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Advices and strategies I learned from my first business attempt
The document outlines Kyriakos Chatzidimitriou's experiences and lessons learned from founding Cyclopt PC, detailing his background in electrical and computer engineering, the challenges faced during startup, and key advice for entrepreneurs. It emphasizes the importance of understanding customer needs, market validation, funding sources, and the critical metrics VCs look for when investing. Additionally, it provides strategic insights on navigating early-stage company development and maintaining profitability.
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Advices and strategies I learned from my first business attempt
- 1. ADVICES AND STRATEGIESI LEARNED FROM MY FIRST BUSINESS ATTEMPT Kyriakos Chatzidimitriou Cyclopt PC PhD in Electrical and Computer Engineering kyrcha@cyclopt.com http://cyclopt.com
- 2. PREAMBLE •My 1st attempt •No silver bullet • The presentation will surely harbor “Narrative Fallacies”: • Our need to find patterns in facts through narration just because as human we prefer it, simplifying though more complex links. • Take book thumbnails as suggested reading for that particular slide.
- 3. ABOUT ME 1978 -Birth
- 4. ABOUT ME 1978 -Birth 1997 – Dept. of Electrical and Computer Engineering, AUTH
- 5. ABOUT ME 1978 -Birth 1997 – Dept. of Electrical and Computer Engineering, AUTH 2003 – First job as a programmer in an R&D project, AUTH
- 6. ABOUT ME 1978 -Birth 1997 – Dept. of Electrical and Computer Engineering, AUTH 2003 – First job as a programmer in an R&D project, AUTH 2004 – Master of Science in Computer Science, CSU with Assistanship
- 7. ABOUT ME 1978 -Birth 1997 – Dept. of Electrical and Computer Engineering, AUTH 2003 – First job as a programmer in an R&D project, AUTH 2004 – Master of Science in Computer Science, CSU with Assistanship 2007 – PhD Student @ ECE in RNNs and RL
- 8. ABOUT ME 1978 -Birth 1997 – Dept. of Electrical and Computer Engineering, AUTH 2003 – First job as a programmer in an R&D project, AUTH 2004 – Master of Science in Computer Science, CSU with Assistanship 2007 – PhD Student @ ECE in RNNs and RL 2010 – Greek economic crisis
- 9. ABOUT ME 1978 -Birth 1997 – Dept. of Electrical and Computer Engineering, AUTH 2003 – First job as a programmer in an R&D project, AUTH 2004 – Master of Science in Computer Science, CSU with Assistanship 2007 – PhD Student @ ECE in RNNs and RL 2010 – Greek economic crisis 2012 – Finish my PhD, work in R&D projects, tech knowledge, awards with team Mertacor
- 10. ABOUT ME 1978 -Birth 1997 – Dept. of Electrical and Computer Engineering, AUTH 2003 – First job as a programmer in an R&D project, AUTH 2004 – Master of Science in Computer Science, CSU with Assistanship 2007 – PhD Student @ ECE in RNNs and RL 2010 – Greek economic crisis 2012 – Finish my PhD, work in R&D projects, tech knowledge, awards with team Mertacor 2017 – Low PoP stats
- 11. ABOUT ME 1978 -Birth 1997 – Dept. of Electrical and Computer Engineering, AUTH 2003 – First job as a programmer in an R&D project, AUTH 2004 – Master of Science in Computer Science, CSU with Assistanship 2007 – PhD Student @ ECE in RNNs and RL 2010 – Greek economic crisis 2012 – Finish my PhD, work in R&D projects, tech knowledge, awards with team Mertacor 2017 – Low PoP stats 2017 – Cyclopt is founded
- 12. ABOUT ME 1978 -Birth 1997 – Dept. of Electrical and Computer Engineering, AUTH 2003 – First job as a programmer in an R&D project, AUTH 2004 – Master of Science in Computer Science, CSU with Assistanship 2007 – PhD Student @ ECE in RNNs and RL 2010 – Greek economic crisis 2012 – Finish my PhD, work in R&D projects, tech knowledge, awards with team Mertacor 2017 – Low PoP stats 2017 – Cyclopt is founded 2019 – 2/2 VCs said no to funding us
