I’m just out of the Pitch Camp x.0 session at Web 2.0 Expo in Berlin (who on earth came up with this silly x.0 thing by the way?). It was an interesting experience - I was somewhat shocked (hmm… not sure about the word - might be a bit too harsh) about the basic level of the program. It still looks like German/European startups need to hone their pitching skills on a very fundamental level - so events like these are very helpful.

Having said that, I’m amazed about the fact that startups don’t work on this on their own more and realize the need for them to actually being able to sell themselves in order to attract financing and/or partner with large, established companies. This somewhat falls into the same category as my earlier blog post about startups not following up with their mentors after the Seedcamp week. So - go out to your favorite book store and buy yourself a copy of ‘The Art of the Start‘ from the amazing Guy Kawasaki. Should be necessary reading for every startup. Seriously.

Having spoken and mentored a whole bunch of startups at Seedcamp (and elsewhere), time and time again these teams seem to be stuck in the capital gap. The capital gap is the grey area of capital to raise, which is too much for an angel/seed investor and too little for a VC fund - which means that your fund raising is stuck in nowhere land.

Let me explain: Angel and seed investors have a certain upper limit in what they can and will invest per company; sometimes you can syndicate a couple of angels into a joint investment but this round is ultimately also limited by the individual investment capacity of an angel. VCs on the other hand often have some sort of minimum investment - below this threshold it simply doesn’t make sense for them to invest (which is a direct function out of the VC business model). Now - if your capital need is between these two brackets you are in the capital gap (and pretty screwed). The exact boundaries of the capital gap vary by industry, investment background, country you seek to raise capital, etc. But in general the lowest figure which makes sense for a VC is 7-digit (aka a million plus) and most angels won’t invest (even syndicated) more than 250-500k.

What amazes me is the fact how many startups actually aim for exactly this gap - asking for something like ‘half a million pound’ and thus making their fund raising unnecessarily hard…

What can you do about it? Well - for a lot of the companies I talk to, VC money is not yet the right step (as they are too young, their business models to unproven, etc), so I suggest: Sit down with your financial model and figure out how much money you really need to get to that next step. Often it is significantly less than you thought it should be. Financing a startup usually is a multi-step approach - prepare for this: You start by raising a few 10k from friends and family to build the first shot of your service; you raise a small angel round to build your first real prototype and try it out in the marketplace; you raise a larger seed round to refine your model and generate traction; you raise a series A to build your product out, generate real traction; you raise a series B to internationalize; you sell your company. Easy as pie. Seriously though: Don’t fall for the capital gap and make your life harder than it should be.

Sometimes the world simply doesn’t make sense to me — I mentored a bunch of startups at both Seedcamps (‘07 and ‘08); this year talking to eight teams over the course of two days. This year - as last year - only one team reached out to me afterward to get some more advice, take advantage of my network or simply say ‘thanks’. Now - don’t get me wrong: I don’t think that my advice is so valuable or my network is so powerful that it would make a difference - but I heard the exact same story from multiple mentors at Seedcamp.

I don’t get this - you are in a startup, you have the amazing opportunity to meet some of the greatest mentors in European Internet, they all give you their business card, most of them even tell you to follow-up with them or offer some very specific help. And all these teams do is: nothing.

I guess I don’t need to rant about how unbelievable stupid this is, how important contacts and personal introductions (especially for startups) are, so instead here’s my personal 101 of following up:

Rule #1: Always follow-up. Always. This is simple courtesy - if someone spends time with you (especially if his time is limited), send him an email and thank him for his time.

Rule #2: If someone offers to make an introduction for you or help you in any other way: Follow-up. Basically simply follow rule 1, but even if you don’t think it’s necessary to follow-up with everyone who sits down with you to meet, at least (the very least) follow-up with them if they offer to help.

Rule #3: Every contact potentially opens the door to dozen of other contacts - so actively reach out to people you met, connect with them on LinkedIn and/or XING and utilize their network.

Rule #4: There is no rule 4 - simply follow rule 1 without exception!

Seriously - somehow I can’t believe that I write a post about this. But anyway - let’s just make it better in the future.

