VC industry changing due to new platform – death or life?
Recently, I have read a very interesting article that continuous my argument that aside from many sectors the financial sector is also changing rapidly due to digitalization. The author states that:
“In my life, I have been very fortunate to chronicle the emergence of the commercial internet (as we know it) from its early days. Over next decade or so, I came to realize the amazing deflationary powers of the internet. It was — and still is — a great deflator, squeezing out middle men, friction and of course, profits.”
The author argues that the next wave of change will affect the way businesses raise venture capital. Intransparencies will be broken open by Angel List and other fundraising platforms that force a secretive VC industry to differentiate their offerings beyond the initial cash injection. While I agree with the broad thesis of the argument I would highlight two aspects that seem to be overlooked frequently.
As previously reported the VC industry as a whole does not generate positive returns. It is an assets class where only very few firms make money. These firms generally are not “smarter” than others but have a strong PR function and therefore get more deal flow than the other industry participants. If platforms now “socialize” deal flow and every investment is instantly shown to the entire industry then the professional selection becomes even less important. An automated investment distribution among Angel List offerings based on a set of pre-determined criteria would probably beat the returns of most VC firms and would require minimal direct investment attention. This would not alter the VC industry but give it the last punch in its current death struggle.
Secondly, the start-up market is now becoming an asset class that is open to the broad public. Crowd funding platforms and projects like kickstarter are already expanding the available investor base. In my opinion, this is not a positive development. Start-Ups as an asset class are much to volatile and hard to read – if professional VCs cannot create a substantial return – how can private investors do so? These platforms are setting 99% of private investors up to lose all their money invested in this asset class.
In addition, there are just a lot of businesses out there that do not deserve funding. The current funding market is a Darwin based system that kills of a lot of bad companies prior to raising capital. If the investor and funding base is now drastically increased we will see more and more zombie start-ups that live much longer than they should based on a “stupid-money” infusion through crowd funding platforms. If you look at the quality of start-ups coming out of places that received a large cash infusion (e.g. Berlin in Europe) you see so, so many ideas that should never have been funded but are now raising funds because way too much money chases too few good ideas.
Crowd funding and platforms like Angel List will significantly disrupt the VC industry but it remains to be seen if this is positive or negative for start-ups and investors alike.
Poor CFO…
These videos are becoming more and more entertaining – after the stunning Visa Commercial Add I have now found a video from Oracle that literally draws a very different picture of CFOs and their daily challenges.
Digital investment strategy …
When and how is the digital industry shift/storm/tsunami going to reach global capital markets? So far companies like Facebook, Google and Apple already provide shining examples of new businesses that mostly rely on new web-based technologies. These businesses have created substantial shareholder value and firmly put “digital” investments on the radar of any professional investor.
Significant amount of funds are already allocated towards these businesses – but this is only one side of a not so shiny coin. If there are new sources of capital allocation there should be other sectors where funds are withdrawn.
Here in Germany more and more companies are going bankrupt – established merchants like Praktiker (Bloomberg News) are going belly up. In my opinion this is not just a continued chain of bankruptcies that are linked to failed business strategies/bad management but clearly a seismic shift in terms of consumer behavior. Traditional business models can no longer keep up with online models that have proven higher agility. Through this agility they are much better at attracting customers while being highly price competitive due to lack of “legacy” structures. This asks for a rapid change in capital allocation and provides opportunities for some interesting trading strategies. So it becomes interesting to predict who is going to be next and to see if it is possible to short stocks like crazy 😉
B2B and start-ups: a love story!
Earlier this summer I faced Deutsche Bahn and a delayed train + no internet + no phone connection while traveling to Berlin to attend the Uber B2B conference. Great to see how many start-ups are looking to go beyond the classical B2C mass market and to clearly focus their business model on B2B products and services. It was quite an eye opener that during the opening speech the organizer actually felt the need to stress that start-ups should be looking for B2B ideas. Even in over-hyped Berlin it should occur to founders to look beyond the often over reported B2C ideas and focus on the sector where the real money is – B2B continues to be a much better sector to start a business. Ticket sizes will in general be much higher and marketing – especially in a B2B niche – is not reliant on ever more competitive online marketing tools. Keep thinking B2B and look for new opportunities here!
