Seedcamp Week 2009 applications are now open for the next wave of European web-tech talent to apply
Seedcamp Week 2009 is a weeklong programme from 21-25th September that connects 20 early stage web tech startups with over 400 highly experienced and sought after entrepreneurs, investors, marketers, product and developer experts. The 20 teams do compete for seed funding, but most importantly, garner world-class connections and recognition in the European entrepreneurial ecosystem. At the end of the week Seedcamp will invest up to €50K each in 5 teams for a small equity stake (5%-10%).
Applications are now open and being accepted till August 23rd. More details are on our website (www.seedcamp.com) and blog (blog.seedcamp.com).
I don't mean that you just got to love them. You actually have to love them and here's why:
There is a reason why the economic downturn has not affected internet startups in the same way as traditional businesses. The internet just passed 1 billion users and bandwidths are continuously increasing at the same time as online advertising and e-commerce is still growing strong. Simply put, the overall market is getting much bigger. Launching a new internet service today is so cheap and easy that it can be done literally for free and in just 24 hours. But putting together a product in as short time as that puts even more focus on measuring what the users actually are doing with the product. You will probably have one idea, but your users might have another. Through simple real time tracking of defined user metrics it is much easier today to make rational decisions based on actual user behavior.
After seeing a presentation by Dave McClure at Seedcamp this fall I got really interested in metrics for startups. According to Dave there are five different areas that are important to measure when it comes to a new internet service or product. In this post I will try to go through and give tips on how they apply to your business. The five areas are:
Acquisition
Activation
Retention
Referral
Revenue
Acquisition
This one is quite basic when you first look at it. Let's face it, if you have a website you'll want users coming to your site. But how should you measure the differant ways you get them. The first single most important thing is also the most obvious. You should have a killer app. Focus on creating a service with one really crisp functional feature that works really good that your users love. But before we go into that let's focus on the acquisition metrics. Try and find your different marketing channels may it be SEO, SEM, PR, Facebook, Email, Widgets or campaigns. Measure volume, cost per acquisition, and best performing conversion. Find your top 10-100 keywords that you should buy adwords for and use Google Analytics extensively. Set up goals and look closely at clicks vs. CPC vs. conversions of each goal.
Activation
Once you have your users coming to your site you need to get them to do something there. This has to do a lot with clear communication of what they can expect to do at your site. Here you need to measure any type of activation that seems logical for you, but keep the different metrics low in the numbers. Things to measure could be, clicks on links, sign ups, low bounce rate, pages per visit, and even mouse movement or eye tracking. Concrete tips on improving these metrics could be A/B testing which you can do with Google Website Optimizer, experiment with many different landing pages, and literally watching over the shoulder of a user when they enter the site. A great tool for this that I recently ran into was UserFly where you can record and playback the users' sessions with mousemovements and clicks and everything you need. Crazy Egg is another good resource for heat maps of user clicks. The best way to start is to make a lot of dumb guesses of what might work and then iterate really fast on those that work.
It just struck me that you might be able to apply genetic programming techniques for the A/B testing. Create 20 different versions of a landing page. Then take the best performing 2 and combine them into 15 new versions that are similar to them, then create 5 that are based on them but include some sort of mutation. Do this for a couple of generations and you'll probably have a pretty good view of what works or not.
Retention
How do you make your users come back to your site over and over again? Even if I usually don't like when services sends me emails, it is still working because I go back to their site. Take facebook for instance. I get maybe 10 facebook mails per day which takes me back to the site because there is something I'm interested in there. Automated email marketing and alerts should not be underestimated. The only really important thing here is to make it easy for the users to unsubscribe. Emails could be sent quite often in some cases, but in others it only makes sense each month. Subjects could be the status of a user's account, best of lists, or interesting news where something has changed. Just remember to keep 80% of the message in the subject line, and 20% in the body text. Other than email, blogging and news feeds are crucial to keeping your users incentive to come back high.
