Valto Loikkanen slides at Startup Estonia Happy Hour 05.12.2014

1. Startup Estonia
Valto Loikkanen
Grow VC Group ++
www.growvc.com ++
@growvc ++
Copyrights © Grow VC Group 2014

2. About me

3. As an Entrepreneur
● 20 years as international Serial Entrepreneur (US, EU, Asia) &
Portfolio Entrepreneur, with personal hard earn success & failures
● 17 years experience in developing web based tools for various
business processes
● 6 Years of developing equity crowdfunding model globally via Grow
VC Group (scaling risk funding)
● 5 years for Startup Ecosystem online support tools, platforms &
metrics
● For past year, being part of three EC Horizon 2020 Groups:
○ Access to Risk Finance,
○ Spreading Excellence & Widening participation
○ International Cooperation

4. As a Business Advisor
● 10 years of startup mentoring with over 2000 one to one mentoring
sessions and workshops with 1000+ entrepreneurs and hundreds
of startups around the world at various development stages and
industries
● 10 years developing Startup Support services, with entrepreneurial
mind and lean methodology (fast ideation, implement and measure
cycle)
● 5 years of “living lab” development for Startup Ecosystem in
Finland with City of Helsinki

5. About Grow VC Group
"The global pioneer of securities crowdfunding, peer
to peer marketplaces and new investment models."

6. Other Business Verticals
Real estate, P2P loans etc. Consulting
in specific areas
Local Investors
Startups
Startup Ecosystem
Global
Investors

7. Other Business Verticals
Real estate, P2P loans etc.
Local Investors
Startups
Startup Ecosystem
Global
Investors
Consulting
in specific areas

8. Startup Development Phases
& Startup Ecosystem
Development

9. Where Does Innovation Happen?

10. Innovation Ecosystem
Research
IPR
Innovation via Big
Companies & Public
Sector.
Closed process &
Internal resources
Innovation by
Startups
Funding
Sources
Customers

11. Megatrend
Innovation process is moving away from “closed
structures” and big companies to more open and
collaborative startup ecosystem.

12. Research
IPR
Innovation via
Big Companies &
Public Sector.
Closed process &
Internal resources
Innovation
by
Startups
Research
IPR
Innovation via
Big
Companies &
Public Sector.
Innovation by
Startups
Open,
collaborative &
external resources
Funding
Sources
Service
Providers
Support
Organizations
Funding
Sources
New
Funding
Solutions
Innovation
Ecosystem
Startup
Ecosystem
Customers
Customers

13. Startup Ecosystem
Research
IPR
Innovation via
Big Companies
& Public Sector.
Innovation by
Startups
Open, collaborative &
external resources Funding
Sources
Service
Providers
Support
Organizations
New
Funding
Solutions
Customers

14. Difference between
innovation & startup?

15. “Innovation is about developing
a new product, service or business model.”

16. “Startups do innovation
AND also develop
a new growing company & business.”

17. Why this megatrend?
● The megatrends of innovation is focusing more and more around startups
● The old world is about ideas, research and big companies creating the
innovation (products and services from these).
● The old models is already working at it’s best and is difficult to improve - as
such, little growth can be achieved in that area
● The new world is about making the innovation happen via Startups, where
innovation is also more openly and independently exposed to markets
● Startups are “outsourced innovation” for big companies and biggest group
generating new jobs
● Startups are fast, flexible, highly motivated, cost effective and supported by
private and public parties
● Smart big companies are moving more and more away from traditional
innovation models towards more open innovation and working with and buying
most promising startups after they have validated scalable innovation.

18. Why Startups?

19. Recent study by Kauffman Foundation
and the Institute for Competitiveness
& Prosperity.

20. “Over the last twenty five years,
almost all of the private sector jobs
have been created by businesses
less than five years old.”

21. “Between 1988 and 2011, companies
more than five years old destroyed
more jobs than they created in all
but eight of those years.”

22. What is a Startup?

23. Startup
“A startup company or startup is a company or
temporary organization designed to search for a
repeatable and scalable business model”
- The term became popular internationally during the dot-com bubble
http://en.wikipedia.org/wiki/Startup_company

24. “New Startup”
High Growth Ambition and
very scalable business model
A B
C D
Low Growth Ambition and/or
Non Scalable business
Market
validated
business
model
Unvalidated
business model
"a kiosk"
"new startup"

25. Startup stages

26. Startup Development
http://en.wikipedia.org/wiki/Startup_company

27. Startup Development
?

28. Improved Startup stages

30. Startup Key Milestones
-2. Ideation
-1. Concepting
0. Commitment
1. Validation
2. Scaling
3. Establishing

31. From investors and startups
point of view

32. “Investor”
- anyone that makes meaningful resource
investment purely for ROI
money, work, project, time, skills, contacts etc..

33. Valuation?
● typically used and know from investing money to company
● is needed also for other calculation purposes
● is also needed for founders ownership % estimates & sweat
equity investments (for work, services, contacts etc.)
● acts as a measure of company development
● is a core "deal tool" at all stages

34. About valuation
● for cash investment the valuation is typically lower than for
other types
● is only as real as validated with an actual deal(s) made -
anything else is "guesstimate"
● typical valuation levels do exist for different stages
● early stages more based on promise and later stages more
based on results so far + estimated development curve

35. Ideation
● Potential scalable product/service idea
● Some initial business models for how it would make money
●One person or vague team
●no real commitment confirmed
●and/or no right balance in the team structure yet
-2 -1 0 1 2 3

36. “Investors” view
"pie in the sky"
– a lot of work to get involved....