With Seedcamp week now behind us, it’s time to get ready for the next big event: Web 2.0 Expo in Berlin. Seedcamp brought us a great bunch of early stage startups (well, admittedly some were better than others) with seven (instead of the originally planned five) winners, each receiving 50,000 Euros and three months full of mentoring in wonderful London. Dan Kaplan of VentureBeat has a really nice write-up on the winning teams - check it out if you are interested in the stuff you get from early stage startups these days. There’s also an interesting comment thread on the Seedcamp site where the Finnish company HammerKit accuses one of the winning teams (BaseKit) of basically copying their service. Looks like the culture of copycats doesn’t stop at events like Seedcamp…

Moving on from Seedcamp we have the wonderful Web 2.0 Expo in Berlin ahead of us - as mentioned earlier the event features a really impressive list of speakers, workshops and there will be a ton of un/associated events go on around the main expo. Just check out the session schedule and you know that you’ll have a busy week in Berlin. From all I can see (and I saw at last year’s event), Web 2.0 is a really nice venue if you want to get some inspiration, ideas, exchange with like-minded people, validate some thoughts you might have about the future and meet some of the most important people in Internet business today. So get your business cards ready, book your flights and I’ll see you in Berlin.

After mentoring 8 out of the 22 startups at Seedcamp on Tuesday and Wednesday here are a few observations - and some thoughts about their respective implications:

First of all let me repeat an earlier statement: All in all the teams were/are stronger this year than they were last year. Having said that I think the one observation which stands out for me is the fact that pretty much every single team I mentored was really (and I mean really) weak on the business model. The most common answer when asked about the business model (or to make it dead simple: The question about how to make money) was ads - most of the time combined with the fact that the team had some magic sauce to make ads more effective. None (!) of the teams actually thought about the fact how to sell these ads - they expected that by simply putting out their ad units, they would sell automatically. This is too bad - as it is the number one question a VC will ask these teams and it should be the number one thing on the forefront of their heads anyway. Also there is a ton of great resources out there which help you figure out how to systematically think about this problem (two of my favorites are Guy Kawasaki’s book ‘The Art of the Start‘ and Dave McClure’s deck ‘Startup Metrics for Pirates‘).

Secondly I found the teams rather unprepared for their mentors - there were a ton of amazing mentors, the teams knew beforehand whom they are going to meet and yet they pretty much never had any specific question to their respective mentors. This is too bad as I believe the teams could get even more out of the whole experience by preparing specific questions for their mentors.

Lastly (and here I clearly side with the teams) I have to admit that the amount of information which rained down on the teams is simply overwhelming. I had situations where six mentors met a single founder - and every single mentor had some valuable advice. Which is great - but can be a lot to digest.

Now we are looking forward hearing tomorrow who will win this thing… All the best to each and everyone and especially all the teams I mentored.

P.S.: The quote of the day is from one of the leading VCs who said the following in one of the mentoring sessions to a founder:

If you don’t have a dog - take the cat hunting.

Having mentored four teams at Seedcamp yesterday, here are some initial thoughts (still pretty raw I guess):

• The overall quality of the teams is better than last year; the teams are further down the road of their development process and are in general more mature than last years crowd.
• Not surprisingly you see quite a few plays in the emerging space of the semantic web (which I applaud) but also plays in areas which are very, very mature (think travel for example).
• As usual some teams are really on the ball and seem to be well prepared to get the most out of Seedcamp (they have good and very specific questions and know what they would like to get out of their mentors), some teams are pretty catastrophic and don’t really seem to understand themself why they are actually there (and no - I won’t tell you who left this impression on me!).
• There is a stronger international flavour to it than last year; it’s really nice to see companies from pretty much all over Europe. This might be a bit cliche but at least at Seedcamp it seems to be true: Startups from Eastern Europe seem to be more technology oriented, teams from Western Europe are much stronger on topics like brand, marketing and user value proposition.
• There is a distinct lack of coffee at the venue! How on earth can you run a conference like this and don’t have plenty of coffee around?

So far I haven’t seen anything which really stands out - let’s see what today will bring.