Key metrics here are to measure the distribution of visits over time. That is how many times a visitor comes back over a period of time and how fast the decay of visits is. This will show you how a full customer life cycle and measure its effectiveness. When it comes to email and news feeds, it is important to measure how many people actually open the email. You can do this by including server loading html or tracking images. You should measure the CTR and the total number of users coming to you through your emails. This can be done with for instance campaignmonitor.com. Relevant levels for this is of course dependent on your site and users, but goals could be 20% open rate with 2% CTR. You should use this tracking to try and identify you fanatical users that will actively promote your service. These are the users that can get virality going and you should pay close attention to them. With Google Analytics you can easily measure visitor loyalty and session length as well as conversions once you've set up your goals from landing pages.
Referral
Once you've found your fanatics and cheerleaders you need to have tools that allow them to easily refer their friends and followers to your site after they've had a happy experience visiting. This can be done with simple social "share this" buttons, or widgets that can be embedded on other sites and blogs. There is a really simple formula for measuring the Viral Growth Factor.
X * Y * Z
X = % of users who invite other people
Y = average # of people that they invited
Z = % of users who accepted an invitation
A viral growth factor that is > 1 means that your organic growth of users is exponential.
And finally Revenue
This part is where the general tips stop to be important and you have to look at the combination of all of your other metrics to figure out what each new user is worth with your business model may it be AdSense, Freemium, Subscription, or Lead generation. For tips on business models you can have a look at The Business Model DataBase. There is a reason why this is the last area of measurement. It might be wrong to start with the revenue model when you develop your new service. Don't let that hinder your progress in acquireing, activating and retaining users. It doesn't matter if you have the best most innovative business model in the world, if you don't have any visitors.
Keep your costs low, focus your development 80% of improving existing features and 20% on new features, all based on your super detailed metrics. And to cite Dave McClure:
Features don't matter... Usability + [Measured] Conversion Matters
Ok, this is a little bit late news, but Seedcamp has released the application guide for 2008 applications. The applications are due August 10 and I really encourage anyone with an idea and a great co-founder(s) to apply. Even if you are not interested in applying for the "competition" I think it would be good for everyone with an Internet business to look at the questions and answer them for your own sake. If you ever will be looking for funding, those are the questions you will have to be able to answer.
I think the key is to write really concise answers. Don't write marketing material. Write short answers that your grandma would understand.
Seedcamp's new promotion video interviews a bunch of great entrepreneurs and investors and asks them a couple of very interesting questions. After seeing the video I wanted to give my opinions on the matter from the point of view of being a fairly fresh entrepreneur that won the Seedcamp competition last year with my company Tablefinder. So here it goes:
1: What is an entrepreneur?
To me an entrepreneur is someone that does not consider work a burden. My job is partly doing exactly what I would be doing in my spare time. So thus I work a lot. Another key factor for me is passion. You have to see the sparks flying out of the eyes and ears of the entrepreneur as he or she is trying to solve the problem.
2: What are investors looking for?
This is obviously not the easiest question to answer for be but I will answer from what I've experienced works and what doesn't.
The single most important factor is your 30 second pitch. And the most important part about the pitch is that it doesn't have to describe all of your business. I made the mistake in the beginning because I wanted the investors to understand everything about my idea and why it was/is so great. Those type of conversations tend to be very detailed and long and complicated, and clearly not suitable for an elevator pitch.
Another thing I've learned is that the pitch is not about to create something that sounds nice and really smart gives metaphors on all of the cool functionality your idea will have. It is rather about simplifying everything to just its core. If you cant say your main thing in one sentence, you are not enough focused, or you are trying to explain to much of the idea.
So from my experience investors are looking for a really clear idea that you can express in a few sentences, and that has a big proven market.
All investors talk about that they think the team is the most important thing. And I agree fully, but the point is, if you and your team is really good, you still need to be able to pitch your idea. And if you even get to have a meeting with one of the bigger investors, you probably already have made a pretty good impression as an entrepreneur.
Your team is not always about bragging about all the stuff you have accomplished, but sometimes passion is enough. If really love solving the problem you are working on, and make that rub off on people around you, I believe you have come very far towards what investors are looking for.
3: How do you find investors that are right for me?
