Gasellit

Do you have any especially great or not so great experiences as an entrepreneur? Wanna share it with me?

The first chapters of my upcoming online book “I Wanna Be a Founder” are already completed but you can influence how the story will look like in the next 21 chapters!

The book tells about Tapio, initially working for Nokia but soon becoming an entrepreneur. He wants to build and succeed in a quite ambitious project, earlier rejected by his management at Nokia. Curious? Take a look of the first chapter which is already available.

Life is not smooth as an entreprenreur, however. Every month there are new ups and downs, all kind of events and incidents a new entrepreneur will often face. That’s concerning financing, partners, customers, getting sued – you name it.

Do you have any experience you would like to share?

Anything that you felt was especially nice or humiliating or for some other reason should be part of the written history? You can share this anonymously, but if you’d like to be mentioned in the “Thank You” section, you should leave your name. I will use the best entries I’ll receive, and use them in the book without any link to the original poster.

Post your experience here!

Traditionally, running an investment round has meant a lot of work with the legal documents. Getting the Term Sheet and Shareholders’ Agreement into such a document that all parties agree on, can mean a lot of work and legal costs. Quite often it’s also the investors who bring the initial document on the table (as often the entrepreneurs don’t have those in the first place).

But what is the definition of a standardized document?

For me it is a document that is acceptable for all parties (investors and entrepreneurs alike) as such, without any tough negotiation concerning the key issues. The parties could just select between some key options (like in this Term Sheet Generator) and fill-in the blanks, such as the company name, valuation and the amount of funding.

With the “old way”, agreeing on the Term Sheet and the creating the actual financing documents requires a lot of legal work. Given the cost of that, the funding round itself really has to be millions of dollars or euros. Which means this process by no means is applicable with the crowdfunding model. Paying more than 10,000 € for the lawyer to close a financing round of 100,000 € really makes no sense!

Standardizing the deal documents would solve a huge part of this.  Also, if the lawyers acknowledged that they aren’t adding much value at this level (e.g. it’s a simple negotiation and a straightforward thing to document), you could get to a place where lawyers should be able to do this for a low fixed price (say, $10,000).  However, this has to be done at the legal level, or you don’t really solve the fundamental issue.  Sure – you theoretically can streamline the process by starting with a better “form” that has been “pre-negotiated” (e.g. take it or leave it), but until you standardize the legal stuff behind the deal, you are always going to have lawyers armed with word processors redlining things.
– Brad Feld, Foundry Group

What we need is set of standardized documents (different for each market, most likely and stage of funding) and specialized “startup lawyers”. The startup lawyers would know the standardized documents and not focus on creating yet another set of customized documents. They could charge the startups for hand-holding through the process and answer any and all questions. That would get these lawyers quicker to work with the start-up with other important legal matters such as licenses, alliances, development deals and commercial transactions.

As there are already at least five different standards for the US market alone, it’s not really a standard yet. There is a great blog entry about this subject here. Each of the examples below would require more or less legal advisor to help you.

• National Venture Capital Association (USA)
• Series Seed (USA)
• TechStars (USA)
• Y Combinator (USA)
• The Funded (USA)

It’s somewhat disappointing that there are no similar documents readily available in Europe. The problem here being of course that each country might requre its own versions of the documents. There are many organizations who standardize the documents within their own portfolio, but that’s a different thing anyway.

If you know any standardized documents for non-US markets, please let me know! Those documents should aim for the purpose described above, and be publicly available without a fee.

As crowdfunding is one of the emerging and high-potential funding opportunities for the startups, what does all this mean for these companies? And those crowd-investors who are putting their 5000€ to possibly several companies a year?

• Higher quality funding documents for small investment rounds (because creating those documents from scratch with minimal or non-existent budget is not possible)
• Better documents from the founders’ viewpoint, as it is no longer necessary to use the investor-provided as the only starting point
• Enables a crowdfunding-style financing round, where there can be 50+ investors, it would be impossible negotiate with each of them!
• Higher quality of documents as they are no longer started from scratch each time
• Higher quality of documents as the issue of big law companies using young trainees to do the work can be avoided
• More efficient use of lawyers to support the process (in case they already know the standardized documents)
• Potentially enlarges the circles of potential private investors as it becomes easier to understand the legal documents involved
• Makes it easier to invest in several companies, as there is much less variation between the different companies and legal documents
• Makes it cheaper to make relatively small investmens as there is no longer need to use one’s own lawyer each time

Summa summarum what is useful for crowdfunding is

• Creating standardized documents (for different stages of the company as well as different markets) is the starting point
• Those documents need to be acceptable for both entrepreneurs and investors
• There is a need for local lawyers who already know these documents, and are therefore able to help the start-ups cost-efficiently
• Investors becoming familiar with these documents will speed up the investment round throughput

There will be standardized documents available within the up-coming Venture Bonsai crowdfunding service for specifig stages and markets. We’d love to hear from possible partners who would like to help us to expand to other markets, and become the local legal experts as well.