A little while ago (sometime in April to be half-way precise) I attended the Mini-Seedcamp event in London and met George Bevis, founder of a British startup called SpeedSell. I was intrigued about SpeedSell primarily out of two reasons: One - the company shares the same name as a company we acquired during my time at ChannelAdvisor (and where I believe that ChannelAdvisor still holds the trademark for) and two - SpeedSell sets out to do something we tried in a pilot while I was at eBay (we failed miserably by the way - which doesn’t mean anything anyway):

SpeedSell will buy your old console and computer games, picks it up at your place, gives you a guranteed price for your game and then tries to make its money back by selling the item on eBay (or later through other liquidation channels). Here’s an explanation in their own words.

So far so good. Here are a couple of the main challenges you have to overcome in this model to make it work:

• First of all you need to have a very good idea about the price you can actually sell the item for once you bought it from the consumer. If you get this wrong your whole margin can go south - or, in case you play it very conservatively, the purchase price you offer is simply too low for any sane person to sell his stuff to you.
• Second you have to deal with people who will sell you citrons - they claim that the disc works perfectly well, that all the manuals are included, etc. As this becomes your responsibility once you’ve sold the item to another consumer you have to test pretty much every item which comes in. That’s labor intensive and therefore expensive.
• Cost control in general is one of the major issues - you have so many moving parts in this game that it can become quite a nightmare to keep your margin in a healthy band.

The first issue is a rather interesting one - you can obviously use eBays past sales data to determine future prices. eBay even has a program where they license this data to you (which by the way is another drag on your margin: if you simply scrape the eBay site to extract this data, eBay will - sooner or later - come after you and shut you down; thus you need to buy their data through the Market Data Program). The problem here is that eBay’s data is notoriously ‘unclean’ - take for example a simple search for a mobile phone. eBay’s search (and thus their data) will return anything from the actual phone to batteries for this phone to bling-bling to pimp your phone. Cleaning this data to make robust price predictions is often not an easy task - it works quite well with media titles, which might be one of the main reasons SpeedSell started with PC and console games. It gets rather nasty once you turn to stuff like sporting goods, electronics, computer equipment or - god beware - fashion.

Having said all that - SpeedSell was one of the three top rated companies in April (the selection was done by a panel of well-known VCs) and is also one of the 22 finalist for next weeks Seedcamp week. SpeedSell is not alone in this market - the German Trade-A-Game is doing very well (with a slightly different business model) and the US-based ReCellular is doing phenomenally well with a similar business model in the market for used mobile phone.

In general I believe that this model has legs - if you are able to make selling for the average consumer easier than it is today (eBay was a huge leap - yet it still is quite a pain in the neck to sell something online) you have a massive market in front of you.

So - congratulations to George for his Seedcamp nomination, I’m looking forward catching up with you guys!

With todays announcement of the Seedcamp finalists the event is now steaming ahead and will start as scheduled on Monday morning.

If you have no clue what I am talking about: Once a year Seedcamp brings some of the most promising startups from all over Europe for a week of mentoring and working together to London. After the week (and a final round of presentations on Thursday) the Seedcamp team selects five winners who will stay in London, receive some funding and three more months of mentoring. They are somewhat similar to Y Combinator in the US - with the difference that Seedcamp was setup by a great selection of the leading European VCs and is doing this whole event only once a year (vs a more or less continuous approach). Check out their site if you want to know more.

What is interesting about this years selection of 22 startups is their higher quality (sorry about that class of ‘07 - but these guys are better) and their better distribution across Europe (with quite a few from Eastern Europe). That’s really nice to see - last year they had a rather strong bias towards British startups (nothing wrong with that)…

In case you are making your way to Seedcamp - ping me, would be great to catch up at the event.

P.S.: Here’s a first write up and evaluation about the Seedcamp finalists.

I’m passionate about entrepreneurship - really passionate about it. That’s one of the many reasons why I think that Seedcamp is great. For those of you who don’t know Seedcamp yet - it’s basically the European version of Y Combinator, backed by the top European VCs and run by a terrific group of people.

Reshma Sohoni (Seedcamp’s CEO) just informed me that they now accept applications for the upcoming Seedcamp week in September (15th - 19th). If you run an early stage startup - go ahead, register, get accepted and see you in London!