Now in German…
I am proud to announce that “Digitalkaufmann.de” is now up and running. I am now publishing all my German articles and analysis there. Enjoy!
VCs vs. Angel
Recently, there have been two interesting blog posts that once again highlight the ambivalence between choosing either a VC or private/business angel investor. One very entertaining rant(!) from Paul Jozefak (Liquid Labs) that focuses on the “more than money” promise each VC makes. He has a very clear opinion what VCs really provide and how their “advertising talk” should be evaluated by future entrepreneurs. (LINK) “Enough with the Kool-Aid though….without your money most entrepreneurs wouldn’t really care much about you. It’s OK, you still have your triathlon, cycling or foodie friends.”!
Protonet on the other hand has chosen to ignore higher valuations and instead go with angel investors. More about their rational here: (LINK). Interestingly enough they left money on the table in order to go with business angels among other reasons due to the easier negotiations and less tight up management time. This is often an overlooked point – VCs are experts when it comes to negotiating deals (given that aside from trying to get a proprietary deal flow that is their only other expertise ;)). If you negotiate with experts you have to take into account that these negotiations will be very drawn out. Your starting point will most likely be documents drafted by a VC who has written many, many preferable treatment clauses in the documents before negotiations have even started. So time and complexity of negotiations is an important consideration beside the price tag.
Does that mean you should leave VC cash on the table and always go with angels? Probably not … this approach will only work for smaller financing rounds – angels will bottom out if you are looking for 1m+ x – or you have to take so many angels on board that it becomes annoying to keep all of them in the loop. They will also have a very limited ability to go for another round or to provide additional capital on short notice.
So chose carefully when you are planning to raise additional funds. Make sure you understand the major pros and cons between investors and try to determine what your long-term strategy looks like. Are you going to raise more funds down the road? Do you need certain individuals in order to grow your business? Will VC connections support your business right now? … … lots of thinks to ask yourself and unfortunately this is highly subjective and there is no clear right or wrong here.
Digital Capital – new accounting approach needed.
Here a true eCFO topic – accounting! Before you stop reading – this is really important – so stay with me. I first picked up on the topic when I started working with our Facebook agency on their generic group concept. By now we have over 1 million fans in general Facebook groups that we “rent” out to clients in order to advertise to a specific target segment. I argued back and forth with our accountant that the capital we invested is in fact not a period expense in our P&L but that we are actually building a long-term asset that should show up on our balance sheet. I lost the argument but still know that I am right – just our accountings standards have not yet caught up with the “digital revolution”. Now McKinsey seems to agree – the consultancy published a new story that focuses on “digital capital” (LINK)
In their conclusion they highlight that even though accounting has not caught up – companies need to act now and explain to investors that they are building assets even if their balance sheet does not reflect it (yet). Capital allocation needs to be quickly adjusted in almost all industries to catch up with changes brought by the rapidly developing digitalization:
“The need for growth and competitiveness will force companies to build strong digital capabilities. Viewing them as assets rather than additional areas of spending requires a new set of management and financial lenses. Embracing them is a major shift—but one worth making for companies striving to master a still-evolving landscape.”
They continue to highlight that companies really need to focus on collecting and analyzing data from their activities. The digital development combined with big-data analysis capabilities offers new business opportunities but also threatens established players that are to slow to react.
“Since identifying intangible assets is difficult, companies may be missing growth opportunities. Many have realized only recently that they can use social-media interactions with their best customers to leverage innovation efforts or that they may have unused data they could restructure into valuable big-data assets to sharpen business strategy. Similarly, companies should take stock of how digital capital they don’t own may be relevant to the business. A retailer that doesn’t have access to digital behavioral data on consumers, for example, may be at a disadvantage. So could a bank whose customers access products through a third-party platform that limits the bank’s ability to capture information.”
So what now? We need better accounting methods that reflect the real value of digital capital allocation but this is not going to happen quickly. eCFOs will need to do a much better job explaining to markets, shareholders and capital providers how they are planning to make money due to their digital capital investment. Financial statements will again become more irrelevant for company valuations and future earnings expectations.
Healthcare and digital innovation?