Comments are welcome (of course)!

I’ve been listening to Internet Business Mastery podcasts for more than a year. It’s length (typically 40 minutes) fits nicely my jogging schedule. Quite often I actually get motivated to go running just to get time to listen to these quite motivating podcasts, from an entreprenerial perspective that is.

Today, while walking from work to home, I listened to the Episode 101 (transcript).

The interesting point was about using social media for your business.

“…people have bought into what I consider to be the single biggest issue with social media and that is there are a number of trainers out there who have been telling everyone that social media is primarily for building relationships. And what they’re telling them is that social media can’t be used for making money and in reality it’s exactly the opposite when you think about it.”

So businesses should use social media (Twitter, FourSquare, Facebook) to build the brand. It’s all about the content, it’s all about proving that you’re knowledgeable, it’s all about proving that you can be trusted, it’s all about proving that you are the very best supplier of information products and services in that particular niche.

“The people aren’t able to make money using social media and the reason why is because they’re spending all their time chatting about where they went to lunch today, taking pictures of their lunch, saying I’m tired, I’m going to go take a nap, good night Twitterites, good morning Twitterites. They’re doing all these things that do nothing to build their brand and have people who don’t want to carry on a business relationship the same way they do a personal relationship and actually it repels them besides taking far too much time for the business people who use those techniques.”

Of course nothing is black and white. But I agree with them to a point, and designing the focus and content of your private and business tweets and other social media channels can be an important task on its own!

What do you think?

Summer in Finland is really hot this year. Maybe that’s the reason why I got this idea of writing a book. It could also be the relaxing atmosphere of the archipelago, who knows. While still on vacation, I quickly mindmapped the story together. And now as I’m back in the city, I wrote the teaser for the book.

Well, there are many kinds of books. What would mine be about?

… it tells about an employee of a large corporation who after failing to convince the management about his project becomes an entrepreneur. It’s not smooth sailing, however.

This book would be based on both true and fictional events. The persons, companies and events mentioned in the book may or may not be existing.

The main character in the book quickly realizes that all the publicity of the growth companies and the importance of entrepreneurs is just not exactly true. At least when it concerns more than the talk. He finds out how tough life actually is. Soonish he is in full action, putting puzzle together with the same-minded. It’s an exciting journey.

And best of all, many of these things actually have happened.

Initially the book would be availabe online only, released in 24 parts, twice a month. Part of the content would be free, but in order to read the whole book there would be a small fee.

And oh yes, what’s the name of the book? It’s “I Wanna Be Founder”

What’s you opinion on this?

So you got your friends, family and even some angels believing in you to invest in your startup. But what if it takes a bit longer than anticipated to make it a success? Wouldn’t it be nice to have a mechanism for the early-stage private investors to make a partial exit?

Many people believe that having a possibility to exit a private investment withing 3 years would greatly accelerate the willingness to invest. The effect would probably be much greater than any of those planned tax breaks. Tax breaks are useful, after all, only after making an exit.

Why should you, as an entrepreneur, worry about the exit strategy of your private investors?

Aren’t there already enough challenges of your own?

There are quite a few things that make this important aspect to think about.

Well, at least to think about whether it concerns you or not.

According to the research done in USA, and explained in an understandable form in the book “Fool’s Gold – The Truth Behind Angel Investing in America”, a typical angel investor differs quite a lot from the public image. There’s also a video interview about the book (in Finnish).

It can be assumed that the “typical angel investor” in Europe has about the same profile than in the US.

According to the research, a typical angel investor in USA, is as compared to the “public image”

• less wealthy
• younger
• often NOT an ex-entrepreneur
• less experienced

Additionally the number of private investors not classified as “angel investor” officially is about six times bigger than just angel investors!

What does this mean for you?

