March 3, 2015

Outcomes follow actions

When running a startup (or probably any organisation), it's important to remember that achieving a target or changing a specific metric require certain actions taken by specific people. One way to sanity check if a metric can be met at a specific time is to:

  • Understand what actions (a new feature, increased marketing etc) are the primary drivers of the metric
  • Estimate how long it will take to implement that action with a given number of resources
  • Understand what resources (people with specific knowledge, money etc) are needed to take those actions
  • If you don't have the resources, how long will it take you to acquire them (hire a new engineer in Sweden = 4.5-6 months with ramp-up time, raise more funding = varies a lot etc)
So even if you know how to increase a key metric, it's as important to understand how long it takes to do the job that will drive the change.

March 2, 2015

Breakit launches Swedish startup and tech coverage

Today Stefan Lundell and Olle Aronsson launched, a "Swedish TechCrunch". The site looks nice and it will probably be a daily read for me.

March 1, 2015

The dots will connect (Omaha Edition)

I'm using Blogg100 as an excuse to try write a couple of sentences or paragraphs on this blog on a regular basis again. I won't limit the subjects to quite the extent I, at least mentally, have done so far. If I find it interesting to write about, I might just do that.

Yesterday Berkshire Hathaway's 2014 Annual Letter to Shareholders was published. Berkshire Hathaway is the corporation through which Warren Buffett, the world's most successful investor the last 60 years, does most of his investments. 

The annual letter is not quite like a normal, dry annual report and is normally worthy to read (if you're finance or business nerd, at least). This year it was made even more interesting due to the fact that Warren Buffett has been CEO and Chairman of Berkshire Hathaway for 50 years and he and Vice Chairman Charlie Munger looked at the past, present and future of the company and the driver's of success.

While failure and hardship often are better teachers than success, studying organisations or people that have been successful for long periods can also be a good teacher.

While there are many lessons to be learnt from the quotable Warren Buffett, a few basic takeaways for business success, small or large, are:

  • Find something you like (or even love) doing and can do for a long time. That will have a major impact on your happiness.
  • Skill and knowledge accumulate over time (but I'd add, in the words of Steve Jobs, that one must remember to "stay foolish"). 
  • Networks and relationships grows too, opening up new opportunities.
  • Understanding what you're good at and understand (your circle of competence) is very valuable.
  • Incentives matter. Over long periods of time incentives matter a lot.

October 27, 2014

Lifesum is hiring!

At Lifesum we're currently hiring Performance Marketing Manager, Test Automation Engineer, Senior Platform Engineers and other roles. Check'em out!

October 26, 2014

Sunday reading on company building and more

An old, I cannot find the date but guess early 2000's, Harvard Business School interview with Tom Murphy (ex-CEO of Capital Cities that's now part of Disney). Some very good food for thought around building a company in no particular order: 1) management running the company like owners for the long-term, 2) responsibility to employees, customers and shareholders, 3) hire smart people and give them responsibility and share of the financial upside, 4) never do improper or unethical things, 5) care about costs, 6) be in a good business.

Business Insider: Why Selling A Startup For $20 Million Can Be Better Than Selling It For $200 Million. Some math that's crucial to understand for entrepreneurs. It all starts with understanding why you are doing something and what you're trying to achieve. More capital can help you achieve your goal, but it can also make it practically impossible to get there.

James Montier: Sharholder Value Maximization (video). A critique of the idea of shareholder value maximization and why it doesn't seem to work from an investor point-of-view. In Conversation Marc Andreessen. On technology, regulation and economics.

October 25, 2014

Don't invest to be an angel, but do recycle capital

I don't think the title angel investor is a helpful or accurate way to describe early investors in startups. Capital is crucial for all companies, but individuals and funds that invest in startups aren't angels. There are many good reasons that drive people to invest that aren't captured by standard financial return calculations, like paying it forward, learning new stuff, building relationships and making the place you live and work in more interesting. But angel? I think not.

Anyone who makes a little or a lot of money from a startup should do whatever she wants with it. Spend it on alcohol, men and fast cars. Or just squander it by paying off debts, making a downpayment on a mortgage, investing in the stock market or buying a well-deserved vacation.[1]

But if there's some capital left after personal needs are taken care of, a fundamentally good ethos in the startup world is paying it forward and investing in new companies. Recycling capital, as Fred Wilson puts it.[2] But even more valuable than only investing capital is to also help a startup with relationships, experience and maybe even some wisdom.

Investing and advising can be very rewarding both mentally and emotionally in the short-term, and if you're lucky financially in the long-term (startup investing is very slow money). But just because an investment isn't entirely captured by a traditional valuation model and is personally rewarding doesn't make anyone an angel, just a mensch.[3]

October 18, 2014

Going beyond the 10 slides. Make sure your startup has a plan and a budget.

When raising seed or venture capital, having a traditional 10 slide presentation (plus backup slides) works well to communicate what your doing to traditional VCs and seed-stage investors and will go along way in raising capital.

However, you should spend quite some time thinking about different scenarios for the next 12 to 24 months and creating traditional budgets for those scenarios and not only create the slides. Having a plan and budget is much more valuable than most first-time technology entrepreneurs probably think.

It might be all about product, product, product the first 12 months of a startup, but if you run out of money you're dead, dead, dead and then product won't help you.

You should build a budget and a plan that allow you to raise enough cash to cover your costs for 12 to 18 months. At the end of the period you should be at cash-flow breakeven or have reached a milestone that will allow you to raise more capital.

If you're building digital services for mobile or the web, guessing your revenue is very difficult and quite risky unless you have some sales already. So assuming zero revenues is reasonably conservative from a cash perspective. But you should be able to estimate your costs quite well once you think through your team, business model, market and product.

By doing that thinking, you should have a good sense of how many people you need and how much to pay them, how much you need to spend on marketing (you're unlikely to grow entirely for free), office space, insurance, attorneys fees, travel etc. Figure out when different costs materialise and add it all up.

You will be a lot smarter about your business and more likely to succeed in both raising capital and building a company if you put in the time to understand how your costs will develop.

As the saying goes: "Plans are worthless, but planning is everything."