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.
When we decided we needed to redo the itnig website from scratch we managed to synthesize our needs in three words.
Fast, simple and reliable.
Is there anything faster, simpler and more reliable than static html? Writing a static html page in the dynamic world we live in was out of the question but we needed something that would allow us to do so in an easy way. That’s when we found Jekyll.
Jekyll lets you generate a static html site from dynamic components such as templates, partials, liquid code, markdown, etc.
Data structure
Data classes are structured in Collections, each collection being a folder where each instance is represented by a file. Each one of these files starts with what they call Front Matter a header where all the instance attributes are defined. This Front Matter is what allows relationships between classes, filtering, querying, etc.
Classes that don’t need an html page representation are stored using Data Files (a typical CSV file) instead of being represented by a file in a collection. In our case, we use them to store people working at our startups.
Data Sourcing
We could manually create a file in the _jobs collection every time we have a new job offer, or a new file in the _events collection every time we have a new event, but we love optimising our time, and we already update our job offers on Workable and our events on Meetup, so why not using their APIs? Well that’s exactly what we do. We periodically run a script that retrieves all jobs from Workable creating a file for each one that is then stored in the _jobs collection. We do the same for the upcoming events and we also use the Google Drive API to retrieve the latest version of the people CSV file.
Design
Once the structure is defined and some data is created you can start working on the design. You can define some properties and attributes on any file using the Front Matter, and obtain and play with your previously created data using Liquid (a templating engine created by Shopify), to finally show it using HTML.
Conclusions
After working on and maintaining a Jekyll site for a couple months I can say it meets our expectations, but there are a couple drawbacks you should take into account before jumping into adopting it.
The first one is precisely what makes it fast an reliable, that is, the lack of a backend. Before choosing Jekyll you’ll have to ask yourself if your project is simple enough to avoid user registration and complex class and DB modelling. If it is, go ahead.
The second one is the lack of a “backoffice” for non-tech people. Whenever we manually update the content of a file (adding for example the video url of an event once it is online) it needs to be synced with the repository using git, and deployed to the server where the site is hosted. This might look simple and clean from the developer’s perspective, but when the content has to be updated by non technical users, this can be a problem. You’ll have to make sure your content manager knows or is willing to learn git.
Hacker schools or bootcamps are getting more and more popular. You’ll learn a programming language in 2–3 months, and you’re more or less guarantied a full-time well paying job.
If you compare this to signing up to a four-year degree at a University and getting tons of study loan, the short-cut through a hacker school is obviously tempting.
But what are the incentives to attend university, and does a “degree” from a hacker school limit you in any way?
We asked the experts.
“If you want to work go to a hacker school, if you want to work at Google, go to University”
The big pro about hacker schools is obviously that the distance from the school to work is a lot shorter, but is a person well prepared to work in a startup after graduating from a 2–3 months program?
“You can not become a CTO with just a bootcamp experience!” (Marc Alier, UPC)
CEO and co-founder at Codeworks a Barcelona bootcamp, Alessandro Zanardi, acknowledge that universities are vital for training specialists in more complex computer science areas:
We need engineers that have stronger theoretical experience. If you’re dealing with big data or artificial intelligence you need developers that have a university degree. If you want to work at Google with AI, get a Ph.D.
The university problem
Marc Collado is director at Iron Hack Barcelona, a bootcamp that also have campuses in Miami and Madrid. Even though Collado now represents a bootcamp, he himself went through a five-year University program at IQS:
The universities are too embedded in society. At Iron Hack we analyze the job market, and work towards creating a program that actually helps businesses hire a much needed workforce, and gets people into jobs.
Ludo (Marc Alier) hopes universities change the way they treat their professors and teachers, and agrees with the bootcamp hackers that there is a lot to be improved with the institution stretching thousands of years back:
The problem with University is that the professors are incentivized to be researchers, not to be good teachers. You get promoted if you’re good researcher, not if you have experience from tech companies or do a great job as a teacher.
Bootcamps do not build CTO’s
Professor Alier is grateful that bootcamps fill a whole and a demand in the market, but he wants to make one thing very clear:
I have seen examples where people have finished bootcamps, and they’re told that they can start a company. I’ll tell you this, they always screw up, always!
He continues:
You can not become a CTO with just a bootcamp experience!
Zanardi at Codeworks does not like the negativity towards the concept of screwing up:
This is a classic example of the difference between bootcamp mentality and university mentality. The best people from all sectors and industries are people that know what it’s like to fail hard.
Also Iron Hack’s Collado weighs in on the CTO statement:
A CTO needs more soft skills than hard skills, it’s about experience, recruiting, mentoring, but yes of course the guy needs to be technical, that’s for sure.
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.
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:
