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How To Make A Startup Community Grow And Become More Inclusive

There’s tons of events in the Barcelona startup ecosystem, you can find all the itnig events here.

Everyone that works in startups desire a strong, growing and inclusive community. It’s something everyone benefit from, founders, VC’s, developers, marketers, the list goes on.

How you perceive a community often depend on if you’re a local or not. In Barcelona the startup community is a good mix of both Spanish people and expats from all over the world, which is a great thing.

I’ve been a member of the startup community in the city for well over a year now, and I’ve been impressed by how inclusive and fast-growing it is. To help me analyze why and how the ecosystem has been growing, I spoke to a local expert.

Want to go fast or far?

Àlex Rodríguez Bacardit is the CEO and founder of MarsBased, director of Startup Grind Barcelona, and the man behind the Slack group StartupBCN. As a local, he’s seen the community grow fast for the last years, and have recognized a clear difference between certain companies:

Some companies fail to understand that an ecosystem is a perfect sum of the actors that contribute. Go alone if you want to go fast, go accompanied if you want to go far, as the African proverb says.

Àlex Rodríguez Bacardit at Startupgrind’s two year anniversary in Barcelona this year.

Even though tech startups is dependent and built by developers, it’s important that all events isn’t exclusively for this group. Bacardit says entry-level events are key in building and growing a community:

Events provided by new startups or even public administration, where you get free non-technical content, not using acronyms or tech-jargon so people can start soaking the startup vibe and culture without feeling lost.

Too many “rockstars”

As Brad Feld wrote in the well-known book “Startup communities”, inclusion doesn’t just mean to invite as many of the people you think will fit into the community, it actually means everyone, according to Feld:

“Welcome everyone to the startup community. Everyone should have the perspective that having more people engaged is good for the startup community.”

Wise, experienced startup founders are essential in all communities that want to grow, but it’s important to not forget the youngest group of the ecosystem.

Young people who’s hungry for experience with their whole life ahead of them, and with“nothing to lose”, can be an incredible resource to a growing (or a stagnant) community. They’re often not limited by the same things as older, more experienced members of the ecosystem can be. Limited time, money, pride, are things young people more rarely have, and make them more free to be active and engaged.

Bacardit explains that even though the Barcelona ecosystem is getting better every year, there’s still too many older “rockstars”.

There is an established “startup mafia” which is everywhere, pulling the strings of the community. If you’re not friends with them, you won’t make it. The biggest pitfall is the conquer-all attitude of some companies that try to gain foothold within the community without caring about other companies.

The founder believes giving before getting, is the key to growth.

An inclusive startup community is where being a competitor does not matter. At this level, companies should partner more often than not, even if they’re competitors.

He continues:

If even Microsoft and Google or Apple partner from time to time, why shouldn’t startups?

Build something that lasts

In Barcelona we’re very lucky to have an extremely strong city brand, but not all cities have the world’s best football team, and millions of people coming to visit every year. If you don’t have a strong identity, it’s easy to start drawing lines to other places that have fostered world-famous entrepreneurs.

You often hear that cities brand themselves as the Silicon Valley of this or that, but if you want your startup community to develop in a healthy way and be a reference to other communities, I think it’s important to stay true to who you are.

For instance to call Barcelona the Silicon Valley of southern Europe would look good as a title in news articles, and create a bit of buzz, but to base your brand on your own talent and success is something that will last much longer, even though it takes more time and effort.

So if you’re part of a startup or a tech company you now know some of the things you should, and shouldn’t do. And Bacardit has one last encouragement to you:

I believe most companies should host an event or two a year just to learn what it can bring them, and how difficult it is. It’s a nice way to pay the community back.

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This post was written by Sindre Hopland, media manager at itnig.

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GymForLess Will Now Let You Work Out Across Borders

CEO Oriol Vinzia checking up with his team at their Poble Nou offices.

The Barcelona-based startup will in October launch new features to their product, and let people work out across borders in both Spain, France and Italy. This was a natural move for the startup that recently have grown a lot in the B2B market, says CEO Oriol Vinzia:

We work with international companies that have workers that travel a lot. If you live in Barcelona, but work a lot from Paris, you’ll be able to choose amongst hundreds of gyms in both cities with our programs.

The itnig company recently closed a bridge round of €160.000 to keep focusing on their technology, as they’re planning on closing an A-round in the beginning of 2017 explains Vinzia:

We’re aiming for a round of €1 million or more, so we’ll start approaching investors from October.

2017 will be the year people talk about the disruption of gyms

At least that’s what CEO Vinzia think is coming as one of the big industries of disruption next year.

