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From startup to scale-up

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Speaker: Alain le Loux MSc. MBA ( EIT DIgital)
Subjects:
- How to scale-up your business internationally.
- The top 10 mistakes for startups
- From start-up to scale-up
- Possibilities to do business in other countries
- Fast growth strategies

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From startup to scale-up

  1. 1. Text Text From start-up to scale-up Alain le Loux MSc. MBA Athens | 1th of June 2016
  2. 2. Education 1989-1994: University of Twente: Computer Science, Technology Management & Communications 1999-2001: Business School Nederland, Executive MBA, cum laude graduated 2010 – 2016: Business Accelerator EIT Digital Business Acceleration & Strategic Coaching of high-tech startups in Europe 2009 – 2016: Angel Investor 2008-2009: CEO Virobuster Technologies High tech startup in Air Sterilization (customers: hospitals, laboratories, etc.) 2004-2008: Managing Director Division “Application Services & Projects” within Getronics PinkRoccade – 1,100 FTE - 130 million revenue – Member Executive Committee – Worldwide responsible for Application Services (multinational with 30,000 employees) 2001-2004: BU Director, 330 FTE 1998-2001: Serviceline Manager, 160 FTE 1996-1998: Project Manager 1995-1996: Bid Manager 1992-1994: My first startup Introduction - Alain le Loux MSc. MBA (45) THE NETHERLANDS
  3. 3. Education 1989-1994: University of Twente: Computer Science, Technology Management & Communications 1999-2001: Business School Nederland, Executive MBA, cum laude graduated 2010 – 2016: Business Accelerator EIT Digital Business Acceleration & Strategic Coaching of high-tech startups in Europe 2009 – 2016: Angel Investor 2008-2009: CEO Virobuster Technologies High tech startup in Air Sterilization (customers: hospitals, laboratories, etc.) 2004-2008: Managing Director Division “Application Services & Projects” within Getronics PinkRoccade – 1,100 FTE - 130 million revenue – Member Executive Committee – Worldwide responsible for Application Services (multinational with 30,000 employees) 2001-2004: BU Director, 330 FTE 1998-2001: Serviceline Manager, 160 FTE 1996-1998: Project Manager 1995-1996: Bid Manager 1992-1994: My first startup Introduction - Alain le Loux MSc. MBA (45) THE NETHERLANDS Coaching more than 30 European high-tech startups per year. In total more than 200.
  4. 4. About EIT Digital • Pan-European Vibrant Ecosystem of Innovation Hotspots • Leading European organisation for innovation and education in ICT • Over 130 partner universities, research centres and companies all over Europe • Fostering innovative technology and entrepreneurial talent for economic growth and quality of life in Europe.
  5. 5. 1992 • My first Start Up: Synergy Systems. – Software for employment agencies. – 2 roles: technical and commercial. – I thought: pfff…I need to do a hell of a job to find customers and he can sit down and can programming on his lazy chair…. – He thought: he is doing nothing, I’m programming during the night and he is sleeping or with friends in the nightlive.
  6. 6. Our first mistake • After one week we received lots of paper mails with advertisements. – if we want to print business cards, and to buy chairs and 500 other shit advertisements…. • A few weeks later we received our first blue envelope (from the Dutch Tax Authorities) – My colleague took care of the blue envelope and filled in the expected revenue • € 1.000.000 (€ 1 million !!!) • It took 6 months to manage the shit with the national tax office.
  7. 7. 2008: CEO Virobuster Technologies • High Tech Startup: Air Sterilization. • 3 years R&D. Investment of € 6 million. • Start on 1st of March 2008. • Preparing for the London Stock Exchange. • 26 May 2008: Press Release. – 21 interviews the first day, live on television, front page of many newspapers. • Within 2 weeks: 250 interested customers – worldwide. • Number of leads increased every day ! • How many orders after 1 year ? □ 864 □ 512 □ 249 □ 97 □ 24 □ 3
  8. 8.  95% is loss-making for the first 3 years  9 of 10 will out of business within 5 years  The best international places in Europe: Berlin, London, Amsterdam, Helsinki, Stockholm, Madrid, Barcelona & Copenhagen
  9. 9. 40 unicorns* in Europe * a unicorn is a tech startup with a value of > 1 billion dollar
  10. 10. 13 new European unicorns last year • Adyen (The Netherlands) • BlaBlaCar (France) • Delivery Hero (Germany) • FanDuel (UK) • Farfetch (UK) • Funding Circle (UK) • Home24 (Germany) • Powa (UK) • Rocket Internet (Germany) • Shazam (UK) • Skrill (UK) • TransferWise (UK) • Ve (UK)
  11. 11. What can we learn from unicorns ? Average 5 – 8 funding rounds !!
