Startups, business & tech
We had the opportunity to talk to Luke Miller, CEO @Hitch, a company that recently raised 700K€ to keep helping companies grow and manage APIs.
He explained to us what Hitch does, their target market, their take on the API market future, how they expect to massively acquire customers, how they convinced their VC to invest in Hitch, why they chose Connect Ventures, their plan to stay in Barcelona and wrapped the interview with some final thoughts.
I’m Oriol Vila, I founded holaluz.com 5 years ago, I’m a Civil Engineer, I studied an executive MBA in 2009 and there is where I met my partners Carlota Pi and Ferran Nogué and decided to found the company.
Can you briefly give us the Holaluz pitch about what it does and how it differentiates itself from other utility companies out there?
Holaluz.com is a utility company, we sell energy. We know people don’t know about energy and even don’t care about energy and that’s okay, it’s not our goal to teach people about it but make things easier for them at a very fair price. Our product is a commodity and thus we can only differentiate from competitors on price or service. We actually have the lowest price and also a customer centered customer service, where we treat people as people and not just numbers (as our competitors tend to do). It is actually lots of little things that make our service better than the others: you can do everything from our website with a single click, we always send electronic invoices, our energy is 100% green (we treat all the stakeholders with the utmost respect).
At what point did you and your associates conclude the industry needed another player in the ring?
I think we realised we had to do something when Ferran’s mother received an 800€ invoice from the electric company. We tried to help her addressing the issue by contacting their customer service. They didn’t know what to do, they didn’t give clear answers, we had to repeat our story hundreds of times to different people and we realised that something that should be really easy was in fact very difficult. Parallelly, European Union’s laws were pushing all european governments to liberalize the energy sector so we decided it was a good moment to start something different.
Can you talk about the team dynamic between founders? What is everyone’s unique role, and where do your strengths compliment each other? Do you disagree often?
At the beginning we were just three, and we had 100 things to do so we split the work according to our abilities. We are three engineers who studied the same MBA, so in theory we would totally overlap, but our past work experience was different enough. Carlota has always been involved in the electric industry, so she managed everything around how to purchase and sell electricity, Ferran was more involved in the project management so he was more sales oriented and I took responsibility of the operations and the technical part of the project as well as the CEO title. At the beginning, when you are three, having a CEO doesn’t make a difference, but now that we are bigger I take the CEO role differently, Carlota took a PR role talking to the press, investors and so on and Ferran is working as the R&D leader and he also manages bank relations. We still talk the company strategy together though. We have the same vision of the market which is really good, but we sometimes disagree in small steps. After we discuss our disagreements we always end up with a better solution than any of our isolated ideas.
Considering you’ve only just raised your first financing round, how did you manage to make that first batch of money last so long?
We started with our own 300K€, each one of us managing to get the money from friends and family. From there, we took advantage of our specific sector, and for example we launched a prepaid option for some customers which helped our cash flow and financing our grow. We also came to an agreement with some providers that allowed us to sell their energy and paying them back a few days later. We can say that our cash flow strategy allowed us to last 5 years without any round of investment. We could keep growing at the same pace without any investment but we think now is the time to speed up our growth.
What is your customer acquisition strategy?
For small and medium businesses, we have an offline channel where we sell directly to SME, just to have the feeling of the market directly. Our offline sales team has two or three people. We also use external channels that already have a portfolio of customers and they want to sell something else. We provide them with a product on electricity and it works quite well. It’s 100% variable so the more the customer consume the more the channel receives.
We also have the online channel where we use AdWords and all the online strategies available trying to acquire customers and leads converting them online or through a phone call. Our acquisition cost is more or less 6–9 months of the customer life time value. Our churn is below 5% so we estimate a customer can be with us for an average of 7–9 years.
When you started you were online only, right?
When we began we wanted to be 100% online. Then we realized we wanted to reach companies, not only retails, and when your electricity expenses are around 10K a year, you expect more than just the online advantages.
Regular customers are acquired mostly online but because contracting is not as easy as we would like (customers have to provide info on the KW contracted, yearly consumption, 20 digit numbers) we have to help some of them on the phone to ensure conversion.
