Archive for the ‘business’ Category

Never Eat Alone and Other Secrets to Success, One Relationship at a Time

Sunday, December 21st, 2014

Reading this book opened my eyes regarding the value of ones network of friends. You need help of other people in whatever you do. If you have the connections with needed people already before starting your new project then you will be off the ground much faster.eating alone

One of the most important lessons in networking is to be nice to other people and help then reach their goals. Even cleaning lady in your office is important, call her by name and tell how much you appreciate the clean office in the mornings!

You can take the title of this book literally. Actually you can schedule meetings with interesting people for every lunch. Very few people say no if you invite them to lunch. Usually you can ask your existing network to reinforce the relationship. Its also good idea to identify people you want to meet and find someone in your network to introduce you. When you go to lunch then be prepared. Find out all you can about this person and go to the lunch with a plan. Just keep in mind that these lunches are not only what you want but try to find something how you can help your companion also. From my own experience I recommend not to have lunch with same people every day though. Usually office workers go to eat with their colleagues and this does not help to expand your network too much.

Another important principle is to keep pinging your network. If you do not keep in touch then you will soon be forgotten. Congratulation on birthdays is natural in these Facebook times. From time to time you can give them a call, send an e-mail, invite to lunch or to house party.

Industry conferences are great way to let people know that you exist. Try to get some speaking arrangements. If you cannot get to the big events right away then start with small and eventually the invitations to big events will also come. When going to event try to identify people you want to get to know beforehand. Go early and find these people. After making such initial connection it makes sense to ask them to lunch or breakfast or dinner also later and have more in depth conversation.

 

If this got you interested then there are many more great tips in the book http://keithferrazzi.com/products/never-eat-alone

 

Thinking fast and slow

Wednesday, April 30th, 2014

Thinking, Fast and Slow by Daniel Kahneman  is a very long with book 533 pages and it is packed tight of useful scientific text. Although this book is a goldmine it takes a long time to process.

Once you have finished reading this book you know all of the most common judgement errors that everyone should know. You should be able to raise a red flag when you are about to make decision on shaky grounds.  This book will open your eyes and all the decision making mistakes will be especially obvious on other people.

I will list just a few examples in here

  • Cognitive ease – if it feels familiar then it feels true
  • WYSIATI – if you know only 2 facts out of 100 then you feel like 2 facts is all there is. You will make decision only based on these 2.
  • illusion of control – stock market experts believe that they have upper hand while statistics shows that majority is not doing any better than general indexes.
  • framing effect – If drug saves 50 people out of 100 then it is much better you say that drug kills 50 people out of same 100
  • duration neglect and peak-end rule – You think that 30 days of vacation in Cancun is 10x better than 3 days. However a bit later it does not make much difference in the memories. If 30 days of vacation is ended with 2 bad days then all of the vacation feels bad.

There are many more situations explained in this book. I gained a lot of valuable understanding and I feel significantly more confident about mu skill of making decisions. Or should I not because self-confident experts should be trusted only if they have considerable experience which still needs to be gained after reading this book? 🙂

The Power of Habit – Book review

Wednesday, April 30th, 2014

Besides of being useful for self development this book is also a good read by itself. All the example cases are are good and interesting stories which give you fun facts from history. How did worst team even win the Super bowl and how people made billions with toothpaste while changing ad creating daily habits? You can get this book from amazon The Power of Habit: Why We Do What We Do in Life and Business

Main point of this book is examining how habits work. There is habit loop: cue, routine and reward. Once someone learns the habit then it will always be there good or bad, riding bicycle or smoking. At first doing something new is hard but the more you practice the less brain activity it takes and you almost don’t notice it anymore. Have you ever wondered if you locked the car door when you parked it? Probably you did and this habitual action is so effortless that you event don’t think about it.

However it is possible to switch the routine leaving cue and reward the same. AA is very good at this. If alcoholics feels stressed then he goes to bar, sees friends and becomes happy. Instead he can feel stressed, go to AA meeting, see friends and become happy.

I learned for myself how to create morning exercise habit. My cue is waking up, routine is exercises and when I finish I get to have breakfast.

Once you read this book then you will be much more skilful in building good habits in yourself and changing bad habits into good ones.

