April 20, 2014

Why I love Twitter

Danielle Morielle Tweet Roll

Started writing this post before I left Iceland for Boston to run the Boston Marathon did not get time to publish it… better late than never, there are some gems in this Tweet Roll from Danielle. Check it out. This is one of the reasons I love Twitter!

If you have not been following Danielle Morrill on Twitter you should. She came to Iceland and spoke at a TEDx Reykjavik Event. Last night or until 3 hours ago GMT, she has been tweeting a storm on startup advice. It was awesome summary of all the things that I and many others try to write in long form. The tweets go with the hashtag dmorOH. Just simple stuff that every entrepreneur needs to keep in mind. There is a tribe of people who are going through the same things as you are, so connect with them and share with them and try to learn from them, that is way of the Force.

 

 

 

 

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April 14, 2014

Investor-Startup Ecosystem

goldengatebridge

The blog post is motivated by an article by knowledge@wharton business school with the title “The Next Generation of Investor-Startup Ecosystem“. I have written a lot about the need for Investors to be empathetic to Startup Founders and how value gets destroyed when that does not happen. I have seen it too often that Investors arbitrarily change the dynamics of a discussion with the Entrepreneur especially when it is time to commit on the amount of investment and value of the investment. There was also a blog post on Wall Street Journal based on a Twitter burst by Marc Andreessen about investors coming into Silicon Valley and get ahead of the other local investors by initially suggesting a very high value to the Entrepreneur only to use the Due Diligence phase to negotiate the value down and also to box out the Entrepreneur. A lot of dirty tricks to watch out for especially if you are an Entrepreneur and new to the game. These discussions also show an ominous sign that things are starting to get too frothy in the Startup Universe especially in Silicon Valley. A number of startups are taking in more money than they ever will need for the next 3 to 5 years.

 

Macro trends matter, the time of cheap money will end and then the cost of funding will go up and then this froth will dry up, taking that into account many large startups like Quora, Uber, Fab etc have taken in multiple Tens of millions of dollars. Here is the article that outlines this trend. All this being said, the important thing that remaining is the struggle of the entrepreneur and those investors who stand on the side of the entrepreneur to say be strong as I am on your side. I see so little of that with the investor community. I struggle a lot with the same challenges that I write about. My dream is that we are able to create a vibrant Startup Community in Iceland. I am happy to see that entrepreneurs have more options now with accelerators and the flurry of discussion arounds money flowing into the entrepreneurial companies, however ventures follow a power law where the top 1% take majority of the funds. Despite all these challenges if entrepreneurs have bargaining power to demand that Investors bring more than money into the game, that would be a great win. Here are some excerpts from the article by Wharton which I thought was great:

 

As investors ask for proof of sustainability, startups in turn want backers to help them grow instead of just writing a check. The explosion of incubators and accelerators like Y-Combinator, 500 Startups, RocketSpace, Rock Health, Plug and Play and others is in large part attributable to this need. Even many institutional VC firms, such as Andreessen Horowitz, Kleiner Perkins, and Sequoia, are selling more than money. “Other things like the operational metrics, recruiting capability, marketing and industry expertise and connections, these things have become hugely important,” says Chaudhuri.

 

Did I mention that I am big believer in Accelerators? I think creating more accelerators that are focused on specific industries is another way to create better Investor-Startup Ecosystem, for example there was a suggestion to create an accelerator in Iceland focused on Tourism and Hospitality. I think that is awesome, creates so many tangents of value that it solves big challenges for Investors and Entrepreneurs. I love the following video that shows the relationship between the some of the Entrepreneurs and Venture Investors. I would build the same relationship with every entrepreneur that I will back. That is a promise.

 

 

 

 

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April 14, 2014

Learnings from CEO Bootcamp – Dealing with Fear and Failure

cae3272cacc61eb07d81c3e66bc057b3As an entrepreneur you are constantly fighting the grips of Fear, Doubt and Failure. It is a natural part of being on a journey that is low on data and high on uncertainty. I wanted to share the learnings from the CEO Bootcamp, the first day we discussed the 5 mistakes CEOs make and how to deal with them. We were made to deal with our Fear and Failure thoughts during the second day of the CEO bootcamp. I have written about being Fearless, and my role model there was my Father. God I miss him! He was always fearless in everything he did sometimes foolishly so but never ruthless or mean. So the fundamental question that you should ask yourself is why are you fearful, Entrepreneurs and Startup Founders are typically impatient with the status quo, pathologically optimistic and the ones who challenge and inspire because they want to make the world better. That is a pretty lofty goal to go after and we wonder why are we scared? I think being scared is natural part of the journey of an entrepreneur. The next logical question is ok, how do we deal with it? There were 3 questions that were posted to all the participants:

What are you afraid of?