There are several big online gym marketplaces that are growing, and we’re the biggest one in southern Europe. I think the industry we’ll read a lot about the next year, is the disruption and digitalization of gym-services.

Brazilian competitor Gympass recently landed in Spain, but they’re only focusing on the B2B market, says Vinzia.

We’ve already established a strong B2C market of thousands of users, and we’ve recently seen great growth in our B2B market. Our challenge now is to find the perfect balance for our focus on the two markets.

Crossing the million mark

GymForLess offers three different programs that gives you access to hundreds of gyms. Here’s the map of Barcelona.

GymForLess had a turnover of €350.000 last year, and expects a turnover of €1 million by 2016, according to the CEO:

By 2017 we’re predicting a turnover of €2.5 million.

The company will now focus heavily on their tech product. With over 100.000 active users on their app they aim to add additional features that goes beyond working out and locating a gym.

We want to add personal trainers, possibly a marketplace to buy gym clothes, but also to add a social layer between the clubbers, so friends can challenge each other, and compare results from their exercises.

CEO Vinzia also adds that they’re looking into possibilities with connecting the app to pulse watches and other devices.

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This post was written by Sindre Hopland, media manager at itnig.

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How Much Is Your Startup Worth?

What would Gordon Gekko think of your startup?

A startup, like any other asset, is worth as much as anyone is willing and able to pay for it.

That being said, let’s analyze the criteria that are often taken into account in M&A or investments:

· Economic factors: every startup must have progressive goals:

1. Generating revenues

2. Generating gross margin: sales minus cost of goods sold/services provided

3. Generating contribution margin: gross margin minus acquisition costs

4. Generating Ebitda

5. Generating net income

6. Generating cash flow for the business

7. Generating return for the shareholders

· Financial factors: is the acquisition of a company able to provide new sources of funds? Usually, M&A operations tend to be financed, from financial institutions to IPOs. Sometimes, a company on its own may have limited financial capabilities and a strategic acquisition may unblock substantial amounts of funds.

· Synergies: any upside or downside for the shareholders of the acquiring company. They can have many forms and I will focus on the positive ones since they are the ones that motivate investors to pay a premium:

1. Operational: optimization of logistics, restructuring of personnel, concentration of offices, etc.

2. Commercial: companies always have comparative advantages. Imagine a company with a great commercial network that wants to acquire another company that has a product portfolio that is complimentary to that of the first one. An acquisition would make sense, as long as cannibalization is minimized, if the first company could generate more value from the portfolio of the second one with their own existing clients. It would also allow to better segment the market or eliminate competitors.

3. Lobbying: the increase in the total size is sometimes wanted since it offers access to a “higher league” level. You may reach key people that before were out of your reach.

4. Brand: sometimes, companies with deep pockets want to get a PR push.

5. Tax shield: companies that have accrued losses over the years will have tax benefits in case they are able to turn the red into black. That is very attractive as long as there are no corpses in the closet which are usually spotted after a proper due diligence.

6. Other: “oh, I really wanted that corner shop” or “I always wanted to own a football club” or “I’ve heard real state is a sound investment since prices never drop” or “I have a friend who has invested in a blue collar job app”…

When we talk about startups, we will focus only in valuations made to raise money. These are some methods used, which may be used alone, combined or compared:

· Discounted Cash Flow (DCF): is the logical one. It evaluates a business like a flow of money in and out, adjusted to the present value by the discount rate.

Example: you plan on opening a doughnut place. At first, you need to make an investment of 1 million Euros. You start operations from day one and generate a positive cashflow of 200.000€. A cashflow is the net sum of all payments, incoming or outgoing. Remember that an expense is not the same as a payment. An expense is an economic thing while a payment is a financial thing.

When we talk about payments, we talk about finance. Considering one of the axioms of finance, which states that a Dollar today is worth more than a Dollar tomorrow (unless there is deflation), the 200.000€ will be worth less today, exactly 170k if you discounted at 15% (the discount rate is the interest rate you expect the investment to produce, and it is inversely correlated to the risk involved in the operation). You may add as many years as you want, but it is advisable to have a perpetuity value calculation instead of year 6 and so forth. A perpetuity is calculated dividing the previous yearly cash flow by the discount rate. And so forth.

At the end, you will add the net present value of all future cashflows and that will be the startup valuation. If this figure based on your predictions is higher than the 1 million it costs, the investment will make sense for that investment at that discount rate. In the other hand, if the investor does not agree with an assumption from the business plan, he/she will have a different valuation in mind. Here’s where the negotiation begins.

DCF — Present values of future cash flows

· Multiples: a company that already has some revenues can be valued multiplying a metric. That multiplier changes with the sector of activity, the growth rate, the total available market and specifically the risk perceived by the investor.

