Pretty much exactly 12 months ago I made my first angel investment ever in a company that makes physical things. My entire entrepreneurial career and the businesses I’ve supported on the side have always evolved around outcome you can not really touch: would it be software or consulting and services.
On this backdrop, the magic of turning ideas into physical objects has a special appeal for me. Estelon‘s flagship speakers weigh 85kg a piece yet are delicate enough to ship with a pair of white gloves for handlers. Their distinct shape is driven as much from physics as from visual aesthetics. And when they actually perform their primary function of music delivery it is as close as it gets to engineering creating pure emotion. The kind which both justifies and makes you forget the fair value on the price tag at the same time.
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After I’ve missed a few events since I was last mentoring at Seedcamp in 2008 after its launch in 2007, managed to sync another London trip with being there again for Seedcamp this week – unfortunately just for the Product Day on Tuesday and a few evening meetups. You can look at full announcement, participants list and agenda here and daily summary clips on YouTube.
Besides a chance to sharpen your mind and spend time discussing their products with the cream of the crop of young European entrepreneurs, a good reason to show up was a recent invitation to join the newly formed Seedcamp Advisory Board, which got announced now. There is tons of action and tons of traction around the European startup scene and Seedcamp has earned quite a central role in this movement. I hope I can contribute to bridging that “center” with the Nordic corners of the continent, where there is tons of tech innovation action happening in my homely Baltic and Scandinavian countries – with the role model and community around Skype playing no small part.
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Spent almost a full day last week in Helsinki by invitation of Aalto Entrepreneurship Society (See also: #aaltoes & on FB) to speak to 10 teams of their Summer of Startups program. All-in-all it was a worthy time investment for me, and I hope for the teams too – after a lecture on the history and learnings from building Skype I could spend about 20 minutes in a mentoring session with each of them.
Characteristically to being just in the middle of a 10-week intense effort of forming their products in such an early seed stage it is far too early to tell which one of them will actually fly as a company. It could be well just 1-2 companies and I have my hunches to which one(s), if any – won’t reveal that before their final pitches on August 10th though. Nevertheless that same hunch tells me that out of the people present the ratio of future success will be much higher, and even if their current concept fails they will find a new idea and potentially a differently formed team that will help them succeed in the future.
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The most recent Garage48 weekend event in Tallinn sparked some healthy discussion around the perceived and actually delivered value of this format towards the commonly accepted goal of creating more young, brave and hungry technology businesses in the country. The devoted fans of the time-constraint, playful and cutely random 48-hour hackathon were publicly questioned if their lack of attention to the big bad real world (business cases, marketing channels and Terms of Service legalese) were not accidentally misleading the youth to think that creating a real company is a joyride, lacking the need of solving the really hard problems.
Following the discussion (including further reading pointers in the end of this post) it felt like a bit more universal of a worry than just this particular event or our particular country. To share these concerns — and furthermore — seek further input from the international scene of startup support programs (and reacting to a random Facebook comment requesting the same) I decided to turn this conversation to English. And as it felt very little value add over Google Translate to start replicating the brightest arguments I decided to do something different.
Let’s try to visualize this conflict.
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Spent a day at London [Seedcamp](http://seedcamp.com/) Week’s [Product and Marketing Day](http://seedcamp.com/pages/weeks_program#2008) again. Hit quite a jackpot on the mentoring group selection lottery and got to spend time with four out of the total seven winners of this year:
* Kyko – online multiplayer gaming by the creators of [Babuki](http://www.babuki.com/mainpage/), with a neat angle of tapping into existing social/IM networks to build their userbase.
* Stupeflix – French startup generating time-synced video clips out of static images and music. [Animoto](http://animoto.com/) competitor with a strong technical performance edge.
* [Toksta](http://www.toksta.com/en/liveconfig/) – whitelabel web based IM client for social networks from Germany.
* [uberVU](http://www.ubervu.com/) – my personal favourite, coming from Romania: crawler based harvesting of comments to and discussions around your content from wherever it get syndicated to. Think of seeing not only the comments to your video directly on YouTube, but also on any random blog that this video got embedded to or any twitter post referring to that video with a tinyurl.
[Decisions for Heros](http://decisionsforheroes.com/) whom I also met have found a very sharp niche of catering the dataporn needs for rescue teams, and I just loved their founder Robin´s passion. Wish them all the best even if they didn’t win this event.
All-in-all and with a few exceptions, I was more impressed by the people and their passion rather than the specific business ideas. Of course, it sort of has to be very hard to differentiate a great company from an utterly silly one before it gets off the ground, otherwise we would all be angel inverstment gazillionaires in a blink. Judging people and their characters is a much more natural task – and I really did like most of whom I met.