This one is very important, but also very tricky. It clearly depends on what stage your company is in. I made a big mistake, but got invaluable pitch-training in the process, by pitching Tablefinder to all of the big investors in London, when we clearly, with hindsight, needed angel funding. The problem for us was that the business had changed directions a couple of times before Seedcamp and the company was more mature than the business idea. In the end it is always important to have investors that share the same vision as you. They should be people that are well connected within your area of operation, and should be willing to help you grow your business.
An investor is going to be a very close partner for quite some time, so it is as important to screen your investors as it is for them to screen you. Unfortunately sometimes or many times we entrepreneurs don't have the luxury of being picky. But when I will do it again, I sure will put my self in a financial situation where I will be able to be picky.
4: What is it like to be an entrepreneur?
Now this one I know. And I can't emphasize this enough: it takes passion and a whole lot of patience. To be an entrepreneur is doing what you love everyday, and not getting tired of working. Many of my friends think I work too much, but is it really work if you love what you do?
I might not love every moment and aspect of my work, especially working without any income what so ever for 6 months is not the best kind of fun. But the rewards of solving a problem and building your business when nobody thought you would make it, that is what I love. The satisfaction of doing something that nobody else could do, and being respected for doing so is unbeatable.
So, in the video they talk about getting through "the first tough months". I don't think that is the toughest part at all. But the big problems come when you try to build your business after you have launched. If the business doesn't start rolling straight away, and you won't get funding until it does. That is when it is tough. But also the most rewarding if you can push through. Seth Godin's book The Dip was a great source of inspiration for me when things looked like we were out of business. We were in the dip, but now I finally feel we are moving past it.
5: What is the biggest mistake you've made?
I've made so many during the last 2 years, but the one I think stands out the most is that I wanted to do too much. I wanted everyone to have our solution because "everyone who eats could use our service", which is true but not really a healthy customer definition for the business. I also wanted everyone to have the best features already there once we launched. This ended up delaying our launch with many months. And now with hindsight, I would like to say as Paul Graham of Y Combinator says:
"If sitting down for a couple of hours to come up with a company motto delays your launch by a couple of hours, it is probably not worth it"
So when I do this again, I will launch as quickly as possible with one solid problem solving feature and nothing more. Additional features can always be added afterwards.
One thing I learned at Seedcamp was to think of "outcomes" rather than "features". What does the user really want to accomplish? And are we producing that outcome? To me it has worked in the simplification process, not only for features, but also for the pitch.
6: Lessons I've learned along the way?
When you are running with your startup in 200 km/h in one direction you are picking up a lot of experience along the way. The problem is that if you don't stop to think, you won't be able to apply what you've learned until you've run past your objective.
Having gone through a really tough period where I had to focus on bringing in money just to pay the bills, it was like a took a step back, slowed down, and everything became clear to me. Almost a euphoric moment when you get a weight lifted of your shoulders because "It can't get any worse" and that there is no pressure for you to produce results because people have stopped believing.
I never stopped believing and I feel I've been rewarded already. Everything I learned at Seedcamp and through all of my pitches I've made, good and bad, I can now apply, and start to pick up speed once again to get even more experience. Hopefully next time I will settle down to understand what I've learned it will be for better reasons.
I've already mentioned above many of the lessons learned for me. But I think one that I haven't talked about is trust your instincts.
I think one of my largest mistakes was when winning Seedcamp, I thought that everyone around me knew better about my business than me, because of their experience in other fields. And I thought it was all done now since the people around me would "make it happen". Nobody but you make it happen!
Meeting great entrepreneurs and investors has been invaluable for me and I wish everyone could do that, but never think that they know exactly what is right for you, and never expect that they should make any decisions for you. You are the one that knows most about your business, so try to take in the advice, even though it is hard when running 200 km/h, but trust your gut feeling about your decisions and stick with them.
7: Europe or the valley?
As I've never been in the valley I can't really say much about it, but I must say I'm envious of the entrepreneurial environment. As Michal Arrington at Techcrunch say in the video, starting a business in the US gives social credit, but in Europe, many people would look at you and think you were crazy for quitting your government job for starting a business.