- 13. GENERAL ADVICE #1 Lifeis hard and full of problems To be happy and for the problems you can choose, choose those that you like solving. By working on the 10K hour of more… …you will be too good to be ignored and you will achieve that by focusing on deep work and working on difficult problems Positive feedback loop, where good things happen
- 14. CYCLOPT P.C. • Foundedon November 2017 • Aristotle University of Thessaloniki spin-off • Our last app is our bot (for analyzing JS projects) https://bot.cyclopt.com • Free to install: https://github.com/apps/cyclopt
- 15. PRODUCTS We support also3 open source projects: 1. npm-miner: Web app with analysis of npm packages 2. jssa: JavaScript Static Analyzer 3. js-starter-kit: JS web app starter kit for the MERN stack along with a software development lifecycle proposal Quality assessment reportsQuality-as-a-Service Bot
- 16. THE TEAM Dr. KyriakosChatzidimitriou Manager & Tech Lead Dr. Andreas Symeonidis Research Lead Dr. Themis Diamantopoulos Software Reusability Michalis Papamichail Software Maintainability Ilias Ouzounidis Branding Design & Digital Promotion
- 17. WHAT IS ACOMPANY? “…a business is a repeatable process: 1. Creates and delivers something of value… 2. That other people want or need… 3. At a price they are willing to play… 4. In a way that satisfies the customer’s needs and expectations… 5. So that business brings in enough profit to make it worthwhile for the owners to continue operation.”
- 18. CREATES AND DELIVERSSOMETHING OF VALUE… http://www.paulgraham.com/startupideas.html Few users Many users I need it much I need it a little Strategy # 1 (and the one we used) Google now Made-up startup Harvard Era Facebook
- 19. MARKET VALIDATION EXPERIMENT Created 2000 quality reports for top open source JavaScript software projects Send them to their developers/maintainers Pareto principle ~ 20% opened (400) ~ 20% clicked (80) 34 answeres our questionnaire, while we had replies like: “Anyone else just get spammed by cyclopt…” “Thanks for your email. It's very interesting.” 1 connected
- 20. PIVOT • Source codequality reports à Monitoring code and teams • From developers à To managers • Lesson learnt: the obvious: startup business plan != reality • We stared with zero knowledge on what it means to sell a new product from zero… • Strategy #2: spent time learning it (10Κ hours? By for example working in another startup) or bring in someone who has done it before A startup is a human institution designed to create a new product or service under conditions of extreme uncertainty
- 21. PROBLEM #2: COSTS Let’swrite down the basic monthly costs for 2 co-founders in a Private Company so that they say they have a company: € 200 - Coworking space € 150 – Accountant (€0 if co-founder, €300 markup price) € 84 – Yearly company tax € 130 – Basic insurance for the manager (if no other activity) € 50 – Some basic expenses (domain name, business portal, bank expenses,etc.) € 614 – monthly without fixed costs, cloud costs etc. With seed capital € 10Κ à Less than 16 months runway So that business brings in enough profit to make it worthwhile for the owners to continue operation.
- 22. FUNDING Savings Friends – Family– Fools Competitions Clients Angel Investors VCs Grants, i.e. SME Instrument etc.
- 23. SAVINGS For a 10Kseed capital and 2 co-founders If I save 200 euros per month … I have to work 25 months or 2 years to regain them. Is it a good investment? There is the notion of expected utility: Lottery A – the startup UA = 0,01 (€1.000.000) + 0,99 (0) = 10.000 Lottery B – Bet on the home team with 0% rake Home: 2,00 – Draw: 3,75 – Away: 4,28 UB = 0,5 (€20.000) + 0,5 * 0 = 10.000 Lottery Α – also win: life lessons, knowledge Lottery Β – also win: a possible heart stroke if the away team is in front during the first half But this simple utility functions are if you don’t have a sense of money.