 

Total cost of working in a startup (read: opportunity cost)

Sunday, March 30th, 2014

opportunity costI have seen many starting business saying that cost of running their operations is very low. Usually they say that they have to pay for servers, maybe some ads and that’s it – a few people working and total cost just under 100EUR.

Unfortunately people often forget the biggest cost – opportunity cost. Lets take simple example that you are a good programmer and building your very own business without taking any salary.  You also have great value server from Hetzner with monthly payment of 50EUR. Total cost of running this business is 50EUR a month because no salary is taken or is it?

Because you are a good programmer the you could work for any other startup(or Google/Facebook in Silicon Valley) and get 4kEUR of net income every month. You could also hire exactly as good programmer as you are with exactly same salary to build your business. When adding up the 4000EUR of salary and 50EUR of server fees you get 4050EUR of the monthly burn rate.

What is the difference from business point of view in above 2 situations? In both cases there is one good programmer working full time on the business. In both cases you end up without any money in the end of the month and of course each month there is 50EUR of server fees. Situation is exactly the same.

If you look further then actually there is slight difference. If you hire someone then because of the taxes you have to pay approximately twice the amount taking 4000EUR up to 8000EUR. This would suggest that working on your own is more cost effective than hiring someone. However if Google is hiring you then it also sees you creating value of at least 8000EUR a month.

Make sure that when calculating the ROI of your business then you consider the real total cost of 8050EUR instead of 50EUR. I also recommend you to ask yourself if the business even theoretically is able to bring back that money? Consider also need for many people: developers, salespeople, support, QA, managers etc. Your burn rate can be 100kEUR a month very easily. If it is hard to make that kind of a income then maybe it is worth helping other more potential startups make it happen?

 

Founder Equity Agreements – required but only if you want to start making money when establishing a new startup.

Sunday, March 30th, 2014

startup_foundersLets say that you get a brilliant business idea with your friend. You will establish a company 50-50, change the world, earn a lot of money in the process and live happily ever after. Statistics have shown that plans like this usually don’t work out. It is fairly common to have changes in founding team. If there is also money involved and everything is not clearly written down beforehand then major problems can happen.

Its clear that everyone in the company must be compensated according to his value. Simplest way to compensate is with salary – you will work and I will give you money. For entrepreneurs the compensation is also in form of the shares. Entrepreneur will work and get the shares in a company as a result. Funded company founders usually get mix of shares and salary.

It is fairly uncommon to pay workers 3-4 years salary upfront when joining the company for obvious reasons. Similarly business partners should not receive full amount of company ownership immediately on the day of establishing company when building full company takes at least 3-4 years.

There are different approaches of how the shares are earned by the entrepreneur. Common thread is having vesting schedule with contribution requirement, for example both founders will get 1% of the shares every month of full time contribution. When investors are involved then they are very interested in long term partnership which may add condition to term sheet that minimum vesting period is 1 year. If founder leaves the company before first year then he is considered compensated only with the salary he got an no equity is received.

One example of reasonable and popular founders collaboration agreement can be downloaded from http://www.seedcamp.com/2011/09/seedhack-founders-collaboration-agreement.html. Read also http://www.inno-hub.com/wiki/view/20 for in-depth analysis of Equity agreements.

How to win Seedcamp week from winners perspective

Thursday, February 27th, 2014

I am one of the founders of GoWorkaBit which won the Seedcamp week London in February 2014. Here you will find here ideas about what is crucial for winning the event and becoming top 1% of European startups.

In case you have not figured it out Seedcamp week means having aroundseedcamplogo 20 startups together in a free and intensive business development training. If your business looks impressive then you will win the Seedcamp week which means getting small investment and access to Seedcamp family together with all the benefits listed on their webpage. Bear in mind that you are not competing with other teams for winning the event but you are competing with yourself. There is no predetermined number of winners and you will win if Seedcamp team finds something extraordinary in you above the threshold.

Firstly and most importantly the startup must have the baseline by having solid business with good management team and it must be able to communicate it very clearly. Communication is important from day one and needs good preparation. Event itself starts by having introductions and practice pitches on day one followed immediately with day two where you pitch in front of the 10-15 investors who are the people making the actual decision during the week.
These people will be following you all week as many of them will take part in mentoring sessions also. In addition the Seedcamp team will ask from other mentors what they felt about your startup.
Pitch is its own big category. It would be best to master the pitch before you stand in from of the decisionmakers but anyway you are guaranteed to have great pitch by the friday due a lot of practice and assistance from Seedcamp week people.

