Aalto vg mickos_20110401

Questions and Answers on starting and building a business Mårten G Mickos Otaniemi 1 Apr 2011 Aalto Venture Garage

A variety of topics
how to get from an idea to the start, how to find the necessary level of commitment and the courage to be ambitious, how to live with the constant, nagging fear of failure, how to get your team to believe in what you're doing, how to help them maintain that belief, and especially how to help yourself maintain it.

One day

You Your supporter Your team

Keep going 1 2 Ambition Outcome 3 4 5 6 7 8

About Mårten Mickos
Born 1962 in Otaniemi, Finland
M.Sc. (Eng) in technical physics from TKK
Founded Polycon in 1987 with 2 friends
VTKK 1991-1993
ViSolutions 1993-1995
Solid Information Technology 1995-1997
Intellitel Communications 1997-1999
MatchON Sports 1999-2000
Vexillum 2000-2001
MySQL AB 2001-2008, Sun 2008-2009
Entrepreneur-in-residence 2009
Eucalyptus Systems, 2010-

Questions from you
Starting and planning
From idea to start
Finding the right target market; market segmentation
Business angels and VCs
People
Building commitment and setting the ambition level
How to live with the fear of failure
How to maintain belief in success in the team and in oneself
Handling founder conflicts
Growing
Challenges in scaling a business
Can you build a successful IT business without moving away from Finland?

Before you start a company, you need to thoroughly understand who is going to buy your product and why.

From idea to start
Sources for ideas
scratching an itch
applying a new ”thing” on an adjacent space
listening to customers
brainstorming around validated new trends
Validating an idea
is it a valuable enough problem that it solves?
will the product be easy for users/customers to adopt?
does it scale?
is the timing right?
can we build it better than anyone else?
will the overall economics make sense?

From idea to start
Common failures around ideas
too much just your own world
much too early
slightly too late
too complicated
Actions to take once you have validated your idea
validate the market and choose target market
analyze in detail the planned customer experience
figure out how to develop and how to produce the thing
find people who can help or join
do the necessary Excel exercises on pricing, markets, deal sizes, sales cycle length, costs, etc.
figure out the elevator pitch
be prepared to abandon your idea

Target market & validation of it
Markets and market changes affected by
New trends that have been validated
Old behaviors that are not going away (but that may start using a new enabling technology)
Demographics + the behavior and attention of the customers
Signs of an attractive market
Old problem that many have unsuccessfully tried to solve earlier
The new product brings quantum leap improvement
Customers BOTH save money and get a new benefit
Fits into or creates a category
Fits into existing buying behavior and patterns
Fits relatively easily into existing distribution channels
Market not too crowded

Target market & validation of it
Common mistakes
Not narrowing down the first target market enough
Not fitting nicely into a category
Not having a large enough market for the long run
Thinking it’s good not to have competitors
Not solving a valuable enough problem; thinking that nice-to-have is enough
” If just 1% of them buy”
Not asking customers
Believeing that customers behave like oneself
Not taking input and weak signals seriously enough

Telltales of a big opportunity
Defines a new category, or radically disrupts an existing one
Product, not feature
Serves a basic human need
Big scalable market
Viable business model
Brilliant and sustainable competitive advantage (in product, in how it is delivered, in how the business model works)

Funding
Starting a company is cheap today!
your mother’s credit card
free and open source software
Amazon Web Services
your friends
Once you need funding
public money
borrowed money
customers
angel investors
VCs

Funding
Angels
they invest in people they would like to spend time with
VCs
they invest in CEOs and teams
VCs come in many flavors
by stage
by geographic area
by industry
by pecking order
by style: prescriptive or supportive

Funding – VC tips
Focused, crisp plan
Weave a story
Understand your audience
Arrive by referral
Fine-tune your presentation
Resarch your competition
Present realistic financial projections
Don’t obsess on valuation
Understand exit scenarios, but don’t be obsessed with them
Understand what you have: a feature, a disruptor, a massive bet, a small bet, evolutionv vs. revolution, etc.
Get in touch with VCs before you need them

What the VCs favor today
Cloud, Mobile, Social, iPhone, Android, Gaming, Online commerce, Freemium business models, Models that accumulate useful data, Real-time web, Energy, Replacing desktop software with online solutions
Source: poll among some of the best VCs in the world in March 2011

People issues
Building commitment and setting the ambition level
How to live with the fear of failure
How to maintain belief in success in the team and in oneself
Handling founder conflicts

"The greatest danger for most of us is not that our aim is too high and we miss it, but that it is too low and we reach it." — Michelangelo

[email_address] [email_address] www.twitter.com/martenmickos Thank you! Please start great businesses

OTHER SLIDES (THAT WEREN’T USED DURING THE PRESENTATION)

When is the right time?
Are *you* ready?
The importance of the S curve
First-mover advantage?
Many entrepreneurs start too early in the window of opportunity

Elevator Pitch Template
For <key target customers> who look to <key need you satisfy>, <OurCompany> provides <offering> that <key problem it solves>. Unlike <key competitors>, <OurProduct> is/does/uses <key differentiator(s)>.

