StartupYard investor, mentor, and CEO of StartupYard alum BudgetBakers, Michal Kratochvil joined the world of startups after a career in corporations as Managing Director of Accenture Consulting in Prague. Michal gives us an idea of how working with startups has changed his view of business in the past few years, and how he became a believer in Acceleration.
Michal Kratochvil joined StartupYard in late 2015 as an investor, and our 3rd “Executive in Residence,” and has continued in that role ever since. In 2016, he took over as CEO of BudgetBakers, a StartupYard alumni company and personal finance platform that has grown rapidly to hundreds of thousands of active users under his leadership, and now employs about 30 people.
Michal joined us after a distinguished career at Accenture Consulting, where he served as Managing Director for Central Europe for over a decade. His switch to the startup lifestyle was gradual, as he slowly converted from his customary suit and tie, to t-shirts and jeans, also switching from an IBM notebook to a Macbook. Today Michal is deeply involved with StartupYard’s operations, particularly in selection of startups, and helping companies to grow their networks through his impressive personal rolodex.
Michal also studies martial arts, and is a fan of western style horseback riding, participating in rodeo events and exhibitions.
2017 was a good year at StartupYard. Not just financially , but also because we saw a number of our Alumni and recent graduates accomplish amazing things in the past year. Of course, 10 companies raising over €2 million total makes us very happy.
Still, the money is less important to us than what the money says, which is that these companies are doing good things that investors believe in, and that therefore we’ve done our job well.
10 Companies, €2.2 Million
More StartupYard alumni raised funding in 2017 than in any previous year. 10 Alumni and startups in the program raised funds in rounds worth between €35k and €750k. Many of these investments we’ve announced, but others have not been made public yet.
We’re also happy to report that there are additional deals in the pipeline, and we will hopefully be able to announce those very soon. We hope that 2018 will follow 2017 as another record year for fundraising.
How Does StartupYard Help Startups Fundraise?
The Network: Aside from the obvious, which is that we begin by investing in Startups that go through our program, every deal that one of our alumni have closed in the past year has been with the help of the StartupYard network.
Through mentoring, and especially Demo Day and the following Investor Week, our startups meet and get a chance to pitch a huge number of likely investors, including business angels, VCs, and even banks and large corporate investors. In every case in the past year, our startups have been able to raise money because of contacts made during the program. In most cases, the startups raised directly from StartupYard mentors or existing investors.
The Reputation: As with any long-running accelerator program with a decent track record, we have a smart group of investors who will pay close attention to any startup we work with. Being around for many years, and having made many right calls in the past, we are trusted by investors to offer clear, honest and helpful feedback about our alumni.
That doesn’t mean investors do whatever we say. But they do listen.
Our investor network know that we do not shop investments that we don’t believe in ourselves. Credibility in the investment community matters very much. You don’t always have to be right, but you have to be informed, open, and honest. I can safely say that every company I’ve worked with in the past 4 years at StartupYard that deserved an investment, got it. We find a way to make it happen.
The Program: Just as important as having the right network to do your initial fundraising, you have to be an investable company to begin with. One of the things we look for in startups we select is that they are usually almost investible, or we see that with some hard work, they will be investable sooner rather than later. That naturally incurs a big risk for us, but it also helps define our mission- not to find “the best” most shiney startups out there, but to find the ones with the most real potential. One of the metrics we use to determine our success at picking “go over show,” is how well our startups do after our program at raising smart money (that is, from investors who know what they’re doing).
The Backup: Another quiet but important part of StartupYard’s role with alumni companies is to provide “backup” in negotiations with future investors.
Having an existing investor on your side of the table is an important practical and psychological advantage in investment negotiations. For one thing, an existing, experienced investor helps ensure that new investors behave themselves, and make fair offers on fair terms. Knowing an experienced partner is behind the startup encourages fair play and discourages game playing.
For another, StartupYard has the network and platform to expose bad actors, and to make sure our startups don’t deal with them in the first place. We have the power, in extreme circumstances, to block investments in our most recent alumni. This should be seen not as a blocker for investment, but as a negotiating advantage for startups, who can always fall back on us to block or negotiate terms that are unfavorable to the founder, on their behalf.
As we say, we can be “the bad guy,” with future investors when we are needed to be.
Listening to What an Investment Actually Says
Many founders who apply to StartupYard, and many who join us and go on to raise further investment, begin with some wrong conceptions of what raising investment is all about.
Of course, it’s the money they’re usually thinking about. But this is only part of the picture. If you need money, there are lots of places to look for it. Not all of those places are good, and not all of them are ultimately worth your effort or the risk you take in going there.
I used to joke with our founders that if you got into this business just to make money, you should just sell drugs instead. It’s almost true.
If there is good money and not so good money (clean or dirty, smart or dumb) how do you decide whom to take money from, or whom to ask for it?
Try approaching the question from the opposite tack: not “how do I get this money,” but instead: “what will it say if someone gives me this money?” It should say that the investor believes in the upside potential of what you’re doing. Any investor in an early stage company should be nowhere near defining the real market value of the investment, because that value hasn’t been fully explored or proven yet.
The investment has to say what the investor can reasonably believe. Here are some things an early stage investment should say about what the investor believes:
The company will be worth more in the future
The founders are honorable and trustworthy
The product is good and there is a market for it
The founders will work hard, and pivot if necessary
The founders will eventually sell or realize a profit
Failure is possible, and ultimately acceptable
Maybe one or two of those points surprise you, but I hope not. We should not expect early investors to be total true-believers in what a startup is doing, but we should be able to answer all these questions before accepting an early investment from someone.
We should also not expect investors to be unemotional, or completely calculating in their early-stage investments. A true opportunist is a dangerous friend to have.
Picking the right investor is not just about sleeping well at night, though that’s part of it. It’s also about making sure that you actually have the clarity of vision and the confidence you will need to do what the investor believes you can do. Convincing someone of something is a lot harder than telling it to yourself.
One of the best ways to get someone to believe all the things I’ve mentioned is to really believe them yourself. The best way to believe those things is to make them true.
Make Yourself Investable
As we’ve seen, becoming an investable company is about more than having a great idea, or the energy and determination to make it happen. It’s also about the network you have, and the choices you make early on.
If you think you have a tech idea with great potential, consider working with an accelerator like StartupYard to grow your immediate network, and turn the idea into a business investors and customers can really trust.
Finding investors, just like finding any business partner, is about knowing what exactly you need, and what to reasonably expect. StartupYard helps you figure those things out.
StartupYard is currently accepting applications for Batch 9.
We’re looking for startup founders in Crypto, AI, IoT, and AR/VR!
Get started applying to StartupYard Batch 9. Applications close January 31st, 2018.
Something jumped out at me from a recent podcast by Y-Combinator with Des Traynor, Founder of Intercom. Asked about the problem he solves, he described how over time, their approach to sales has changed:
“. When you’re trying to pitch them something, they just say “Hey, here’s my two numbers, which one of these are you changing?” And I think when we show up and we’re like, well if you love your users you’re going to stick around, and they’re like sh-sh. Don’t care about any of that. Are you going to make me money or save me money? And we need to get better at answering that question. And we need to have better evidence to answer that question.”
In Startup culture, there is always a lot of talk about “solving problems.” Every product and service has to solve some problem. That’s true as far as it goes, but “solving a problem” for your users is not, in itself, enough to build a business on. You have to also answer some version of this question: how do you make me money, or save me money?
As we accept applications for StartupYard Batch 9, this question will be forefront on our minds when making initial selections.
Lots of problems exist, but not all of them are promising new businesses. How do you know when you’ve nailed down that problem that people are willing to pay money to solve?
You can check out the video podcast here:
A Problem That Isn’t a Problem
The reason we always begin our acceleration program with the classic Positioning Statement, is that expressing the problem you solve is one of the hardest things an early stage startup has to manage.
Often times the “problem” founders pick to talk about is just another way of saying that their customers want their product. Maybe they do, but why?
Over the course of in-depth positioning discussions with dozens of startups, I’ve developed a sort of framework for determining whether a problem is in fact a real problem, and not a “startup problem.” While not universal, this framework is extremely helpful in determining whether you’ve really nailed down the problem you’re solving.
I apply this mental checklist:
Does the problem have clear financial implications?
Is the customer aware that this is a problem?
Does the customer actively search for other solutions?
Is this problem something your customer would list among their most important concerns?