We know you’ve been fundraising for a while now. The process can be very long. Can you share with us how you set about seducing your investors?
A friend of mine once told me that “as an entrepreneur you must be always looking for money because you never know when you are going to need it”. As exaggerated as it might sound what I take from it is that “once you know you need the money the work has to be done in advance, otherwise you won’t have time to raise it”. With more or less effort and resources I would say we have been in touch with investors since the first day. We had the opportunity to close a couple of deals during these 5 years but we decided we could keep going on our own. We are now in a really comfortable situation for fast growing and we felt ready for an investment that could help us with it.
And how did you finally settle on Axon Partners as investors?
We know a lot about our businesses and vision whereas investors are more keen on the financial aspects, and that’s why we contacted Creainversión last summer, an M&A boutique to help us with the process. They have a huge network and also having someone who perfectly understands both sides of the story as a mediator helps you talk the same language investors do. We spoke to 20 to 30 investors before meeting Axon Partners. We really liked them, which is something I think it’s mandatory when you are talking with a financial investor. We had a similar vision about the future and we decided to close the deal.
Now that you’re a big company, how do you manage to keep a fresh attitude? Tell us about your company culture* — what’s it like working at Holaluz?
We want to deliver the company values to the customer. If the people don’t feel our values, our customers definitely won’t. We like to treat our people the same way we would like to be treated.
We need people who feel comfortable in an environment where there’s always something to do.
We cannot compete with Google on salaries, but we make sure our employee feel we value their work.
If you want to get told what to do every day, don’t work for a startup.
Where do you see Holaluz two or three years from now?
We currently have 60k customers. During the next 2 years, we have to multiply that figure by 3 or 4. The problem we are facing right now is that people don’t know the brand because we are too small. Now, only about 10% of the people will know Holaluz. If you are a mass market product you need to be known, and that costs money.
We are using electricity as our main product line to acquire new customers, but what we really want to do is to manage anything related to energy for our customers such as gas, solar panels, electric vehicle, domestic batteries…
What kind of advice would you give to other entrepreneurs who plan to compete with the big players of their industries (eg. big utility companies)?
First, if you see the opportunity, believe in it. You need to convince more people, if you are the only believer, maybe you are crazy. So you need to find someone else who believes in the idea.
Quote: “Those who say it is impossible shouldn’t stop those who are doing it”
Playfulbet is on a roll. Last week the social gaming platform hit five million registered users and has just been awarded the award for Best Social Gaming Company at Los Premios eGaming ‘16.
Between the accolades and a recent Ux overhaul on the platform, Playfulbet CEO Christian Enestrom found time to talk to itnig about it’s recent successes and what’s in store next for the company:
Eliza: Hi Christian, can you tell a little bit about what you do at Playfulbet?
Christian Enestrom: I’m the CEO so what I do specifically tends to vary over time. Right now, I’m dealing with product which basically means making sure that we know what the product roadmap is. We’re working in an AGILE way, which means that we work in sprints. We have two week sprints and I help define what the tasks and stories are for each sprint.
E: So you act as the scrum master.
C: Yes — scrum master but also product owner. The product for now is just a social betting platform so we have one product right now, but that will be changing soon.
E: As CEO you must have a hand in everything that’s happening at Playfulbet.
C:I do product, I do business development, which means talking to our clients and looking for new partners. I also do strategic planning, so basically thinking about where we are and where we want to be. And I do team — team building, new recruitment, making sure everyone knows what they should be doing. And that’s pretty much it. I’m also starting now with funding so we’re opening a new round of investment and that’ll take a lot of time. So that’s my story, my role. I’ve been CEO only 6 months eh! I started in… October!
E: You’re about to start your second round of investment right?
C: Yea! It’ll be our second round.
E: Can you tell me about the business model at Playfulbet?
C: So our business model is based on add revenue and affiliates. I would say the innovative part of our business model is basically that someone interested in sports can log onto our platform for free, and earn real prizes without ever spending a dime.
E: I’d say so, you just hit five million registered users! How many active users are there on average on the platform in a day?
C: In day we have around 200,000 people logging in to play.