G Moore’s List for Target Markets
Target Customer
Compelling Reason to Buy
Whole Product
Partners & Allies
Distribution
Pricing
Competition
Positioning
Next target
Source: Geoffrey Moore

Technology Adoption Lifecycle Innovators Early Adopters Early Majority Late Majority Laggards Techies: Try it! Pragmatists: Stick with the herd! Conservatives: Hold on! Skeptics: No way! Visionaries: Get ahead of the herd! Source: Geoffrey Moore

Typical Investment Criteria
Compelling concept - one that changes an industry or creates new markets.
Convincing and committed management team.
Attractive value proposition.
Sizable market opportunity.
Viable, long-term business model.
Sustainable competitive advantage /differentiation.
Acceptable valuation.
Track record so far.

Building commitment
Enthusiasm
Leadership
Open two-way communication
Firmness about purpose and flexibility about methods

Handling the ups and downs
Set and manage expectations
Celebrate every victory
Be open within the team about both good and bad vibes (but, as CEO, always instill confidence)
Face the brutal truth
Never stop believing

Founder complications
What starts as a coherent, comitted and friendly team may end up dysfunctional when someone is or becomes:
Not committed enough or not able to fully engage
Confused or improductive
Self-centered and unyelding
At odds with the values and the company culture of the rest

A Good CEO
“ The CEO has to have great marketing skills -- the ability to position a company and product in the market. That means figuring out what the dogs like to eat and packaging it in a way that's crystal clear to people in a one-minute elevator pitch. That's a skill that 99 percent of people don't have.
Another attribute a CEO has to possess is a certain energy , in terms of vision for the company, to be able to motivate people and be a catalyst for change. It takes a lot of courage to invoke change. It's easier to leave things alone. People are resistant to change; that's their nature. You constantly have to drag them into this change mode, which requires a very strong-willed individual.
It also requires an articulate person , because the best way to drag people is to talk to them and make them see your point. If they don't see your point, they'll put too many obstacles up. They'll make it like a donkey going through cement.” – Bob Ryan
Source: Red Herring News Email Jan 2001

Being a startup CEO
Knowing & accepting yourself
More humility than ego
Faith in people
Visionary & contagious optimism coupled with sustained ability to face the brutal truth
Ability to hire the best
Listening & experimenting
Inexperience can be a great asset
Ability to be engaged in making things happen, coupled with ability to detach and see the helicopter view
Relentless drive towards goals
Remember, it is a lonely job to be the CEO.

8 key mistakes I’ve made
Just 1%
I believed "just 1% of the market" would make sense. But you either get 0% (more likely) or tens of percent (less likely) of any given market.
First mover
I believed in the first mover advantage. But there may be nothing such. Google wasn't the first search engine, Oracle not the first RDBMS company and Microsoft not the first operating system company or GUI company.
Self-delusion
I believed in our own PR. I.e. when we told the market and the press what we believed in, we started believing in it ourselves when in reality we should have been realists and used the time to ensure that the vision became reality.
Flattery
I was fooled by flattery. I had told the VCs I could be CEO only in the starting phase and that we then needed a CEO with specific industry experience. Into the game, the VCs made me believe I was so great I didn't need to be replaced. A year later the company was in bankruptcy.
Toxic team member
I didn't remove a key employee from the company when I should have. First he turned unproductive, and then he turned into a saboteur of teamwork and of the company. Throughout all of this I kept telling myself that I could handle it, that things might get better, and that it would be even worse with the person outside the company. I now realize I was wrong.
Pay the price
I wasn't ready to pay for a strategic deal. I was ready to pay reasonably, but not unreasonably. But later I have realized that if a deal is truly strategic, you have to pay whatever it takes, not what you think is fair.
Naïvete
I believed that time and the goodness of people would cure a problem that occurred on the day I took a CEO job. Well, I was wrong. The people in question never turned good (in the way I would define good) and the situation never improved.
Unfocused
I was unfocused. Heck, I always was unfocused, and there is a risk that I still am.

Growing and scaling
(Great news when you get this far!)
Challenges in scaling a business
Can you build a successful IT business without moving away from Finland?

"Success consists of going from failure to failure without loss of enthusiasm." — Winston Churchill

Thoughts on success
Shoot for the stars. Even if you fail, you’ll land on the moon.
Succeed in spite of your background, not thanks to it
Assets can turn into liabilities in an instance; liabilities can turn into assets over a long time
There are innumerable ways to fail, but there is also always more than one way to succeed
Quotes
"Fall seven times; stand up eight." — Japanese proverb
"I've failed over and over and over again in my life and that is why I succeed." — Michael Jordan
"Full effort is full victory." — Mahatma Gandhi

Easy ways to fail
“ The market is so big that 1% is enough for us.”
“ Actually, there are no competitors.”
“ Our product does, among other things, everything.”
Greed, fear
Falling in love with a product or idea, believing your own PR, not knowing your place
Lack of patience and endurance
Misjudging the scale of the challenge
Lack of “Excel Gymnastics”
Inability to deal with people
Not solving the customer’s problem
Not listening, not experimenting
Not removing toxic individuals
Failing to act on early signals
Blindly believing ”experts”
and many more ...

Aalto vg mickos_20110401

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