One of the most typical early positioning problems is that founders will identify things like “a better interface,” or “more efficiency,” or “saves time,” as the key benefits of their solution to a problem.
But by applying this checklist, we can see that benefits like “saving time,” are not always as urgent as they might appear. Does the time have a clear financial cost? Is the customer aware that they can do something faster? Would they actually seek a faster solution on their own? Is this time that they are wasting a concern for them?
You can sell me a way to shower in half the time every morning, but I wouldn’t buy it. It’s only a problem if the time I spend showering is a frustration to me.
Sometimes I ask founders: “Have you ever sat down and googled: “how to do x faster?” Most of the time, they haven’t, because that’s not typically how people behave. Only when something is taking so long, and is so arduous that it has become a clear problem, do people act to find solutions.
A Case Study: Steel Mountain
Getting your positioning, and particularly your problem statement to answer those questions can mean changing deeply how you talk about what you do, and how you see your customers, and who they are.
I’m going to use the case of one of our most recent startups Steel Mountain, the home-network security company that will soon be offering a single device to monitor and protect homes from digital intruders, viruses, and other threats.
Steel Mountain, it must be said, were already in a more than usually advanced stage of development when they joined our program, but I would say this exact roadblock was among their toughest questions early on. They had a compelling product, but they needed to really be able to express the problem that it solves.
The “You Need Us” Problem
After about a month in the program, their positioning looked something like this:
“The privacy and security of homes and small businesses are increasingly at risk from digital threats. Steel Mountain’s Secaura device plugs into your router, providing enterprise grade security across your entire home network. Unlike typical security software, Secaura covers all connected devices instantly, requires no active maintenance, and employs advanced artificial intelligence against known and unknown security threats.”
That is a very straightforward positioning statement, quite typical of a security company. Just one problem: it doesn’t quite pass the checklist I mentioned earlier. Let’s see:
Does the problem have clear financial implications?
Not really. We are told first of all that there is a threat lurking out there somewhere online. But that threat has no exact proportion, and the target customer (the head of a household or small business), is at pains to estimate how much exactly a digital threat means in terms of lost income, lost business, theft, or other mischief.
Is the customer aware that this is a problem?
Maybe… although given that this is such a simple solution to a complex problem, it’s rather doubtful that anyone who truly understands the problem doesn’t already have a solution in place. Perhaps there is market awareness of the problem, but we aren’t yet clear from this statement that the target market knows they’re in real danger.
Does the customer active search for other solutions?
Again, it’s not yet clear whether the target customer actively engages with this problem at all. Some probably do, but the alternatives mentioned, such as security software, serve only a minority of households. Most do not have a sophisticated solution in place. Is the product only for security minded people, or is it for people who can’t deal with complex solutions?
Is this problem something your customer would list among their most important concerns?
Again, we can speculate that the typical household or small business does not list security among its top concerns. Those that do are probably using more complex solutions. For those who are using no solution, it is seen more as a low-level, constant issue that many people would rather ignore than understand, and most people believe will never have an effect on them either way.
As we can see clearly from this checklist, we haven’t identified an urgent, well-understood need from a well-defined target customer.
Making the Problem a Real Problem
How did Steel Mountain come down to a positioning statement that did involve a clear problem and urgent need for the solution?
First, they took the painful but necessary step of considering that while their expertise and the value of the product as they see it is in security technology, the typical customer in their target market has no way of evaluating such products.
Instead, they went back to these 4 checklist questions and identified a problem that satisfies all of them at once.
The problem they identified was this:
“Parents of families feel great pressure to provide a safe digital environment for their children, and are prone to wasting money and effort on partial security solutions that never completely protect their homes and families.”
Bingo.
For starters, we have narrowed the customer set in this positioning statement to parents. In doing so, we’ve been able to identify a more universal emotional and social problem that the target customer can easily identify with.
So the problem is no longer: “my home is not secure,” but instead: “I am afraid of feeling like a bad parent who can’t protect their family.”
How does it do with the checklist?
The problem has clear financial implications. Every parent has wasted money on safety equipment that wasn’t really needed. This solution promises to end that guess-and-check approach to digital security.
The customer is very aware of the problem. Any parent who gives their child a smartphone or a tablet knows the dangers, and tries to consider them.
Nearly every parent in the target market has or will in the future investigate digital security to protect their children. The solutions are in fact much broader than merely software, as in the earlier positioning statement. Education products, specialty devices, operating systems, and many other solutions are available to address the same concerns. This solution can now be compared to those as a cost effective and complete alternative
Child safety is a top concern for most families with children. Again, by shifting the problem to one of “parents with children” rather than “owners of homes,” we have also shifted the conversation towards top concerns that parents have, for their children. Now, rather than comparing Secaura to an anti-virus software, we can compare it to other home security essentials: baby monitors, door locks, or fuse-plugs.
This process also helped the founders identify more features of the product that were very attractive for customers. Parental content locks, and “bedtime” settings for individual devices, though the founders had included them as an afterthought, were of prime interest to this new target market.
The reactions the founders got began to change because of this new positioning.
When Steel Mountain’s CEO Will Butler began pitching the company with this strategy, the change in enthusiasm was remarkable. People in his target market started asking: “Can I have one?” And “I’ve always wanted that!” It went from a geek product to something the customer had to have, and should have already owned.
Steel Mountain CEO Will Butler pitches about the stress of living up to your role as a parent.
It’s often said that “people don’t buy security.” What’s really meant by that is that people have a hard time seeing the value of something that protects us against a problem we don’t understand. If the product solves a problem we do understand, and even better, one we already have right now, then the customer is much more likely to consider buying it.
Some security companies only manage to sell to customers who have already been victimized by attacks and theft. But others find a way to sell “peace of mind,” instead.
When solutions really find a clear and understood problem and customer, they begin to feel not just strong, but practically inevitable. Why hasn’t someone done this before?
Applying it Yourself
Of course, not every problem has to do with security, or money, or peace of mind. Your customer might not be concerned with saving or making money. The logic of the framework is about the relevance of the problem to a particular customer. Have you picked a customer and a problem that match?
If not, how can you change your thinking about who the customer really is, or what their problem really might be?
Squaring that circle is never easy. As a founder, you’re naturally absorbed in what you’re building, and driven by your own reasons for building it. Opening up and applying that work to problems you haven’t considered is part of a continuous creative process. It involves talking to your target customer and others about what their real feelings and concerns are.
You have to talk to a lot of people. Not just customers, but the people who sell to those customers, and understand them best.
Getting the problem right is a life or death challenge for an early stage company. That’s one of the reasons an accelerator can be such a great choice for a team like Steel Mountain, or many other companies we’ve worked with. The opportunity to shift your thinking and test it with so many mentors and potential customers in such a short time is a rare opportunity for a startup.
StartupYard is currently accepting applications for Batch 9. We’re looking for startup founders in Crypto, AI, IoT, and AR/VR!
Get started applying to StartupYard Batch 9. Applications close January 31st, 2018.
https://startupyard.com/wp-content/uploads/2017/11/IMG_4494.jpg12801920StartupYardhttp://startupyard.com/wp-content/uploads/2023/08/SY_accelerator_dark.pngStartupYard2018-01-09 11:17:042019-05-21 11:06:01Startups: Do You Make Me Money, or Save Me Money?
At the end of StartupYard Batch 8, we asked our founders, along with some alumni to tell us about their experience with us for 3 months. Here is what they had to say.
StartupYard is currently accepting applications for Batch 9.
We’re looking for startup founders in Crypto, AI, IoT, and AR/VR!
Get started applying to StartupYard Batch 9. Applications close January 31st, 2018.
So you’ve got an idea for a tech startup. You’ve done your positioning statement, you’ve talked to people you trust about the idea. Maybe you’ve even talked to customers. Maybe you’ve already sold your product, or gotten users to sign up for your beta. Fantastic. Now maybe you need a Seed Accelerator. Not every tech startup needs one, and not every accelerator is the right choice. How do you know?
To Accelerate or Not?
At StartupYard, 59 startup investments in 6 years have shown us that the most important factor for founders looking at acceleration programs is fit. If the founders and their company are a good fit for the program, with the other startups, the mentor community and investors behind it, then the stage of the company, the domain, and the market focus are not nearly as important.
This is why we’ve invested in companies doing hardcore cutting edge technology like AI and Cybersecurity, but also companies doing technologically simple things, like marketplaces, and sharing economy startups. If the fit is good, then the diverse backgrounds and ideas of the founders enhance each other, and mentors and investors get more engaged, because all of them are able to find something they’re passionate about in every batch.