During my work with eTribes we have completed several projects for merchants, producers and publishing houses. All these industries have already been heavily impacted by digital innovation and new, web based technologies. Many of the established players in these industries have not quickly enough “braced for impact” and will eventually disappear since their business models have become obsolet in the digitalized economy.
Recently, the healthcare sector has picked up on the ever fastening process of digitalization. Funding is moving to all time highs and even crowd funding is picking up on the trend. Rock Health recently published an interesting analysis of where funding is allocated in the United States.
“With half of 2013 behind us, we’re able to uncover some interesting insights and trends in funding in digital health. We saw continued growth with $849M invested in 90 different companies. This is 12% more money and 25% more deal volume than this time last year.”
So there is money, other industries as examples and a definite need in the healthcare industry to innovate. Therefore, we have now combined the traditional “start-up weekend” methodology with the healthcare industry and created the “Healthcare Innovation Weekend 2013” in Hamburg. We hope to encourage budding entrepreneurs in the healthcare sector to innovate and to build new businesses in this favorable environment. Come join us for an interesting and fun weekend in September!
Startup valuation…
… remains a mystery. There is very little data and often very differing views on future start-up developments and valuations between entrepreneurs (IPO here we come), investors (hopeful but very cautious) and parents (you are doomed). Here comes a very good summary and an even prettier graphic from Anna Vital on Funders and Founders!
In eigener Sache: vielen Dank!
Heute haben wir den Verkauf von NetImpact und Creative-Task bekannt gegeben. Vielen Dank für alle die uns auf dem Weg begleitet haben! Alex und ich freuen uns auf die weitere Zusammenarbeit bei eTribes und werden Tarek+Betzi+Team mit allen Möglichkeiten unterstützen.
Mehr Info findet Ihr hier!
OTTO PR wurde ebenfalls heute raus gegeben.
Eine genaue Beschreibung und Analyse könnt Ihr im Detail bei Alex auf Kassenzone nachlesen.
In English!
Today we announced the sale of NetImpact and Creative-Task – the above links are all in German but with Google translate you should get most of the info.
I really wanted to thank all of those that have supported us along the way! Alex and I are looking forward to continuing our work at eTribes and wish all the best to Tarek+Betzi+ Team, who we will of course continue to support!
What to do with all this liquidity…?
Encouraged by Alexander Graf and his critical analysis of the current digital environment I asked myself why so many irrational business seem to get an almost unlimited amount of funding. In Germany there is always Zalando as a great example of this trend. The business is so far not profitable and investments that by now are topping over a billion Euros will never be recovered but international money is being thrown at Rocket Internet with an ever increasing speed. Its business model is not closely examined and investors push new capital into the firm without even asking some of the most basic due diligence questions. Is it really a plan to buy up the fashion market and pray that your proprietary brands and size will eventually lead you to break even? How are logistics organized behind the shiny technology and TV commercials? Why is there such an irrational rush to throw more money at these kind of businesses? Since we are now starting to talk about investments going into the billions I am going to take a macro economic perspective to create a possible explanation.
Due to the current monetary crisis money has been pumped into our economic environment – if printing presses would still be responsible for monetary supply we would be running out of ink.
As you can see from the graph above monetary supply has increased substantially. In Europe it is a fairly even growth story but it becomes even more drastic if you look at monetary supply expansion in the United States.
What are investor to do with all this capital that has been pumped into our economy? There is no substantial growth in the “real” economic output within the developed word – in fact there is a decline based on the recession the European Economic Area and the United States are currently going through. In addition there is only so much capital that can be invested in “traditional” economies in rapidly growing markets e.g. BRICS countries. On top of these factors investors are also scarred – the ongoing EURO crisis, horribel US economic data, emerging conflicts in the Middle East and Asia … all this has impacted the ability to invest large amounts of capital. Investors now have less opportunities and more importantly have come to terms with lower return expectations, while taking higher risks.
What does this mean for digital investments?
Based on the above described trends we will continue to see irrational capital allocation in digital growth projects such as Zalando. Investors will increasingly accept long-term returns that are barely above inflation just for a chance to allocate some of their access capital. It does not mean that it will become any easier to raise growth capital below EUR50 million but it is becoming easier to collect amounts above EUR250 millions for growth projects.
