THE EARLY YEARS
SINCLAIR ZX 81
With a shilling of pocket money a day, I could only buy the hard, old donut from the day before, if the school guard had not thrown it away yet. My parents could not give me more to school at the beginning of the 1980s. Longingly, I watched my school friends, how they could afford the unattainable for me delicacies such as fresh sausage or cola. Cola! How unbelievably strong a need grows when one sees no way to satisfy it.
I was 12 years old and since I can think of a technology freak. The first computers came on the market at that time. Of course I really wanted to have one. The only option was the Sinclair ZX 81. This was one of the first affordable home computers, with 1000 shillings (today about 73 euros, if you do not take into account inflation) the cheapest device. The technical abilities would not even be enough for a toddler game phone today: 8 bits of processor and 64 kilobytes of RAM were the only achievable goal of my desire. Of course, there was also a Commodore 64, then between 3,000 and 5,000 Schilling expensive, but that was absolutely unfinanzierbar for me and my parents. But 1,000 shillings were damned a lot of money for us. My parents came from Germany to Austria when I was 7, to look after my grandparents, who were in very poor health. Both were trained as psychologists, a German study, which was then not recognized in Austria. My father worked underpaid as an educator, my mother took care of my seriously ill grandparents. Of course, we could not afford our own apartment and moved into the little house of my grandparents in the countryside, in a village called Fischlham. In order to somehow have room to live, we had to rebuild and all the modest savings were quickly consumed. So only the bare necessities for survival remained. To fulfill my burning needs, I decided to become active myself.
In Fischlham, as is the case in many Central European villages, there was a fair once a year. When I saw the many stalls full of junk, I came up with an idea. I decided as the first 12-year-old in the history of Fischlham to set up a table and sell all sorts of things: old toys, homemade things, everything I find or could relatives and acquaintances abluchsen, no matter, mainly free. So I stood with my pitiful little table and my old, worn-out junk in the midst of glittering stands full of toys, sensational world premieres for the kitchen, cotton candy and herb-scented leather goods.
Maybe that was my unique selling point, maybe the people just felt sorry for me or they really needed exactly what only I had to offer here. Anyway, at the end of the day I had earned an incredible 800 shillings. A fortune – but still missing 200 shillings. Luckily I had an uncle who was a bit better off. He finally paid me the missing sum and finally I was able to unpack my Sinclair ZX 81 with feverish hands.
The Commodore 64, which was unaffordable for me, had an extensive keyboard, it could be easily connected to the TV and all programs stored comfortably on a cassette. Except me, almost every one of my friends had that. My Sinclair ZX 80 had very little memory, a sensor-rubber keyboard with bulky BASIC program commands and when it was turned off, the painstakingly entered program was gone in the dark. But from today’s perspective, that was a very important key point in my life. A device that was incredibly laborious to train trained me in crucial, basic skills.
All of my friends had long ago been given the Commodore 64 by their parents, with the most intriguing games copied and shared, each collecting a wealth of ready-made programs. No one had to deal with how it all works, they all became mere users. Except me. Of course, I also wanted to play with my friends. But no one in the whole school had a Sinclair ZX 81 – the most ridiculous cheap device for everyone. So I hid myself in our house for days and started to write my own programs. There were two challenges: First, the Sinclair had a catastrophic graphics. Second, the memory was so small that I had to save every single byte. Instead of the numerical value 1 I wrote not P and thus saved space. With these extremely meager resources, I began to painstakingly write games like the Pong – the classic with the two bars and the point as a ball. Finally, when my games ran smoothly, I finally got friends to come to me. Together we played until hunger, fatigue or the nightfall and forced to quit.
With my Sinclair ZX 81, I was forced to delve deeply into the functions of a microprocessor and memory optimization. And again and again, when I turned off the computer, the program was gone. I had to rewrite everything. I was getting better and better.
After a couple of years of unwanted hard programming I got from my parents, who were now financially better, a Sinclair Spectrum, on which you could finally save everything and even had the much desired color. I wrote a complicated and elaborate strip poker program for the time, drawing pictures by hand with the hand of the graphics. The program was a total hit with friends – and I had now so much self-confidence, self-acquired and book-related knowledge that I wanted to use it.
