Aalto vg mickos_20110401

Copyright 2011 Mårten Mickos

Questions and Answers on starting and building a business

Mårten G MickosOtaniemi 1 Apr 2011Aalto Venture Garage


A variety of topicshow 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 MickosBorn 1962 in Otaniemi, FinlandM.Sc. (Eng) in technical physics from TKK

1. Founded Polycon in 1987 with 2 friends2. VTKK 1991-19933. ViSolutions 1993-19954. Solid Information Technology 1995-19975. Intellitel Communications 1997-19996. MatchON Sports 1999-20007. Vexillum 2000-20018. MySQL AB 2001-2008, Sun 2008-20099. Entrepreneur-in-residence 200910.Eucalyptus Systems, 2010-


Questions from youStarting and planning

• From idea to start

• Finding the right target market; market segmentation

• Business angels and VCsPeople

• 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 conflictsGrowing

• 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 protected]@eucalyptus.com

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


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!

Technology Adoption Lifecycle

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 complicationsWhat 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 ...

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