We emphasize fit over most other considerations. How can we actually help companies succeed?
Nothing can guarantee fit, but there are at least 11 things you *can* ask any accelerator to determine whether it is the program you really need.
So here they are:
1. Why Is the Accelerator Interested in My Startup?
Few founders ask us this, but to me, it’s a potential game changer as a question.
What I see as an ideal answer is: “Because we see potential in your team, because we believe in the market you’re in, and because we think our program can help you.” It helps if the accelerator likes your technology, sees it as a big opportunity, and doesn’t want to miss out. But that’s unlikely to be enough on its own.
If the accelerator can’t clearly show you why your interests are aligned, you should think twice.
2. Are You Convinced by My Pitch?
Everyone likes validation. But you don’t necessarily want an accelerator that isn’t willing to say “no.”
We are not convinced by every pitch we hear, and that’s ok, if we *are* convinced by the team. Founders should go into a program knowing that they may need to consider big changes to their approach, and their assumptions. We want teams with a passion for their ideas, but not with a toxic sense of pride.
If an accelerator is not willing to voice doubts when you ask, then it might be a sign that they aren’t going to challenge you when needed.
3. What Do Your Investors Want, and/or Where is the Money Coming From?
Another key question almost no one asks. You really should, because the investors largely determine the direction of the accelerator. They ultimately control who runs the program, and thus the decisions being made.
If the money is from a corporate sponsor, what does the corporation want? If the money is private, then why are the investors backing this accelerator? Pay attention to how aligned the accelerator team are with the investors. If the investors and the team have a solid relationship, then you aren’t dealing with office politics or competing ideas about what success looks like.
4. Does the Accelerator Management Team Have A Stake?
This is related to the previous question. Ideally, the decision makers at the accelerator have a financial stake in the decisions they are making. This helps you to determine what their motivations in working with you really are.
Is it a deal breaker if they don’t have a stake? Maybe not, but you need to know who you’re talking to. The decisions a person makes when they have no financial stake in the outcome are bound to be different. Is the person making a decision because of the politics of their job, or because they really believe in it?
5. Why Are Your Terms What They Are?
Terms vary between accelerators. I don’t think there’s an ideal formula for how much an accelerator gives, or how much equity it takes. Zero equity programs are not always a bad thing, and programs that give more or less money for more or less equity have their own reasons for doing so.
The answer tells you how the accelerator views their role in your company. “Founder friendly” terms are very important. On the other hand, a mature investor is also up front about what they would be willing to do in case something went wrong with the relationship.
The terms are one thing, but the answers are another. Any contract is in place primarily to outline a relationship, not to define it in personal terms. Those personal terms often matter more than what’s on paper, so you need to know why the terms are the way they are.
6. Have You Ever Fired a Startup During the Program?
Not every accelerator has ended a relationship with a startup in less than ideal circumstances. It does happen though, and the story is usually instructive.
StartupYard, for example, has been very open about relationships that have gone wrong. In case such a thing happens, we try hard to identify the mistakes that *we* have made that led to the problem. In each case (and there has only really been one out of 59), we recognized our own errors in choosing, working with, and helping those companies. We have only “fired” one company during our program.
We were not vindictive and did not blame them for our own mistakes. If an accelerator puts blame only on the other party, that may indicate that they don’t acknowledge their failures or their part in the relationship. We all make mistakes, but you need investors who learn from theirs, and are not afraid to tell you about them.
7. What Do You Expect from Me?
What we expect from our founders informs how we choose companies to work with, and what we see as success when they go through our program. We have our own tough standards, but they are not universally what all accelerators expect.
We want every one of our companies to be a unicorn. We expect them to try. We expect ambition and drive, and hard work. We expect companies to improve markedly in all areas during our program. We expect them to challenge themselves and to meet challenges that we help them set.
But if you ask us, we will tell you that we also expect things like personal availability, honesty, willingness to talk about your motivations and to discuss your feelings. We expect our founders to take a broad range of input that other accelerators might not insist on. We expect them to adjust their ambitions according to new realities; to make changes swiftly if something doesn’t work, and react to obstacles rather than avoiding them.
Some accelerators will give hard and fast expectations in terms of growth, even on a weekly basis. There’s nothing wrong with that approach, but you need to understand the consequences of failing to meet those expectations.
You just need to know what you’re getting into, and what success looks like to accelerator you choose. Be honest with yourself, as to whether these are things you really want, and can handle.
8. What is Special About Your Ecosystem? Why Should I Go There?
Accelerators are deeply affected by their location in a particular ecosystem. What that ecosystem has and doesn’t have, and where it is, are important factors in your decision.
For example, StartupYard is located in a beautiful, accessible, and highly livable city: Prague. Our geography places us between East and West. We see that as a big advantage, and we want startups who also see it that way.
Our ecosystem has its strengths and weaknesses. Its size makes corporates more available, while it also limits which industries are most engaged here. The history of our region affects what we have to offer startups, and we work hard to express those peculiarities and special qualities to our companies.
Pick an ecosystem that works for you. Just because a place is big, doesn’t mean it’s best. Just because there’s money, doesn’t mean it’s the *right money*. The accelerator’s answers to this question will tell you a lot about how they see their value to you.
9. Does the Accelerator Pay The Mentors?
Hopefully the answer is “No.”
Of course, accelerators do pay for input from professionals in areas like design, marketing, speech coaching, in-person sales, and other soft skills. These workshop runners are professionals, and you get what you pay for. Mentors are different, however.
A mentor community should be all-volunteer because the connections that founders make with their mentors must be genuine. These are people who you will be relying on to follow-up, to open their contacts to you, make introductions, and be available for further advice and support down the line. That has to come from a place of passion, not greed.
Our mentors do it for various reasons. It improves their personal or company brand, it makes them look good, it gives them insight into emerging trends, etc. Primarily our mentors tell us that they do it because of the personal fulfillment and stimulation they get out of being mentors. These are high achieving individuals, who relish the chance to talk to people at the beginning of their own journey, and share their wisdom and knowledge.
That should be enough.
10. What Entrepreneurial Experience Does the Management Team Have?
An accelerator is for true entrepreneurs. No one is better suited to recognize your entrepreneurial strengths and weaknesses than a fellow traveler. That’s why most of StartupYard’s management team are founders of one kind or another themselves.
The management team don’t have to all be former tech startup founders. I was not a startup founder when I joined StartupYard. Neither was our Associate Helena, or our Portfolio Manager Jaromir. But we had all been entrepreneurs of one kind or another.
Cedric Maloux, our Managing Director, was a tech founder before it was cool, in the mid 90s. Helena owns a Yoga Studio, I run several side projects, and our Head of Partnerships, Gustavo, ran his own healthtech company for several years- we met because he applied to StartupYard with that project. It failed, but no one has better insight as to why it failed, than he does.
A military leader with no combat experience is a danger to the people he leads. It’s the same in Startupland. An advisor who hasn’t seen plans and dreams fall apart, is a liability to the founders he or she advises.
11. Do You Have Partnerships with Potential Customers?
Accelerators are not just about learning. They’re about doing. A key part of growing your company is going to be working with larger partners inside and outside the tech industry. A B2B startup needs real customers to talk to, and a B2C startup needs to talk to companies who serve the customers they are after. So ask about the accelerator’s real relationships with companies that may be important to your success.
In Startupland, there are “Partnerships,” and there are Partnerships. Promotional partners are cheap, and the relationships totally impersonal. Sponsorships and co-operational partnerships are better. An ongoing partnership is better than a short-term one.
You want an accelerator with a real working relationship with key players inside multiple industries and corporations. You may not always know which contacts you need, so the depth of the partnerships are important. Just because a company’s logo is on the accelerator website, doesn’t mean you’ll get past the secretaries if you need to.
So when you ask about these partnerships, pay attention to which contacts the accelerator actually has: they should be C-level, or other empowered representatives like board members, founders, and investors.
No accelerator will have powerful contacts in every corporation or government institution you may need, but an accelerator should have strong relationships in a range of key industries. This is why StartupYard has a dedicated team member for Partnerships, and it is why we have investors with deep ties to tech-related industries, who can leverage their networks for founders.
StartupYard is currently accepting applications for Batch 9. We’re looking for startup founders in Crypto, AI, IoT, and AR/VR!
