VC Perspectives

Just got back from a few days in Barcelona having attended the Mobile World Congress 2009 (formerly known as 3GSM). It’s a pretty hectic place with some 55′000 visitors ranging from operators, vendors and start-ups. This year we had two portfolio companies attending, Xtract and Aito both from Finland. It was great fun spending some time with them especially since they both managed to attract significant interest from potential customers.

From a start-up perspective, I am usually a bit sceptical to these large, general exhibitions but here are some things that I have seen work for companies attending:

• Start with defining an objective and goals for attending. Are you there to meet investors, customers, partners, competitors and/or the press? What should be achieved for it to be worthwhile spending the time and money?
• Identify the people you want to meet and book meetings in advance. I cannot stress this one strong enough. Although people may not be willing to commit themselves to set meetings beforehand, at least agree on that you should meet and make sure you have their contact details.
• In addition to track down the people you really want to talk to, be open and talk to as many people as possible. Your friends and colleagues you can talk to at home.
• Only have a booth if you have plenty of meetings booked in advance. Otherwise there is a risk that you’re tied to your booth rather than being out hunting down interesting people to meet. Sure, there will be people attenting your booth but are they really the ones you want to talk to? You are a small company so the odds of you attracting the right people to your booth are smaller than the other way around. And only have a booth if you have attented the exhibition before so you know where it should be placed, what it should look like etc.
• Try and associate yourself with someone more well-known; it could be a customer, partner or some other companies from your country.
• Have someone well-connected singing your praises, a third-party saying you’re great is usually stronger than you saying so yourself.

As you have seen, Meetic has acquired the European operations of Match.com. Despite Loic arguing that this is a sign of strength from the European online M&A market, I think this is to be considered more as a divestment on the part of Match.com. It tells the world, and in particular the investors and entrepreneurs in European online ventures, that the US-online-success-expanding-into-Europe-through-acquisition-exit may be a concept of the past, if ever. Certainly, Match.com has concluded that the EU business is not core, and has sold it. Which means that despite their thought leadership in the field, the net present value of Match.com/eu is larger in the hands of someone else. Someone local, European.

David Stauffer at Harvard Management Update have put together a list of five missteps to avoid in volatile times (with volatile really meaning that the economy is in really bad shape…):

1. Delaying decisions that will improve the long-term health of your company for fear of the market’s near-term response
2. Assuming that the smart way to gear back up is always cautiously and incrementally
3. Trying to bulletproof the company by moving into recession-resistant businesses
4. Focusing on broadening your customer base
5. Assuming that a recovery is based on what leaders do, not what they think

Some of these advices are clearly geared towards large and mature companies (start-ups don’t often have the choice of jumping into recession-resistant businesses, they rather follow their survival instinct and find cash where ever that might be), but I still think there are a some good points also for start-ups.

Although start-ups (and even more so their investors) are focusing on growing the customer base, it is especially important to focus on your existing customer base in a recession and build strong customer relationships. If you provide a valuable service, many customers are willing to chip in to make sure you don’t go out of business. And often you’re in a position where you could actually grow your business with existing customers by understanding their pains and come up with solutions. Also, you build a great platform for when times are improving again.

Another relevant point is to figure out ways to keep the company heading in the right direction (while still making sure that there’s enough cash in the company of course). This can be hard to achieve with investors, banks and family breathing down your neck, but if you loose the sense of direction you’ll be soon gone anyway. And there are ways to handle this, one example is to get customers to pay for product development that’s planned to be implemented in the product at a later stage. Another example is to use models that generate cash faster, e.g. use factoring (even though you loose some revenue it doesn’t affect your business model) or introduce a premium option instead of only relying on an ad-based model (at least until the ad-market picks up again).