Articles for October 2010

Tips to get seed funding and support 3/6 – Product

We talked about the idea and the team, now it’s time to discuss about how the idea will be shaped into a product and hopefully turn into a successful business. Roughly speaking, there are three aspects that you need to consider when applying for support from the Openfund and similar constructs: innovation, revenue and market.

Innovation

First of all, what you’re proposing has to have at least a small amount of innovation. It can be at its core concept, at its technical basis, at its design or just at a key business operation. And although there’s a school of thought saying that copycats can be profitable and perhaps better than the original, everyone wants their startups to be exceptionally successful – not just very profitable. And this can only happen if either something entirely new and disruptive is created or at least if a fresh perspective is implemented at an existing idea. So, yes, iterating on an old idea can mean success – but iteration works only if it achieves serious improvements, i.e. innovating.

Innovation can also mean applying ideas working well in one industry to another industry in need of something new. For example, suggesting relevant and customised content – if applied successfully – to the music business could mean something big. Mass deployment of e-commerce sites may not be innovative – but combining it with social shopping can make a difference. The point is really to try something novel – and that can include a new way to combine old ideas. Just make sure that this supposed new combination has indeed not really been tried before.

Revenue

When it comes to revenue, it’s only obvious that you have to have a clear, well-defined and well-thought out method of how you plan to generate some income, as soon as possible. It’s not necessary for it to have been tried before just to prove that it works, but it has to be based on sound assumptions. If you’re able to make valid quantitative estimates about your business model then you’re on the right track – and you should share those both to confirm them and to convince us. If you’re at a loss of how to do this, try coming up with sensible numbers for three scenarios – the best, the worst and a middle case. Just going through his exercise of setting upper and lower limits is eye-opening – for both you and us.

Needless to say, the more viable and well-thought-out revenue streams you include in your business model the better. Usually at least one will in practice turn out to be not viable or as feasible or scalable as expected so you will have to fall back on the others. You can check out here a quick list of the broad categories of revenue streams to get you started – although probably some apply less than others to startups. On the other hand, don’t include all the streams you can think of just to be sure something will work. More streams mean more features – you simply can’t implement them all! One way to balance these approaches is to create something simple that can be inherently used to generate profit by smartly and flexibly tapping on many revenue streams using the same limited feature set. Another is to plan to tap on different revenue streams depending on the stages of your startup – starting with the easier to implement and gain traction on. In any case, you should support your qualitative descriptions with estimates and ballpark figures. It’s essential you’ve done it for your own use – so why not share it?

No post on revenue streams would be complete if it didn’t include a special mention on ads. You should use this as a revenue stream only if a) you’ve already included a few other solid streams, so ads only have a complementary role and b) if you include an as complete as possible estimate of the revenues expected. Ads scale practically only for Google – the rest of us have to be really smart, specific or targeted to make them work.

Market

Finally, your product should have certain characteristics when it comes to the market it aims at. A quick and dirty way of making sure that there is a market to begin with is to have a short and concise answer to the ‘What’s the problem my startup is solving?’ question. As already mentioned, if you can’t fit an answer for that in a sentence or two, your project probably needs some cohesion or even an overhaul. Other than that, you should be able to identify major groups of people that will be willing to use your business – and probably a few subgroups too. It’s easy to fall in the enticing trap of ‘the entire internet’ but this is usually an indication you haven’t thought things through: you can and you should try to aim for specific groups split by demographics, industry, location or other means. Once decided on that, you can make estimates on market size which can make the difference between an interesting and an insignificant investment.

Also make sure to factor in your approach not just the end user and your company but also any intermediaries, middle men, government bodies, legal requirements and other relevant considerations. Such issues could pose problems in entering the market (additional bureaucracy, less revenue, etc) but they also can be significant allies – for example tapping the developer community to your advantage, outsourcing tasks to specialised agencies, etc. Remember, your target market works as the amplifier or the sink hole of a start-up’s endeavors; make sure you have made a sustainable and wise pick.

Next week we talk competition!

Tips to get seed funding and support 2/6 – Team

In this post, we’ll focus on what’s the best way to structure and present your team when applying to the Openfund – or for that matter to any other seed funding vehicle.

When filling out our application you should always, include links to your previous work (and especially the achievements you’re proud of), your portfolio, your blog, your Twitter and anything else you would consider representative of your accomplishments and your personality. That way we’re only a click way from the parts of your resume that matter and essentially we have a quick way to understand what you’re all about as individuals to begin with. Since we try to find as much as possible about the applicants, we’ll be definitely looking for all this information ourselves, so saving us some clicks is a good idea. It’s also important to provide an email you regularly check so that we can be able to contact you for clarifications on questions not covered by your profile links.