37. Valuation level
$0

38. Business Potential
More Potential
Big Market
Market growing
Market pull
Scalable
Less Potential
Small market
Market shrinking
Market Push
Not scalable

39. Concepting
● Have set some clear meaningful target
● clear direction (3y+) with key milestones to get there
● …36, 24, 12, 6, 3 months -> 3, 6, 12, 24, 36 months…
● Team of two or three core people
● but can also have additional team with lighter
commitment
-2 -1 0 1 2 3

40. “Investors” view
“hmmm..., maybe there is something
here...”
still very risky.... money does not really help here...

41. Valuation level
$0 - 100k

42. Commitment
● Committed skills balanced founding team
● Able to develop the product/service (without dependency of
uncommitted external resources)
● OR already have initial product/service developed
● Shareholder agreement with “right things” in it
● milestones & committed time/money usage
● founding team commitments for min. 2+ years with
vesting, etc.
-2 -1 0 1 2 3

43. “Investors” view
“Looks like this may have real
potential..?
Time to get in for a good deal...? Still very
risky..... Maybe join as Advisor...?”

44. Valuation level
$300 - 500k

45. Team Validation
More Potential
Good Team
Balanced Skills
Committed
Doer Attitude
Right Culture
Less Potential
Solo Entrepreneur
Uneven Skills
Not committed
Talker Attitude
Wrong Culture

46. Validation
● Can already show some user growth and/or revenue (initial
traction)
● And/or continue to attract external resources (money /
additional people/work) for equity or future revenues
-2 -1 0 1 2 3

47. “Investors” view
“This is starting to get interesting...”
Join now? - Later I may not get in or it's going to be out of my
range…

48. Valuation level
$500k - 2M

49. Between Previous & Next Stage
● Is where assumptions get validated
● If selected market and team is good…
-> The idea and business models can be (and
often is) changed or pivoted several times

50. Scaling
● Showing clear and growing user/market
traction, momentum and or growth
● And/or is able to attract significant funding
-2 -1 0 1 2 3

51. “Investors” view
awesome! :)
OR
Oh, I missed the boat :(
earliest time when good VC's start to get interested....

52. Valuation level
$1 - 10M

53. Establishing
● Pretty clearly is going to make it
● Often wants to culturally continue behaving like a "startup"
for as long as possible
● No longer need to "try" get resources and can get those
easily
● Continue to grow
● Founders make exit or continue biz as usual
-2 -1 0 1 2 3

54. Valuation level
$5 - 10M+

55. Success
idea + plan + action + timing
= reaching a set target

56. Success
idea + plan (set of initial
assumptions) + action ((volume x
testing assumptions - failures) +
(volume x testing improved
assumptions - failures)) + timing =
reaching a target

57. Valuation development

58. "What are the keys to help
get successful results?"

59. ● To new growth ambition startup creation
● Pre-startup and early stage startup support services
● get more research, inventions, ideas and other IPR to be
utilized by startups
● develop individual services in balance & context with entire
ecosystem
Focus

60. Startup Ecosystem
A startup ecosystem is formed by people, startups in their various
stages and various types of organizations in a location (physical
and/or virtual), interacting as an organic system to create new
companies.
Different organizations typically focus on specific parts of the
ecosystem function and/or startups at their specific development
stage(s).
Learn more: http://www.startupcommons.org/understanding-startup-ecosystems1.html

61. Startups & Ecosystems
Startups develop in startup ecosystems through the
development phases in constant interaction with
various organizations, services & people.
The more dynamic, transparent and balanced the
ecosystem is the more successful startups ecosystem
can create.

62. Three steps of ecosystem development
1. map out starting position
2. Identify and fix gaps and bottlenecks
3. implement measurements
Iteratively improve; measure and learn

63. Using key stages tool
● Map out ecosystem
● Describe ecosystem
● Common Language To Label items;
○ startups, services, events, funding instruments, blog
posts, tools, ideas, suggestions, etc.

65. Startup Development
Public services
& funding
Knowledge vs. Money
Private service providers
& investors
-2 -1 0 1 2 3

66. Map your startup ecosystem
services here!
-2 -1 0 1 2 3

67. Organization B
Service A
Organization A
Service A
Organization A
Service B
-2 -1 0 1 2 3

68. Support activities
Targets

69. Idea evaluation
NOTE: as a public sector!
High Job Creation Potential (need
of people)
A B
C D
Low Job Creation Potential
Low Demand Potential
Very few and/or low paying
limited region customers
High Demand Potential
a lot of potential well
paying international
customers
No Value Idea
High Value Idea
Medium Value Idea
Low Value Idea

70. High Growth Ambition and
very scalable business model
A B
C D
Low Growth Ambition and/or
Non Scalable business
Market validated
business model
Unvalidated
business model
"a kiosk"
New Startup
at Stage 0
Startup
Early Startup
at Stage 2

71. Use together with
development phases
criteria

72. About Metrics
● Ecosystem as a big service offering and a path
● Find bottlenecks
● Develop in balance
● Input and output volumes of each service
● Measure & iterate to improve services

73. Single most valuable
tool to improve your
ROI
Free to use under
creative commons
licence
Original www.
startupcommons.org
Licence terms
http://creativecommons.
org/licenses/

74. Recap
● Develop startup ecosystem as a whole
● Measure “everything” to learn and improve
● Improve iteratively

75. “Only the things that are understood can
be developed”

76. “When more people and organizations
are developing things together, there
needs to be a common language and
understanding about what is being
developed.”

77. “Systematically implement common
language to your ecosystem and other
things will start to follow naturally.”

78. “Only things that can be measured,
can be improved.”

79. “Any missing knowledge you can buy.”

80. “Plenty of EU funding available.”

81. Valto Loikkanen
valto@growvc.com
+358 400 421 551 (FIN)
+1 415 854-0546 (US)
Grow VC Group ++
www.growvc.com ++
@growvc ++
Thank You!
#startupecosystem