— MRR: in companies with recurring revenue, specially the ones with a subscription model, are evaluated based on the Monthly Recurring Revenue. In SaaS, that multiple can be around 100.

— ARR: same as above, but with Annual Recurring Revenue, which results from multiplying last months MRR by 12. In SaaS, that multiple can be from 8 to 12. However, I am only stating what some VC’s admit publicly, there have been operations far above these multiples.

— Sales: some companies, specially those with more stagnant figures, can be valued at 5 times sales. However, this is a vanity metric since a company is not made to sell, but to make profits. The rest are NGOs.

— EBITDA: is the net result from operations so it is pretty close to a cash flow if everything was paid at the moment the invoice was issued. That includes sales, COGS (Cost of Goods Sold), acquisitions expenses and fix costs, but exclude amortizations, activation of fixed assets such a development, interests and taxes. The EBITDA multiple is inversely correlated with the amount of CAPEX investment needed each year. It is only possible to apply on companies that already have a positive EBITDA, of course. The general multiple rarely steps out of the 5–15 range, having the average at about 7–8. I insist, it all depends on many other factors, I would personally never make an investment based on an EBITDA multiple outside of the stock market.

— Formula: there is another complimentary metric, also more suitable for companies with recurring revenues. I also do not encourage anyone to use it since a company is always something more that a formula, but before entering a negotiation, you must know all possibilities to be able to discuss them properly. Value = (MRR * Gross Margin %) / Churn % . There are multiple ways of defining the churn, one way should be the average percentage of active users you lose in a month. The lower the churn, the higher the value.

· Balance sheet: the purpose of accounting is to have financial statements that reflect the real value of a company. In a balance sheet there are assets on one side, everything the company owns (cash, receivables, inventories or fixed assets) and on the other side there are the liabilities, which is everything a company owes (payables, loans…) and the Equity, which is basically the difference. The Equity is the value that’s left for the shareholder. So the theoretical value of a company is the subtraction between what the company owns and what the company owes. However, in startups, this is a joke. The real value is never reflected because an increase in equity can only come from a direct investment or a higher profit. Profits and startups are an oxymoron, both because they tend to invest in the long term and because the recognition of earnings, and therefore the increase in Equity, goes hand in hand with Friday the 13th main character’s, Jason Taxes.

· Esoteric methods: sometimes, some celebrities raise money over a power point. I’ve heard some investors saying that the valuation is roughly 1M€ per founder, as long as they are rockstars. This type of situations may happen when an entrepreneur has a good track record or when, for any reason, there’s an oversupply of investors for a specific project. Should Elon Musk in the flesh approach you and ask for your money for a new venture he would lead, would you demand a business plan and a couple weeks to think it over?

You may as well throw some cards before using some methods

All that being said, remember that a valuation is always a subjective amount that is on someone’s head and that depends of other factors not mentioned above. Make sure you pitch well and give the valuation you are asking at a moment that is convenient for you. At the end of the day, the valuation you will get will depend a great deal in the show you put on and the trust you generate in the investor. So make sure you practice and learn with lots of investors and that you control the momentum.

Also bare in mind that the hardest ticket to get is the first one. No one wants to be the first. If you can secure a reputable first investor, others will follow with less questions asked.

What is your preferred method? Did I miss something important? Do you disagree in some of the statements? Feel free to discuss it. You are also welcome to suggest new topics we can cover.

Thank you and godspeed skipper!

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How to write a press-release journalists actually want to read

One of our hard thinkers at itnig.

All entrepreneurs believe in their product, even those who maybe shouldn’t, and that’s great. But how to get journalists to believe in what you’re building?

I’ll give you some tips on how to let your press-release stand out amongst the thousands of developers that hope get their startup presented in the media.

As a journalist both at regular newspapers and for tech blogs, I got tons of press-releases every day. Some were good, others were horrible, and a few were really great.

It’s not given that these guidelines will guaranty that a tech blog picks up your product, but it will dramatically enhance your chance of “being discovered”, if you didn’t do any of these things in your earlier press-releases.

Remember that before your product has any market validation, you and your team are the product. Who are your team-members, what have they done before, and why will your team work well together, are all questions you need to answer.

Tell your story (briefly, not from birth). If something special in your life has led you to start your company, this is important to express. Journalists love a good story, and people do too. A good concrete example is Ryan Green who made the computer game That Dragon, Cancer, to help people confront cancer. He did so after his son was diagnosed with terminal cancer at the age of four. Not all stories are that powerful, it can be any kind of story, but if there’s a personal motivation for your startup, share it.