E: And what are the strategies that Playfulbet has employed to get to such a high number of registered users?
C: We started with what’s called influencers. We work with influencers, and they help us promote the platform. Once we start working with one, when we can ensure the correct fit with our brand, we then work with another one, and another one, and so on and so forth until a wide enough array of non-incentivised and non-influencer people start getting to know and talking about Playfulbet.
E: Non-incentivised?
C: Meaning we didn’t pay them to talk about us. I mean influencers are a business so we have paid some of them to collaborate with us. The goal is to create a snowball effect and so far it’s worked really well for us. We have maybe x amount of influencers, each talking to their respective audiences, who then sign up and start liking our platform and what happens afterwards is basic word of mouth and that is actually the main reason we’re growing so much today. Via word of mouth. So today it’s mostly organic growth.
E: And Playfulbet has been around for four years, right?
C: Four years, yes. We’ve been very focused on Spain so far. But right now we’re starting to look at other markets like Brazil and France. We started working with an influencer in Brazil about two or three weeks ago and we’ve already started seeing a lot of videos popping up on YouTube from people — we have no idea who they are — just playing on our platform there [in Brazil].
E: Gameplay is huge on YouTube.
C: Yea, and it’s basically about getting those people to play when you have no idea who they are. They’re small, pulling in maybe 5,000–10,000 views each, but that’s really what has helped us grow. It all adds up over time.
E: How do you keep your audience once they register?
C: What do we do on retention? We do a lot of things. Right now we’re changing the emails that you get when you first sign up to use the site. We’re changing everything, making it all adaptive, meaning you sign up, and what you actually do on the platform will influence which email you get from us. So let’s say you sign up and you don’t place a bet at all. The next day you’ll get a list of recommendations on where you can place a bet on the site. If on your first visit you do place a bet, then the next day we might send an email telling you “look these are the prizes you can win for this many coins.” And the next day you might get an email prompting you to download the app and if you do, you get 10,000 coins…
E: Let’s circle back to your arrival six months ago. Has anything changed in the way you think about audience development since coming to Playfulbet?
C: I spent the first few weeks and months trying to understand our users, our platform, and based on that, start to plan things. The main thing that has changed in the last six months is basically where and how we want to grow. I’m now looking at Playfulbet as more of a sports platform in general. So, we’ll go beyond social betting. The business model won’t change, so it will always be social and we will give prizes to those active users that accumulate coins. But we’ll offer more than just one product or one experience. A multi-product platform all based around sports and e-sports.
E: Does that mean if they have enough coins, they’ll have an array of items to choose from?
C: Let’s say you have 100,000 coins today and FC Barcelona plays. There’s a 1.2 odd that Barcelona wins or something like that, and you multiply your coins by that odd. So you’d get 120,000 coins, and then you can redeem those coins for a prize if you want. That’s how Playfulbet works today. If you reach X amount of coins, you can redeem those coins for a prize.
So what we want to do eventually is not only have those coins to place a bet, but you could also have those coins to, let’s say, play a sports trivia or you could put some coins into other related games and sports.
There’s something else that’s buzzing around now, and that’s fantasy sports. We plan to get into daily fantasy, and that’s where I think the multi-platform will come in.
E: Daily fantasy! Can you explain more about how that’ll work on the platform?
C: For example, you have 10,000 coins. You decide to bet 2000 and you can play 5000. This means that you’d enter a league where you’d create your own team based on, let’s say, the Champions League of today and tomorrow. And if you win, you’ll get 10–15% of the whole pot. There are some similar companies in the US doing this, but they aren’t social. They bet for real money. We have no plans to change our business model which means that the social aspect, and winning real prizes and sports, those three components remain as they are. Moving forward, the betting will be just one part of the many things that we’ll be offering.
E: Has Playfulbet encountered any major on path to five million registered users?
C: The website went down for a few days in 2014, so that was a problem Playfulbet had to find a solution for really quickly. Launching the android app was a big hit for us in terms of getting new users. That was in May of last year… I mean, before we started working with influencers we were using other tactics for user acquisition but influencers proved to be really successful since it created a real and organic snowball effect. We haven’t really looked back since.
