Cross Border Diaries

Cross Border Diaries provides SMEs and enterprises with sales and marketing tactics, transatlantic trends and insights.

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European Startups Heading to US: Brain-Drain or Jump-Start?

There is no doubt that the most resourceful European startups are leaving town when they hit the investment wall. But there are many other reasons why European startups head west.

[fred-wilson]

Berlin was unfinished, like this generation, which pioneered ad hoc, improvisatory, piecemeal development.

(via fred-wilson)

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Fundraising Outside Austria: Berlin, London or the US

Ojinnaka of ChalkRow Ventures pontificates on EU venture capital expansion/growth trends and opportunities to Austrian incubator INITS.  While it is clear the growth/fundraising opportunities in the US, there were questions around any advantage between growing/raising capital through Germany or the UK and any associated impact of being in the Berlin hub. Ojinnaka clarifies it depends on a number factors - product, company stage, market, current capitalization, traction points and target market/customer. He ended the presentation with the rise in direct participation of strategic investors, Family Offices and LPs in Europe 

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When Do You Need a CTO?

The question of whether you need a CTO and when, depends on three main factors.

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Talent Turnover and Growth in Tech

Among the challenges facing tech companies in Europe is growth talent and talent turnover.

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TechOpenAir Berlin and ChalkRow's Venture Capital Panel

ChalkRow in collaboration with TechOpenAir and Linko moderated a VC panel on July 17 with over 70 companies in attendance titled: Expanding to the US: What NY and Bay Area VCs look for in Growth Startups. 

BMW i Ventures Investment Principal Christian Noske emphasized rising trends in corporate partnering/venture capital and industry trends for companies exploring NYC as an expansion market. Nilesh Trivedi from DoubleRock streamed in live from the valley gave fresh views from Silicon Valley on recent large seed rounds and the new Series A using Series B metrics, how EU startups fare amid local competition and how to nail one’s local market before expanding. Both speakers and Chaney Ojinnaka, Moderator agreed that startups have to map out a US market plan taking into consideration their goals. Are they going there to fundraise? Or are they seeking to establish a market presence and find corporate partners/customers? Then they need to ask, which coast makes the most sense taking into consideration their situation. Either case requires seeking long term US partners who can actually help.

See more pics on the conference below

https://www.facebook.com/TechOpenAir/photos

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NYC vs. Silicon Valley: 5 Factors to Consider

venture capital, growth, us expansion, startups, nyc, silicon valley, european

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Challenges of Post Accelerator and Growth Funding in Berlin

Growth, Accelerators, Incubators, Germany, Berlin, Series A, Follow on Rounds, Entrepreneurship, Venture Capital, Traction, VCs, London, Europe, Startups

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Media Hack Day in Berlin

ChalkRow was at the two day Media Hack Day event held at Axel Springer’s Plug & Play Accelerator recently. And yes, we joined a team to get in on the hacking action. An interesting hackathon to say the least where journo’s meet techies. The focus was on mobile apps with great user interface that solve issues in journalism. API’s where provided from Getty Images, Embedly, Axel Springer, Storyful and a few others. Some of the highlights were an app that showed a different color for a different news perspective, a spell checker that alerts journalists of their error, and an app that visualized your twitter feed.  

What was quite interesting about this event is that many of the participants had flown in from out of town. Most came from other German cities, some as far as the Netherlands. And with that said, they spent the whole night developing. The much more interesting observation was that there were pre-formed teams and these teams were representing an established company. For example – Asuum, Welt and Sonoma had developers participating.

The 1st price was a trip to Silicon Valley. And the winners, a trio of young developers deserved it, with an impressive app that allows you to get your news anywhere. In summary, in the age of content clutter, the hackathon shared new ways to visualize content and appeal to the mobile first consumer

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Growth Hacker Marketing for B2B Businesses

Article on Tech Cocktail on Growth Hacking as it relates to  Human Capital 

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Berlin: Numbers At a Glance

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Customer Relationship Management and Your Sales Force

Your sales pipeline is as good as your CRM tool. If that database is outdated, guess what, your contact rate and sales output is going to be poor. Here are 3 points to keep in mind.

Getting to the Decision Makers. 

Selling your tech solution to enterprise can be a daunting exercise. Each enterprise has its own configurations, departments and hierarchy and the titles can be confusing. For example figuring out who falls under IT, Business operations, Marketing and who is the decision maker can be a challenge. While LinkedIn is your best friend when starting with a prospect, more importantly, it’s the action after each correspondence/conversation that’s crucial. Logging each one in your CRM database with appropriate contact info, department, titles, size of organization is necessary. Detailed notes/commentary is so key. It sets good precedent for future conversations.

