Today we complete our 365 page book with a bottle of champagne, and tomorrow we start a new book with a blank page (and maybe a few aspirin). Happy Holidays from Bolt Capital.
Both Square and Match.com (with the Tinder fame) posted strong IPOs debuts last week. The power of these tech IPOs isn't about which VCs made money, the IPO valuation or the late round ratchet terms, it is about the newly minted millionaires that are going to be launching the next generation of startups. Over the next 6-12 months, hundreds of people will become real cash in the bank millionaires. What they will do with that cash is one reason why Silicon Valley (West Coast) is different that any other place in the world. Many will leave Square and Match to become founders of their own startups. Some will see ways to do things better than their current employers. Some will identify a pain point within the business or customer and build a solution for it. Others will finally have the financial horsepower to launch an idea they've had forever. Whatever it is, they will do it and the startup ecosystem gets that much stronger.
Silicon Valley is a flywheel of entrepreneurs. This is what makes startups in the US, and specifically Silicon Valley, a special entrepreneurial ecosystem. Success breads more success.
In Europe the flywheel is starting to turn. More VC funds are being raised. Entrepreneurism is more culturally accepted. Larger and more frequent exits are happening, and employees are seeing the value of stock option. And most importantly some of the best European entrepreneurs are staying home and not bolting to Silicon Valley for their next venture. All steps in the right direction.
Last week the European Parliament issued its ruling on Net Neutrality by rejecting protective neutrality amendments, thus allowing loopholes for an Internet with two speeds. This dealt a royal flush to telco providers, an unbeatable hand that could make it impossible for startups to complete.
Immediately after the announcement, Deutsche Telekom AG CEO posted a blog supporting a win-win for everyone. The major loophole allows DT and the alike to create a toll on any company that doesn't have the liquidity to finance whatever price they decide.
In addition the doors also swung wide opened for major companies like Google, Facebook, etc to dominate in Europe. There was a reason none of these companies signed the protection for net neutrality document. European startups will have to compete on a uneven playing field (like it isn't already) against industry giants, while smaller groups might have their voices drowned out by well-financing groups.
Proponents of the passed legislation cited 'consistent net neutrality regulation across Europe for the first time' as a major win leaving Europe in a better position today than yesterday. So much better that DT is already to offer special services to startups for just a little piece of revenue.
Europe had the opportunity to learn from the USA and do it better. In the end, corporate interest came first. The governments of major European cities traded revenue and taxes at the expense of innovation and competition. Time will tell how it plays out, but at the end of the day the biggest loser will ultimately be the consumer.
Everyone is back from holidays and the work sprint to the end of year has begun. That also means it's event season. Not all events are built equally. Poor organization, boring panel discussions, and lack of networking skills can make many events a huge waste of time. But there is a different kind of event happening in a few weeks called Startup Weekend Frankfurt. Instead of panels and slides, this event is an interactive accelerator where entrepreneurs build teams and work with mentors to launch a business over a weekend. It's a very 'hands-on' approach and a perfect opportunity for anyone looking to launch a business or wanting to join a startup and doesn't know how to get started. Join Today. I hope to see you there.
Here is an interview I did for the event:
Matt please explain who you are and how you can help our Teams at Startup Weekend Rhein-Main? I'm really excited about the concept and format for Startup Weekend this year because the teams will have to focus on understanding markets, customers and G2M strategies, not just a glorified hackathon. Personally I'm passionate about building products people love and in order to achieve that it requires understanding many aspects of product building that aren't found in just a beautiful mobile app. I started as a venture capitalist, then became a 2x entrepreneur. My goal is to help the startup teams think through use cases and critical questions. The teams can leverage my experience from 'both sides of the table'.
What are the trending topics / startups in Frankfurt's Startup Scene? I've spent the majority of my career working in Silicon Valley, thus I have fresh eyes to the Frankfurt Rhein Main area. But that also means I have a 'jaded' view of what I believe it takes to be a successful startup ecosystem. No other place in the world is like and/or compare to Silicon Valley. I think Frankfurt is trying to figure out its place in the German and European startup scenes respectively. Because of Frankfurt's central and accessible location in Europe, as well as being a major banking center, it has a lot of natural characteristics to be an impactful startup ecosystem. Recently I'm seeing this topic debated and discussed at events more often. This is a good sign! Bring the issues to the market. Startups are organizing better, asking for support, and trying to raise capital. This forces the surrounding Frankfurt ecosystem to take notice about the fantastic opportunity in front of them. The big question is will the angel/VC/corporate community bring the support as well. If the startups don't get that support, they will leave to other areas. Industry wise, the Fintech sector has a growing buzz and a few incubators and accelerators are being established with a specific Fintech focus. Also the 'Connected' anything is gaining traction as businesses and consumers start to understand the use cases and benefits that machine to machine (M2M) and Internet of Things (IoT) can provide.
From a VC perspective: Why is it useful to support a Startup Weekend as a mentor/partner/sponsor?Many VCs have been entrepreneurs themselves. Making the leap to start your own company or join a small startup team is the first and most difficult step into entrepreneurship. It's risky and historically not widely supported by the culture. That's why it's important that there is a entrepreneur and startup support network available to mentor, answer questions and provide encouragement. The fact is building startups is a meaning, learning and highly rewarding experience. It is difficult to launch a company and at times it feels like being stranded on an island with nothing, but all of us entrepreneurs can point to situations when others have lent a helping hand. That is one aspect that makes a great startup ecosystem. Events like Startup Weekend can help encourage some of these ideas form and grow and hopefully gets others to join as well.
With all the hype and success around venture capital, high valuations (unicorns), record number of deals, unlimited angels, etc. it seems like entrepreneurs have forgotten about the power of revenue. Constantly I talk to startups that believe getting funded is as easy as taking 'candy from a baby' and a critical measure of success vs business metrics like revenue. Unfortunately they quickly realize after a few meetings that investors are concerned with traction, repeatability, talent and go to market plans.
This reminds me of a statement used by a partner in my VC days – Revenue is the best deodorant. Not only does revenue mask the smell of many imperfections, it also has a lot of benefits too:
- It's non-dilutive funding. Entrepreneurs get to grow the business without selling shares for capital. Sounds like a good business deal to me.
- It funds new and different marketing campaigns. Flexibility to try stuff or take advantage of opportunities.
- It helps hire great people. Expand the budget needed to land the candidate or show the company has excited customers.
- It can be used to accelerate discussions with partners. Nothing draws a crowd like a crowd, and leverage revenue paying customers to gets others to come along as well. The fear of missing out.
- It’s a proof point that you have a product that people are willing to pay for.
- Oh ya it attracts investors too!
Funding never closes as fast as expected. Finding great talents takes longer than needed. Things just don’t always go according to plan. A company with revenue can often times deal with these circumstances better than ones without. When revenue is available, take it all.