February 6, 2009 at 13:35AddVenture - crisis medicine for Russian startup
Just 4 months after the AddVenture startups' dynamic development program was launched, at the height of the crisis, two of its six “graduates” attracted the next round of investment. AddVenture Business Angels Foundation considers the crisis a “window of opportunity” and launches a second program in March.
In August 2008, AddVenture Fund selected six IT startups, in which they invested 20-50 thousand dollars each. We were looking for teams of “superheroes” - purposeful people with a deep understanding of the market, because the only certainty in startups is “everything will go wrong.” It is known for certain that the business plan will become obsolete before the ink dries. So, you need to be able to adapt and play outside your comfort zone, to be able to quickly find solutions.
So, the first tranche has been transferred to the account of the newly created company. Here, the work of most investors, if it does not stop, then becomes much less intense, but at this moment the most interesting thing started for us.
1. How did AddVenture startups help?
Business model
After 3 months of the program, none of the companies did the same project as they “sold” to us during the selection. All startups have more or less radically changed their business models. And this is a normal, moreover, the only scenario true for the seed stage. At the beginning of the journey, it is still not difficult to change course without consequences for the business (the ship did not pick up speed and only left the port). And it’s stupid not to change it if, during weekly dinners, you are advised by tops of Russian IT companies, like Felix Muchnik from SoftKey, or investors, like Andres Susi from the Martinson Trigon fund.
Network of experts and investors
AddVenture attracts many experienced experts with a deep knowledge of innovative business to advise startups - A. Dvornikova (president of the AmBAR Silicon Valley Association of Russian Professionals), N. Mityushin (ABRT), serial entrepreneurs - A. Sergeev (DataMash, Sundera, Epsylon, etc. ), R. Mandrik (Ksan, TV-Click, ArtyTalk) and others.
So in November, during a trip to Silicon Valley, our startups visited the office of Slide, the new startup Max Levchin, and talked with him, which was especially useful for the project toolwi.com - widget platforms, in perspective Noah compete with Slide.
And with Guy Kawasaki (partner of the Garage Ventures fund, author of popular books on entrepreneurship, for example, “The Art of Getting Started”), our startups talked twice - they were able to “eat” it during the Silicon Valley Open Doors conference, and then discussed the Internet and venture investment trends for a long time in Moscow during his visit to the Innovation Convention.
The benefits of such communication are enormous. Having built their business, and often not one, experts see the whole picture of the industry, global trends, they can present the startup to potential partners or simply wish good luck, like Sir Richard Branson.
Launch
The difference between a project with an idea on paper and a project with a ready-made prototype of a service is huge from the investor's point of view. Creating a beta version allows you to remove technical risks for the investor, check the team in action. And getting the first users or customers is important not only because of the cash flow, but also for the purpose of real field testing of the product.
For software companies, it is especially important to focus on the opinions of real users, and not on their own guesses and add “features” gradually, rather than trying to immediately develop the final product.
All AddVenture projects were able to start in 3 months of work, while most of them started from scratch. So, the project of the browser-based game "Superheroes Online" made a prototype of the game for the iPhone and the online battle - the most difficult and highly stressful part of the game.
Stimulus for dynamic development
Slow development is the most dangerous signal for an investor; it means that either the team is not able to overcome difficulties or is not aimed at doing business, but has a different motivation (lifestyle, building a personal brand, research).
Development is necessary because competitors are not sleeping. So, the project kinokrug.ru - a closed online community of film professionals with a set of useful services, ran into a web project of industry insider Fedor Bondarchuk. From the outside it may seem that competing with such a famous player with connections and great financial resources is useless.
Colleagues from the game startup supported KinoKrug in our internal mailing list - “It's not scary even once”, because Bondarchuk’s project has a overlapping, but not matching, target audience and because it wasn’t openly accessible then. The decision of KinoKrug was as follows - to continue to gain professional audiences through film festivals, guilds and communities, without lowering the quality bar (it’s easy to recruit 9 thousand film students through the VKontakte website, it will be difficult to keep existing professionals on the site, if this happens) and create services, focusing on the solution of problems of working filmmakers (estimate prospects of the film project, etc.)