Those private investors you as an entrepreneur are looking after are different than you think. They invest smaller amounts and would like to see some alternate opportunities to sell their shares than just the final exit. It can take ten years for the exit to happen, and they might want to harvest these investments within 3-5 years.

What possible exits do the early stage investors (like your mam) really have at the moment? No so many.

• IPO (Initial Public Offering). Well, quite rare occassion. Don’t count on this one.
• Trade Sale. This one is possible, happens once and a while, but can take much more than 3 years for this one to happen.

Some services like Privanet in Finland, SharesPost, SecondMarket and Nyppex in the US are already offer marketplaces for private shares. They are often geared at later stage companies or certified investors.

There is great effor to offer different incentives and services to make private persons (or in some cases only  ”angel investors”) to invest in startups. Some of the most interesting services include Investiere in Switzerland and Venture Bonsai in Finland.

There seems to be almost no discussion on the exit side. Private investing in startups will only really boom after there’s going to be an aftermarket for the shares.

What do you think about this?

Time flies, they say. It’s now ten years since we closed in Akumiitti one of the biggest investment rounds in Finland.

Akumiitti was founded by Antti Hannula, Pertti Kasanen and Mika Wenell. The company was originally focusing on advanced backend solutions for networked services, and evolving into one of the leading companies in the mobile entertainment solutions.

One of the projects startingf around 1998 was concerning ringtones. That turned out to be one of the key businesses for Akumiitti as well. You can read some of the history here!

By the way, there has been quite a bit discussion concerning who “invented” commercially made quality ringtones. Technically it all goes back to the idea of some Nokia engineers trying to find use for some extra memory in the phone, and the SMS protocol enabling over-the-air ringonte download. The truth is that the originally idea was given by Mika Wenell in a lecture at the Helsinki University of Technology, and it led to establishment of SoundOne company by Mika Eriksson and his friends. Quite soonish also the co-operation between Akumiitti and Wireless Entertainment Services (WES) – as the company was soon called – started.

… and what has changed in last 10 years? What would we now do with 20 million euros at the bank account of my company? It’s very easy to be wise afterwards so probably we would do the same things than we did at that time. Of course right now things are different so same results could be achieved with a fraction of the money. For example, at that time high-volume transactional software (like ours) needed to be installed on site (of the mobile operator). That again required certain things for the installation team and support. Nowadays we have faster Internet and the cloud-based services – quite a difference.

Looking for an Angel Investor in Europe?

Take a look of the following statistics by the OECD (Organisation for Economic Co-Operation and Development) .

The graph shows number of angels groups in each country.

In Europe you’ll have the best chances of finding an angel investor in the following countries:

• France (66 angel investor groups)
• Germany (38 angel investor groups)
• Spain (37 angel investor groups))
• Sweden (22 angel investor groups)
• United Kingdom (18 angel investor groups)
• Italy (11 angel investor groups)
• Portugal (10 angel investor groups)
• Netherlands (9 angel investor groups)
• Switzerland (8 angel investor groups)
• Norway (7 angel investor groups)

Finland, Greece and Slovenia have only one angel investor group.

ReadWriteStart wrote an excellent blog post 30 Finnish Start-Ups. As I came to think about it, I thought I’ll add few more great companies to the list.

Eight of these companies are located at the Aalto University’s Start-Up Center: Fambit, Fansmagnet, Intunex, Jobita, Screenpeak, Sopima, Synble and Venture Bonsai.

• Fambit one can extend the family conversations online and store all the things to remember in one shared place. Video is here.
• FansMagnet is a service for music artists and other celebrities to communicate with their fans. Video is here.
• Intunex has a product for competence management solution. It’s purely B2B service, and has quite well-thought process for HR people.
• Jobita is the marketplace for work – a tool for contractors and other independent workers to market their skills, get leads and make deals. And also a place for consumer and companies to find practical help quickly. Video is here.
• Screenpeak is a mobile consumer service for watching and recording television on your mobile phone.
• Sopima is a contract management tool for companies. Although relatively young company, Sopima has successfully raised one million euros from private and public sector.
• Synble offers a B2B solution for crowdsourcing translation service. Potentially useful for many wanna-be European startups, giving access to user-generated translation model.
• Venture Bonsai is the new kid on the block, offering a long-waited solution for startup’s private (crowd)funding. It offers a service facilitating funding round marketing, company health check and other related services. Video is here.