- 24. EXPECTED UTILITY Lottery A– The startup 0,01 x U(Sk+1M)+ 0.99 x U(Sk-10K) = 0,01x 44,96 – 0,99 x 1,55 = -1.0849 Lottery B – Betting 0.5 x US(k+10K) + 0.5 x US(k-10K) = 0,5 x 1.39 - 0,5 x 1.55 = -0.08 Lottery C – Do nothing 1.55 Mr. Beard’s Utility Function U(Sk+n) = −263.31 + 22.09 log(n + 150, 000)
- 25. STRATEGY #3 If youstart with your own money (and a similar utility function like that of Mr. Beard)… Create the need before you found your company… Create something to show around… Create content/SEO around your product/presence to increase trust (these guys know what they are talking about)… And only if you close some deals then found your company (just to start billing) or go for other sources of funding. Because investors are looking for 3 things: 1. revenue, 2. revenue, 3. revenue.
- 26. FUNDING Savings Friends – Family– Fools Competitions Clients Angel Investors VCs Grants, i.e. SME Instrument, etc.
- 27. COMPETITIONS We got 2.5Kfrom competitions I have heard of as much as 70K Strategy #4: Try 1-2 for starts If you get an award continue going, broadening your geographical horizon. (Local, National, European, US, Global) If you don’t … stop going for that idea. Wins: Free-equity money, dissemination, experience in pitching, feedback, possible a client from the sponsors Losses: Time (one more presentation, business plan etc.)
- 28. FUNDING Savings Friends – Family– Fools Competitions Clients Angel Investors VCs Grants, i.e. SME Instrument etc.
- 29. VENTURE CAPITALS • Equifund •After many emails, skype calls, presentations, demos, meetings etc. • 0/2 • Other than market validation (revenue, revenue, revenue) two other basic things I say they were looking where: 1. Defensibles 2. Scaling • Advice #2: Before going to VCs, solve those three prerequisites.
- 30. DEFENSIBLES • Secret sauce…somethingthat cannot be easily copied • Patent (difficult in software) • One in every country • The software must have a further technical effect (i.e. ABS) • A large company has the personnel (legal/technical) to do something similar without infringing your patent • Other things: • Annotated data by experts • A specialized ML pipeline • An Expert database • In general in software it is a good idea to get first out in the market, have a good timing and your defensible will be that early start.
- 31. SCALING Assumption 1: Acompany is sold 5 times its revenue Assumption 2: VCs will like to exit within 5 years Let’s say that a VC funds 20 startups with seed capital 200Κ for a 20% percent equity Statistics say 1 out of 20 startups succeeds Others say 90%, 95%, 99% failure rates What revenue should you have by the end of the 5 years? So, from the 1 company they will have to get 20 x 200K = 4Μ+ to break-even 4M+ for the 20%, thus the company must be sold 20M+ Thus its revenue must be 4Μ+ With this scenario the 200K seed capital must be made 4M+ revenue within 5 years Obviously you cannot predict how much you will sell, but now you have a target and an idea what the VCs want to do with your idea…to scale it. A simple exercise from the VC point of view
- 32. VC INTERVIEW QUESTIONSCHEAT SHEET • Which problem are you solving? Which KPI are you improving for the users? • What is your go to market strategy? •Competition? • What are your defensible assets? • Total addressable market? • What have you done so far with your idea? • Describe us the perfect customer. • If we fund you what will you do in the next 6, 12, 18 months? • What are the strong points of your tema? Why you? What is your track record? • What are you missing as a team? • What is your next milestone? •Customer Acquisition Cost (CAC), Customer Lifetime Value (LTV)?
- 33. Strategy #5: GoodLuck kyrcha@cyclopt.com www.cyclopt.com