Secondly the team must be full of energy, know what they are doing, have clear responsibilities and share the vision. Carlos and Reshma are watching you very closely and you can expect to have private conversations during the day or parties in the evening alone with one founder. If founders stories don’t add up then it comes out very quickly.

We also printed a roll-up and paid a lot of money to take it with us in the airplane. We rolled it open everywhere, even when we went to coffeeshop in the morning to discuss our idea with the team.We was asked to relocate the roll-up only once which is good because we were noticed and found the limits.
We made even more preparations by taking enough local sweets to share with mentors during the session as you normally do when meeting business partners. People liked it, they were more positive and only a few times it was called “bribery”.

Olle-Kaidro-Margus-Pala-Gerli-Veermäe-Kei-Karlson-at-Seedcamp-2014Seedcamp team is looking for progress during the week. Most visible progress is pitch. Another way to see progress is what you actually say about your idea in the beginning and end of the week. With such an impressive list of mentors you meet is not logical if your business idea will not become much more sensible and clear. If you don’t make any changes to your plans then most probably you are stupid beyond help or pure genius(which happens not so often).

Last crucial item is preparation ahead of arrival to Seedcamp. The most important preparation is for meeting with mentors. It is best to think of your business and write down everything you need to know about it during the once in a lifetime opportunity of discussing it with up to 100 experienced business people. If you have the questions then you can browse the mentor list and direct the question to specific mentor. We also tried to browse mentors and think of question to ask but it did not work out because its very time consuming and you don’t have much free time available. I even recommend to have accommodation near the facilities to save time on travel. ROI will be good enough.
I already mentioned the pitch, even if you are trained well during the week then pitch must be still great when you arrive. Also please take care of gadgets, business cards and other stuff to share. When you have the prerequisite, good business with great team, and follow the advice in this article then you can be confident that you will win the Seedcamp also. Please send me feedback if this advice helped you, I will be very grateful.

Entrum – Award winning concept of teaching kids how to make business

Friday, January 17th, 2014

I was very fortunate to discover program Entrum in Estonia, which teaches highschool kids how to start a business, at autumn of 2013. I immediately liked the concept and wondered why I did not know about it before even though it having its 4th season by then.

Program itself is very clever. Gather a bunch of high-school students match them with experienced business people as mentors and push them into learning about making business. I took part of this competition as business mentor and found following surprising or interesting points.

Firstly young people are incredibly talented but they lack a lot of experience. Out of 600 students is possible to find any talent imagined: sports, singing, dancing, thinking, speaking, presenting etc etc.

I found it very big contrast when I come from professional IT and business background and see how kids try to make business without knowing anything that I take for granted. When we talk about IT start-up then often students have learned programming at school but it is quite amateur level. They have hard time understanding code versioning(git), IDE-s, testing/QA nor other advanced professional concepts.

However biggest challenge is organizing, focusing and getting stuff done. Students are loaded with school tasks and homework, setting priorities and actually working takes a lot of effort.

I spent a lot of time at first with my team to help them understand what they want. We talked about big dreams, what others like them have done and that they can do it also. Once they told their dreams and started believing into them it was time to start working. It was hard at first, there was no roles not good plan. Fortunately team was quite big and each was able to choose its role, either sales, development, design or organizing.  By now the team is almost getting used to setting weekly goals and having regular planning meetings however there is still room for improvement.

Despite all of these challenges I am very happy to see real results from the start. Boys are doing android app “Math helper” and MVP was uploaded within a few days of Entrum starting. By then there has been steady increase of downloads. Progress was bit slower during Christmas holidays but now in January the pace has gone up again and I am seeing serious work being done. It looks like from now on there will be major upgrade coming out every week.

As a conclusion I must say that every school kid must practice making business with experienced business mentor at young age to get onto fast track of life. It avoids learning too much from own mistakes or even quitting. Entrum is currently happening in each school once every 4 years and unfortunately it accepts only 600 students each year. I sincerely hope that the number of students participating it will go up very soon and the program quality will not go down.

Thanks to Darja Saar and the Entrum team for keeping up the good work!