Another interesting group of companies have their roots in Nokia. It’s true that both of the Fambit founders also have Nokia-background, but these are more clear spinoffs one way or another.

• Lekane has a B2B mobile solution for sales organizations such as car dealers to turn leads into deals. Lekane is also in Tekes’s Young Innovative Companies program, a sign of potential growth company.
• Previously mentioned Screenpeak also has it roots within Nokia, more specifically also in the Nokia Innovation Mill program which aims giving Nokia IPR to those employees who will found a new startup around the idea.

It’s that time of the year, the sailing season is starting. Well, at least here in Finland where it’s between May and September…

Some time ago, I thought about comparing entrepreneurship to sailing. Let me explain why.

First of all, as an entrepreneur you are in control of your boat. You’re the captain. You have the power and the responsibility.

There are many different sizes of boats, as there are many different sizes of companies. The boat size affects the crew requirements, you can sail 35 feet boat with your wife but for that 65 feet boat you need quite a bit of crew.

When your company grows, the crew requirements change. With a bigger boat you may sail faster, and reach destinations further away. You may want to practice with a smaller boat first.

Unless you already have a boat, you need to buy one. Like as an entrepreneur, you may need external funding. Those funding your boat need to accept that the boat can also sink.

You also need to have a destination, something to look for.

It’s easier to get somewhere if you know where you’re going.

In order to reach the destination, independent on the weather, you need to navigate. Navigating carefully is like being sensitive to your environment as an entrepreneur, and knowing which rocks to avoid.

You may also get lost, like Christoffer Kolumbus did, but still find something valuable. He had a vision, and the will power to get it done. And sometimes The Journey is The Reward.

Talking about the weather, looking at the weather forecasts several times a day is important while sailing. As is adapting to the weather conditions, and sometimes staying at the harbour if there is a storm.

Being an entrepreneur, that corresponds to knowing the market conditions and proceeding with actions accordingly. And in case of a real storm one must have enough reserve food (reserve cash) to be able to wait for the conditions to calm down. As they say, a good skipper survives a storm which an excellent skipper can avoid.

It might be (and it’s likely to be) that you don’t reach your destination with the most direct, optimized route. You may have to go with the wind, take another route. It’s still important to know that you’re going to right direction anyway.

Reaching the destination is always a victory, you made it!

And if you feel desperate, remember that Titanic was built by professionals and Noah’s Ark by amateurs!

Happy sailing to all entrepreneurs

Two months ago Venture Bonsai piloted new kind of professional Elevator Pitch on the Video production.

The benefits of creating a professional-quality Elevator Pitch (on the video) include

• high quality impression and differentiation of your company
• video distribution and visibility gives you access to potential investors you would not be able to reach otherwise
• the public video (Elevator Pitch, 2 minutes) is ” the teaser”, creating an interest in potential investors
• the private video (Investor Pitch, 5 minutes) is your “next step” for potential investors who contacted you
• easy process for busy entrepreneurs looking for funding and who do not really need more things to do
• pre-defined list of the most important questions, you can practice in advance

You can see couple of examples here:

View on Vimeo.

View on Vimeo.

You can see all public Elevator Pitch videos here.

For each company there is also the Investor Pitch, but as those are not public we cannot show you an example. If you’re an investor, you can contact Jobita, Venture Bonsai, Fambit, QAim or Fansmagnet to get access to the Investor Video.

In the pilot video process we also learned number of lessons and have improved the process accordingly!

In the Venture Bonsai Video Pitches version 2.0 we do few things differently:

• everything now takes place in a professional video studio (in Helsinki)
• there is a well-known industry expert (Matti Copeland) going through all the questions with the entrepreneur
• the new “interview”-format decreases the stress of the entrepreneur even more than earlier
• see examples of Matti’s interviews in his own McReads site
• all the taglines, slogans and images company wants to use will be delivered in advance to us
• both videos (2 minutes Eleavtor Pitch and 5 minutes Investor Pitch) will be ready in two weeks, guaranteed

The next studio days will be May 10 and June 3. Both days can accommodate maximum four companies.

Call Antti Hannula (+358 40 5447586) or email at antti.hannula(at)hbe.fi to learn more and to reserve a slot for your own high-quality video pitches.

Deadline for the May 10 session is Monday, May 3rd at 12:00 and for June 3 session Friday May 14th at 12:00.