Entrepreneurs THINK BIG!
So in conclusion tech-savvy entrepreneurs: stop thinking about running a business on EUR10 million start to think how you could allocate EUR500 million!
Due diligence – what is important for digital acquisitions?
Over the last month we have supported a wide range of acquisitions in Germany with eTribes. On the one hand we have worked with our clients to identify targets on the other hand we are constantly asked to evaluate business ideas by VC/angle investors or by entrepreneurs who are looking for feedback. In addition, we also have to work with the CEOs of our equity participations to create new business models and to react to a digital environment that has really picked up speed. Through these various mandates and evaluations a range of points have come up again and again – so I am now publishing a quick summary. I am hoping that some of it will save me from hearing the same catch phrases over and over again e.g. if I had a dime for every time a marketing plan consist of “it will go viral” I could probably buy Apple.
Team
Probably one of the most overused catch phrases is “team is everything” but again it is absolutely true. Give me an A team with a B idea anytime over a B team with an A idea. Therefore, we pay lot of attention to the skill set of the founds and team – are they complementary? Can they cover the entire needed range from business skills to online marketing expertise? Will they be good at sales? How do they deal with stress? How well do they talk to investors? Here, we do not only look for solid CV credentials but also talk to people they have worked with in the past to get a good understanding of the work they have done historically.
Additionally, I would argue that not only having a certain skill set is key but that implementation trumps credentials every time. What do I mean by that – some people will have worked in corporates and gained substantial experience in a field (on paper) without ever actually doing the work. Supervising an add agency that prepares an online campaign is not the same as running your own web project with a marketing campaign you have to set-up and optimize. Often people will be surprised by the difficulty that is in between theoretically understanding a concept and implementing it.
Customer Acquisition Cost
This key variable is often connected to the marketing section shown below. 9 out of 10 entrepreneurs we talk with have not thought scalability and customer acquisition cost through. Every time we are surprised by this – online business models collect an amazing amount of data and so determining a rough estimate of customer acquisition cost very early one is not very hard. How much does it take to get a customer to buy your product? How often do you need to be in contact before a purchase is made and what does each contact cost? How often will your customer come back e.g. what is your customer lifetime value? I do not expect to get a formula that is absolutely correct but I do expect the entrepreneur to have thought about this!
Marketing (Viral does not work!)
Marketing is expensive. Even in times where zalando clearly spends millions and millions on advertising most business models still think that if there product is strong enough customers will just be running through the (non existent) doors of their website. Here we most often see horribly wrong assumptions about marketing costs. These days it is incredibly hard (and expensive!!!) to differentiate yourself online and to get a customers attention long enough to place your product. There are very few viral models that have worked historically and generally these work only in the United States and not in Europe.
An accumulation of hype phrases is not a business model
Oh my – have you seen my newest mobile optimized app that through geo location really adds value in the social media space through its gaming characteristics … 🙂 Going to a digital conference and adding all the seminar titles together does not create a business. Where is the differentiating value? How do you plan to make money? How do you acquire your customers? What problem do you solve? These are questions that are not answered through hype phrases but through well thought out business plans!
Money & Billing
So often I see entrepreneurs who sit here and tell me that they have already several very happy customers – my next questions always is: great, what is your revenue? Unbelievably enough I often get the reply: well we are using a freemium model and are not actually charging anything. If you do not value your product enough to charge money for it, why would or even should your customer value it? How honest is feedback for something you get for free? Make money right from the start – get a billing system and send out invoices!
Hockey Stick (but only in sales)
Never missing is the famous hockey stick for sales projections – customers will love the product after 6 months and make you rich. Unfortunately, lots of business plans show this trend but neglect to create a sensible cost to revenue ration. I do not believe that you can either increase revenue by 10x without hiring additional people nor do I think that additional people will not need new / bigger office space etc. Often business plans will have a strong cost /revenue correlation for 6-12 months and in month 18 show entirely surreal ratios.
