This post is my own personal reflections and will elaborate on some of the things that where lifted during the Brad Feld event earlier this week, as well as my thoughts from running the startup Contentor, being involved in the co-working space Mindpark – and most notable after having started this site over a year ago now.
Brads talk was great, and I think he has a lot of good points. However I think we are missing one more thing in the region and there was another factor he might not have known about that is important.
One thing missing – and one thing needs improving
There is no shortage of money in the region, especially not if you look at the business angels (€ 50k – 100k) or seed levels (€ 500k – 2.5M). There are plenty of wealthy individuals that can fund with these amounts, either alone or in Angel syndicates. However, what is missing is Good Money – because most of those that are wealthy enough have too little investment experience. There are too many investments happening that seem good at the start, but turn sour in a year or two.
I have myself witnessed four startups that have failed so far this year, all of them not because of a poor product, or insufficient sales channels – but because they all have taken in angel investors at a too low valuation. That has ruined all four of them.
Update, 6 oct: OK, maybe “too low valuation” is a too simplistic way to express it, but the problem was to a large extend that the investments had one or more of the following flaws: 1) was at a valuation which made it unattractive for future investors 2) involved terms that made it unattractive for future investors 3) the investor(s) did or could not help the company secure future investments.
This is a big problem, as the money did not seem “bad” when it was agreed upon – it just wasn’t good enough. The problem is that the too low early valuation (under $1M valuation at the early stage) makes the startup un-attractive for further fundings, which are often required. In at least one of the cases the only persons that could invest further when the startup needed money where the original investors, who ended up owning over 50% of the startups before it closed it’s services – not a good recipe for creating a growing company.
This is one of the reasons I push for reporting on investments and funding – we need more knowledge about that, so that unnecessary mistakes are avoided. Mistakes that often take 1-2 years to truly show themselves. There is a more or less ready framework based in Silicon Valleys investments, that framework needs to be applied here as well, so that we do not waste time on details but can instead grow companies.
(if you are interested in knowing more, I have high hopes of the Investment Lab event next week to provide good input regarding funding)
Bridging the clusters
Bridging is actually not meant as a pun in regard to the Øresund Bridge, but between all the clusters in the region, both within Copenhagen and between / within the cites Malmö / Lund / Helsingborg. There are many networks and locations in the region, all large enough to be self-sustainable – but with the down-side that they are too big to seek further integration with other clusters. This is not to say the people inside them don’t want to mingle with others – when asked almost everybody says they want to meet more people with experience, and sometimes go on and complain that “the startups scene in [insert city name here] is so small”. So there is a will. However, going to events outside ones cluster requires energy: first to find the events and knowing about them in the first place, and then to actually going there. I think getting more collaboration requires hard work and commitment – it does not just happen, you need to do it yourself. You have to seek out others, take the time to go to events where you don’t know anybody and reach out and invite them to yours.
But if it is hard work, why would you want to do it? The answer here is actually connected to the previous point about funding – even in our region, with all the experience and startups here, there still are too many bad investments being made. By better connections, better understanding and better sharing of knowledge between us we could have, and should, avoid that more startups get ruined because of both the entrepreneurs and the investors know too little or had to few reference points.
There is also some very niched clusters, such as Mobile Heights Business Center or Media Evolution City, which gathers a lot of special expertise – so it is not just about funding, but about knowledge in general.
An entrepreneur is never worried about hard work, he is only worried if it is worth it. And getting to know people with more experience is definitely worth it.
One year ago and now
I started this site a little over a year ago, because I felt there where two things missing: no good way to get international attention to the startups here (which I had seen do a lot while in Berlin), and too little awareness about what other startups there are in the region. I therefor choose to focus on news about funding (as fundings validate a startup and tells other entrepreneurs that it is worth keeping that startups name in mind) and events (as that helps people find other people).
Some things not as expected
Now one year later, I can say it did not go as I imagined. Some things are slower: event participation outside ones own cluster still is unusual, even if I know that at least some ambitious people have taken the time to participate in events a bit further away. Also interesting: the ones that are prone to do that are either the most prominent entrepreneurs, or somehow involved in the startup scene “glue” – so anyone participating from an outside cluster is often a very interesting person to talk to!
Awareness about other startups might be better: if entrepreneurs are more aware of other startups is a question I actually cannot answer. I would like to think it is, just because of people reading startup names in headers or articles. But I do not know. A little over a year ago, before I started the site, I could name just four startups in the entire region outside my own core cluster: 23 Video, Crunchfish, Saplo and Foap. And still I was rather active in the entrepreneurial scene already. So if I was anything of a normal entrepreneur then I hope you that are read this can name at least a couple of more outside of your direct close ties. But it is still not at a level where everyone knows what successes we have had in the region – I myself still find new success-stories on a monthly basis!
Some things better then expected
However, some things have gone really great. I feel that a lot of players are keen to have other clusters in mind when new initiatives are started, and that I think is the best change I have seen. That I can hear people getting ideas for new events, and thinking “we should make sure that we get people from [insert city name] interested as well!”. That makes me always happy.
But what I think is the best so far is the Øresund Startups Facebook “community group” that I started at the same time. It has gotten a lot of users, and features regularly interesting discussions – either about startups, funding and entrepreneurship, or about the region. Such as the thread right now about what clusters there really are in the region. It also serves for posting about events and getting people to help each other out, which I think is great.
In the begining I was worried that the group might get to heavy from one “side”, with either Danes or Swedes “taking over” – which I was worried would upset my goal of having english as the language in the group. But that has worked out fine so far, and english seems to work really well.
Third lesson for a great startup community
And sticking to english also thought me a lesson Brad did not mention in his talk. I think mostly because he might not have realized it: I would say using English is an important factor for building startup community.
I think the reason for it is simple – it opens the community to people that contribute a lot, which to suprising large extent are immigrants or expats. Of all the people that contribute the most right now, creating events and getting the community going, less then half are born in the region. Just looking at the contributors we have had here on Øresund Startups, more then half are native from outside Scandinavia.
Immigration can be both regional and across borders – either from another part of the country, or from another country. I myself am one of those, being born in Berlin.
I had no idea that this would be the case, and that choosing english proved to be important in this regard as well – because foreigners could suddenly engage and feel they can contribute, even if they did not know good swedish or danish.
With all that said, I am happy that I started the site and that we seem to be achieving thing in the region. Now lets get to it creating even better things!
Oh, and if you want to learn more and meet me, I will hold the lunch-seminar “state of the Øresund Startups region” on the 22th Oct, at SHIP CreativeLab.