This mentality is exactly what Seedcamp is about, which is also something I strongly believe in. We need to utilize and recycle entrepreneurial experience in Europe, and help each other succeed. This reason alone is why I took the initiative to start OpenCoffee in Gothenburg as there are not many places for entrepreneurs helping entrepreneurs.
8: What are the classic mistakes start-ups make time and again?
For us, one of the main problems has been focus. As Saul Klein said on Demo day:
Find your mountain!
Meaning that you have to pick one peak to climb, and not take on all at once. This is very difficult, but from what I understand now, a good measurement of how focused your idea is, is if you can define it with just one short, clear, and understandable sentence.
Another problem on the same theme is trying to pinpoint your core customer. I mentioned this above, but the answer to the question "Who is you customer?" is not "Anybody can use this service!" but rather a specified demographic which you know a lot of details about.
On the May 8, STING's Innovation & Technology Award will be given to the top technology companies that apply to the competition. The winners will get a nice 150,000 SEK (€16,000) in pricemoney, but more importantly the winner will be direct qualified to the final of this years Seedcamp. Last year I was lucky to be among the winners, and I have nothing but good things to say about the experience.
When working in a venture capital financed company and trying to get stuff going really fast really early, the most important thing to have is a good network of contacts. Once you know the right person at the right company, things get way easier. Seedcamp is about giving you the opportunity to create such a network, whether you win or not.
So if you are a Swedish company I strongly recommend applying to both STING's competition, but also to Seedcamp directly.
Last week something odd happened. Or how often would you say that two of your friends start the same business idea - separately - without them knowing about each other. One was started in Sweden, and the other in San Fransisco. I think we have ourself a match.
The two companies are Tuurf.com and Zkout.com. I don't know any details of the business ideas, but I do know that both are operating in the mobile social networks market. They arenotalone, and reports keep coming in that the mobile social network market is going to be huge.
What is really interesting here is that the two companies have taken two completely different approaches to creating their businesses - one silicon valley style, and one European style. During Seedcamp we discussed that European startups are usually to humble in their approaches to solving a problem. That Europeans do not aim big enough, and on the other hand, US startups go super big with sometimes very crazy ideas. But crazy ideas are only crazy and funny if they are done with bad timing.
Tuurf has not yet taken any funding, and that is not because they can't but due to strategy. Zkout has on the other hand taken an angel round and are hiring at least 10 people from what I've heard. Tuurf does not yet have any full time employees and it is treated as a project as the founders all have other jobs or are still in school.
So what is the best strategy in this situation. Either you go full speed and work in the market and closely follow all developments in user trends, burn though a lot of cash fast to try and get an early piece out of a growing market? Or do you watch this market grow from a distance, and try and get a trend line on the direction of the market without following all ups and downs, and let others do the dirty work of breaking in the market?
As I'm all for the "go big, or don't go at all" kind of mentality my first thought would be to go for the more aggressive Zkout. But then again, I think this market is still a bit too immature for even early adopters to use these types of services. So, if Zkout are to come out a winner in this fight, their pockets better be deep, or they will run out of cash before the market is ready.
On the flipside, Tuurf might miss out on some key trends by not being focused enough, and might not have the manpower to scale up in time when the market is ready. Going too slow might be a problem, and is probably as hard to fix as going too fast.
I'm not that passionate about the mobile market, so for me I might not even be an early adopter for these types of products. But looking at this match in terms of business strategy, I would not want to miss a minute of the action to come.
Wow! What a fantastic week at SeedCamp! Me and Tomasz managed to do a pretty good presentation today. At least in my opinion.
During this week, we have been able to change the way we describe our idea in a better way than what we have been able to do for over 16 months of trying. I'll swallow my pride of not being able to figure it out myself, and say thank you very much!
Tonight we are going to the TechCrunch Party at a really nice and big private flat somewhere in London.
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And I can't emphasize this enough: it takes passion and a whole lot of patience. To be an entrepreneur is doing what you love everyday, and not getting tired of working. Many of my friends think I work too much, but is it really work if you love what you do?