Get started applying to StartupYard Batch 9. Applications close January 31st, 2018.
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StartupYard is currently accepting applications for Batch 9. One of the key verticals we are focusing on during this round is Crypto-tokens and Blockchain.
Get started applying to StartupYard Batch 9. Applications close January 31st, 2018.
Bitcoin’s unsavory early associations have meant that many have tried to separate the discussion of Bitcoin and Blockchain technology. But that is an incomplete approach. Blockchain in a technical sense is just one of a number of elements that make up crypto-tokens, like Bitcoin, and will continue to form the basis for future innovations.
The central idea behind crypto-tokens is to create trust via collaboration, communication and computation through cryptography. This approach relies on a number of technologies: the blockchain (a distributed database), a decentralised consensus algorithm (proof of work) that allows security and open systems of access (no accounts are necessary). For more information on bitcoin, we encourage you to follow one of its most outspoken evangelists: Andreas Antonopoulos.
Today, a lot of startups are working with crypto-tokens and distributed ledgers to create new decentralised services to reinvent entire industries.
Why is StartupYard Investing in Crypto Startups?
This week we also wrote about why cybersecurity startups should apply to StartupYard. Much of the reasoning is the same, however unlike Cybersecurity, where the list of customers is long, and the need is very well understood, crypto-token technology is in its early years.
Bitcoin is making headlines, but the deepest benefits to society of secured distributed ledgers, transparent transactions, and the decentralization of data sharing and communication are still to come. Most of the true benefits have not yet been realized, but are appearing on the horizon. Startups need a deep network of business, tech, and investment mentors who can help them turn novel technologies into tangible, real world change.
Our interest is in finding those founders who have the ambition to solve societal, business, and governmental problems using this technology for the good of mankind. The ways in which crypto-tokens can benefit us all can’t be tallied, but just a few examples are:
Transactions: Crypto technology opens up the potential for a true peer-to-peer transactional ecosystem, in which both people and machines can trade anything from processing time, to energy, bandwidth, or currency, in a secure, trustless and cost-effective way.
Net Neutrality: As open access to the internet comes under attack in the US and elsewhere, crypto can provide a check against the censorship of information, and the suppression or preferential treatment of some sources of data and services over others. Distributed ledgers may also help fight state and non-state propaganda operations by providing tools to check facts and records.
E-Government: Transparent, open, decentralised networks without a single point of failure allow for decentralised trust to provide potential open-source solutions to election fraud, voter suppression, online voting, and voter identification- all problems that are linked with corruption and inefficiency in state and local governments.
Security: Crypto and blockchain technologies provide a potential defense against cyberterrorism, cyberwarfare, and malicious destruction of data, or the dissemination of false data and malicious code across networks. It also provides the potential for more secure collaborative networks that are not based on a central entity such as a corporation or government, eliminating the need for 3rd party support of data storage and sharing.
Why StartupYard?
Opportunities for crypto and blockchain startups appear to be numerous at the moment. Blockchain is having its first day in the sun, and ICOs (Initial Coin Offerings) are now proliferating. However, this unregulated and largely disorganized market is poorly understood by institutional investors, and especially corporations and governments.
This is a shame, because it will be these players who will give breakthrough technologies access to global markets and the customer base they will need to really have an impact. This is what StartupYard offers: not the quick cash of an ICO, but the stable foundation of a sustainable, global business.
For that you need:
Credibility and Access
StartupYard is a trusted partner for corporations, utilities, and investors who are seeking to engage with early-stage cutting edge technology startups. Translating and aligning your goals with those of large organizations with a global footprint is a long and painful process in the best circumstances.
Without a key partner providing access and credibility, this becomes even harder. StartupYard allows a crypto company to get their foot in the door of banks, telcos, and large investors with our deep network of mentors and advisors. Convincing those in power to trust and rely on you is a key step toward achieving your global ambitions. It should not be ignored or minimized in its importance.
Business Fundamentals
Blockchain and crypto technologies are exciting, but the fundamentals of business have not altered because of these technologies. Companies that operate outside traditional business structures and legal frameworks put themselves at risk, and just as importantly, risk the future of their technological breakthroughs.
Building a sustainable and rational business is as valuable today as it was when StartupYard was founded in 2011. You need experienced partners who have built fast growing tech companies before, to share their mistakes and their successes, and give you your best shot at success.
Experience
StartupYard’s hands on experience in blockchain technology is still recent, but we have already made two investments into companies leveraging the blockchain – one in Cryptelo, which has turned to providing secure key storage and transmission for blockchain products (and is raising an ICO), and Bloknify, a winning project in our most recent hackathon in partnership with KB Bank. Blocknify is developing a solution for secure contract verification using blockchain.
Beyond that, StartupYard has a deep well of experience in turning novel technologies with unclear or undeveloped applications into real businesses. We helped turn an NLP product for the Albanian language into Gjirafa.com, the fastest growing tech company in the Balkans. We helped turn a team of music and neural network geeks into Neuron Soundware, now making enterprise grade IoT devices with on-board AI that diagnose faults in heavy machinery (like Airbus jets).
We helped boost a once hobby project (BudgetBakers), into a global company serving hundreds of thousands of active users, and we have helped Rossum, an AI company doing document analysis, evolve into a venture invested company with a growing team.
Not all of our bets will pay off, and crypto-token technology will be no different. But as any one of our alumni will attest, startups at StartupYard do not fail due to lack of preparation.
Should my Blockchain Startup Apply to StartupYard?
Are you an early stage company, with a unique approach using crypto and blockchain to one of the problems we’ve talked about (or a new problem we haven’t), that would benefit from a deep network of mentors and advisors with the reach and scale the technology needs to succeed?
Are you two or more founders, who know the value of an accelerator, and are looking to build a global, sustainable business, serving clients potentially all over the world? Do you believe in what you do? Do you think you can convince others that you’re right?
Does your work have the potential to impact the lives of many people in a positive way?
If so then yes, you should apply.
Get started applying to StartupYard Batch 9. Applications close January 31st, 2018.
StartupYard is currently accepting applications for Batch 9. One of the key verticals we are focusing on during this round is Cybersecurity.
Prague, and StartupYard itself have a long history of security successes, which we’ll cover here.
In the past 4 years, StartupYard has accelerated a number of high-profile tech startups, which have gone on to have a big impact. These include enterprise mobile security firm TeskaLabs, secure storage and exchange platform Cryptelo, and most recently, the home network security provider Steel Mountain. We are looking forward to adding companies in the cybersecurity, cryptography, and blockchain in Batch 9. Applications close January 31st 2018.
There is no single more pressing issue than cybersecurity in the technology industry today. As big data proliferates, and AI takes over many tasks and systems formerly run by humans, our digital lives and businesses become less physically vulnerable, and more dependent on secure transfer, storage, and access to data and the devices that use it.
As StartupYard’s recent alum, Steel Mountain founder Will Butler put it on this blog: a digital attack on your home now has a greater potential danger than a physical one. These dangers are not only related to money or to privacy, but increasingly to basic safety as well.
The number of potential weak points in digital security continues to multiply daily, constantly increasing the rewards to those who would steal information and compromise networks.
For enterprises and governments, the story is much the same. Forbes magazine called 2017 The Year of CyberWarfare, and from attacks on democratic institutions to massive data breaches in enterprise systems, affecting billions of individuals, this has turned out to be true.
State actors and potential terrorists have also gotten into the game, with massive black-hat propaganda campaigns, targeted data thefts, DDOS, doxing, and more. This year saw organized cyberwarfare against Ukraine, and a possible state-sponsored attack on public and private utilities across Europe in the wannacry ransom attack.
Why StartupYard?
As the number of threats to our data and our electronic systems has increased, a new wave of cybersecurity companies has risen to meet the challenge.
2017 was a record year for cybersecurity startup fundraising. The sector has grown from under $1bn in 2012 to over $5bn today, with a record 44 M&A deals occurring in the first quarter of 2017 alone.
You might think that in this kind of environment, a team with a cybersecurity product and a few brain cells between them could make it big. And in fact they could, if they were very, very good, and very, very lucky.
The reality is that even in a hot space, and sometimes even *especially* in a hot space, differentiating yourself and building a network that will sustain you and grow your business for years into the future is as hard as it ever was.
Growing a global business is hard, even when you’re selling something everyone needs. Especially when you’re selling security, which everyone needs, and no one wants to buy.