I was not a pretty kid, a real nerd, had a bad tooth dislocation, 45 degrees forward, my parents could not afford expensive correction for me. When I got into the bus with my carelessly combined second-hand outfit, health insurance glasses and a coiffure created by accident, spontaneous mirth came on. But I did not care. The others went out to rip girls up. I stayed at home and programmed.
There was a vending machine in the school, a coke cost an unaffordable 7 shillings. So for me drinking only water or the free school milk. But unfortunately it was totally smoked from the lounge of the chain-smoking schoolmaster and as good as inedible. So the longing for cola grew in me. I needed a steady source of income and came up with the idea of producing a school paper. From the Matura newspapers I had figured out how to earn money from advertisers. As the first partner, I confidently chose a bank, went straight to the store manager with my concept and was actually able to convince him of my project, with the argument that the youngsters in the schools were emotionally attached to the bank at an early age. The institute received the last page as advertising space and took over the production costs of the newspaper. The articles wrote friends in the school who were proud to work as a reporter and read their name in the paper. We wrote all sorts of stories about things in and out of school that interested us, about Johnny Depp, events, drug problems. I started selling more listings to companies and slowly making good money. It was not a school paper, but my private project: In good times, I earned between 4,000 and 10,000 shillings per issue. With the money I could not only buy coke, but also better and better computers – and when I was 16 was also a Vespa.
Despite the significant financial blessing for a student, I have not forgotten the extreme shortage of funds in my childhood. I can not possibly make a normal deal today. That was also the case with this Vespa. A well maintained Vespa cost at least 15,000 shillings – I bought mine for 4,000 shillings: in a box of hundreds of pieces. I was well acquainted with computer programs, but I had no idea about the vehicle technology, but I was determined to get the thing working. I bought a book for that, which had to be sufficient as a guide. Then I started building the Vespa together in weeks of work, piece by piece, repainting the frame in cool metallic paint, polishing the chrome, and finally made it: On a sunny summer’s morning, I came up with my signature, chrome-flashed Vespa to school. This resulted in a new additional business, at least in the medium term: My friends now also wanted a metallic paint job for their Vespa. This allowed me to market the acquired know-how even better.
With the Vespa I had some time then my joy until I was old enough to make the driver’s license: At that time it cost 12,000 shillings. I would not need the Vespa anymore. In the paper I found an absolutely uncool, but fit Puch Maxi moped a deceased, older woman for a cheap 900 shillings. The Vespa I sold for 14,000, I could afford the driver’s license and until I was allowed to hold the bill in hand, I had something to get from A to B. This form of unconventional approach to business has been maintained to this day, on every scale. This is also reflected in the following anecdote, which took place only a few years ago, but is briefly told here:
Cars are much cheaper in America than in most European countries. There are no additional taxes as in Germany or Austria. The dollar exchange rate at the time of the euro was 1.60. I bought a Lamborghini in the US, registered it for half a year, and brought it to Austria after the sale of the company in California by air as resettlement property. The comparatively expensive flight I have done, 2 weeks salty sea on the ship are not recommended for a car in this price range. Typing did not include taxes because of their status as relocated property. All together, I’ve paid a third for the car. Such a deal gives me a consistently good feeling: even if I drive for five years by car, I can sell it for the same amount in Europe. In other words, I drive a Lamborghini for free.
I was 16, the newspaper business was now routine and I was looking for a new business challenge. Even today there is an Austria-wide computer training institute called 2F. There I wanted to apply as a coach, sent them my strip poker program and an artificial intelligence game called 4 wins: It’s about placing four points in a field to make a set of 4 points. You play against an opponent – in my case the computer. The game was designed so that the PC opponent was constantly learning and virtually unbeatable. When I presented this at 2F in 1987, the managing directors were completely perplexed: The other applicants could then program a maximum of a simple routine for a cipher code.
So I got the contract and was released on the first seminar participants. At the age of 16 I already had the confidence, but not yet the suitable business outfit and lent my dad a jacket that was much too big, but no matter, I felt suitably styled to convey my knowledge to adult students.