Of course, it’s important to show what makes each member a great fit for the business being suggested, essentially what they can bring to the table. Usually this is about ‘just’ three things: product development, business development and knowledge of the industry. These can be achieved in a number of ways but usually for the sort of startup we’re talking about you’ll need a couple of technically exceptional people that will develop the product (for example a developer and a designer or two developers) and one or two more that will push on the business development front. All or most of them should also bring some expertise on the domain the startup operates in (e.g. sports, image processing, fashion) – although having one or two people with little experience and a fresh perspective instead, can also be an advantage.

If for some reason, an element is missing (i.e. you need an exceptional designer for a project that relies heavily on that aspect and don’t have one) you need to address this, as it will stand out and you’ll lose points. It’s important to acknowledge the lack and perhaps address it by saying that you’re looking for an extra member or external partner – and actually doing it of course (spending a few weeks on this should be enough). Outsourcing a major aspect of your project to a freelancer is a bad idea and should be reserved only for secondary functions.

Apart from that, it’s very important to have an accurate picture of each member’s availability. Working full time for the project is something we have found makes all the difference. It’s best to be open about any future obligations early on rather than surprise everyone later. We’re open and flexible to give applicants time to wrap up projects after they’ve been accepted but this should be done in advance knowledge. Minor distractions may also be acceptable, but they should be indeed minor and in any case addressed in your application. At the end of the day, be prepared that a start-up cannot but be a full time occupation, and if you’re not ready to take the risk and fully commit into that, then you’re probably not that convincing when asking for people to take the risk and partner with you.

Another parameter that is often neglected is how the team actually met and to what extent they have worked together. Obviously old friendships and tried and tested collaborations score the team points but that’s not the only way. Putting together a team for a particular proposal may also be fine if it shows off determination and passion for the idea. In any case, a brief story (2-3 sentences at least) of how the team members decided to apply as a team and why they blend with one another is essential.

To wrap up, the team description is very important because at the end of the day, and contrary to popular belief, it’s more about the team and less about the idea. This means that your team may realise that they should change significant parts of their concept (main offering, revenue streams, target demographic) and they should be comfortable and flexible in doing it if it means the project flourishes. Unfortunately, changing team composition isn’t that easy so it’s more important to have a talented and flexible make up that can pivot towards a killer idea – rather than believe you’ve found the next big thing.

The next post will be about the product itself – stay tuned and keep the applications coming!

Tips to get seed funding and support 1/6 – The idea

This post is the first of six to provide solid and practical information on how to apply for seed funding. It is based on the experience we have accumulated by going through a large number of applications throughout the first year of the Openfund and the posts will be structured after our application form but the suggestions included should be easily transferable to other seed funding vehicles too. First up, is talking about the idea itself.

One of the most crucial parts of a submission and also one of the most common to go horribly wrong is the description part. The reason it’s important is because this is your first chance to allow us into your idea and show off its basic merits instead of confusing us and predisposing us negatively towards it for the rest of your application. So, it should be one of the sections you work on the most: do a couple of versions, show it to colleagues, make sure you say what you mean. Avoid buzzwords, just tell us what you actually plan to do. Talking about the problem you’re addressing is an excellent way to do this. Write it first and revisit it before submitting your idea.

Remember: we start from zero knowledge on what you’re planning to create and we have our own understanding of the industry – which is possibly quite different than yours. It takes some effort to describe your idea in absolute terms that leave no room for confusion. So, you need to pay extra attention to this part – especially if you don’t have a prototype. If you can’t have one on time (there’s plenty of time for an alpha version until our next deadline:), you can try to support it with mock-ups which will probably do a better job even if they are not that polished. Make sure to include any work done so far even if it means merely mentioning your registered domain name.

Also, remember that if you are between long and short go for short and try to be concise. Can you encapsulate the entire idea in one sentence? If you can, you should and that should be the first sentence. If you can’t, think hard if that indicates a broader problem with your concept – and even consider changing it (i.e. limiting it) to fit a short description. Descriptions like ‘Twitter for pics’ or ‘a cross between flickr and Facebook’ do help – but make sure to clarify which bit crosses which. Whatsmore, we would like you to cheat and include links to whatever complements in understanding your concept. This should preferably be your work – but not necessarily.

Finally, try to have some structure in this particular passage – short sentences always help on that front. Somehow managing to include the three aspects we look for in every proposal (international market – at least potentially, some amount of innovation and solid revenue streams) is sure to get you some bonus points. Other than that, of course there’s also a ton of resources out there to consult on this specific issue – don’t be afraid to tap them.

In the next post we’ll address the issue of team and what you can do to improve your chances in that part of a submission.