Note our emphasis on sustainability and the future. StartupYard believes strongly in building a sustainable global business for the future. The winners in cybersecurity will be those who started with a stable foundation, a network of mentors who know what they’re doing, and a set of investors ready to support them long term.
So here are the ways StartupYard can help a Cybersecurity Startup in 2018:
Trust and Reputation
You may know the old line about conservative business decision-making: “Nobody gets fired for buying IBM.” This is still very true. Security is all about trust and reputation. Big corporations with complex decision-making processes and complex needs have to work with companies they know.
After all, no one wants to “buy security.” They want to buy peace of mind – insurance against things they don’t want to think about.
The only way your technologies will end up being used at Microsoft, or IBM, or by a government or a bank, is if someone who already has that level of trust and comfort with those same customers helps you to enter the inner circle.
That is exactly what StartupYard’s mentor network is set up to do: give startups a ready-made relationship with trusted partners who can make those connections for them, and help them build trust faster than they could on their own.
Location and Community
StartupYard is at the heart of the Central European tech ecosystem, and our home city, Prague, is a hub for cybersecurity technology in Europe. World leading security companies such as Avast, Cognitive Security, and AVG were founded and grew right here, along with Eset in neighboring Slovakia. Their influence, knowledge, and reputations have made the Czech tech ecosystem particularly suitable for security companies looking for partners who understand the value of their work, and how to use it.
Not only is Prague an excellent place to develop a cybersecurity business, it’s also a great place to build your team, including engineering and sales. Czech security and cryptographic skills are among the highest in the world. The region is known for producing superior talents in security engineering, and knowledge of sales in this field is particularly strong.
StartupYard has a deep web of connections to this industry, that growing companies can leverage right away to grow and position themselves for success.
Experience and Knowledge
All of which would be meaningless, if StartupYard were not the home of more than one high-profile cybersecurity startup.
Our track record includes companies such as TeskaLabs, the first Czech company ever to attend TechStars, and now a profitable and growing company with major enterprise clients such as O2 and Cisco. We also have Cryptelo, which boasts a world-leading standard in cryptology, with secure storage and transmission of data.
And there’s Steel Mountain, our latest investment in the field, focusing on consumer digital security, who have recently signed agreements with a major manufacturer to build their breakthrough home network security solution for families.
These companies contribute to our team’s experience in cybersecurity, but they also act as mentors and support mechanisms for future startups in the StartupYard program. They bring a network of mentors, investors, and advisors with a proven track record of getting results for growing companies in the field.
Should my Cybersecurity Startup Apply to StartupYard?
Are you an early stage company, with a unique approach to a serious security issue, that would benefit from a deep network of mentors and advisors with long experience in cybersecurity?
Are you two or more founders, who know the value of an accelerator, and are looking to build a global, sustainable business, serving clients potentially all over the world? Do you believe in what you do? Do you think you can convince others that you’re right?
Does your work have the potential to impact the lives of many people in a positive way?
If so then yes, you should apply.
Get started applying to StartupYard Batch 9. Applications close January 31st, 2018.
Why Should VR-AR Startups Apply to Accelerators in 2018?
VR/AR (Virtual Reality and Augmented Reality), have been around as concepts for a long time. What we might recognize as VR in its modern form dates back, surprisingly, to the 1950s, when the inventor Morton Heilig developed the “Sensorama,” a machine that combined stereoscopic images, binaural sound, and even smell into 5 short films.
Augmented Reality, or AR, has in fact found broader applications in the past few decades. It is common in military applications, and in aviation, where it is used to enhance HUD (Heads Up Displays) with flight data. Today, even some production cars include HUD displays as a safety and ergonomic feature.
Since the 50s, VR has periodically captured the public imagination — notably in the 1990s, when both Sega and Nintendo developed headsets (though Sega’s never reached the market). Even photorealistic 3d simulations were possible by the late 1990s — I tried one myself at the Kennedy Space center nearly 20 years ago. But despite the hype, VR has never taken the mass market by storm.
This post will dive into some of the reasons why not, and why now is probably different.
For the past few years, familiar signs of a resurgence in VR popularity have been growing. What has changed?
It seemed cool, but it was pretty awful.
Obviously something. StartupYard has received more inquiries from AR/VR and so called “mixed reality” startups during our current open call than in any previous year. In fact, I’ve personally met more VR startup founders in the past 6 months than I had in the past 4 years combined.
Why are VR/AR Startups Applying to StartupYard Now?
This year, we got an influx of applications from startups, all working on AR/VR technologies and applications. We shortlisted several, and eventually accelerated two: Mixed Reality Cloud, and Mindbox. In this post, I’m going to outline a few reasons why I think the AR/VR train is suddenly coming into the station in 2017.
As with any technology, there is not always a perfect correlation between being able to do something, and having a good reason to do it. As we will find in this piece, technologies tend to really explode only when both those conditions are fulfilled.
Thus, here are a few reasons AR/VR is a legitimately big deal for early stage startups in going into 2018:
1. The Smartphone Has Peaked
As Gizmodo noted over a year ago, the massive adoption of smartphone technology has peaked, and is now slowing down as consumers cycle more slowly through technologies that bring fewer noticeable improvements, at a lower rate over time. The release of the iPhone X, for all its technical achievements, underlined the basic premise: the smartphone concept has been fully articulated, and is now undergoing continual refinement.
Smartphones and tablets have ceased to double and redouble their abilities every year, and have begun to be refined into replacements for the traditional desktop computer for many consumers. Already, tablets and phablets have replaced home computers for many consumers. In business, the same trend will likely follow.
This has had a few consequences. First, the core benefits of a smartphone have more or less been fully realized. A typical smartphone can do almost anything you’d want it to do. There is no longer a huge demand for performance improvements, given that even a low-end phone can do so much. The market has become highly differentiated, and every niche has been filled.
Second, as smartphones have become ubiquitous, the businesses built on leveraging them have also achieved scale and begun to saturate the market. As room runs out for smartphone makers to stand out against competitors and justify their higher prices, new use cases must be found or invented. And VR, particularly recently, has been the beneficiary of that pressure.
And…
2. We’ve Hit Peak Mobile
Related but distinct is the peak of the “mobile revolution.” It may be hard to believe, but it was only in 2016 that mobile web browsing overtook desktop browsing for the first time. Today, a majority of human interaction with the internet is done using mobile devices.
Facebook, at the center of that revolution, has grown to over 2 billion active users, but its unprecedented growth of the late 2000s and early 2010s (which was around the time Facebook transformed itself into a mobile-first company) has slowed to a crawl. Not because people are using it less, but because it isrunning out of new people to add to the platform.
As a sign of how mature the mobile market has become, Facebook indicated in 2016 that it would soon run out of space to show people ads on their newsfeeds, prompting the company to begin delving into new experiences in which customers can see and interact with advertisers (such as messaging, and soon, VR).
The mobile revolution brought the age of apps from the Apple App store, Updates from Facebook, Google Maps and the Play Store, and mobile gaming. Mobile gaming alone became more profitable than traditional gaming in 2016.
Again, as with peak smartphone: peak mobile means that mobile software and content developers, along with advertisers, face higher competition and a more saturated market than ever before. Differentiation on mobile has become harder, and so they are actively seeking new media that can provide fertile ground for new content, and new marketing.
And…
3. We Still Need Immersive Experiences — and We Aren’t Getting Them
Gartner noted in their predictions for consumer digital technology in 2017, two very interesting trends. First, that the key upcoming innovations in mobile mostly have to do with AI, IoT (Internet of Things) and ubiquitous computing. Not with consumer applications, but with intelligence and data layers that enrich our lives without necessarily meaning we need to actively engage with them.
And this is backed up by recent hardware developments. Amazon is promoting home computing systems with no physical inputs at all. Apple has just announced the HomePod, which again, proposes to eliminate some use cases for smartphones and televisions, and free up our eyes for looking at, I suppose, other people. I have been told that is what people used to do.
There has been a lot of talk about how the Amazon Echo and other home audio devices are a new medium for advertising, but I’m sceptical of how important that will be in the future. In a technology landscape where more and more of our contact with computers and information is self-directed, and two-way, the nature of advertising and marketing will have to change as well. Perhaps in 5 years a display ad will be a dying relic, and new “marketing AIs” will instead engage directly with individuals to find products that best suit their needs.
At the same time, Gartner predicts that VR, not television, and not tablets or smartphones, will be the leading area of innovation for digital media. So as home computing trends toward becoming less obtrusive, and less all-consuming, at the same time, VR promises to offer a deeper content experience than any medium ever has before.