Quickly I worked in the coaching business and became more relaxed and confident in dealing with my students, who could have been my parents. But now the business really started. It was easy to find out at what great prices these courses were sold. Multiplied by the number of participants, a decent amount came out here. I did not deserve bad, but only a fraction of it. So, in my view, a lot of money fell by the wayside – for a job that I actually did on my own. The only thing that contributed 2F was to find the students. So I looked at how they did it. The system was simple: they had a telephone marketing team that contacted everyone in the vicinity of, for example, Edt near Lambach. Telephone operators called the telephone book, if enough people were together, rooms were rented and the course took place in Edt near Lambach. As a reference, they brought the mayor on board, who told his fellow citizens, how important it would be for the economic prosperity of Edt at Lambach, if its inhabitants would have a sound computer literacy.
I wanted to see what these telephone operators deserved and how many phone calls they made each day and asked if I could do that job for a week – my bosses looked at me in surprise, for her it was a total regression. But I wanted to learn, I stuck behind the phone for a week and watched my colleagues closely, then I knew how the shop is running.
By advertisement I looked for 2 operators, selected a few villages, called the mayor and soon I had my own four courses. The pre-financing for the first course ran on the income from the school newspaper. Now, with my courses, I made the right money. Along with the income from the school paper business, I was probably the one who made the most money in the whole school – including my teachers and the director.
I was 19 in 1991, had some experience as a course organizer, when I noticed the then rapidly increasing need for hardware – everyone who worked in the course with the computer, of course, wanted to have one at home. I realized that the time came when the PCs in the market would really boot up. So I looked around on the then manageable provider market and came up with the idea to raise the business as well as my successful Vespa deal: import the items, assemble themselves and then resell with the appropriate profit. So I founded my first “real” company, as a sole proprietorship without much needed seed capital.
I came across the announcement of a small software company in a godforsaken district town called Perg. I also managed to successfully apply there. The company had developed a merchandise management system, my job was to develop custom solutions as a sales manager with a programming team. Since I had now outgrown the youthful nerd and had also developed a good eye for aesthetics, I got the entire marketing transferred. With the first successful decisions, the old self-esteem and the analytical skills came back.
Soon, I understood all the details of the product and the customer needs and came to the conclusion that the outdated merchandise management system could be fundamentally improved. I started programming again, the old passionate fire blazed again, my product gradually got sharper contours and stood my high expectations.
Soon I had convinced one of the existing major customers to buy my much faster, more complex and easier-to-use software. With this first big order in my pocket, I decided to try again. Software was a good deal. Once developed, you could sell your product over and over, get maintenance contracts, did not depend on suppliers, and did not have to bother with computer criminals struggling to survive.
The business developed very fast, the software convinced entrepreneurs from all industries. Soon I had over 250 customers with this system, we called it a supervisor, many still work with it today, almost 15 years later. It is programmed easily and efficiently – ultimately with the knowledge that I had already acquired as a 12-year-old.
Around 1998, the Internet became popular in Austria. A topic that interested me as well. In America, the dotcoms went public every day and I too wanted to use the new technology for my purposes. The idea was to make my software supervisor Internet-friendly. You should be able to handle all functions, invoices, orders from any point in the world. With this, then revolutionary concept I met a successful industrialist, who was spontaneously enthusiastic and saw a good chance to become even richer. In 1999 he bought me half of my company for a sum of several shillings. I had developed into a successful middle-class entrepreneur, got an ever better sense of business, but had no really big fish on the hook. At this stage, I recognized the importance of mentors, in my case experienced entrepreneurs, who are richer and more successful than themselves, and had conversations at every opportunity. Reich does not mean that I have inherited everything, that does not count for me. I’m impressed only by who has worked his life and his own assets. In the course of my entrepreneurial life, I have also met many wealthy heirs, consistently interesting, educated and sympathetic people, but have found that they are mostly very saturated. But I was still hungry to see something big, to grow up a bit. I did not care to discuss cocktails or wine cellars or designer clothes. Self-made people are much more interesting to me, this is an exciting variety of people, creative but structured, consistent and mostly also very charismatic.
One evening I sat with Josef B, chairman of an industrial company, in front of the fireplace. I talked to him about the many different participations, a little bit from everywhere, but what was missing was a big, fascinating project. A project that makes you tickle, that covers you completely. He replied that I should just enjoy it now as it is – it would come the right time by itself. It’s like trying to rip up a friend by force, that too will not work. If you are relaxed, but open, sharpening your senses and letting things come to you, then it happens. This is also the strategy of one of evolution’s most successful animals. The crocodile has survived the dinosaurs and will probably survive us too. It does not rush after its prey and wastes its energy senselessly. It slides relaxed through the water, only eyes and nostrils are visible, always sound alert the environment until the unsuspecting prey passes. Then it hits in a flash.