Updating Your CRM.

A couple years ago, I led the US sales territory for a Pharma conference marketing SMB while studying in London. We hired a team of data entry/sales support to update contact details of key executives and make the first contact. It worked to some degree however information was always changing. Furthermore, due to high attrition, knowledge was lost. Since you are aiming for a lean startup or SMB, you only really need one person to manage a central database and control quality whether via Google doc/excel or some other solution. But it is important that your key sales staff is updating their versions as well as they are gaining knowledge making sales rounds and feeding it through to the central manager/repository.

Incentivize Your Staff.

A great way of incentivizing field staff to update sales knowledge is encouraging the use of tablets and mobile apps.  If you can’t afford to hand out tablets, how about encourage a bring your own device (BYOD) policy for example by paying/reimbursing for your sales force data plan.

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3 Things Tech Startups Should Prepare for before Fundraising

It’s been a good 3 weeks of fundraising activities since Demo day at Startupbootcamp Berlin. From an EiR perspective, I thought I’d summarize some general learning points pitching one of the teams to investors. 1. It is an intensive activity. Presentations, research, tweaking, several meetings assessing fit. Be prepared. It will affect your current operations so perhaps split the roles if you have a larger team. A few handle investors and the others continue on product/operations. As most founding teams are small, this means concentrating all efforts on fundraising and getting it done. Paul Graham summarizes this nicely - "Because fundraising is so distracting, a startup should either be in fundraising mode or not. And when you do decide to raise money, you should focus your whole attention on it so you can get it done quickly and get back to work". 2. Be prepared to show how you will hack growth. Per advice received from Fabian Siegel, Global Founders Capital, on your spreadsheet have tabs on P&L, operational costs, monthly user acquisition numbers & cost per marketing channel, conversion rate and average revenue per customer 3. Valuation. Be prepared to defend your valuation. In Berlin/Germany, valuations are on the lower side than in the US sometimes by up to 2x. This 2012 Angels survey gives an idea of average valuations per sector in the US. Note the averages in the software column.

Valuations are still a learning process in Berlin and also London due to investors lower risk appetite, competitive forces and lower funding resources. Revenue/ terminal values after five years out and DCF is what I learned in business school. While that method was historically a good basis to start, it rarely applies to tech startups due to little to no revenues at start and faster growth (the so-called hockey stick). Martin Zwilling in this Gust article points out several methods in which to cumulatively corroborate a valuation that balances both the interests of the entrepreneur and the investors interests.

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TechCrunch Disrupt Europe: 5 Observations

The inaugural TechCrunch Europe event earlier in the week was interesting. It felt like a Eurovision of sorts for startups. To that regard, expat heavy Berlin felt right for the event. Here are five observations

1. Hardware is Trending

Besides the fact that the winner of the TechCrunch Disrupt cup was hardware startup Lock8 (digital bicycle lock), Qardio (wearables to track bloodpressure) and High Mobility (smart car device integration) were also in the finals.

2. Fashion and Travel Tech Ever So Hot

While Asap54 (discover fashion by photo image), Shufflehub (shop online by shuffle), Wanderio ( travel logistics guide), WhatNow (find location services offline while roaming) were TechCrunch Battlefield finalists, LocalFox (search and shop retail stores closeby) and Style Marks (find and shop unique clothes) were startups in the main hall.

3. Corporate Presence

Judging by the pricing (about 1000 Euros), corporates seemed to be the intended audience. What was particularly interesting is the large presence of certain companies namely - Microsoft ventures (new player in Berlin Accelerator mania), Groupon (they are hiring), Audi (they were showcasing startups).

4. States Support

There were Pavilions representing regionally located startups with a sort of Eurovision like theme. Brought together by one denominator – potential global reach, they represented in alphabetical order - Arabia, Germany, Israel, Lithuania and Turkey. In addition, state government representatives - IDA (Ireland) and BerlinPartner (Germany) had booths showcasing startups and looking to lure new ones.

5. Visibly Absent

Universities were nowhere to be found. Or perhaps I missed them. In a conference that is about showcasing innovation, one would have expected a Pavilion for schools and their portfolios. One key observation was that some of the volunteers (green shirts roaming about/ networking) represented a cross section of European and American business schools. Perhaps they could have coordinated with their schools? Africa focused startups were also absent. One company I chatted with - Mobofree (Craiglist for Africa) was part of the Enterprise Lithuania portfolio. That was it.  Considering the proximity of Europe to Africa and 6% growth rate in some economies, certainly a missed opportunity. 