Team
Is key! So here it is a second time 🙂
Book Review: „What would Apple do?“ by Dirk Beckmann
by Anika
As I wait at the central station in Hamburg for my delayed train to Cologne, I notice the huge white posters advertising the new iPad mini. This triggers, as if often happens, the thought, “Wow, what has Apple come up with now?”. The hype around the success story of the probably most innovative company in the world and its founder Steve Jobs has fascinated the media, retail industry and e-commerce sector for years. Apple products (iPhone, iPod, iPad, …) or the AppStore are well-known to roll up entire markets.
During the last two years alone, more than seven German-language books have been published about Apple. Subject of discussions are mainly the development of the company, the life of Steve Jobs and the company’s unique design.
The economic book “What would Apple do?”, which was on the short list for the German Book Prize 2011, I have looked at more closely. It is written by Dirk Beckmann, CEO of a German digital agency and an expert in digital innovation. ,It deals in an entertaining way with Apple-related questions like “What makes Apple so special?”, “What can you learn from Apple“ and so forth.
According to the author, there are three things, which make the company unique: its business model, technology and the design of Apple.
Apple’s business model
Apple exclusively produces products with the sole aim of deriving profit. Apple’s secret of success is to continuously develop new, complete supply chains, implement own ideas without compromises and to make resulting platforms, products and solutions usable by other companies. However, Apple controls Apple-compatible products of other companies (such as apps) to the smallest detail. One could assume that Apple has a ’madness of control’ regarding its products. For example, all apps developed by other companies run through strict controls and must be released by Apple.
The company offers a wide range of products and waives a comprehensive market analysis. However, sophisticated marketing and advertising strategies will be implemented. Apple’s success is especially noteworthy in terms of the digital music download through the development of a revolutionary software, the AppStore. In December 2012, the company published a press release in this regard, in which it declared a new record: AppStore customers downloaded more than 40 billion apps, of which nearly 20 billion alone in 2012.
Apple’s technology
Apple knows how to not only use existing technologies and assembling these to its liking but it also develops entirely new applications and revolutionary products like the iPhone with its new user experience. As an innovative technology brand, the company is investing exorbitant sums in research and development of their products.
Ipad and Co. are developed as an integrated package of hardware and software preventing a ‚function overkill’, and the user does not notice the technology, while using the device. Apple particularly focuses on the customers’ needs. The products are extremely easy to use, can interact with other Apple products and are of high quality. In addition, the users’ devices can be customized with various apps.
Apple’s design
Over the years, Apple has become a well-established and modern lifestyle brand. A special role in the brand building process plays Apple’s design. The company intents to trigger the customers’ emotions such as excitement with its products. Apple is convincing for instance with a reduced structure of the company website, an innovative design of stationary AppStores as well as visually appealing products.
Last but not least…
Reading this book has given me a broader understanding of the phenomenon Apple. The author Dirk Beckmann has chosen the title of the book consciously referring to the book “What would Google do?”, which was written by Jeff Jarvis in 2009. The book focuses on the aspect how you can benefit from the success strategies of internet giant Google. In „What would Apple do?“, Beckmann has repeatedly related to the business model of Google. I have not discussed this aspect in this blog article as it should only concentrates on Apple.
Beckmann praises Apple at the highest stage. I would have liked to learn even more about the failures and problems Apple faces e.g. problems with the sales figures, staff fluctuations, criticism of the production in the Far East or the constant pressure to innovate. In addition, I was not that excited about the chapter “What would Apple do?”, which demonstrated potential business models of Apple by means of examples such as a car, a kitchen or an e-learning platform. This chapter could have been covered by just one example. The remarks were partly irrelevant and have been repeated.
Moreover it should be clear, that the strategies and concepts of Apple are not simple transferable to other products, but rather be seen as an inspiration for other companies. Likewise, I would have found it interesting to learn more about the development of Apple’s key performance indicators. The author describes Apple’s development over time without mentioning the company’s key performance indicators (sales, development of R&D expenditures).
Conclusion: Venture Capital – does it still work?
…finishing of my post series in regards to VC industry changes …
Will prices for start-ups significantly change?
In my opinion most start-ups will continue to raise the necessary funds in Germany. Firstly, venture capital never played a significant role here and secondly a large range of new capital sources have been developed over the last years. Corporate investors have become much more active and crowd funding offers a new way to raise initial proof of concept financing. Universities and government agencies have also been offering additional financing sources. So I believe that in terms of start-up financing there will not be a significant impact from the declining venture capital funding. Internationally, this will probably be a different story.