In the course of a company sale I secured the rights over an already highly developed Videoconferencing system. At the same time Skype came on. But I saw that my system was much better: Skype had no video at this time, no SMS, it only worked with broadband connection, it was at this time a technically immature system, but still had high acceptance, the market was obvious worldwide there and no serious competitor in sight.
I had the better product in my pocket. That was the point when I felt something special, every cell in my body responded. It was the moment my mentor had predicted. Now I had to seize this opportunity, had to go through it. An important insight in my life is to always focus on one thing only if I want to bring it to completion. This started with the programmed games as a 12-year-old and continued until my business software. The realization of this new, greatest opportunity in me was clear. She was so strong that she mobilized all my strength. I was not yet aware of the details of the further procedure. But the idea was clearly on the table: Just as I developed a better merchandise management software with Supervisor, I now wanted to develop a better Skype. The advantage: Skype was already on the market, we knew the consumer needs and our video system was already developed in the most important cornerstones. Market research, which otherwise needs to precede product development, was therefore not required. A major corporation such as Procter, Unilever or Henkel develops an average of 60 prototypes and carries out extensive tests until a single marketable product goes into series production. But there is another way. I learned that from John Doerr.
THE BEGINNING OF JAJAH
THERE IS ALWAYS A MARKET. YOU MUST SEE HIM ONLY.
Electrical engineer John Doerr walked down a street in Silicon Valley in the 1970s when he suddenly saw an unusual long line of people standing. What was going on here? Among the people were also friends and acquaintances of Doerr. What the hell could be so important or interesting that you could be pinned for hours between sweaty programmers? But these people had nothing better to do than throw dollar coins into an apparatus. A few primitive computer games bound her, making her forget everything else. At that moment Doerr had an idea – and at the same time the best proof of concept he could dream of. The machine became Atari and in the 1980s became the world’s largest developer of slot machines. John Doerr became one of the most influential executives, later helped Intel to breakthrough and funded with the fund he founded giants such as Google, Compaq or Amazon.
Exactly the same market research for our video system. It was not about developing some crazy vision for which there were no prospects or consumers yet. The market for the system was already there. All you had to do was open your eyes – and, as in our example, watch your beloved wife, for which she was prepared to spend a lot of time every day and a lot of money at the end of the month: communication. For hours, all friends chat over the phone, laugh, cry or just listen. Taste it what it wants. Not only me, but also all my friends had a whopping bill on the table at the end of the month.
At the same time, the world has become smaller since the 1990s through the Internet. Global contacts have been strengthened, not only in business but above all in the private sector. Hundreds of millions of migrants around the world were able to make renewed contact with their families with the new technologies, old friends suddenly returned somewhere on the planet, even if it was technically tedious, for example in the stuffy, loud Internet café in Nairobi via Skype to have a good conversation with the headset and the old-fashioned PC.
So the topic was telephony: far too expensive, although there was really no reason for it. Because even then the entire telephony was transmitted over IP, everything was already digital and basically cost almost nothing more. Distances technically did not matter anymore. Nevertheless, the price differences were enormous regionally, nationally and internationally. We were all really ripped off.
I wanted to eliminate these unnecessary hurdles of communication – and make voice over IP as simple as possible for the user. International calls should be removed from the PC and taken out onto the street.
The video system had some major advantages over Skype: It had a greater variety of functions, you had the video conferencing function for several participants at the same time, you could chat with icons, you could call not only PCs but also directly mobile phones or landline phones. The main difference was that it did not need a broadband connection. In Europe there was hardly any broadband at this time, only in America it was already fairly widespread. Outside these zones, broadband was not an issue in the long run. In any case, my system was able to transmit the language a lot better with its codec – ie the coding and decoding method. The data packages were extremely compressed compared to Skype. For example, if you were at the airport and wanted to make calls over wireless LAN, Skype was way too slow. But my product could easily be used there.
That was revolutionary.