  12. 12. Ingredients for success A good (disruptive) idea Capital Entre- preneur- ship Also a good ecosystem is important
  13. 13. Greek startups Forky: Founded in 2014, Forky is a venture backed and fast growing food company that delivers you great food in ~10 minutes. The Athens- based team consist of passionate engineers, chefs and operations people that value fresh ingredients, healthy meals and fast delivery. Forky’s chefs prepare 2 main dishes and 1 salad every day and deliver them to their clients as quick as possible. In April of 2015, the promising startup raised about €800K in venture capital. Nannuka: An online platform that connects parents to numerous child care providers across Europe. In just a year, Nannuka has become the childcare leader in Greece, bridging parents to 17 different categories of child care and is now landing in 2 more countries (Italy & UK). The Athens-based startup was founded in 2014. So far, the ambitious team behind Nannuka secured roughly €245K in funding.
  14. 14. Difference between startup & scale-up • A scale-up waits longer with bringing the technology to the market. • Timing is important (you also need luck). • A scale-up has more experience managers and has a group of founders • not a single founder • have the right mentors and advisors • Growth > 20% per year. • A scale-up has more funding rounds. • Mostly have a B2B focus. • Have a scalable concept and concept is suited for an international roll-out. • Lots of startups forgot to think about distribution, pricing, etcetera. Only 1 out of 200 will be a scale-up.
  15. 15. Scalability • My central question is always “How to do business in New York, without buying an airplane ticket?” • If you can’t answer that question, you don’t have the right business model.
  16. 16. How can we roll-out Forky in New York ? • Hiring own cooks is expensive and too risky… • And we may not buy a ticket to New York ???!!!?? • And now ? • Possible idea: • Franchise the platform and take out some money out of the revenu. • So try to find chef cooks / restaurants who like to deliver the fresh concept and Forky uses the platform to attract customers and manage the payments.
  17. 17. Mc Donalds franchising
  18. 18. 10 reasons why startups fail
  19. 19. 1. Underestimate the time before the company is making profit • The business case always fits – I don’t see business plans which are lossmaking • 99,999% of the startups underestimating the marketing & acquisition costs – What is the cost price of getting a customer ? • First year already fast growing revenue ! – Realistic: NO – Will take in 99% of the cases at least 3 year; before a company is making any profit
  20. 20. 2. Overestimate the market-size • Typical startup thinking: • “We made a new personal Heart Rate Monitor. We can make it for only 12 US Dollar and will sell it in the shops for 50 US Dollar. If we sell to 2% of the Chinese people we will be rich.” • 2% is equal to 27 million devices • Do you think such a startup will sell 27 million devices in 1 year ? • In 3 years ? • In 5 years ? • It costs really millions and millions and millions on advertisement costs to have at least a small market position (0,0001% is more likely then 1%).
  21. 21. 3. Funding problems / cash flow problems • Without (enough) money you cannot • startup your business • pay your employees • pay your personal expenses • Without (enough) money no one in the world will know your product / service: you need (a lot of) money for marketing & sales !! • Always my first coaching question: “how much money do you have (left) and what is your monthly burn rate?” • BUT: Finding a VC will take time and a good preparation!
  22. 22. Get funding: prepare for the investors pitch 1. Problem: connect emotionally with your audience 2. Solution: resolve the pain – PRODUCT / SERVICE (DEMO) 3. Business/revenue model: how you make money ? 4. Proprietary technology: your unfair advantage 5. Competition: why you’re better than competitors 6. Marketing plan: customer acquisition 7. Financials: quarterly revenues versus expenses 8. Your team 9. How much capital do you need and what will you do with it ?
  23. 23. There went never a startup bankrupt of being diluted. Do you want to be 1% owner of a billion dollar company, or 90% owner of a million dollar company.
  24. 24. • Phase 1: own money & FFF Friends, Family & Fools • Phase 2 (still early seed)  informals / business angels  crowd funding  subsidies (governmental, EU, etc.) • Phase 3: growth money  VC’s Raising money
  25. 25. 4. Problems with customer acquisition “Everyone likes it, but no one buys it” • The problem is that startups only ask to potential customers, do you like my product and do you want to have it ? – Sounds like “Do you like a Ferrari ?” • With Business Model Testing (Osterwalder) you have to check: – Which problem are you solving ? – What is the value of that problem ? – What do they use now ? – Are they willing to change? – And how much are they willing to pay ?