But what does it mean for valuations? Again I believe that most German start-ups would not have been sold/continued financing rounds to/with VC funds in any case. Trade exits are the normal route to go for start-ups here and most corporates are not only willing to invest in start-ups but have been allocating significant amounts of capital. In terms of pricing I also believe that Germany is looking at incredibly low valuations anyhow and that equity markets are not an exit route for start-ups due to depressed listing outlooks. Hopefully corporate capital availability will actually help to increase pricing levels here.
In my experience …
Overall, I believe that corporates will play a significantly larger role in the German start-up scene than VCs ever had, have and will. The OTTO Group alone has an early phase incubator (Liquid Labs http://www.liquidlabs.de/), later stage incubator (Project A http://www.project-a.com/) and a later stage VC funding partner (eVentures http://www.eventures.vc/). Most other large German corporates are following this trend and are establishing their own teams.
In addition, I am pretty sure that we will start to see an increasing number of more specialized incubators that offer additional guidance and support as well as follow-up funding through corporate buyers. Here an interesting trend from the US are specialized healthcare incubators like Rockhealth or Medstartr.
“Rockhealth is one of the growing incubators in the healthcare industry. They help teams with venture capital, advice and their network to find proper healthcare business models & help to scale them. The startup industry is just starting to innovate around healthcare and those incubators are likely to be in the centrum of this development.” http://rockhealth.com/
These significantly more specialized funds will take over start-up financing and provide industry trade buyers for growing start-ups. Entrepreneurs who are looking to grow their business should therefore forget about impressing VCs and start building their corporate contact network.
eTribes Business: StartUp-Roundtable am 19. März 2013 – come see Alex in action!
Liebe Mitglieder und Freunde von Hamburg@work,
Woche für Woche sprießen neue StartUps wie Pilze aus dem Boden. Es lockt der Traum der Selbstständigkeit mit der zündenden Idee. Doch nicht jedes StartUp kann zum Knaller werden.
“Rising Star oder Flop! Ist Erfolg eines StartUps planbar?” heißt das Thema unseres nächsten StartUp-Roundtables am 19. März 2013:
- Wie bewerte ich, ob mein Geschäftsmodell erfolgreich sein kann?
- Der ‘Proof of Concept’ ist erbracht; aber wie bringe ich meine Idee
zum wahren Erfolg? - Auf welche Faktoren kommt es dabei wirklich an?
Auf diese und viele weitere Fragen zur erfolgreichen Umsetzung einer Geschäftsidee, werden Ihnen unsere 4 erfahrenen Podiumsteilnehmer in der moderierten Diskussion Antworten geben.
Freuen Sie sich mit uns auf:
- Jörg Binnenbrücker; Geschäftsführer von DuMont Venture, Beteiligungs-Unternehmen für digitale Medien & IT sowie Capnamic Ventures, dem neusten Multi-Corporate Fonds.
- Alexander Graf; Gründer und Geschäftsführer der eTribes Framework GmbH sowie Herausgeber von kassenzone.de.
- Katharina Wolff; Bürgerschaftsabgeordnete der CDU und erfolgreiche Gründerin der Personalberatung “Premium-Consultants“.
- Christian Richter; bekannt als Serial Entrepreneur, gehörte z.B. zu den Initiatoren von radio.de; heute Geschäftsführer der internationalen Digitalagentur Spoiled Milk.
Weitere Informationen zu den Podiumsteilnehmern finden Sie hier.
Ablauf:
Einlass: 18:00 Uhr
Beginn: 18:30 Uhr
Networking: ca. 20.30 Uhr
Im Anschluss an die Podiumsdiskussion laden wir Sie sehr herzlich ein, sich bei Drinks und einem kleinen Buffet auszutauschen.
Anmeldung:
Bitte melden Sie sich bis Mittwoch, den 13. März 2013 zu der Veranstaltung HIER an.
Wir freuen uns auf Ihr Kommen – ob junger Gründer, erfahrenes StartUp oder innovativer Unternehmer – und danken Ernst & Young ganz herzlich für die Unterstützung!