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4 Key Observations: London’s Startup Scene

1. Sense of optimism.

A couple of years ago, while working in consulting and residing in the city, I recall having clipped discussions about startup ideas and opportunities. English friends and acquaintances used to laugh or chuckle then with phrases like – there goes the ambitious American again. Last week, I reunited with London for just a couple of days. Had long engaging conversations with same friends. As I travelled around town on the tube, by foot, through London’s frenetic districts, and iconic structures, there was lots of optimism in the air.

2. City (financial) workers continue to jump ship.

Google's Campus  is closeby so perhaps that’s the inspiration. Met over 10 people who left jobs in the financial industry during a session at the Campus. Corporate led incubators are popping up everywhere perhaps to scoop them up. Accenture’s Fintech Innovation Lab focused on Finance and BBC Worldwide Labs focused on Media, are just a few to note.

3. Services industry supporting startups is burgeoning.

Venture capital advisory, design/dev shops, financials consulting, graphic print services, you name it and it exists or is about to. And depending on whose figures you use, there are 4500+ tech startups in London's Silicon Roundabout area to be targeted.

4. Government initiatives and public private partnerships are occurring at a rapid pace.

Hackney recently got the greenlight for a £100m fashion hub, the government released £50m to create 'Europe's largest indoor space' for startups managed through an entity called Tech City, new visa options for entrepreneurs and early stage investment tax incentives abound as well. London is awash with cash, which will nourish its young ecosystem.  

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The Value of Copycat Ideas in Europe and Beyond

I’m constantly fascinated by copycat ideas. In Germany there is a plethora of them thanks to the Samwer brothers of Rocket Internet. While launching existing ideas from across the atlantic is not particularly innovative, it does create some value for the economy.

Here are four reasons why

1. Disrupts emerging economies. 

Rocket’s Jumia is a great example of this. The Amazon for Nigeria, it opened up an online branded goods marketplace for consumers accustomed to buying such items - real or fake - on the black market. Essentially creating price transparency and access to these goods to some people whether rich or poor for the first time

2. It nourishes local communities.

We have heard the stories of multinationals and more recently fast growing startups expanding to new territories gone awry. There's nothing more empowering and strengthening to a local economy than having a new company created with its own citizens, culture dynamics in mind and with a long-term view. I recently had lunch with an executive from Rocket and learned that every company in their portfolio is fitted with a local country manager. Expats are there for very short periods to teach business fundamentals.

3. There are always learnings.                                                      

While it’s a ‘lift and drop’ model, there are always opportunities and challenges in an international market. Government regulations, cultural norms and consumer buying preferences can pivot such businesses. Local created businesses are incentivized to stay the run. Such learnings are now so valued especially by the original creator. Thus warranting exits such as City deal to Groupon and Alando to ebay.

4. Investors love tested ideas.                                                        

Who would have thought? We hear the catch phrases all the time like disrupt and innovate. Well, great for PR and media headlines. For VC investors, their keyword is execute. Especially, if you want to go beyond Series A. And for this, all they care about is the team, credentials, their track record and ability to execute. If you look at the biggest early stage deals in the last two years in Europe, they are all copycat ideas. Some examples are Sumup (Square for Europe), Wimdu (Airbnb for Europe), Monoqi (Fab for Europe). 

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Zalando, The ASOS of Germany

I was at a house party recently and after we all introduced ourselves, I got into an involved chat about ecommerce. One of the guests works at Zalando and does online marketing. Now for those that don’t know, Zalando is the Rocket Internet powerhouse for finding affordable trendy clothing in Germany. Most tech writers will say Zalando is the Zappos of Europe, which makes sense but Zappos is nowhere near trendy, it’s more functional.

The more appropriate comparison is with ASOS (A fitted online version of Urban Outfitters). While Zalando entered the UK market in 2011 to encroach on ASOS territory, what I find fascinating is the amount of SEO marketing they are investing in as I learned. A whole team in Germany is dedicated to the UK market.  How will they fare? Only time will tell. From observation, the UK market is very fragmented and fashion forward. Lots of players and the 18 – 34 shoppers are very open to experiment and being individualistic meaning they require lots of choice. It’s the hottest ecommerce market on the planet right now. According to eMarketer, when it comes to how much money the average buyer spends via digital channels, the UK often ranks No. 1 worldwide. A recent poll of digital buyers in Britain showed that 42% purchased clothing and sporting goods the most, the highest of any other e-retail category.

With sales from mobile phones and tablets expected to increase 71.8% year over year to just north of $10.49 billion, perhaps Zalando is on to something. They will have to work on increasing the number of unique brands on their site though to compete.