2. crisis for startups and investors
staff
"crisis much healthier labor market", - says Wi2Geo team. “Projects like us have a chance to invite top-level developers to the team.”
Another startup, AddVenture, was founded by a team from a large Russian media company. When they left the company, colleagues twisted their fingers at the temples; but after reduction in it apprx. 200 programmers, only the lazy did not knock on ICQ or wrote to former colleagues about the opportunity to join the team and the willingness to help with specific tasks even for free.
Those. From the point of view of the startup’s most valuable resource - employees, the crisis certainly helps.
We play monetization
The crisis forced startups to take off their pink glasses and, according to Roman Mandrik, “start playing monetization, not capitalization”. Indeed, it became pointless to inflate the company's valuation in the hope of buying the company as a strategist or a round of investment on favorable terms. The main task is to generate cash flow.
AddVenture startups quickly reordered. So, toolwi.com is now also developing widgets for corporate clients. Relatively large contracts in this area finance the creation of a widget platform for bloggers.
Outcomes of the AddVenture I program The
main objective of AddVenture has been completed - we helped overcome the “Death Valley” - a period of startup development in which venture investments are not yet available, as the product was not tested by the market, the team did not work well, there are no sales, cash flow is negative and the risks are too great for the funds.
Providing for 3 months of the program the resources really needed for startups - contacts of investors, experts and first clients, assistance in team building, business development, and not a printer, cooler and accountant for most Russian incubators, we laid the foundations for a successful business.
On November 15, at the end of the program, “Investor Day” was held - a presentation of startups to venture funds, angels, and the press. About 100 participants evaluated the progress of the projects (presentation videos are available on the AddVenture blog - addventure.to/blog ).
The main result of the program is to attract during the crisis the next round of investment in two projects. The media startup has attracted a major angelic round of investment from a pool of business angels. And the Wi2Geo startup, founded in the summer of 2008, attracted an A-round of investments from a Russian venture fund. Based on hybrid positioning technology, the company provides users with location-based services (LBS).
The AddVenture model has confirmed its performance and in March the foundation starts a new program.
Magazine Angel Investor,
Masolova Elena
In August 2008, AddVenture Fund selected six IT startups, in which they invested 20-50 thousand dollars each. We were looking for teams of “superheroes” - purposeful people with a deep understanding of the market, because the only certainty in startups is “everything will go wrong.” It is known for certain that the business plan will become obsolete before the ink dries. So, you need to be able to adapt and play outside your comfort zone, to be able to quickly find solutions.
So, the first tranche has been transferred to the account of the newly created company. Here, the work of most investors, if it does not stop, then becomes much less intense, but at this moment the most interesting thing started for us.
1. How did AddVenture startups help?
Business model
After 3 months of the program, none of the companies did the same project as they “sold” to us during the selection. All startups have more or less radically changed their business models. And this is a normal, moreover, the only scenario true for the seed stage. At the beginning of the journey, it is still not difficult to change course without consequences for the business (the ship did not pick up speed and only left the port). And it’s stupid not to change it if, during weekly dinners, you are advised by tops of Russian IT companies, like Felix Muchnik from SoftKey, or investors, like Andres Susi from the Martinson Trigon fund.
Network of experts and investors
AddVenture attracts many experienced experts with a deep knowledge of innovative business to advise startups - A. Dvornikova (president of the AmBAR Silicon Valley Association of Russian Professionals), N. Mityushin (ABRT), serial entrepreneurs - A. Sergeev (DataMash, Sundera, Epsylon, etc. ), R. Mandrik (Ksan, TV-Click, ArtyTalk) and others.
So in November, during a trip to Silicon Valley, our startups visited the office of Slide, the new startup Max Levchin, and talked with him, which was especially useful for the project toolwi.com - widget platforms, in perspective Noah compete with Slide.
And with Guy Kawasaki (partner of the Garage Ventures fund, author of popular books on entrepreneurship, for example, “The Art of Getting Started”), our startups talked twice - they were able to “eat” it during the Silicon Valley Open Doors conference, and then discussed the Internet and venture investment trends for a long time in Moscow during his visit to the Innovation Convention.