What are you afraid of?

What are you afraid of?

it is not a trick, you have to dig deep to find out what you are really afraid of, the superficial narrative that is on the top of your head is not the only answer, there are layers of fear. We fear failure and therefore we fear uncertainty. Uncertainty is painful, uncertainty undermines our sense of safety, uncertainty fuels our expectations of infallibility and luck exacerbates the uncertainty. Did you see that? getting lucky actually makes the problem worse. Continue reading

April 9, 2014

Day 1 – CEO Bootcamp

The Flatirons rock formations, near Boulder, C...

The Flatirons rock formations, near Boulder, Colorado. (Photo credit: Wikipedia)

I started writing this post on the first day of the CEO Bootcamp, but the bootcamp was so intense on me personally that I could not sit down to write the rest of the program. I will do that in the coming days. This has been one of those life changing week and event.

I wanted to document and share the pre-work that I had to do as part of the Leadership/CEO bootcamp that I wrote about earlier. The camp has not yet started, I left Iceland on April 1st and reached Boulder around 10pm about 2am Iceland time and just did not have any energy to do anything. After a good 6 and half hour sleep, I got up at 4:45 am and did some work and did my 8km run and got some really nice Egg Benedict for breakfast. I was watching some of the videos that was our pre-work before the event. I have already shared some of them before, here is one that I thought was very relevant it is a bit long but totally worth it. I highly encourage all Entrepreneurs and Startup CEOs/Leaders to watch it, Jerry goes through a number of things that you are always afraid of asking.

In addition to the above video, here are a bunch of videos that I highly encourage all the Startup CEOs/Leaders to go through.

 

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March 30, 2014

Getting to Yes

PersistenceI was reminded yesterday of a blog post that I wrote a while back about True Grit, the persistent, relentless push forward quality that I see everyday in Entrepreneurs who get it. I have been talking to some of the institutional investors who have been interested in participating in the “Alternative Asset Class” that is the name used by Banks, Pension Funds and other financial institutions if you did not know. Almost all of them ask me what is criteria for me to invest in companies, I cannot emphasize enough about the quality of Grit, someone how has the Chutzpah, the gump, the courage to boldly continue on when all the natural things begs you to stop. I really got inspired reading the latest article by Mark SusterOne of My Most Frequent Pieces of Advice: Be Politely Persistent“. I am sure there were some Entrepreneur who was being pissed off or arrogant about not getting to an yes with Mark. That happens a lot. Nice thing about Iceland is that there are not that many venture investors that you get only a few Nos :), the important thing is obviously to continue on your journey. But as Mark says in his post don’t be bitter about it or arrogant or be an a#$h%&! about it. The best way to get to a yes, is always hard work, focus on what matters and your circle of influence and move your circle of concern away from what needs to get done.

The above advice by Mark is a classic and comes at the right time, Jason Mendelson one of the Managing Directors at Foundry Group and who attended Startup Iceland last year (Have you bought your tickets yet! we are going to have a sold out event, do don’t wait till the last minute get your early bird tickets) was interviewed by xconomy.com about “18 ways to kill as startup: Bad Teams and Ideas, arrogance…“, do you notice the pattern? Arrogance is one of those attributes that an Entrepreneur needs to let go, you cannot be arrogant in a sphere riddled with high uncertainty and low data. You need to be positive and continue on your journey. I also like the post Brad wrote a while back about an “Entrepreneurs Math:(.9)^10=1 “, you need to be in the deterministic world and not the probabilistic one if you are an entrepreneur. If you do the odds, it will tell you how small of a chance you have for success, but that should not define how you go about doing things. You need to believe that you will succeed despite everyone showing the odds of success at your face. That is how you get to Yes! quiet, polite, persistent, relentless focus on the next step… May the force be with you!

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March 28, 2014

Best of times to be an Entrepreneur and Venture Investor

Image representing Andreessen Horowitz as depi...

Image via CrunchBase

I cannot emphasize enough the exciting opportunities that are in front of us. In case you have not noticed, Andreessen Horowitz announced the closing of a $1.5 Billion Andreessen Horowitz Fund IV. Yes, that is a Billion. In addition to that True Ventures closed a fund for $350 Million. The announcement by a16z is what inspired me to write this blog post. Here is an excerpt from that announcement:

We believe this is an incredibly exciting time to be a technology investor. The ultimate market size that this current generation of tech companies can go after dwarfs that of previous ones.