The Openfund startup portfolio and how to join us

Having only recently announced the call for proposals for Round IV and having completed more than a year of operations for the Openfund, it’s a good opportunity to reflect on the progress so far. It’s a chance to share with the community some of the insights we learned in the process of accepting and screening proposals, as well as the even more exciting part that follows – that of supporting and collaborating with the startups. That’s all in an effort to guide and help those who are interested in applying and improve the overall level of submissions – as well as of the startup activity in the region. In other words, it’s our way of giving back some of the value we have been accumulating – and also in the process perhaps make the selection process somewhat more transparent.

The first post in the series is dedicated to the features we value (see also here) – by means of demonstrating them on the startups we have actually selected so far. You can see brief descriptions of those in the newly created Portofolio section of theopenfund.com. And to prevent this post from being considered shameless self-flattery, the focus will be on those aspects we saw and liked early on – as opposed to the achievements of the teams so far. So, without further ado and in alphabetical order, here we go.

Fashinating This team approached us with some very attractive – or, fashinating – attributes to begin with. First of all, it was applicable to a particular vertical: fashion. (Note though that the concept was flexible enough to be applied to certain other verticals as well). Secondly, it involved a significant casual gaming factor (which makes it even more attractive) – a bet that in retrospect was a safe one given the addictiveness of the Fashinating experience. Thirdly, they approached us with a business model suggesting no less than five revenue streams – even if one or two of them proved to be wrong, the rest would still leave the project standing. Fourthly, the idea had a strong international aspect and, although it was necessary to base its first steps in a local market (i.e. Greece), its expandability to other markets is within easy reach. Lastly, they included a healthy portion of innovation in their submission both in the actual game mechanics, as well as the way they approach users and fashion items. Overall, although no prototype was ready at submission it was a very well-rounded effort who showed commitment in the first place and was backed by an able team – which also did not hesitate to expand to complete their make up.

Listiki This was one of those ideas that made us go ‘Now, why didn’t I think of that?’. Impressive, well-contained, lean and with obvious potential. The idea had been tried before, but in a much more overloaded with features version as what the Listiki team had in mind. Their simple and modern approach was important in convincing us – something that the many members of the Board of Advisors rushed to confirm after the team’s Demo Day presentation. The same simplicity was adopted from a technical view negating the need for elaborate technologies just for the sake of them. Finally, Listiki also outlined quite a few possible revenue streams – something made possible by their simple and flexible yet ubiquitously applicable idea which could work on a number of levels and made it an overall foolproof decision.

Sportmeets Another submission with a vertical scope which aimed to tackle a couple of real physical world problems. Finding partners to sport with, organise the entire meet and create a platform to keep score and performances sounded like something with a well-defined international target market. At the same time, depending on the sport in question, there were a number of approaches the team could take to develop the business and that allowed for a wide range of alternatives to pursue. The team also showed they had a solid technical background, a high degree of familiarity with the subject on a personal basis and a thorough understanding of the competition. This overall enabled them to identify a niche in terms of some of the unique features they suggested but also in their modern interface. Although they started effectively from scratch when they were accepted in the Openfund, a complete rebranding was undertaken and a full version was launched on time – something that stresses the team’s commitment and confirmed the flexibility and persistence that they demonstrated during the various rounds of the selection process.

Stockpodium This application was submitted at the prototype stage and having achieved some impressive milestones at that. In particular, the team seemed to have achieved very good results in creating a visual similarity search engine which along with some other innovative features made ignoring it difficult. At the same time, they had thoroughly thought through and structured their business model in a set of successive phases during which well-defined revenue streams would be implemented. All this combined with a target market of considerable depth and width, next to their profound passion for what they were pursuing, made selecting them additionally appealing. It is also worth mentioning that the intellectual property is of important added value to the project – something significant in times where quite often services and value is generated by combining existing infrastructure (i.e. not actually creating them from scratch).

YouScan This project is perhaps one of the most mature submissions received so far and featured innovation at a language level. It won points in terms of the intellectual property included, the monitoring of a virgin and large market, the rare sentiment analysis and the natural language processing aspects. The team showed from early on remarkable commitment and their combined experience was also exceptional – a factor which confirmed early on its importance especially in the front of generating sales and business leads. It’s also worth mentioning that the language barrier (esp. in such a language-centric app) was something we were admittedly worried about in the beginning but an issue which after all little affected our combined effort.

So, this all should give you some indication of where to place your resources in order to improve your submission. Next up, some posts based on our actual application process to provide some do’s and dont’s when submitting. In any case, feel free to apply even if your proposal is half-baked – early submissions benefit from early feedback which you can incorporate into your idea and improve it, thus increasing your chance of success.