The benefits of such communication are enormous. Having built their business, and often not one, experts see the whole picture of the industry, global trends, they can present the startup to potential partners or simply wish good luck, like Sir Richard Branson.
Launch
The difference between a project with an idea on paper and a project with a ready-made prototype of a service is huge from the investor's point of view. Creating a beta version allows you to remove technical risks for the investor, check the team in action. And getting the first users or customers is important not only because of the cash flow, but also for the purpose of real field testing of the product.
For software companies, it is especially important to focus on the opinions of real users, and not on their own guesses and add “features” gradually, rather than trying to immediately develop the final product.
All AddVenture projects were able to start in 3 months of work, while most of them started from scratch. So, the project of the browser-based game "Superheroes Online" made a prototype of the game for the iPhone and the online battle - the most difficult and highly stressful part of the game.
Stimulus for dynamic development
Slow development is the most dangerous signal for an investor; it means that either the team is not able to overcome difficulties or is not aimed at doing business, but has a different motivation (lifestyle, building a personal brand, research).
Development is necessary because competitors are not sleeping. So, the project kinokrug.ru - a closed online community of film professionals with a set of useful services, ran into a web project of industry insider Fedor Bondarchuk. From the outside it may seem that competing with such a famous player with connections and great financial resources is useless.
Colleagues from the game startup supported KinoKrug in our internal mailing list - “It's not scary even once”, because Bondarchuk’s project has a overlapping, but not matching, target audience and because it wasn’t openly accessible then. The decision of KinoKrug was as follows - to continue to gain professional audiences through film festivals, guilds and communities, without lowering the quality bar (it’s easy to recruit 9 thousand film students through the VKontakte website, it will be difficult to keep existing professionals on the site, if this happens) and create services, focusing on the solution of problems of working filmmakers (estimate prospects of the film project, etc.)
2. crisis for startups and investors
staff
"crisis much healthier labor market", - says Wi2Geo team. “Projects like us have a chance to invite top-level developers to the team.”
Another startup, AddVenture, was founded by a team from a large Russian media company. When they left the company, colleagues twisted their fingers at the temples; but after reduction in it apprx. 200 programmers, only the lazy did not knock on ICQ or wrote to former colleagues about the opportunity to join the team and the willingness to help with specific tasks even for free.
Those. From the point of view of the startup’s most valuable resource - employees, the crisis certainly helps.
We play monetization
The crisis forced startups to take off their pink glasses and, according to Roman Mandrik, “start playing monetization, not capitalization”. Indeed, it became pointless to inflate the company's valuation in the hope of buying the company as a strategist or a round of investment on favorable terms. The main task is to generate cash flow.
AddVenture startups quickly reordered. So, toolwi.com is now also developing widgets for corporate clients. Relatively large contracts in this area finance the creation of a widget platform for bloggers.
Outcomes of the AddVenture I program The
main objective of AddVenture has been completed - we helped overcome the “Death Valley” - a period of startup development in which venture investments are not yet available, as the product was not tested by the market, the team did not work well, there are no sales, cash flow is negative and the risks are too great for the funds.
Providing for 3 months of the program the resources really needed for startups - contacts of investors, experts and first clients, assistance in team building, business development, and not a printer, cooler and accountant for most Russian incubators, we laid the foundations for a successful business.
On November 15, at the end of the program, “Investor Day” was held - a presentation of startups to venture funds, angels, and the press. About 100 participants evaluated the progress of the projects (presentation videos are available on the AddVenture blog - addventure.to/blog ).
The main result of the program is to attract during the crisis the next round of investment in two projects. The media startup has attracted a major angelic round of investment from a pool of business angels. And the Wi2Geo startup, founded in the summer of 2008, attracted an A-round of investments from a Russian venture fund. Based on hybrid positioning technology, the company provides users with location-based services (LBS).
The AddVenture model has confirmed its performance and in March the foundation starts a new program.
Magazine Angel Investor,
Masolova Elena