Herzliche Grüße,
Ihr
Hamburg@work Team
What are the implications for start-ups?
cont’d from last post VC funding…
Does it matter whether venture capital is a failed asset class or not? Yes, some capital restrictions will apply but I would argue that there are sufficient alternative sources of capital to not significantly restrict new venture creation. Smart entrepreneurs can bootstrap, rely on angle networks or newly emerging crowd funding platforms in order to bring a venture through the proof of concept phase.
Additional follow-up capital rounds can then be financed through trade investors who are currently committing significant amounts of capital. There is a significant interest from trade, publishing and pharma companies to invest in digital start-ups. These companies have hundredth of millions available for new venture creation or “corporate innovation” outsourcing. Almost daily new funds, initiatives or deals are announced by corporates who are looking to mitigate the impact of digitalization on their core investment business. These sources of funds should be able to replace venture funding (at least in Europe). In addition, German/European entrepreneurs are also cashing out and are ready to invest in new ventures. In Hamburg there is a wide range of angle / VC money available from successful industries partners e.g. HackFwd – Lars Hinrichs.
Therefore, I would argue that especially in Europe the decline of the venture capital industry does not create significant problems and is compensated through alternative sources of capital.
Book Review: “E-commerce for advanced readers” by Krisch & Rowold
Hello – I am Anika and new to the digital world. After receiving a stellar business education at University of Rostock and spending some time abroad I decided to join the eTribes Framework team in Hamburg. I quickly needed to broaden my understanding of the digital world and therefore took it upon me to read a whole list of recommended books. Together with eCFO I am now publishing the resulting reviews/learnings from my reading materials.
My first book ‚E-Commerce für Fortgeschrittene – 50 Denkanstösse für den Online-Handel’, written by Jochen Krisch and Sascha R. Rowold, I devoured within a few hours.
The author Jochen Krisch is a well known e-commerce expert in Germany and also the editor of the internet-branch service Exciting Commerce. In line with the editor’s motto „the exciting future of e-commerce“, the book presents the top 50 blog articles of 2009 to 2011 describing different kinds of business models and discussing the latest e-commerce trends due to new technologies and social innovations. The columns are cross-sectoral and broach the issues of among other things live shopping, mobile commerce, shopping systems and clubs, setting up shopping networks and applications, social shopping as well as Ebay, Amazon, Facebook & Co.
Ebay, for instance, has progressively turned from an open marketplace to a managed marketplace (i.e. more fixed prices, professional sellers and new goods) in recent years. However, the expected increases in sales remained slightly down in comparison to Amazon. A return to the traditional retail auctioneering business offers eBay’s classifieds platform. But not only Ebay will evolve in the future. Likewise, the development of Amazon, Google, facebook or Zalando as relevant players in e-commerce is exciting.
Also worth reading were the blog articles about shop systems. According to the authors, shop systems should no longer be based on catalogue models or be standardized. Due to increasing predatory competition and the online ordering saturation, online retailers are better adviced to find special, innovative shopping solutions. To be successful in the future and to achieve growth through a regular customer business, they must reinvent themselves and especially inspire their customers emotionally. Alternatively, online retailers should specialize in a market niche.
What I especially like about this book is that subjects were taken up several times to identify and analyze new developments e.g. the business models of Vente Privée or Ebay. Thus, I got a feel how fast and in which directions the online world can change within two years.
For eTribes and it’s stakeholders the book is a good read to learn about different business models. New trends and the rapid development in e-commerce e.g. the increase of online buyers from 45 percent in 2004 to 69 percent in 2011 show, that the retail is constantly moving to the internet. This means that companies have to adapt e-commerce solutions to their business models.
Also this year, I am convinced that Jochen Krisch and his team will publish diverse pioneering articles about e-commerce on their website. The book incited me to think about future trends of e-commerce, too. I’m particularly looking forward to the developments in mobile commerce – how will mobile shopping be improved this year? How will Ebay’s new payment system will work out? – Let’s get ready to be excited!