If smartphones and home computers are going to be less attention-consuming than ever, then where will content creators and marketers go? A good bet is that many will see AR/VR as fertile ground for development. What better medium than somewhere people choose to go to become totally absorbed?
3. People Aren’t Happy with the Status Quo
As smartphones and mobile-first applications have become the core of our experience of media in general, our experience of online content and storytelling has, in some ways, become less impactful. Everything is noise, and nothing is substantial- a feeling you’ve no doubt detected on your Facebook News Feed more than once. Technology has progressed, but it’s failed to deliver experiences people engage with ever more deeply. We may check our phones hundreds of times a day, but do we watch whole movies, read a whole magazine, or play through entire games? Not so much.
And in fact, consumers are not happy with these changes. The ASCI found in its most recent consumer studies, that consumer satisfaction with computer software, smartphones, and social media platforms declined overall in 2017, or failed to make any gains – breaking a decade long trend of increasing satisfaction in these areas.
So we’re getting sick of the status quo. VR can be seen as literally the antidote to checking a smartphone 150+ times a day: a medium that requires your full attention as no other digital media does. And that’s a super attractive prospect, not only to a content creator, but to an advertiser as well.
As the smartphone has evolved, it has at times tried to fill very contradictory roles. It wants to be, by turns, invisible, and very visible: innocuous, and attention getting. We’ve cycled rapidly between smartphones technologies that virtually disappear into the background (like smartwatches), and those that dominate our field of view, like phablets, and even mobile VR headsets. Very often the same companies, like Apple and Samsung, try to sell us both ideas at the same time.
But I am betting that the age of “in-between” experiences is not going to last forever. Ultimately, people want rich content experiences. People still go to cinemas, even though they can download thousands of titles on demand. People still read paper books, even though it rarely makes economic or practical sense anymore. I would bet that VR will join staples of media like the book and the cinema- a technology people use not for convenience, but for the value and depth of the experience.
And…
This is What Big Data Was Always Supposed to Do
StartupYard has been involved with data focused companies from the beginning. But for years, up until just very recently, one of the only ways of turning big data into a business was the same way people had been doing it for generations: selling it to somebody.
Of course, that generated many user-facing applications that enhance people’s lives and make things easier, but at the end of the value chain for most data, there is an advertiser waiting. Facebook, Amazon, and Google have built empires on that assumption, and Apple and Microsoft have made the infrastructure and devices that generate the data, and make it possible to distribute the resulting content, with ads embedded.
Data may still be “the new oil,” as it has become popular to say, but we must remember that as with oil, it took many years, and many fits and starts, to discover its ultimate potential.
Consider the evolution of oil in the modern world. First we burned it, and when that trick got old, we figured out ways of distilling it to make it burn even hotter. Then we figured out that you could use it to make things: chemicals, plastics, synthetic rubber, and other materials.
The innovation with oil wasn’t setting it on fire (we have known oil burns for thousands of years). The innovation was in making novel things out of the oil: fuel, but also tires and even whole cars, smartphones, microchips, and everything in between.
So if Data is the New Oil, then VR may be the new Plastic
VR promises at least one way in which big data will actually translate into novel products that ordinary people can use. Creating artificial environments, or enhancing existing environments with information and interactive elements takes a lot of data. As sensors and data processing platforms have grown in complexity and scale, we are approaching a point at which we can use that scale to be creatively free to make new things.
I have met recently with more than one startup who are counting on that very assumption: that now, unlike ever before, we have enough data about places, objects, physics, and people, to make artificial environments that will be fulfilling to use, and add detail to real environments that will be really useful.
I believe that a century from now, we will view VR as the child of big data — just as we now view the automobile as the child of big oil.
And…
VR Was Inevitable, But Not Always Obvious
There are some technologies that have been so easy to describe, that we’ve known we wanted them since long before they were possible. Powered flight, for example. For centuries, humans understood the benefits of flying, but still, we didn’t have the knowledge or skill to make flight a reality.
And yet other technologies are strangely elusive in that way. The telephone was patented in 1876 by Alexander Graham Bell, who, according to legend, was unable to sell the technology to Western Union for $100,000 because they thought it was a toy.
Despite what we know now about the transformative power of the telephone, it’s surprising to learn that despite the fact that transatlantic telegraph cables existed before the telephone was invented, the first transatlantic telephone call took place over 50 years later, in 1927. And that first phone call from England to the United States happened the same year as Lindberg’s first flight from New York to Paris, only 24 years after the first working airplane was built.
Airplanes were never underestimated, but it took a lot of imagination to picture the way the telephone would transform life as we knew it. Western Union had been right at the beginning: without a dense network of connections to make it truly useful, the telephone was only a novelty. You needed dense telephone networks on both sides of the Atlantic to make a transatlantic call economically viable. Yet when it became commercially viable, the benefits were so obvious that in another 25 years, there was a telephone in literally every house in the developed world.
So while international telephony was inevitable due to its technical advantages, it was not obvious, due to its network dependency.
VR is a lot like that. It’s been not much more than a toy for decades, because the network needed to support its most promising functions hasn’t really existed until recently. How do you generate content? How do you distribute it? These solutions have been long coming, but they have only just begun to make VR an obvious area of growth in the future.
And today, startups are seeing opportunities in the same way that businesses first began to realize the potential of the telephone decades after its invention. A network has been needed, and today, with a world full of smartphones, connected by social networks, and filled with content creators and eager marketers, that time has finally arrived for VR.
Applications are open for StartupYard Batch 9!
Are you a startup, or an entrepreneur with a great Deep Tech idea?
Applications are now open.
https://startupyard.com/wp-content/uploads/2017/11/20171115_224434-2.jpg29885312StartupYardhttp://startupyard.com/wp-content/uploads/2023/08/SY_accelerator_dark.pngStartupYard2017-12-01 13:30:072019-05-21 11:06:02Why Should VR-AR Startups Apply to Accelerators in 2018?
In our last post, we talked about the “Hero’s Journey,” the basic premise of most modern storytelling. We looked at some examples of this story in action, and some examples of it done badly.
Now we’re going to talk about your story as a Startup.
Starting with Characters and Plot
We start every round at StartupYard with Product Positioning Statements. The structure of a positioning statement has a useful clarity. In essence it’s this:
Who it’s for
What problem they have
What the solution is
What the competition is
What makes this solution unique
This is the plot of the story, and it introduces key characters.
But it isn’t enough. The key to a great story about what you and your company does is conflict. What are you fighting against? What is wrong with the world?
Building an Appropriate Setting
All stories take place against a backdrop. A time and place, or a certain part of the world or of society, or business. And that setting is a part of the story. The setting changes along with the characters. The characters are affected by the setting.
Your setting is a key part of your story because it helps to define the stakes of the story. Putting a story in the wrong setting can damage its impact. For example, telling the story of your Groupon-clone startup against the backdrop of the mobile revolution might be a bit too grandiose. Likewise, for a company doing something ambitious and far reaching, a setting that is too confining limits the story’s impact.
Your Story Seems a Bit Off
Thus, bad storytelling happens when there is a mismatch between the setting and the actual scope of the story. Increasing the efficiency of a complicated accounting process by 10% is not “making the world a better place,” just as altering the way that people travel and view hotels (such as with Airbnb), is not “increasing the availability of lodging by 15%.”
The stakes you are playing for are important. Don’t go too big, and don’t go too small. More importantly, particularly for early-stage startups: bigger is not necessarily better. We can’t all change the world right away.
Identifying Conflicts
Conflicts don’t always occur between competitors. Your conflict is what makes you, as a startup, different from everyone else.
Your conflict is what makes you unique. They are your reason for existing.
If I’m, say, a home security company, then what is the central conflict of my story? It might be that another security company rips off their customers, and I don’t. That’s a conflict with a villain. It might be that people need to be more concerned about their security. That’s a conflict with the status quo. Or it might be something else entirely.
Here are some examples of central conflicts companies use to define company stories:
Sustainability: Being more environmentally conscious than competitors
Affordability: Sticking up for the little guy and providing a better service
Accessibility: Being available to more customers, or to customers with more specific needs
The Underdog: A small company fighting the evils of a large corporation
Patriotism: Emphasizing a patriotic or locally-focused attitude
Exclusivity: Offering something with limited availability, for discerning customers
Charity: Using your profits, business model, or market position to do good for others
Design Focus: Emphasizing a high attention to material or visual design
The EveryMan: Portraying a company as representative of the average person, or lacking in pretension (often the opposite of design focus).