In addition to the roster of enthusiastic startups, I am also very happy about making some new friends among [fellow mentors](http://seedcamp.com/pages/mentors), such as [Robert Gaal](http://www.linkedin.com/in/robertgaal), co-founder of [Wakoopa](http://wakoopa.com) (which I have been a user of for a few months) and [The Next Web](http://thenextweb.org/). Chatting with guys like him is very energizing and raises hopes about the vision of Europe as an innovation hub. Which was Saul’s point of creating Seedcamp after all, wasn’t it?
Just a quick reminder that this year’s Seedcamp is getting close and the application deadline is already this Sunday, August the 10th.
As a reminder:
Seedcamp is where Europe’s top young founders can come together in one place.
From securing funding to developing the right network, young entrepreneurs in Europe face challenges in building globally competitive technology businesses. Through the provision of seed capital and a world class network of mentors, we want to provide a catalyst for Europe’s next generation of entrepreneurs.
There was just one Estonian entry – RealEyes – last year and unfortunately they did not make the shortlist. So if you’ve been playing with an idea to start your own company, get your act together and apply now to get a proper kickstart.
This year, there is also a potential shortcut to the shortlist. Just go and win the Video Pitch contest.
It looks like I can make it there this year again as one of the mentors. Last year was fun, hope to see you there.
He shared a very interesting and bold incentive concept that the British Columbia (not even the whole Canada) government has introduced to motivate private investments in small technology startups. Per every dollar invested, the government will pay you 30% back at once. The conditions include holding your investment(s) for five years minimum and a yearly cap of 200,000 CAD total.
So in other words, when you invest 10,000 CAD in a software startup, you get a 10,000 CAD share of equity for the price of 7,000. Or, as an alternative scenario, a private investor can keep investing their capital gained from a previous exit at a rate of 200,000 CAD per year, taking an annual cashback of 60,000 CAD out for their own living expenses as opposed to paying themselves salary.
This scheme is applicable to both direct investments and private investors participating in VC funds, such as the ones Discovery builds.
The results? The district of 4 million people that has been heavy on mining and forestry industries now hosts 70,000 people in tech sector (that’s almost 10x more than Estonia, half the size; comparable to Czech Republic – but their total population is 10M), 8 locally focussed VC funds (larger ones with 500M CAD funds), 8000 mostly small and medium tech companies…
I just love the simplicity as well as braveness of this lever and can only imagine the type of political opposition introducing it could have caused.
I wish Estonian government would spend some time seeking out similar ideas from the world… and implementing the best ones fast.
Small and medium businesses form a dominant part of any economy. Countries, governments – in some more progressive corners in the world, whole societies – work hard to create fertile environments where new startup companies could spawn from. Just a tiny percentage of them will become the next [insert your favourite global brand here]. But we couldn’t live without even those who don’t. As a random example, SME’s give over 50% of the jobs and turnover of the UK economy – and the UK is supposed to be the most “large corporate” one in Europe.
Given this, it is no wonder that you hear the “we need more startups!” rally cry, especially in innovative and more value generating fields promising a brighter future. Depending who you talk to, there is always a different benchmark to look up to. Estonians feel that we should get to Finnish level. Finns feel that they don’t have as many startups as in Sweden or Singapore. Anywhere in Europe you can’t escape the discussion on when and how we get to where Silicon Valley is without startup culture and volumes.
And now a scary though from Silicon Alley, in the context of the MSFT-YHOO acquisition:
For $44 billion, Microsoft could buy every Silicon Valley and Silicon Alley venture-backed start-up in existence. That includes Facebook at $15 billion. It includes Slide, RockYou, and every other elemental company. It would be a Moe Green kind of scene like at the end of the Godfather when Michael Corleone takes out all the heads of the five families. It would turn Microsoft’s Internet business around overnight. It would be the ultimate coup.
Just $44 billion (well, I know it’s no pocket change, but remember the times when AOL paid about $182 billion for Time Warner? and US dollar has become a lot cheaper as well since then.) and for a second there are no more startups in the Valley? Nor the Alley. That is scary.
At the same time, the venture capital market looking to invest in those startups is better financed than ever. VC investments reached $40 billion globally in 2007 (why does this number look so familiar?), high since 2001. And the result? Sellers market, of course.
Paul Graham‘s essay The Venture Capital Squeeze from 2005 is a must read now. To understand why having rich employees is a benefit, how post-Enron SOX rules are suffocating the IPO market and how VC industry has gone head to head with corporate acquisitions.
On Monday I was in Helsinki, speaking at a seminar organized by Tekes, Finnish funding agency for tech & innovation. They are launching a new generation of integrated startup financing schemes – which I do not know much about, as my Finnish is below par to fully understand their published materials. But it was a nice half-day event to provide context around their announcements.
The guest speakers included Dr Orna Berry who shared the Israeli innovation financing experiences, Quatar Capital’s Mikko Suonelahti’s talk on venture capital markets. In between them, I was asked to share the story of Skype as a recent startup.