Multimedia is key. Present good pictures of you and your team, and the product your building, as well as the interface of your app, or the design of your website. If you make a video or a GIF, that’s even better. This is a great example from Amity, a messaging app.

Journalists are lazy/busy (depends who you ask). But one thing is for sure, it will help you a lot if your write finished quotes, so the writer can copy-paste the lines into the article, and doesn’t need to contact you. Make a team-member interview you, and answer the key questions about your project. The vision, the market, the product, etc.

Be exclusive. Obviously, you want to get your product in front of as many eyes as possible, but being a bit exclusive can actually help you a lot. Journalists wants to be the first to publish the story, in that way, other outlets need to reference to them in their stories. If you have a particular news outlet you prefer, send it to a journalist, and tell her that she is getting the story exclusively until tomorrow, when you’re sending it to the whole list.

For those of you that didn’t read the whole article, and just scrolled down to see if there’s a summary, here it goes (but you should read the whole thing):

Remember that you are the most important product, present your team.

Connect your own story with the story of the company.

Good pictures and videos/GIF’s of your product & team are key.

Write quotes, so the writer don’t have to track you down.

Give your favorite news outlet exclusive access to the press-release one day before everyone else, let them feel important (because they are..).

If you have any tips that worked for you, feel free to comment under.

We had Jeremiah Gardner visiting this fall talking about Value Creation. He made a lot of good points on creating a company journalists (and everyone else) actually cares about:

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This post was written by Sindre Hopland, media & brand manager at itnig.

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How important is networking for your startup? (Isn’t hard work enough?)

Some of our hard-working people at itnig.

If you’re running a startup, or working in one, you probably know how much work it takes to build a brand new product from scratch. It’s not unlikely that you’re reading this post by your desk at 10pm, just because you needed a break from your sweaty keyboard.

But no matter how much and how hard you work, it’s not enough. At least that’s what some experts claim.

Most humans are social creatures, and even though the tech world is built by developers (not famous for being super keen on networking), the startup industry arranges more networking events than most other industries.

In Barcelona you can go to several events every night if you have time.

Is hard work enough?

As I’ve worked as a journalist, meeting founders and entrepreneurs every week the last year, I’ve been asking several of them why I haven’t seen them at tech events before?

The answer is usually:

“We’re busy working, I don’t have time to attend events and drink beers several times every week.”

It’s a valid point. Nine out of ten startups fail, so working day and night makes perfect sense.

I went to cover a startup competition for a major European tech blog earlier this year. After tough competition between some of Spain’s best performing startups, one of them were crowned the winner. Me and my college were surprised that we hadn’t heard of the company before, and asked them how they went beneath our radar. The founders told us:

“We usually never go to events. We actually signed up for this competition almost by accident.”

This made me wonder how many other great startups go under the radar, missing out on important exposure because they’re too busy working (too hard?).

Another example is the founder of Tradesy’s, Tracy DiNunzio, who says she thinks too many founders are wasting time going to tech events:

When I was bootstrapping through Tradesy’s first two years, I never attended events. Instead, I stayed focused (obsessed, really) on improving our product and technology. I was glued to the computer for 17 hours a day.

Building a network

It’s clear that networking is important, but it’s probably also true that many entrepreneurs would benefit more from working, than from sipping beer at tech events every other night.

To some people networking is the most natural thing to do, the ones that have the gift of speaking to anyone, anywhere about anything (or nothing). To them it’s like breathing.

For others it’s more about building a network, doing a job, rather than talking to a massive amount of people. And to some people, a small group, it’s torture.

But no matter what group you belong to, as long as your startup is being built, you’re the product. Before you have users, customers, a physical product, or any metrics at all, you and your team are the only thing representing your startup.

Connections are key, and good advice are extremely valuable, especially from people with experience from your own industry. But tech connections are not necessarily found through going to events.

It’s about being present, and especially talking to the right people. It does not have to be at tech events, but any place you can meet people caring about the product your startup is building.

Connecting to people via mail (or social media etc.) can be just as good as going to an event. Mark Suster made a good Snapstorm on how to send email intros, because there are mistakes to be made.

To sum it up:

Growing a solid network of people in your startup ecosystem can never go wrong, not to think about the vital support you can provide to other entrepreneurs building their respective upstarts.

But hard work is still as crucial as it always has been. Just because there is an event every night with great headliners and interesting topics, does not mean you have to attend.

Tech events are often a blast, and networking is good, but not for the sake of networking itself. Going to events will rarely create more value than a well-functioning team can accomplish in the same amount of time.

However building a network and providing value for your ecosystem is guaranteed to benefit both you and your startup. Just don’t do it on the expense of your startup.

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This post is written by Sindre Hopland, Media Manager at itnig.