Why do we call these conflicts? Because in every case, the central conflict is put into contrast with an opposing force. Your company is sustainable, but others are not. Your company is charitable, while others are greedy. Your company is focused on normal people, while the competitors are for specialists or geeks, etc.
There is always an opposing viewpoint in brand positioning: there is always someone on the other side of the fence.
Putting Your Conflict Into Words
In Part 1, we talked about how all great stories are human stories. And so the conflict at the heart of a startup’s story has to be a human conflict.
Very often, startups get bogged down in talking about how they see themselves. They’re smart. They’re design-focused. They’re “fun.”
But what is smart? What is design-focused? How do we define fun? Why do we want a company to even be fun? We want those things because of how they make us, the customers, feel about ourselves. People don’t buy products from a company because the company is cool, they buy them because the products themselves are cool, and because owning them makes us feel cool too.
Your central conflict has to drive your story: it has to be what customers think of when they think of you.
Try a creative exercise: Pick a list of negative adjectives to describe how your customers feel about the problem you are solving for them. That list might be something like this:
Annoyed
Angry
Tired
Frustrated
Trapped
Unhappy
Hopeless
Do that step first. Now go back and supply a list of roughly opposite adjectives:
Relieved
Joyful
Energized
Pleased
Free
Happy
Hopeful
These are the words with which you will describe your customer’s feelings. The feelings your products give to customers are the opposite of the bad feelings they have now.
Thus, a story about a company helping its customers might go something like this:
“So many ordinary people are tired, and frustrated by X. They feel trapped and hopeless because there’s no way to stop X from happening. That’s why we worked long and hard to create [our product], it frees you from X, so you can enjoy relief, feel energized, and be hopeful for a happy future.”
That’s an extremely blunt story (and it sounds like an advert for hemorrhoid medication), but it is a story of conflict. There is evil, human suffering, sacrifice, and triumph. It’s everything a story needs to be.
Picking A Conflict You Can Win
It doesn’t matter how big your competition is, or how big the problem is that you’re solving. A startup story is about how you are different: how you see things differently from others.
In 2000, Google’s startup story was based on the words: “Don’t be Evil.” For a company positioning itself against competitors like Microsoft and Yahoo, both of which already had a reputation for being sort of evil, this story worked well. Google wasn’t bigger. It wasn’t more powerful. But it was *not* evil.
It shouldn’t be a surprise then that 17 years later, this is no longer Google’s story. Yahoo is gone. Microsoft isn’t a member of the “Big 4” any longer. There’s no one for Google to be less evil than anymore.
Your conflict has to be something you can win at, though. Otherwise it’s just ridiculous. Better logistics than Amazon? Probably not. Better natural language processing than Google? Doubtful. You have to be able to win at something a competitor doesn’t do well. What is that thing?
Identifying Arcs
The way that a character in a story changes is called an “arc.” A character begins as one thing, and ends as another. Foolish to wise. Arrogant to humble.
The arc of a character is best seen as a change in what motivates that character- how what they want changes over time. As in the Hero’s Journey, a character with an arc not only becomes wiser, but also wants different things at the end of the story. He or she learns to see the world differently, and thus change their priorities.
When we talk about character arc, it’s convenient to view it in a binary way. Characters are either “rising” (becoming better), or “falling” (become worse). In this way, almost any character arc in a story can be described:
Rags to Riches (rise)
Riches to Rags (fall)
Man in a Hole (fall then rise)
Icarus (rise then fall)
Cinderella (rise then fall then rise)
Oedipus (fall then rise then fall)
Thus, archetypal characters have arcs that are some combination of rising and falling. But this trope is not contained in just literature. It is all around us. A person’s life story and the story of a startup are a series of these arcs. Telling a story is about showing how a person has changed. Likewise, a startup story is about how the startup, or the founder, or any other character has experienced an arc.
Bill Gates is a Rags to Riches story (not just in the sense of money). He rose from a solitary geek to the king of a software empire. Steve Jobs is a Cinderella story: he rose to the heights of fame, then was drummed out of Apple, but returned to become one of history’s most impactful CEOs.
These arcs are all around us: they play out in every life and in every startup. Which is your arc?
Putting Your Story on Paper
One of the hardest things about my job is getting founders to sit down and commit their stories to words. The anxiety it provokes is very real. Does this story mean anything? Do I sound stupid?
There is a natural tendency for people to avoid exposing themselves for possible shame and ridicule. However, telling your story is a risk: if it doesn’t feel risky, it isn’t a compelling story.
Try to keep in mind the elements we’ve covered here: Your setting, your conflict, your characters, and their arcs. If you’re doing that, you’re probably not doing it wrong.
https://startupyard.com/wp-content/uploads/2017/10/typewriter-2794560_1280.jpg7861280StartupYardhttp://startupyard.com/wp-content/uploads/2023/08/SY_accelerator_dark.pngStartupYard2017-10-13 09:30:202019-05-21 11:06:04What is Good Stortelling? (Part 2)
Originally published on our blog way back in 2014, this post has been one of our most enduringly popular. According to Google Analytics, the average reader has spent over 20 minutes studying it. It is also our most popular piece on Medium. Since that time, we’ve shared this post with scores of startups, and used the methodology detailed here over and over again. This post is updated to reflect all that we’ve learned in the past 3+ years.
What is Positioning?
“Positioning” has often been described as “the organized system for finding a window in the mind.” That’s how Al Ries and Jack Trout described it in their book: Positioning, a Battle for Your Mind, a groundbreaking work from 1981.
Al Ries is often credited with coming up with the term “positioning,” and he describes it as a way of using a customer’s own experience of the world (including with other brands and products) as a way of communicating with that customer. Rather than communicate in a vacuum, companies that use effective positioning target customers who are already familiar with competing products and brands, and use that familiarity to differentiate themselves.
In the book, Ries highlights perhaps the most famous example of brand positioning in the 20th century: that of Avis, which in 1962 premiered the tagline: “At No. 2, We Try Harder.” Avis was at the time the market runner up in rental cars, and the company used that fact to imply that they were more accountable than their competitors, because they had to be.
In an early case of position-focused advertising, Avis used their status as 2nd in the market to imply that they were more attentive to their customers, because they had to be.
Positioning is Everywhere
When we stop to think about positioning as a promotional tool, we begin to see that it is everywhere.
Brands use their competitors as foils for their own messaging constantly. Remember those “I’m a PC, I’m a Mac” adverts.
Apple portrayed PC users as unstylish and bumbling in a popular series of TV spots.
Brands for the the past half century have often focused less on defining what their products are, and chosen rather to define what they are not. Another striking example comes from 7-up, which in the 1970’s sought to gain market share by telling customers that their clear soda was “the un-cola,” explicitly defining themselves as essentially “Not Coke.”
Whereas in the past, consumers may have seen their range of choice as: “drink Coke or don’t drink Coke,” 7-up presented a different scenario: “drink 7-up when you don’t want Coke.”
In presenting consumers with a new choice: either drink Coke or drink 7-up, the brand found a window into consumers’ minds. It suggested that there were many people who would prefer an alternative to Coke that was not available.
By framing 7-up as an alternative to a popular drink, the brand convinced retailers and consumers alike to buy 7-up along with Coke, in order to fill the demand implied by the advert. In 7-up’s ideal scenario, customers would not stop buying Coke, but would buy 7-up in addition to Coke.
In the 1970s, 7-Up promoted the idea of a citrus-flavored soda as an “un-cola,” to break down consumer expectations that carbonated sodas are dark in color.
The product itself also emphasized its differences from traditional sodas. It was not caffeinated, it was sour, and it mixed well with the more popular alcoholic drinks of the time, including gin and vodka, which were gaining market share in the 1970s. “7 and 7″ was a popular drink choice by 1970, a mix of Seagram’s 7 Crown Gin, and 7-up.
The brand thus further differentiated itself from Coke, which had traditionally focused its brand on taste and tradition, using the tagline “It’s the Real Thing.” Whereas Coke was a conservative choice, enjoyed by families and older generations, 7-up was a young brand- enjoyed at night in bars and in cocktails, rather than on sunny afternoons at baseball stadiums or at restaurants.
Thanks to these ads, 7-up rose in the 1970s to 3rd place among sodas, only losing its market share with the rise of diet sodas in the 1980s and 90s, and the decline in popularity of mixed drinks in favor of bottled drinks and beer.
