Chris Kobyłecki, Innovation Nest ▮ Venture Capital ▮ To talk or not to talk, that's the question! Chris Kobyłecki [00:00] Oh right, oh right, oh right! Chris Parjaszewski [00:03] Guys! This is the bridge-connection between Chris and Chris. Gliwice-Krakow. I invited you today, because I briefly wanted to discuss the situation that has an early-stage founder. And even before that. A person that has an idea and is thinking out of the possible options that he has for developing his company and I know that your company... A quick background: Chris works for the Innovation Nest - one of the coolest VC company out there with HQ in Krakow, Poland - so totally recommend talking to these guys. But from a perspective of an early, early-stage entrepreneur... basically, maybe that will be our first question, what do you think, when it is the best moment for such person even to consider talking to a VC or Angel or Business Angel? What should be the first step when thinking of some capital that probably be needed to start this company? Because I assume that some companies can just be started with the existing funds, but not everyone has them. Then we need to go and look for people that do have. Very generic question, but very curious, what you think on this? Chris Kobyłecki [1:36] Alright! Hi, everyone who's listening to the podcast! I guess this is the very first episode. My name is Chris Kobyłecki, I'm personally from Gliwice, but I live in Krakow, where our offices are. As mentioned by the other Chris, we’re called Innovation Nest. We are a venture capital firm based here in Krakow, Poland. We focus on early stage B2B software companies in Europe. This is what we do in a short brief. Going back to the first question that you had. Basically, the question is, "When should you talk to investors or when should you start considering taking external money?” And I think there are two sides through to this question. First, let's start from the second side. I think my honest answer to the question, like when should you get money is: “Don't do it, don't get money, don't look for an investment!”. If you're able to bootstrap your company, bootstrap meaning that you are self-sustainable, you have enough money or saving at the very beginning to jump-start your company and you see growth and everything. Building a sustainable organization where you don't need external capital, don’t do it! Do not go and find capital from other external sources. If you want to get capital, I would highly recommend considering a credit line or something that is able to give you some cash that you need for your cash flow and making sure that you're able to be sustainable. Taking external money is a different topic, because it goes into a question: "Oh, so you're not building a company. You’re maybe building a startup” Steve Blanks’ definition is: (startup) is a temporary organization looking for a scalable and repeatable business model. Chris Parjaszewski [03:43] Yeah! Chris Parjaszewski [03:44] What does this mean is that you're looking for scalable and repeatable business model. You're looking for something that is not going to be a normal company but it's going to be a high-growth company, usually. This is something that is overseen by a lot of people that: “Oh, I'm building a startup and I just need to get some money and things will happen, right?” No, if you're looking for money and you want to get investment from someone, then the expectation from the other size is that you're building a business that is going to be a high-growth business and everything in this organization will change into the growth. Of course, there are different types of the businesses and there are different stages of the businesses and there are different stages of funding and this is what I guess we'll cover during this podcast. At the very beginning and I don't know, ideation stage or when you're trying to build your MVP, which stands for a minimum viable product, I would not try to look for money because there's a lot of problems in that stage and because you don't really have a product. You don't really have a defined customer. You don't really have a defined solution. You don't know what kind of a market you are operating on. Everything is a hypothesis. This is a huge hypothesis stage that you're in. Everything, what you're doing is a big question mark and you're trying to answer those question works with some kind of a validation of your hypotheses. I would spend as much time and I would invest my own time in order to answer those questions that I have. Figuring out what kind of customers do I want to have. What kind of a customer am I building for? What am I building? What's going to be my product? First of all, what's going to be my value proposition for the customer segment? If you're at this stage I highly recommend one book which is called “Business Model Generation” by Alex Osterwalder. It basically sums up your business into nine building blocks. The two building blocks that I mentioned: customer segment and value proposition are the first, and the founding building blocks of your business and there's even a second book by the same author, which is called “Building Value Proposition” or “Value Proposition Design”. Chris Parjaszewski [06:17] Yeah Chris Kobyłecki [06:18] This goes into detail on figuring out your customer segment and your value proposition for that. Your customer is usually a persona or someone that is going to be on a receiving end of your value. That person has either pain that he would like to solve or that person has a need. Those are two different aspects, right? You're either building a pain reliever or something that actually solves a big problem for someone. Or you're building a vitamin that basically generates some good for someone and it's not necessary, it's not critical for that person to run their business. Those are two different types of products. The value proposition for those two different segments has to be different, when it comes to this. When you will figure out your customer segment and your value precision then you can move on to building an MVP - this minimal viable product. That not necessarily has to be some kind of a solution that has how many millions of lines of code and everything. Maybe there's a way to hack it or prove that you can deliver this value to this customer and charge that customer for something without building a product at this stage. If you will get, I don't know, just two customers or something that will start using your service, order or a product and then you will figure out, "Okay it's actually were spending some more time to build something that I would invest more time into finding someone that would be your co-founder that will be able to join this lonely journey of building a better future and trying to convince them first to invest their time too in that service. I would find a second person or a third person that is willing to dedicate their time. When you will reach that stage that means that you have a product and you have clearly defined a customer segment and this value proposition, and you have some kind of a solution. Chris Kobyłecki [08:28] Now, I’d start looking for a way to: "Okay, how can we validate this? How can validate this actually goes on some kind of a market and so on. When you would validate that, it means that you start generating some more money, you have three thousand monthly recurring revenue or something like that. It really depends on your pricing strategy and so on. If you're building a huge enterprise product and it will take years to close that first customer, and that is I really tough spot to be in, but typical SaaS solution will start with a single app and when you will build on top onto, and then you will start charging more and more, and then a problem of scale will basically be postponed to in some time. When you will have generated some of early traction, then you will see that. “Okay, I have this kind of a market that I am actually on and I have those customers that are willing to pay for my service”. And then the question is like, "Oh, do I want to jump-start this ship into a rocket ship and do I really want to speed up then”, maybe then, there is this point of like: “Okay, if I could take some external money from some entity and basically this capital will allow me to, I don't know, growth faster” then maybe that's the point when you can start looking for an external investment. And then there are multiple entities that are available for you to actually ask this capital for. Chris Kobyłecki [10:06] We're leaving in Poland and we're living in a European Union. There's plenty of places that you can find capital here. I think one of the basic building blocks of building investible companies and so on, are the Angel Investors. Those are typically the people that have to fit. One: they have capital and they're willing to invest in this early stage company. Two: they have knowledge. They went through a building process of the company and they will be able to help you to solve those question marks. Getting Angel Investors at the very beginning, this is the best way to do it. Getting Angel Investor that can provide you not only the capital, but also with knowledge and this ability for solving questions that you have, every single day - this is something that is highly valuable when you're an early stage startup. Then, of course, you have different things. You have Venture Capital - let's talk about that in a moment - but you have loads of different types of grants. Chris Parjaszewski [11:17] Yep. Chris Kobyłecki [11:18] Building technology in Europe and we're living in this place where the amount of money available for R&D projects is a huge! And they have loads of constraints. I would be really careful when selecting something, because it really puts you on a lot of constraints to us