The obvious reason for this is mobile internet penetration: We’ve gone from an internet population of 55 million users to nearly three billion, and smartphone users are expected to grow from 1.5 billion today to five billion in the coming years. The winners in tech today can become massively larger than those of previous decades because the markets they can sell into are enormous, and growing.

I believe these kinds of funds create tremendous opportunities all over the world it is not concentrated in Silicon Valley, although the bulk of the money goes into the Valley. According to the post the total amount of venture money raised by the industry is $16-$18 Billion a year, I wonder how much the investors in Iceland invest in this asset class? My educated guess would be about $20 Million in a year, yes you heard me right $20 Million that is about 0.11% of the amount invested in the US.

I believe that there is a huge opportunity to find strategic fits around the theory that a16z looks at, the broad theme is the Software is Eating the world and more recently the Full Stack development. These themes allow smaller startups to find a unique niche, create a market for that value proposition and typically get positioned to be acquired by those larger startups who are looking at the Full Stack to accelerate their development. I believe there is merit in this investment strategy and I believe Iceland can create, build and export those smaller startups. These startups do not require a lot of capital and with the current state of software and infrastructure it is easier to get to market and create value. Here is another excerpt which validates that thinking:

Yet as these markets have grown, the technology costs required to support them have fallen dramatically due to developer productivity tools and cloud-based computing. For enterprise in particular, the advent of SaaS and BYOD has expanded the market opportunity. Why? In previous tech generations, selling to an enterprise required both the support of the end-users of the application and the IT organization. The limiting factor on application deployment for enterprises was the finite capacity of the IT organization, since they would ultimately have to install, support, and manage the applications internally. With SaaS-based applications, however, individual departments within a large enterprise can find and adopt new technologies freed from the constraints of the IT organization’s support capacity.

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March 26, 2014

Meniga – A Startup Profile

Image representing Meniga as depicted in Crunc...

Image via CrunchBase

Meniga is one of the companies that came out of the financial collapse of Iceland. It is a Whitelabel Personal Finance Management software that is primarily used by banks and financial institutions to enable their end customers to better manage their finances. I have watched the company grow from strength to strength and I believe last year was huge year for them in terms of really accelerating their market access.

I am not sure if they can still be categorized as a startup, the team has grown to over 70 people if I am not wrong, with expansion into the UK Financial district, Sweden, Poland and other markets and strengthening the Icelandic core team with Kristjan Kristjanson who used to be the CEO of Innovit. I think Georg Ludviksson their CEO and experienced team has really started executing on the vacuum created by the financial collapse into the financial services industry. The financial services industry and the banking sector is actually one of the biggest buyers of technology and innovation, however since 2008, the sector has been focusing on building their base and it has created tremendous opportunities for startups to come up with innovative solutions that can be bolted on to the core service offering of the financial service sector. The team at Meniga capitalized on that and focused on the value proposition from the customers perspective and built a solution and made it mainstream.

Meniga has been the recipient of Best of the Show in Finovate 2011 and 2013. They are the leaders in the European market for Whitelabel PFM solutions and they continue to innovate and penetrate new segments within the Financial Services industry.

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March 24, 2014

Two key deficits of the founder CEO…

source: GigaOm

source: GigaOm

… when compared with a professional CEO”. I had to complete the sentence because some of the founder CEO’s go on to become great CEOs but they don’t always start that way. I finished reading the book “The Hard Things about Hard Things” over the weekend and the last chapter captured the essence of where Startup Founder need help and how Andreessen Horowitz Venture firm was created to solve that. According to Ben Horowitz the two key deficits are:

  1. The CEO skill set – Managing executives, organizational design, running sales organizations and the like were all important skills that technical founders lacked.
  2. The CEO network – Professional CEOs knew lots of executives, potential customers and partners, people in the press, investors, and other important business connections. Technical founders on the other hand, knew some good engineers and how to program.

I think this is spot on in terms of the technical founders that I have worked with in the past. In addition to the above, I have seen investors who put money on technical founders with absolutely no idea of how to resolve the above two deficits and they expect magic to happen with the startup. I cannot imagine investing in a company and not knowing how I was going to help the startup founder in some tangible way to bridge the above two deficits. Ben goes on to explain the question that he and Marc Andreeseen tired to answer through their new venture Andreeseen Horowitz Ventures,

How might a venture capital firm help founder CEOs close those gaps?

http://a16z.com there is a story behind the URL as well. Go get the book, it is a must have for startup founders and investors alike.