  26. 26. • The Swirlid is a convenient and beautifully designed opening device Business calculations & realistic forecasts EXAMPLE: SWIRLID
  27. 27. • The inventor / owner has invited his personal 1,600 LinkedIn relations to buy his device with a special discount: € 35 in stead of € 60 (it was still not available in the shop). • How much people (personal relations) did order this device ? • I was coaching this owner and he asked me this question. – I said 4. – He said “how did you know that ?” • actually it were only 3 ;-) – He said “I really thought that 800 people should buy it” • I said “By the way: I think those 3 bought it because you’re a nice guy” Business calculations & realistic forecasts EXAMPLE: SWIRLID
  28. 28. There is big difference and between the following: 1. I like the product. 2. Yes, I like it. 3. I would like to have it. 4. Yes, I would like to have it. 5. I think I will buy. 6. I will buy it. 7. I’m sure I will buy it. – But when: next week or in 5 years? – Why should people order it today ? – Why should people pay € 60 ? (it is really a big problem ?) 8. I want to have it this week. I will ask my husband to buy it. 9. I will step on my bike and will ride to the shop ? (even when it’s raining ?) 10.Yes, I got it. Business calculations & realistic forecasts EXAMPLE: SWIRLID
  29. 29. 5. Pricing and revenue model • Lots of startups spend a lot of time with internal discussions “What must be the price ??“ The answer is: NO ONE KNOWS !!!! – Ask your customers ! – Do not mention prices on your website (only when you have online subscriptions; even that: you have to test it before going live) – Use value based pricing models and not a cost price+ model. Pricing: € 5.000 per year Duration: 3 years# customers: 3 Pricing: € 400 per month Duration: 3 months for free, monthly subscriptions and direct accomplishment possible # customers: 50 customers with only 1 successful mailing
  30. 30. How do they make money ?
  31. 31. 6. Not the right team Most occurring problems – No winners in the team – Lazy employees (focus on connecting hard-working people) – Not enough experienced sales power in the team (you need proven sales people !!) – Not enough creativity in the team – Technicians are good but not good enough  Spend time to find the best ones – Employees are not involved enough (or have other activities as well) – It is NOT a TEAM
  32. 32. 7. Lack of focus / not the right market Technicians like to improve and improve and improve and improve their solution STOP IT ! – Ask your customers what kind of basic functionality they want to have and bring that to the market – Afterwards you can offer new functionality and can make improvements First focus is: making money !
  33. 33. 8. Product / service is not as good as expected
  34. 34. 9. Problems with scaling up and growing • Is your business model / service scalable ? – Is the technique ready for it ? – Can you easily scale up without organizational problems? • If not, it is always a challenge. • How to sell in other countries ? • Do you know the costs of opening an office abroad? • First focus is always: make money and create value ! • Hire own people? Or connect distributors ?
  35. 35. 9. Problems with scaling up and growing
  36. 36. 9. Problems with scaling up and growing
  37. 37. 10. Internal troubles within the management team • Fighting about shares • Fighting about salaries • Fighting about positions and roles – Including the titles on the business cards • Fighting about the fact that not everyone is making the same hours per week – Some people start at 07.00 and others at 10.00 • And last but not least “Fighting about nothing”  Do not forget: everyone is in the same rowing boat on the ocean !!
  38. 38. Summary: Top-10 reasons why startups fail 1. Underestimate the time before the company is making profit (underestimate the marketing & roll-out costs) 2. Overestimate the market-size 3. Funding problems and cash flow problems 4. Problems with customer acquisition (“everyone likes it, but no one buys it”) 5. Not the right pricing and/or revenue model 6. Not the right team 7. Lack of focus / not the right market 8. Product / service is not as good as expected 9. Problems with scaling up and growing 10. Internal troubles within the management team
  39. 39. Top-10 reasons why StartUps fail
  40. 40. Startup Experience
  41. 41. Startup Experience
  42. 42. 10 recommendations for startups 1. Have fun! When you don’t have fun, stop immediately !! 2. Talk with potential customers 3. Focus on launching customers. The earlier you involve potential customers in the R&D process the better. 4. Rule-of-thumb: spend 1 euro for marketing for every euro you spend in R&D / developing your products / services 5. Try to find the right pricing model 6. The lower the thresholds the easier to get new customers 7. Test your business plan with Business Model Testing 8. Commercial skills in the management team is necessary 9. A formal launch with a press release can fasten-up the market entry 10. Find an experienced start-up coach / mentor
  43. 43. Ready to scale up? Take the EIT Digital Challenge!  €50,000 in cash  Access to EIT Digital’s pan-European innovation network with 130+ partners  Chance to join the EIT Digital Accelerator for a full year  Publicity and visibility throughout Europe Apply by July 15, 2016 www.challenge.eitdigital.eu @EITDigitalAccel
  44. 44. Page  50 Thank you for your attention!
  45. 45. Blog: http://www.eitictlabs.eu/news- events/blog/blog-startups/ Alain le Loux MSc. MBA Business Accelerator Mobile: +31 6 29 52 63 81 E-mail: alain.leloux@eitdigital.eu https://twitter.com/alainleloux http://www.linkedin.com/in/alainleloux

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