What a Product Positioning Statement Looks Like
Here we’ll focus on a sub-discipline of positioning as a whole: Product Positioning. It’s the same general philosophy, but with its own specific methodology.
When a startup team joins StartupYard, one of the first things we ask them to do is to sit down and write our a “positioning statement.” The format is deceptively simple, and it looks like this:
Product Positioning Statement:
(Our Product) is for (target customers):
Who (have the following problem):
Our product is a (describe the product or solution):
That provides (cite the breakthrough capability):
Unlike (reference competition):
Our product/solution (describe the key point of competitive differentiation):
Why A Positioning Statement Is Important
The positioning statement contains the core elements not only of a product, but also of its marketing and sales strategy. And while most of our teams have worked primarily on ways of describing their ideas, a positioning statement does more than this: it also justifies the notion of that idea becoming a business.
It’s important for a startup to have the concepts of saleability and market differentiation baked into the essence of the product. Writing a positioning statement, like writing a SWOT analysis, can reveal basic strengths and weaknesses in a product while it is still in the “idea” phase.
A Starting Point
Even more importantly, a positioning statement can serve as the basis for validation of a product. If you can’t describe what your company does in this compact format, it’s possible that you aren’t sure yet what your company actually does. You may be sure of what you are doing on a technical level, but what that means in business terms might not yet be clear.
The positioning statement is a conversation starter, particularly with early mentors and core team members, to facilitate early discussions about core strategy, and how the team sees itself in the bigger picture, what market it is really addressing, and what its real competition is in that market.
And a positioning statement, well-executed, can be transformed virtually complete into the core marketing message for a product, once it is developed. Take this copy from Nest’s webpage:
“Our mission is to keep people comfortable in their homes while helping them save energy, and with the next-generation Nest Learning Thermostat, we’re able to spread that comfort and savings to even more homes — and to help higher-efficiency systems perform the way they were meant to.”
Here are all the elements of a positioning statement. If the Nest founders filled in our form, it would look something like this:
Our Product is
For: Upper-middle class and wealthy people
Who: Own homes and spend a lot of money on energy costs and heating/cooling systems
Our product is a: Smart Thermostat and related products
That provides: Savings and increased comfort by improving efficiency of existing systems.
Unlike: manufacturer provided systems
Our product/solution: Learns and intelligently adapts to the inhabitants to increase comfort at all times, while saving money
A Positioning Statement Tells the Truth
The above “translation” of the Nest positioning statement doesn’t say exactly what their marketing copy says of course. They don’t mention wealthy clientele for one thing. But at $130 for a smoke detector, and $250 for a thermostat, that is surely the market they are targeting.
Their products are priced high enough to be clearly exclusive, but low enough not to seem extravagant or make a money-wise customer feel foolish for purchasing. And anyway, that messaging is not only found in the price, but in mention of “homeowners,” and of “higher-efficiency systems.” These subtle cues indicate to customers that the product is made for people who value performance, and are willing to pay to get it.
Features ≠ Differentiation
Notice too that none of the positioning statement deals with the exact features of the product. It’s all about the outcomes the product promises.
This is key: their competitive differentiation is not on a feature-by-feature basis, but holistic. They frame their competition as not only out of date, but barely worth mentioning at all. They indicate that their competitors (the providers of the systems), are not even in the same business as they are, and that therefore competing products are not even worth comparing in a more granular way.
These are all elements of Nest’s marketing that are informed by the market segment they have chosen to address, from the quality of the products, to the design, to the sales language and the pricing. And so the marketing message that says: “this product is for you,” when speaking to its target client, is backed up by a product that is built with that person in mind. The mission is clear: this is not a product for anyone, but for someone very specific, so that when the customer comes across the product and thinks about buying it, he or she can immediately see that it is made for them.
Who, Not What
There’s a reason the positioning statement starts with “who.” Over the years, we’ve consistently observed that the first thing most startup founders do is try to talk about the product before talking about the customer.
But here’s why that’s a mistake, and why the positioning statement doesn’t do that: understanding the target market is the first hurdle in actually validating a new product. Features are a distant second consideration to clearly articulating who the customer is, and what their problem is.
A laundry list of features doesn’t really address the problem of “who” the product is for, but only “what” it is for. And that “what” that a feature describes doesn’t necessarily give any indication of what problem is being solved. Startups that are dealing with complex technologies can easily skip over the core user benefits of the technology, in favor of describing the technology itself.
Common is the startup that pitches “a revolutionary new method of transforming leavened wheat products into crispy squares by employing concentrated on-demand heat conduction derived from electrical coil technology,” instead of pitching: “toast whenever you need it,” or even “a less boring version of bread.”
People Buy Outcomes, Not Features
Customers ultimately buy solutions to their problems, not technical specifications. And those problems are not always the same as the ones that the feature list actually addresses.
Consider this, when thinking about buying a car, what are the first things you’re likely to check?
Probably it isn’t technical specifications. Most people will answer one of two ways: they will check either prices, or reviews.
That indicates that the customer is very aware of what their problem is. They need a car, and they need it at a certain price, or at a certain minimum level of comfort and safety, or both. Car companies rarely list their prices up front on their websites precisely because they know that this is what customers are looking for, and so they are able to ask for customer information in exchange for information on their pricing.
Cars rely heavily on marketing to differentiate themselves, but the marketing is typically not focused on what the cars actually do. And that’s because cars all pretty much do the same things. So the problem being solved for the customer is not “I need a car,” but “I need a car that fits my personality/lifestyle/class/status and/or specific needs.”
Look carefully at a car commercial, and you’ll be assaulted with subtle and unsubtle cues about price, lifestyle, class, education, and culture, but not much about fuel injection, or anti-lock brakes, or all-wheel drive. These things may get a mention, but the whole object is to present the car as being a great value, in consideration of all that it offers for the price being asked.
Lincoln’s famously ponderous commercials for town cars are definitely not focused on features.
The goal of a typical car commercial is to convince a customer that they are buying the status and the culture that is associated with the car; that their decision is not motivated by price, even when it usually is.
That is how powerful positioning is. By showing a very clear understanding of who their customers are, car companies can turn a price-motivated decision into a statement about who the customer is, and about their place in society as a whole.
Try this: go and ask someone why they bought the phone they own, or the car they drive, or the computer they use. Whatever it is, ask them why they chose it.
The majority of people you speak to will probably not say: “it’s the best I can afford.” Instead they were answer the question in terms of what the phone or car or computer represents to them; what it says about them and their values.
For example, if the person has a cheap phone, they’ll say something like: “I just use the one that came with the plan. I don’t need anything fancy.”
That’s often code for: “I’m too cheap to buy a nicer one.”
On the flip side, ask a latest model, hi-tech phone owner why they bought their tech toy, and they’ll say it’s because they value the design, the features, or the amazing convenience of using it. They won’t say: “I bought this because I want to signal that I am wealthy and can afford luxuries.”
This dedication to explaining our motivations in personal terms doesn’t extend only from a marketing strategy for high end consumer products – it derives from the way those products are made as well. The design and build of a product must subtly betray its role in social signaling for the owner. Cheap cars are “humble,” while super-expensive cars are “subtle.” It is the cars in between that are most ostentatious.
When you see a fancy paint job on a cheap little economy car, you cringe because it is a confused communication of values by the owner. It’s pig dressed as a lady.
Consumer products can also be designed to signal their utilitarian nature, in order to make customers more comfortable with their purchase. For every €20 bottle of wine, there is a €5 bottle of wine that looks somehow less pretentious, and more sensible.
The Position and the Pitch
The main difference between a positioning statement and a full blown pitch is that the positioning statement says in plain words, what is really true about who your product is for, and what you believe its market fit to be.
This will help you to stay away from visions of (and talk about) your product changing the world, even if it doesn’t really have the capacity or the capability to be a real world changing idea. Not all products have to be for everyone, and many of the best products aren’t.
It will also keep you honest and focused; force you to make clear the needs of the market you are targeting, and force you to live in their shoes instead of your own.
https://startupyard.com/wp-content/uploads/2014/03/playing-chess-1432405-m.jpg226300StartupYardhttp://startupyard.com/wp-content/uploads/2023/08/SY_accelerator_dark.pngStartupYard2017-08-30 10:00:012019-05-21 11:06:05The Positioning Statement: Finding a Window Into the Mind
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