Februar is launch month for eTribes
So many new projects I thought I share them here as well. We have diligently planned for quite a while not to bring our new initiatives online. Here a quick overview what has been launched this month (and it is only the beginning of the month) and what else you can be excited about up as the “short” February month continues:
Here it is:
Netshops Commerce relaunched their website!
Localgourmet stands for meat for all and all for meat (fresh and delicious!) Localgourmet
PreziDay Europe is upon us! Check it out!
Competence Center for Digital Analytics now offering the first classes!
Last and definitely not least:
eTribes has launched a new offering together with an updated web presence.
Still to come:
launchwerk GmbH’s new web presence
Developer Conference Hamburg 2013 sneak preview
Netshops first appearance during CEBIT 2013 in Hannover, Germany!
… and lots more!
Book Review: “Rework” by Fried & Hansson
Rating: excellent
Useful for: everybody
“Rework” is an excellent book to read while traveling, in the bathroom or during short work breaks since it is separated into short, interesting paragraphs that are usually not longer than a page. This book came highly recommended and out work library has no less than 3 copies of the book in English and German. We are also using some of the products the authors have developed: Highrise (CRM) and Basecamp (Project Management). Since both applications are very useful for a small to medium business I was wondering what the people behind these products had to say.
Since the book is split into several main sections, which consist of a catch-phrase and a quick explanation I am going to highlight the ten “commandments” I found to be most interesting. This is a highly subjective view and each of the short sections will probably be of varying interest depending on a reader’s perspective. Most importantly you can tell that these guys are strongly product focused and therefore some sections apply less to other business models such as service businesses.
These ten principles highlighted below really hit home for me and I will be integrating them into my daily business routine.
Learning from mistakes is overrated (p. 16)
I love this statement. I guess in Germany people take this approach anyhow since an entrepreneur who has failed will very rarely gets another chance. Nonetheless, I believe that celebrating mistakes will often lead to not fully understanding why a business failed. This is especially true in the US / venture funded start-ups where burning through millions of investor money seems to be a rite of passage for an entrepreneur. Being good at spending money is very, very easy – being good in making money is a totally different game.
Why grow (p. 22)
We have scaled down whenever we could. Each time we got to be more than 20 people we founded a new business with a separate CEO who would focus on growing a specific aspect of our business. We are currently again downsizing from 30FTE to less than 4 FTEs and I honestly believe that building a valuable and lasting business has nothing to do with growth. Profitability and client satisfaction are the only measure that counts. If you cannot profitability keep one client happy you will also not keep 1000 clients happy – and should you?
Outside money is plan z (p. 50)
I could not agree more. Lots of post on my blog deal with sources of capital and honestly bootstrapping or “robbing through the mud” (as we call it) still has the greatest appeal to me. Who do you respect more: the elite single ninja who relies on his skills and resourcefulness to reach an objective or an over equipped tank that just drives somewhere through pure scale?
Interruption is the enemy of productivity (p. 104)
Yeep.
Say no by default (p. 153)
The hardest lesson we learned so far. As an entrepreneur you will tend to see opportunities everywhere and you will always be excited about following up on them. It will almost always turn out to be a disaster. Focus, focus and more focus will lead to success and focus is only possible if you say “no” to almost everything.
Welcome obscurity (p. 167)
Haven’t been famous yet but I sure know that being outside of the limelight while testing our business model and various ideas has been a blessing.
Hire when it hurts (p. 204)
Not a second earlier. It is always easy to hire but damn hard to fire. Not having external financing helps with taking this commandment serious.
Decisions are temporary (p. 250)
Nothing is forever… keeping enough flexibility to change decisions is a key aspect of being an entrepreneur.
What do I not agree with:
Planning is guessing (p. 19)
Deep down I am a CFO and I will always be a CFO – so please do not expect me to agree with this statement J I believe that over planning is guessing but coming up with a range of estimates to evaluate our day-to-day achievements is educated guessing and therefore legit.
Hire managers of one (p 220)
Well, if you are really not planning to grow this is the way to go. Yet I believe that these managers of one are very hard to find. Very, very few people are able to solely manage themselves without supervision. Most who do poses this skill will already be self-employed or entrepreneurs. So following this example will limit your hiring pool significantly.
So here is a quick impression of the book. My recommendation: MUST READ!
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