company unless they’ve done it, and experienced it themselves. I have done that multiple times in my life.

And unless you’ve experienced the opposite, which is failure, you probably think somewhere in the back of your mind that it can’t happen to you. I’ve also failed, publically. The last time one of my ventures was mentioned in Wired, it was in the context of the company going out of business.

So I know what that’s like to be notable enough to be in Wired, but still to fail. I have a deep technical background (I studied AI at University in the 1990s, when it wasn’t cool), and I’ve had a long career in sales. If a founder can’t sell; to employees, to co-founders, to investors, and customers, then he can’t make his ideas a reality.

So sales is not just about closing deals?

No. It’s about everything. Selling is essential. I’ve sold customer-facing services. I’ve sold B2B products to big corporations. I’ve sold my own company. Selling is an art. As we say, “telling isn’t selling.” You have to be able to not just talk about your ideas, but sell them.

Also, I learned a lot from running online businesses during the 2000 Internet bubble and the 2008 financial crisis. These things taught me the hard way about discipline in the fundamentals of business.

What was your hardest lesson through those experiences?

Cost understanding and control is at the heart of your company. You can only control one thing: your costs. Revenue projections, cost control: these are the things that get you through a crisis. It’s all about planning. Not your revenue, or development time, or investors, or customers. Just costs. Knowing when the money will run out. So financial hygiene is a top priority.

You’ve run companies. You’ve sold one company. So from that background, if you were starting a tech startup today, would you apply to an accelerator, even knowing everything you know?

Short answer, yes I would.

Long answer, I do have a few tech businesses on the side that I have started with other people, and with one, I’ve been encouraging the CEO to apply to an accelerator (though not StartupYard because it’s not in our area of focus). That should tell you what I think about accelerators, and not just about StartupYard.

If I was starting a business, I would go to one tomorrow, because no matter how much experience I have, I am limited by my own capacity as a human being. One thing that I’ve learned over the years, is that success doesn’t come from what you know, but from who you know. Your network is a vital ingredient for success.

A great startup has these things:  a hard problem to solve, a great solution, a clear value-proposition, a strong sales/marketing team, perfect timing, and great connections. You cannot be in control of every one of those things at any one time. You can however always work on your network. An accelerator connects you with people who help you seize opportunities and move fast when the time is right. Your connections help you discover weaknesses, and also opportunities. Knowing you need help is a strength, not a weakness.

Speaking of networks, StartupYard has quite a few corporations on its mentor list. Why do you focus so much on corporates during mentorship?

It’s a good question, and one we are asked a lot. Startups even tell us they would like to meet more people who are more like them. Usually when you meet a mentor, like at a competition or in a conference or at an incubator, or many other accelerators, they tend to be investors, or entrepreneurs.

It’s actually relatively easy to get a meeting with an investor or an entreprepreneur, which is why it’s easy to convince them to mentor startups. But, if you’re a B2B startup looking for early traction, you need to go door to door, talking to customers. And most of the time doing that, you’ll meet low level people.

What we decided early on, was to incorporate high-level corporate decision-makers, not just a lot of people, but leaders and C-level executives. The people who aren’t so much in the internal politics of their corporations, but are in a position to make things happen for startups. And we have many concrete examples of that working really well.

If the Chairman of the Board at a bank invites one of our startups to talk to his executives, that’s a meeting where people will be paying attention. It will have results. Not long ago, our mentors at Microsoft brought one of our startups to meet Satya Nadella, CEO at Microsoft, in Redmond. You won’t be able to name many early-stage companies who can get that meeting.

Yes, I was genuinely surprised when that happened too. The engagement from Microsoft was extraordinary. What do you think the corporate people get out of being startup mentors?

As it happens, those heads of industry share many of the qualities of startup founders. Ambition, drive, vision. So they love to be exposed to young founders and interact with them, not just about ideas, but about ways of working and thinking. The CEO of a global corporation told me a while ago that it’s his job to know what’s going on outside his company, because they are under constant attack from startups. You have to know your adversary.

We sometimes call corporations “dumb and slow,” but it would be a mistake to think that the people running them are either dumb or slow. Often the people at the top are thinking very far ahead, and when a startup is looking for the right stakeholder, the top is often the best place to start. Outside of our program, our founders would just never get meetings with such people. Even if they did, it would take years to get them all, and by then it wouldn’t matter.

