Reflections on my first startup - part V

Hi!

Over the last 4 weeks you have been able to read 4 publications with lessons I learned as employee of Abn Amro Bank and entrepreneur as Founder and former CEO of digital wealth manager Pritle. Topics I wrote about ranged from laying the foundation of a technology company to management and leadership. This week you can read my final publication with lessons learned in relation to product & marketing, financial management, selling your company and my 5 big surprises.

Enjoy reading.

Product & marketing: Build around your client

Your product is your most important marketing tool! With Abn Amro I gained extensive experience with a wide range of investment service concepts and products. When it comes to investing, the potential and ultimate result are the biggest drivers of sales success. Luckily over time also sustainable, durable and green investment services gained significant interest. The underlying drive of the latter is our environment, security and emotion in relation to the future of our planet. This should be and luckily is a stronger driver of all of us every day. But the first mentioned drivers are purely financial. When building digital wealth manager Pritle I experienced the difficulty to move bigger crowds than we moved, to start using a new wealth management service in spite of the simplicity to use the service, the fact that it became available for virtually anyone and still is the lowest cost wealth management service in the market (now called Binck Forward). I attribute this to the lack of sense of urgency to reduce costs, start investing and the relatively complex onboarding process in comparison with non-financial digital services due to the information we need before we can provide a suitable investment service. You can spend millions on marketing without significant, let alone durable success. For as far as digital investment management is concerned, the strongest potential drivers of customer acquisition are delivering a largely better performance, a journey that’s exciting or much more insightful in relation to what the service could bring you and how you can contribute to a better environment. If you have triggered prospects effectively, their customer experience can function as a snowball effect. Be outstandingly valuable, insightful, exciting or simple. Build a service that makes your clients see you as the best or only of its kind. Keep them coming back so you remain top of mind and their networks will likely become your clients too. You can learn a lot about what your prospects and clients really find important by measuring their behavior online and ask feedback. Build around the needs of your clients. Digital products always leave room for improvement. That’s why I find it such an endlessly exciting challenge to build technology services.

Be consistent in branding from team to office and product

Your company’s profile can influence perception about you, your team and your service. Make sure to keep in harmony at all times how you want it all to come across. From your office to your communication and your team’s principles and personal presentation, it should all be in line with the aimed branding positioning.

Be excellent in determining who your prospect is and how to reach her/him

If you know who you want to reach, you can choose the message, tone and location. In preparation of my first startup I had tens of conversations with potential investors of whom many entrepreneurs and professional investors very experienced with marketing. Target audience was a widely discussed topic. One of the effects of these conversations and eventually the introduction was that we had a more specific answer to the question, who are you targeting. This allows you to profile into greater detail client categories in the form of personas. This allows to understand whether you achieve your target audience goal, or in actual fact attract another audience. That enables you to change your marketing communication strategy or make decisions on where to focus more intensely. This is a data driven approach which ideally is in harmony with your assumed most interested types of people. If concluded differently, at least you can act fact based. I have had many discussions about whether you should choose traditional channels to advertise your existence as well. In reality my view is, if no one knows you exist, choose a wide mixture, while staying efficient and measure effectiveness. Think carefully and perfect your understanding about where your prospects hang out from social media to news and sports sites, apps, TV, outside, airports or newspapers. Work out a methodical scheme from PR to marketing communication backed up by well defined assumptions about where to reach whom and how to best do so. Test and continuously try to get better. Get your whole team to think in matching service, words and channels to your objectives and get the best out of your commercialisation.

PR is by the hour

Always be prepared to speak to media. If you never did, follow a media training. Prepare a wide range of answers to commonly asked questions. Be to the point in an interesting and inspiring fashion. Journalists will give a fair representation of their interpretation of you and your company. If you get to review the article before publication, don’t rewrite it entirely and respond instantly. Media is by the hour.

Finance: Create and maintain a solid backbone of your company

Be profit oriented

When building Pritle, we had three outcomes in mind. 1) We become a white label B2B service provider of our technology, 2) we grow big and profitable or 3) sell at an early stage for a nice price. These three potential success pillars formed the foundation to take the risk to build the company. But an important lesson learned from building Pritle is to make a decision between one of the pillars and subsequently focus on profitability. Apart from spending money wisely, it is advisable to set up a system to use all data available to continuously keep track of costs and income per category and client group to continuously improve your cost/income ratio. It helps you focus on delivering a service to an embracing target audience and of course establish a sustainable business. When you need and want to attract investors, there’s nothing more clarifying than having great insight in your financials and marketing analytics and actual basis for extrapolation of investments to profitability. While having the greatest fun building great solutions for clients and making the world a better place, as a business, you have to make money.