E: Any other key takeaways for us?
C: It comes down to these three things being completely aligned: Influencers, the business model and the target audience. Today you get to Playfulbet and you can enter for free, and you can win a PlayStation4. And that’s without ever putting in a single euro! So with no money, you can earn a real prize. And the target audience, well it’s aligned with the acquisition channel, (Influencers,) and with the business model. The three put together really works for us. For someone new coming in, even in another industry, you really have to make sure the three are aligned.
E: Last but not least, what’s next for Playfulbet?
C: Well, we continue to focuse on Spain but now we’re also looking to grow proactively in other markets — mainly France and Brazil like I mentioned. But my biggest objective is the US. I have hopes to get into that market next year. I’m preparing the whole company — team, resources, product, to make sure we take off running in the US!
Lately has been a lot of debating and hype around Microservices. But what are microservices? Why is there that amount of noise around a term? Hope this introductory blog post can help you understand what is a microservice and introduce you into the topic.
Paraphrasing Martin Fowlers in his article about Microservices, “microservice architectural style is an approach to developing a single application as a suite of small services, each running in its own process and communicating with lightweight mechanisms, often an HTTP resource API”. Although he’s making a reference to HTTP APIs, it’s not the only mechanism to communicate services, but it’s becoming the most used due to the growing popularity of the web services.
It’s pretty common to see people getting confused about libraries and microservices when reading about it for first time. Don’t worry, it happened to all of us. They are different in that libraries are running in the same process than the main application, and they communicate using in-process function calls. Another common mistake is to confuse an architecture based on microservices with a modular architecture. While they are similar they’re not exactly the same. It’s true that microservices are implicitly modular but it’s false that every modular architecture uses microservices. In fact, most of the modular applications are monolithic.
As developers, sometimes we tend to organize our code around technical features, such as frontend, backend, helpers, libraries, etc. Microservices are organized around business capabilities and that’s why it’s often confused with modules of a modular application. It means each service performs a business feature and inside this service you can organize the code as you desire. You can think in a service as an independent application which is able to run alone and has value by itself.
“Smart endpoints and dumb pipes” — with that sentence microservice community tries to summarize how the application should be structured in terms of communication. The smart part of the application should reside in the services (endpoints) and communication should be done as simple as possible, using REST APIs or message queues, such as RabbitMQ or ZeroMQ. In fact, message queues is the second most used approach for communicating services, especially those ones that run long-time operations or are not high priority. For instance, if a service needs to communicate with another one that just sends emails, message queues are a nice choice.
Microservice term has been out there for years but lately, as web services grow, it’s going to generate some hype around it. It’s not the ultimate solution for all your application architectures, because of this you should be aware of the pros and cons.
> Evolutionary Design
This is probably one of the biggest advantages of the microservices architecture. As your application grows it’s easy to plug-in new services with new business capabilities. As most of the software applications are business-driven and market changes so fast you will end up loving this advantage.
> Multiple Programming Languages
Every time you start an application you have to decide in which language you’ll build it. Sometimes you choose one depending on your skills and sometimes depending on the best choice for the application in question. As time goes on and your application grows you end up having to stick to the selected programming language and related technologies you chose. Then you realize that some new features will perform better in another language/framework. Or even worst, that technology doesn’t have a library to use with your programming language. Here is where microservices can help a lot. As every service is a decoupled and independent application you can use a different language/technology for each one, depending on your needs. So, for instance, your application is written in Ruby on Rails and you want to integrate a chat using Node.js.
> Multiple Database Types
Similarly as described before, you can have different types of database in your application. For instance, let’s say your application uses MySQL to handle most of the relational data but for a chat you may prefer to use a time series database such as InfluxDB. I’m not a DB expert, don’t take my word literally on which kind of DB is the best for a chat, it’s just an example.
> Independent Deployable Units
As I said before, a microservice is an independent application and, as such, it can be deployed independently. It means that every time you need to change a service it’s not necessary to re-deploy the entire application. It will make you feel more self confident when you’re about to deploy.
