My 2005 talk in front of students of Johannes Kepler University Linz about starting a business, our learnings distilled

1. © 2005 Mindbreeze Software OEG. All Rights reserved. AW April 09, 2005
1
JKU Speech
Lessons learned from
starting a business
April, 2005
Dr. Andreas Wintersteiger
andreas.wintersteiger@mind-breeze.com
© 2005 Mindbreeze Software OEG. Copyrighted Material. This information is confidential and no information, representation or warranty may be reproduced, in whole or in
part, by any recipient or sent by them to anyone else or used for any other purpose without the prior written consent of Mindbreeze.

2. © 2005 Mindbreeze Software OEG. All Rights reserved. AW April 09, 2005
2
1. COMPANY PORTRAIT
2. MARKET
3. RUNNING A BUSINESS
Agenda

3. © 2005 Mindbreeze Software OEG. All Rights reserved. AW April 09, 2005
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Andreas Wintersteiger
 Austrian, born in Linz
 Johannes Kepler University Linz
 Dipl.-Ing. Computer Science
 Dr. technical Sciences
 Univ.-Ass. System Sciences Institute
 Lecturer FH Hagenberg
2002 – present
CEO, Mindbreeze Software
1998 – 2002
Business Dev., Sales, Consulting
SAP Central & Eastern Europe
1992 – 1998
IT Consultant, freelance
Personal Business Background

4. © 2005 Mindbreeze Software OEG. All Rights reserved. AW April 09, 2005
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Mindbreeze Software
 Foundation 2002
Initial Idea „Smart Knowledge Software“
Team: Gerald Haslhofer, Andreas Wintersteiger
Focus: Product, no consulting services
 Seed phase 2003
High tech incubator „tech2b“
2 additional co-workers (diploma thesis)
„First blood“ with customers

5. © 2005 Mindbreeze Software OEG. All Rights reserved. AW April 09, 2005
5
3+ yrs. in search engine technology
 2002
 First prototype
 Alpha version
 Field test with 18 pilot customers
 2003
 Q2: Version 1.0
 4 pilot installations
 2004
 Q1: Synopsis 1.1 Prof. launched
 400+ Installations (few $$)
 2005
 Q1: Enterprise Search 1.5
 ca. 500 Users installed base
 3rd Generation
 Efficient search engine
 Robust and scalable
 Hybrid architecture
• Local (decentral) and
• centralized approach
• in one place
 100% based on UNICODE
• „world-ready“
• All languages / scripts
 Enterprise security aware
 First commercial success

6. © 2005 Mindbreeze Software OEG. All Rights reserved. AW April 09, 2005
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Two product lines, past to present
 Search
 Desktop & network shares
 Files (MS Office, PDF, HTML, …)
 E-Mails, attachments, contacts …
 Additional KM Features
 Related information
 „Knowledge radar“
 Memos
 Content tagging
 Publishing
 Synopsis 1.1 Professional Edition
 Professional users / small teams
 Network enabled, but no server
Synopsis
 Focus on plain Search
 Simple, but powerful UI
 Fast indexing, resource saving
 Client and real server application
 Small & Beautiful
 Out of the box (Web Distribution)
 Easy setup & configuration
 Challenges
 Data volumes up to 10 Terabyte
 Indexing speed >40 GB/h
 Multiple queries/sec on clients
 Even on Joe Average‘s laptop
Enterprise Search

7. © 2005 Mindbreeze Software OEG. All Rights reserved. AW April 09, 2005
7
1. COMPANY PORTRAIT
2. MARKET
3. RUNNING A BUSINESS
Agenda

8. © 2005 Mindbreeze Software OEG. All Rights reserved. AW April 09, 2005
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Analysts: enterprise search is crowded space
 Enterprise Search: Market Size 2003: US$ 500 Mio.
 Knowledge Management: Market Size 2004: US$ 5.4B,
CAGR 40% (Source: IDC)
As of Q2 ‘03
Gartner Magic Quadrant for Enterprise Search

9. © 2005 Mindbreeze Software OEG. All Rights reserved. AW April 09, 2005
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Goal: Recognition as niche player…
Personal /
Desktop
Enterprise Internet
Fullyfledged
KM
Search+plain
search
2004
Google
Copernic
Convera
X1
Autonomy
Verity
Lycos/Hotbot
MSN
Hyperwave
Inktomi
SER
Mindbreeze
Google
Microsoft
Ask Jeeves
Teoma80-20
Vivissimo
… then move „upmarket“
Personal /
Desktop
Enterprise Internet
Fullyfledged
KM
Search+plain
search
Battlegrounds 2005 – 2007
Microsoft
Google
Microsoft
Autonomy
Verity
Hyperwave
Mindbreeze
Google

10. © 2005 Mindbreeze Software OEG. All Rights reserved. AW April 09, 2005
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Search: a small Window of Opportunity
2004 2005 2006 2007 2008 2009
MacOS X „Tiger“
(with embedded desktop search)
Microsoft Windows „Longhorn“
(with embedded desktop search)
Microsoft Windows „Longhorn“ Server
Desktop Search
Enterprise Search+
Knowledge Management
Mindbreeze
Synopsis 1.1 Pro
Mindbreeze
Enterprise Search 1.5
KM Suite 2.0
Enterprise Search+ / KM
Free desktop search
(Google, MSN,…)
Microsoft Windows Server
with Enterprise Search
(expected „end of decade“)