Coming back to our small island north of the atlantic, what is lacking in Iceland is a venture firm that has the core mission of trying to solve the challenges entrepreneurs and startup founders have here in Iceland. I have written about this a while back when I had been working with the Team at CLARA.

What if a venture firm in addition to investing capital at all stages of the company development also provided the kind of mentorship that would accelerate the learning process for the founders? Also, what if the venture firm also systematize and professionalize the network and made the connections and helped build bridges from Iceland? That is exactly what Andreeseen Horowitz Ventures has done. This is not very different from what Brad Feld, Jason Mendelson, Ryan McIntyre and Seth Levin have done in Foundry Group… here is an excerpt from Foundry Group’s website:

What We Do

As true early-stage investors, we are comfortable making small seed investments (as little as $250,000 – $500,000) to help promising entrepreneurs get their ideas off the ground. We are equally comfortable participating in larger, more traditional Series A venture financing rounds. Regardless of the size of our initial investment, the size of our fund allows us to continue to support our portfolio companies through their entire financing lifecycles.

In addition to providing the necessary venture capital to get a company up and running, we are committed to leveraging our experience in starting and growing companies, our expertise in the technology industry, and our network of relationships to help great entrepreneurs turn great ideas into great companies.

How We Do It

We believe that success comes from building a collaborative and supportive relationship between Foundry Group and the entrepreneurs and executives in whom we invest. Having walked the proverbial mile in the entrepreneur’s shoes, we understand where we can add value—such as helping build out a management team, thinking through strategic business development and growth opportunities, or providing advice on exit strategies—and we aren’t afraid to roll up our sleeves and get our hands dirty.

Rest assured, however, that we also know the difference between being value-added investors and being micro-managing investors. As venture capitalists, we believe our role is to identify, help build and support the team that will make our companies successful, not to run those companies ourselves.

We also believe that, in early-stage investing, it is critical we maintain a direct relationship between our entrepreneurs and our managing directors, rather than using junior professionals to manage the work load. Foundry Group’s team structure, fund size, and investment process have been intentionally created to ensure this philosophy guides our interactions with all of our investments.

In most cases, Foundry Group will be the first institutional investor in the companies that we back. Because of our active engagement with our companies, we typically will take a correspondingly substantial ownership position in our investments and will join as a member of the company’s board of directors.

We recognize that sometimes the best ideas aren’t ones that generate broad investor consensus. Though we are happy to co-invest with other venture firms as part of a syndicate, we look to our own evaluation and interpretation of an entrepreneur, a market opportunity and a company’s prospects to guide our investment decisions. As a result, we view ourselves as “syndication agnostic” and are entirely comfortable investing in an early-stage company as its sole investor rather than seeking the validation of co-investors.

Would it not be great if we could combine the Andreeseen Horowitz and Foundry Group’s “How we do it” philosophy and have that firm based in Iceland to invest in Icelandic Startups? If you have read this far then it is not difficult for you to connect the dots… :) keep watching this space for more news on this.

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March 18, 2014

Iceland Buzzing

Image Source: Iurie Belegurschi Photography

Image Source: Iurie Belegurschi Photography

It was a great surprise and boost to the local startup community yesterday. Gunnar Holmsteinn, the Co-Founder and CEO of CLARA is returning from Silicon Valley to Iceland to join the ultra popular game company Plain Vanilla Games as their COO. It is a great testament to the positive startup environment in Iceland. I am thrilled to have Gunni back and all the connections that he has made in the valley and how that can really help the local entrepreneurial community. The news is in Icelandic. I think it is what I had hoped for would happen, every Icelander that I know wants to come back to Iceland. I have a theory about it but I won’t bore you with that.

I remember the first meetings that I had with Entrepreneurs in 2009, right after the financial collapse, there was a lot of hesitation, fear, anxiety and lack of self confidence. Gunni and his team were the total opposite to that. They believed in what they were building and that is what prompted me to work with them and invest in CLARA. Roll back to 2014, the situation could not be more buzzing and different… everyone is interested in looking at Startups and Entrepreneurship. I want to throw a word of caution, I wrote about it yesterday as well. The mechanics of building a company is always the same, build your core team, find your product/service to market fit, build a marketing and sales strategy and execute, execute, execute and scale the revenue, the team and the business. Of course it sounds simple and common sense but common sense is never common practice. The road is littered with dead entrepreneurs and lost dreams, but that does not mean one does not dream or want to be an entrepreneur. I tend to take the middle ground, extremes are not good. Any community needs to have a vibrant startup community where entrepreneurship is encouraged, failure is accepted and anyone who wants to take a chance and live their dream should feel confident in doing that. My vision has always been that, a vibrant and inviting startup community already exists in Iceland but it is not obvious to everyone. We need to water it, weed it and give it space to grow. No one can predict the future, but we all can do the right thing as a community to continue to nurture it.