> System Resilience
As a decoupled and distributed system, when some of the services fails (and it will do) just a feature of your application will fail, but the application will be still usable. Moreover, you can have a service monitoring the rest of the services and if one of them fails it will reboot the service.
> Easy to Scale
Imagine your application is allowing to upload images and apply effects over them. Some of these effects may consume a lot of memory and you don’t want it to affect to the rest of the application. Using microservices you can easily add memory (or other resources) to the server/process running this service. It’s easy to scale resources depending on the service needs.
> Deal with Too Many Services
When you’re deciding in how many services you want to split your application it’s easy to get crazy with the service boundaries and end up having lots of services you’ll have to develop and maintain. It will be so easy to introduce unnecessary complexity into the system, and therefore errors. Be careful with that.
> Code Duplication
The same way is nice to have the ability of using different programming languages, it’s also very easy to have the same code in different languages. When it happens within the same language some people suggest to use this code as a library but then you’ll be introducing coupling.
> Testing
Testing is a pro and a con. While it’s fairly easy to test a single service it can be a pain to test the whole system and its integration, since every time you want to test the entire application you have to configure and set every service up.
> Asynchronicity
Asynchronous operations introduces complexity in its coordination and make it really difficult when you need synchronous or transactional operations.
Many of these are not really a disadvantage but just a lack of tools for automating or monitoring. As a friend of mine says: “We need a tool!”.
That’s a great question I often heard. I would start by analyzing the application needs carefully. My advice is that it’s better to start small and easy but without disregarding that your application can grow and you don’t want to suffer it, but enjoy it. Be pragmatic not dogmatic. It’s true that there are well known practices that will work for your application but don’t be afraid to adapt them to your needs.
A common approach that I also follow is to start the application monolithic but modular. After this, start separating these modules into services as you really need it. It will not be easy, as every in-process call you made you’ll have to rewrite as a Remote Procedure Call, you’ll need to mount a new server/process with its own resources and configure them, but believe me, it will be easier than having to start with a tightly-coupled application.
This title is an excerpt of a nice quote from Louis Sullivan:
“Whether it be the sweeping eagle in his flight, or the open apple-blossom, the toiling work- horse, the blithe swan, the branching oak, the winding stream at its base, the drifting clouds, over all the coursing sun, form ever follows function, and this is the law. Where function does not change, form does not change.” — Louis Sullivan
***
by Francisco Méndez Vilas
Full Stack Developer at Redbooth
References
Many business schools tell us that having a balanced mix of professional profiles in a startup team is key to maximize your chances of success.
This is true. However, you need to know what skills does your startup need in order to validate a value proposition. Since starting up nowadays involves development of some kind, a CTO is key.
You also need to know how you will sell your product…
Sayings such as “my product/service is so good that it will sell by itself” are the first indicator that you don’t know how to sell. No sales, no business. That’s why the other key figure is someone who can sell to the client, someone who gets people to your site and understands how to drive them towards the cart checkout. I am talking about the CMO or the Growth Hacker,depending on the business.
So far you can make things and sell them, but the third key role in a startup is the BUSINESS one. This figure tends to be the leader, the one with the vision, the one who has a clear idea on how to turn the concept into a profitable enterprise, the one who can manage all the resources (specially the time) and make things happen.
Is this business entrepreneur the finance person? Not necessarily. It always comes in handy to have someone who can deal with reports, taxes, banking and other administrative stuff, because these are things that assure the survival of a business that sells. Again, no sales, no business. A startup needs to find at least one revenue source with a lifetime value higher than the acquisition costs, with enough market size and market share.
Finance person, do you need one?
When a startup has validated its business model and can then start to think like a company, is in this moment when it is key to have a finance person: someone who can deal with the administrative tasks, give business performance visibility to managers and provide trustability to shareholders.Nowadays, finding a qualified person for this tasks is not as hard as looking after the three entrepreneurial types mentioned above: the CTO, the CMO / Growth Hacker and the Business/Product oriented person.
Therefore, a CFO is not essential on the first stages of a startup, although it may be convenient, of course.
In this post, I have indirectly stated that the ideal number of entrepreneurs is three. They also need to complement one another, not clones with repeated profiles. Why three?