11. © 2005 Mindbreeze Software OEG. All Rights reserved. AW April 09, 2005
11
1. COMPANY PORTRAIT
2. MARKET
3. STARTING A BUSINESS
Agenda

12. © 2005 Mindbreeze Software OEG. All Rights reserved. AW April 09, 2005
12
Good Software takes 10 Years*
 Product development
 Four parameters:
Time, Costs, Scope, Quality
 Giving a constant
 Only one free variable: Scope
 Timeline usually fixed,
“Internet time” is a mythos …
 Budget mostly defined
 Quality always high
Observation
 Poor Management of Trade-Offs
may lead to
 Poor quality
 Delay in release schedule
 Keep it as simple as possible
 But not simpler
 Focus
 What are the 20% features,
people need 80% of time
Implication
* Joel Spolsky in “Joel on Software”: Good Software takes 10 years, get used to it!

13. © 2005 Mindbreeze Software OEG. All Rights reserved. AW April 09, 2005
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Travel light
 Managing Requirements is hard
 Understanding the real requirements
 Different perspectives
 Market
 High Costs of Change
 Late changes produce ex costs
Observation
 Don’t: Development process -
the general approach:
 Do it all, stay very common
 Be prepared for any kind of
eventuality
 high complexity from the beginning!
 Do: The focused approach:
 Understand the core!
 Build only the most necessary
 Delay the “big decisions”
 Get it right the first time
Implication
$
Time

14. © 2005 Mindbreeze Software OEG. All Rights reserved. AW April 09, 2005
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Testing hypotheses
 Everything changes
 Customer’s expectations
 Market demands
 Competitors
 General design  complexity
 Throwing away hurts
 Simplicity is hard
Observation
 Manage change process actively
 Don’t build things needed
“possibly” in future
 What’s the simplest thing that
possibly could work?
 Automated Quality Assurance
 Test your hypotheses soon
 Understand the three most critical
assumptions
 Validate them early. Again and
again
Implication

15. © 2005 Mindbreeze Software OEG. All Rights reserved. AW April 09, 2005
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Don’t make the bill without a customer
 Customers will tell you
 What’s right
 and what’s wrong with your
assumptions
 There’s no lab simulation for
 The “field” (real world environment)
 All kind of users
 All possible combinations your product
may work in
 The “customer universe”
 Super-high demanding
 Happy with the bread-and-butter
Observation
 You need a real customer
 Do the “real world” test
 Obtain feedback
 Focus on the right things
 Recognize the spectrum
 High- and low demanding customers
 Find your niche
 Classify yourself
 Earn money from the beginning
 Create success with the low demands
 Win in your niche
 And then move on
Implication

16. © 2005 Mindbreeze Software OEG. All Rights reserved. AW April 09, 2005
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MAKE MONEY !!!
 Planning Game is hardly real
 Learning curve in estimates: come
close to reality after 12 to 18 months
(sometimes never)
 Prediction inaccuracy in Startup phase
• 20% within 3 months horizon
• 50% within 6 months horizon
• 300+ % beyond a year horizon
 Funding programs may put you on a
mistaken security
 Sales cycles endure
 No low hanging fruits in 1st year sales
 Sales revenues are never exponential
in startup phase
 Up to 200% inaccuracy in time to close
deals
Observation
 Only Coarse planning
 On a quarterly basis
 Reflection: Learn from your own
misestimating
 Establish a Sales Pipeline
 Within the first 6-12 months
 Earn money in the first year
 Become profitable
 Do not feel save
 Only customers testify your
success!
 Only customers who pay count!
Implication

17. © 2005 Mindbreeze Software OEG. All Rights reserved. AW April 09, 2005
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Founding Distilled: Ten Commandments
Process:
 Side by side execution
Clarify responsibilities, challenge each other, demonstrate
consensus to the outside.
 Collective business ownership
Any job that needs to get done gets done. Know your
business from toe to head.
 Travel light
Do the simplest thing, that could possibly work. Don't build a
lot of amazing superstructure, don't do anything fancy.
 Test your hypotheses soon
know the three critical assumptions about the problem you
solve that need to be true for your plans to materialize.
Validate them early.
Product:
5. Recognize. Stabilize. Enrich
Recognize the core (the 20% features that create 80%
value). Do not enrich unless your customers testify
stability.
6. Eat your own dog food – early
Why don't you use your own product?
7. Release early and often, patch smoothly
The first thing you need is a patcher, then release as often
as you can. Leverage your installed base, make it easy to
give feedback.
Customers:
8. Harvest early
Create success stories with your least demanding
customers. Prove your concept before moving up market.
9. Burn a few demanding customers early
Select a few highly demanding customers wisely
and learn from your failure to serve them.
10. Don't care what they say
observe what they do

18. © 2005 Mindbreeze Software OEG. All Rights reserved. AW April 09, 2005
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On Innovation – lessons learned
 Get the trade-offs clear
 Time / Costs / Scope
 Quality is never a trade-off
 Project Management
 Focus, Focus, Focus
 “Daring the gap”
 Permanent and sustainable
feedback
 Frequent releases
 change and adapt
 Assume Simplicity
 What is the simplest solution that
possibly could work?
 “Refactoring”: better simple today
with a few changes tomorrow,
than complexity without payoff!
 It’s the people
 Broad spectrum
• Software Engineers differ 1:10 in
development speed
 Good people are very rare
 Get the right people in
 Don’t waste your time