Maintain liquidity and solvency

Continuously maintain an actual oversight of all financial movements. It is strongly advisable to implement a system to keep track of liquidity and solvency and forecast both to timely raise more capital if needed. Financial stress will distract a lot of people. Order is fundamental to stay in control. I recommend to try to predict your next 4 quarters’ costs, income, capital raising needs and potential as well as valuation as detailed as you can. To Close new large investors or pivot strategic direction always takes time. Financial management and accounting is about forecasting and steering toward the forecasted future while making sure that the past is properly documented.

Make agreements on payment terms with service providers

As a startup you rarely are overcapitalised. When you engage third parties, make agreements beforehand around payment terms. Make sure you can meet those obligations or inform them upfront about the fact that they may have to wait longer than they are used to. Some companies may be flexible in their effort to support you. But due dates should be a joint decision. In order to fulfill obligations, maintaining liquidity and solvency is required. Otherwise you put your relationships under pressure and most of all, are insufficiently in control of your destination.

Top 10 tips for when you sell your company

1)     Diversify the suite of potential buyers. Even if you got an unexpected offer, engage others to compare how it feels and what it could bring to the company.

2)     Hire a lawyer to support negotiations and create the purchase agreement.

3)     Buyers may want to finalise (non) binding offers or agreements quicker than you. Ask time.  

4)     Inform your team. They will sense or find out otherwise soon enough. They can help you to make sure everything stays in even better control while negotiating. Moreover, they will appreciate your openness. As long as there is a fairly smooth transition process expected, my experience is that they will not run out as they become aware. Unite the team toward the objective and involve them in the due diligence processes taking place. It’s fun and learns everyone a lot.

5)     Before you and your team present to a potential suitor, go over the story with each team presenting team member beforehand. Prepare a time schedule per topic. Get a team member to manage time, bites and drinks so that you can focus on the contents. As you commence the presentation, sketch the range of topics so you can avoid a lengthy introduction or lots of questions to be answered without a process underneath.

6)     When it comes to deal terms, it’s all about finding an acceptable balance between all elements to be considered. Determine requirements with your shareholders and lawyer.  

7)     Maintain a good relationship with all suitors you speak to. Even if you don’t want to proceed with either of the suitors, it's an honor to have these conversations. Moreover, terms, your perspective and their approach may change positively over time.

8)     If the plan is that your team will be employed by the buyer, make agreements about roles of all staff, mandate of teams, operational and marketing budget before Closing of the deal. It may seem something you can discuss later, but after the deal, it instantly becomes very important.

9)     Determine alignment on the vision for the (part of) the company that acquires you.

10)   Plan combining the teams and companies. In a deal making process both parties easily get carried away by focusing on the technical due diligence and financial deal terms while defining the objectives in terms of people and culture are instrumental. Determine together with the Board of the suitor, possibly supported by an external and neutral advisor, the ideal scenario when blending the two companies. Ask yourselves what the pros and cons are of integration. Determine cultural differences and define the ideal result after blending on the basis of which combining the two can be planned. Engage both parties team members in the development of the plan to challenge your ideas, get support and the best results. Present/communicate the respective plan to all your staff and all - or if a larger corporate all relevant stakeholders - staff of the buyer to create alignment. Agree to review the execution of the plan with the Board of the buyer every few weeks/months, possibly supported by the external neutral advisor. Communicate the mutually perceived progress of the merger of teams or new agreements made to the staff informed about the plans.

My 5 big surprises

1)     Commitment of your believers. Team members are super excited and stakeholders can be greatly enthusiastic ambassadors. It’s a huge elevator of your company profile. Thank you all.

2)     Investors can propose toxic deal terms. Be careful. Luckily most are reasonable. But we can all overvalue risks and opportunities and are driven by emotion. Understand it and stay mindful. Eventually it’s about clarity and trust and staying aligned.

3)     The difference in quality between lawyers comes down to personality. Law is a great example of a profession that’s based on immense documentation and still not exact. Making agreements is a matter of documenting responsibilities as well as predicting the future and using creativity to - as much as reasonably possible - avoid negative implications and provide security. Passion for profession can very much make the difference.

4)     PR rocks. To have your company’s rationales and objectives as well as interpretations of journalists being outlined to millions of people changed my view on PR for good. It rocks.

5)     After my first successful entrepreneurial experience I became more hesitant to do it again. Having gained the insight in what it really takes and how often you may get very close to failure is not necessarily encouraging. It remains the most educational and fulfilling thing I ever did though.

This was the 5th and final publication with my most memorable lessons learned following my first startup.

Hopefully it helps you navigate to your goals even more successfully as entrepreneur or professional otherwise.

It surely helped me to write it down. That would be my last recommendation for substantial experiences: reflection on paper is extremely effective to concretise lessons learned on a life long journey of personal development.

Have a great week.

We keep in touch.

Cheers!

Thomas