I believe we are under-investing in the Startup Community in Iceland as a society. I would be exaggerating if I guessed we are investing probably $50 million/year on startups. It is probably a fraction of that. I believe there are a number of opportunities that exist in Iceland like Clara, GreenQloud, QuizUp, Meniga, GuideToIceland, reKode/Skema, apon etc The trick is to enable these kinds of businesses to graduate from one stage to the other and again, this is no rocket science invest time, money and mentoring to help entrepreneurs as a community.

Are there challenges with regard to Capital Controls, the Currency, High Interest Rates, Political turmoil? Yes Euro! No Euro Debate? sure… all those things have nothing to do with building a startup community. If this was easy everyone would do it, I believe we in Iceland have the right amount of pain and the necessary raw ingredients to actually make it.

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March 17, 2014

Investor, Founders and the journey of building companies

Image representing Steve Jobs as depicted in C...

Image via CrunchBase

The last 6 years, I have been breathing EntrepreneurshipStartups and Venture Investing. I have more or less confronted most of the pitfalls that you read about in blogs and books about entrepreneurship or startups. I have been focusing a lot about the Principles of Leadership and Win-Win agreements for a specific reason, I have realized that when investors are involved the bargaining and or negotiation capacity of the Startup Founders gets rather skewed. I have seen time and time again, founders getting marginalized to a point where it makes no meaningful sense for the founders to participate in the painful journey of building companies. I have tried my best to stick to my mission which is to help Entrepreneurs and stand on their side when it comes to building their startup irrespective of the role I play. I meet many investors who have had some success in some investments and they try to invest in Startups and they start thinking that they are more important than the founders of the startup. I wrote about this a couple of weeks back. The best way to the poor house is getting into investing in Startups and ventures where the investor adds no tangible value other than money. There is a better and easier way to lose money than this route.

I was reading a post by Hunter Walk titled “You’re either venture-backed or a lifestyle business: a big lie“, here is an excerpt from the post

What I want to focus on instead is our proclivity as an industry to demean these smaller companies as “lifestyle businesses,” which suggests an easy path, a coasting team, the four hour work week. Bullshit. These companies represent the majority of entrepreneurs across the US and should be celebrated. The profitable seventeen person company with an enterprise value of $20 million, 90% owned by its founder? That’s awesome even if you’ll never read about them in TechCrunch.

I vote for building companies the above way than raising money from anyone. The challenge every entrepreneur has is the cost benefit analysis of raising money vs bootstrapping. My advice has always been if you can bootstrap a business that you own 100% just do that. You are in charge of your destiny, you don’t have to answer to anyone other than your customers and team.

I have seen startups where the founders have been sidelined for some professional manager, I think that is a wrong approach, typically suggested by “investors”. When you look at tech companies that have endured the test of time, Apple, Microsoft, Google, Amazon, HP, Cisco etc all these companies had their founders playing a key role in the development of the company through thick and thin. And then we have other examples where companies that just flounder once the founders step aside Dell, and Yahoo come to mind. The jury is still out on Facebook, Twitter etc My belief is that Founders need to play a meaningful role in the building of the company that they founded. In addition, the investors who are “feeders” and not “leaders” need to support and help the entrepreneur in making the company really reach its true potential. Too many times I see investors and the Board of Directors act like they know it all and make dramatic decisions that at best are compromises and at worst Lose-Lose outcomes, rather than building a culture of Win-Win and really focusing on building a Win-Win company.

There was an important post by Fred Wilson titled “Founders and CEO” and there is a quote that really resonates with me:

One thing I know is companies are better off when their founders remain involved in the business, even if they are not the right person to run it. That is not always possible and sometimes a scenario like what happened to Steve Jobs plays out. But it’s not the ideal way to resolve these conflicts.

I believe the ideal way to resolve conflicts is to search for the 3rd alternative, it is not your way or my way, it is our way which is better than anything either of us have come up together. The power of Synergy where 1+1 = 100 or 1000 or 10000. How sweet it is to be part of those discussions…

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