I feel very proud of our mentor group. One mentor told me recently, that it was an honor to be included. That just made me feel very proud. We have spent years developing StartupYard as a platform, but we can’t rest on our achievements. We have to keep improving and building that network ever round, or it dies.

You said you can’t rest. What is your biggest difficulty when it comes to talking to founders about acceleration?

I would say we see two types. There is the founder who really understands the value accelerators can bring, and is eager to join. The other is the one who is more defensive; defensive of their ideas, of their priorities, of their sense of control and sometimes pride as well.

They may see joining an accelerator as a risk rather than an opportunity: that they risk wasting time. But often I think it’s just that they risk giving up control. Startup founders can be control freaks, as everyone knows, and we ask people to give up some of that control in order to grow, and that is a hard thing to ask of people who have always performed at a high level in their lives. Even the tiny amount of control we want them to give up can seem like a big, big change.

But if you’re so concerned about making the wrong choices, that you don’t act, then you risk never making decisions at all. Our biggest challenge is to show skeptics that the accelerator is called an “accelerator” for a reason, and it is not to slow them down or take up their time. That interrupting their process and refocusing them can actually save them time, and not waste it.

All our alumni will confirm this to you and in fact, they often talk about the empty period after the program. Once a founder told me he wished the program never stopped. And this was a startup which already had some revenue, but had skyrocketed with us.

You have to be a bit smart and a bit arrogant to start a business, but you need to let your intelligence prevail, and admit when you need other people. We all start as fools in life, and the only people who are doomed to remain fools are the ones who refuse to admit this, and don’t let themselves be questioned.

Some founders will tell us that all they need is cash.

That’s true. But when you ask them: “If all you need is cash, then why don’t you already have it?” They start telling you about their real problems – the reasons investors aren’t giving them money. It’s usually because they haven’t earned it yet. They don’t have enough data, they don’t have enough traction, or they don’t know how to sell to the investors.

You are absolutely right, and in an environment where cash is king, it’s sometimes difficult to explain to these people that to deserve cash you need to go through some steps.

What we find is that the act of just applying to StartupYard, and answering very specific questions about their business can help founders to realize what they don’t know. Even just forcing yourself to really answer these questions, you can begin to see that there are a lot of areas where you can grow and learn more.

So you need to bring people down a bit to build them up?

Yes. The acceleration process is challenging not just intellectually, but also emotionally for some people. But if you want to really run a global business, and meet your potential as an entrepreneur, that is the kind of challenge you will have to face, one way or the other.

We aren’t here to judge people and their ideas. The projects we look at are very early stage, and the people running them have a lot of room for mistakes and wrong roads. Our job as an accelerator and the job of our mentors is to support people who are taking these creative risks, exposing them to dangers and opportunities. We prepare them for taking good risks, and being aware of the dangers they will face.

Over the past 5 years, I have repeated certain things over and over again through every program. One of them is: “be careful, about what might happen if…”

To you, what is the biggest misconception about what StartupYard does for founders?

What I think some founders don’t expect is that the mentorship process, and the whole acceleration program, is aimed not just at their business, but at them as people. It would be waste of their time, and ours, if we spent our energy trying to make people into something they don’t want to be. So we pay very careful attention to discovering, with our founders, what it is in their hearts that they really are passionate about and want to do and to become.

So it’s not just about business for you?

There is a saying: “just business, not personal.” But I think this is very misleading. Growing a global business is all about who you are as a person. If you do something that is true to who you are, and who you want to be, that is infinitely better, for everyone involved, than if you’re just trying to make money. You can make money in a lot of ways, if that’s what you want. We want to help people to become their best selves as founders, and that means finding in them that special energy they possess that no one else does, and helping them to tap into it.

The biggest successes in business don’t think “It’s just business.” They know it’s about more than themselves or this one goal. It’s about relationships and it’s about being true to who you are.

Any last words?

Apply to StartupYard! Applications close June 30th, so I hope anyone who recognizes themselves in what we’ve talked about will consider applying now.

I can’t wait to be impressed.

You can now apply for StartupYard Batch #9.

  • Artificial Intelligence
  • VR/AR
  • IoT
  • Cryptography
  • Blockchain
Applications Open: Now
Applications Close: January 31st, 2018
 

Apply to Startupyard