ENTHUSIASM. THEN THE REST COMES.
The starting signal was fired in the 4th district in Vienna. We rolled up our sleeves with a small but talented and motivated team of programmers. Still too technical-oriented, but driven by boundless conviction, we worked obsessively on the day and night units of the development of our system right from the start.
Co-founder Roman Scharf was also introduced to us in this phase. He was an international business consultant and had already developed several successful projects. Even Roman saw the huge potential and was convinced of our idea from the beginning. He was immediately ready to collaborate personally and to take money into the development process.
It was planned that Roman and I above all have advisory functions at a strategic level and not take over operational management. We tried it with an already experienced internet entrepreneur as operational manager, but soon realized that we ourselves are the most suitable candidates. From then on, I became a manager, responsible for the financial and technical matters, and Roman took over marketing and PR.
For now, the project was planned as a purely Austrian solution. Although we also focused on the international market, the location should remain in Vienna for the time being.
The project grew rapidly, we needed constant reinforcement. Office staff, developers, graphic designers, Austrian and German marketing people were enthusiastic about our idea. In this start-up phase, from September 2005 to March 2006, a fantastic startup feeling developed. Our 180m2 loft was artistically pimped, on the walls graffiti lit up, the furniture we tinkered ourselves. As a highly motivated team, we needed no orderly working hours. During evening joint brainstorming sessions with red wine, lots of jokes and laughter, the learning and development processes took place informally, but all the more effectively. At noon came pizza deliveries and my beloved Cordon Bleu. The developers spent days and nights in the office, slept with the dog on the couch. The energy came from the fridge in the form of Coke, Mannerschnitten, nuts and gum. Skateboards, scooters, balls and toys provided movement, fun and creativity.
On our blog are still the important and not so serious stories from this period. Between milestones such as the Paypal and Paysave contracts, we report on the first big party to which people from Asia, Australia and the US were flown, the unbelievably fast growth in user numbers and the first grand prix of office chairs on an incredibly difficult and fast track in the office ..
THE BRANDING PROCESS
Working title for our project was MPQ. But we soon realized that we needed a strong name, a brand that could survive internationally and has the power. For this term we defined 5 hard parameters that had to be met:
We needed a .com domain, without the most important top-level address in international business, an internet startup is inconceivable. The catch on the matter: Even then, 50 million .com domains were forgiven. Finding a free .com domain for a good name looks like the proverbial search for the needle in a haystack. With the addition that we also had to invent the haystack ourselves. In principle, it was analyzed whether the term should be self-explanatory, ie the topic of telephony communicates. But if you consider strategically that at some point 50 players are on the market, all of which have the topic in their name, you are no longer able to distinguish themselves: Freephone, Globalphone or much more was available – but that would only make us one of these phones someday -companies. Descriptive word compositions are not as well protectable and long-term restrictive, if, for example. would like to expand its product portfolio. So an abstract concept should be found that almost did not exist. This would have full unique position and could be charged in the course of the branding with the desired emotions. The name should be short, with a maximum of 5 letters. And we wanted to have a letter that does not appear too often in the alphabet, such as Q, X, or J. This should increase USP and notability. That word should be easily pronounceable worldwide. We narrowed down the search. In purely mathematical terms, e.g. for combinations with 5 English letters 11.9 million variants. With 2 vowels each, there are only 231,525 variants left. With the initial letters Q, X or J, there are 33,075 variants. So still enough choice …
The hardest hurdle, as expected, was the .com domain. 50 million against 33,075. So we sat for hours, finally with a bottle of red wine and tried one name after the other – without success. Everything was allowed, no approach was too crazy not to be tried. In the course of the evening we even began to study the language of the Australian Aborigines, from whom we had discovered a dictionary. At some point we came across a strange word: Jajah, completely unknown, independent and yet noticeable. Only 5 letters short, rare initial letter, spontaneously triggers positive associations. Immediately the first checks were made, we checked the free .com domain and the search engine capability, how many results the term e.g. At Google, the fewer scores, the better, the greater the chance of getting us all the way up – and Jajah was completely unoccupied. That’s how the name was found.
We wanted to found the company as a limited liability company – but with the name Jajah that was not possible for the time being. In Austria, a descriptive element is required for the GmbH name. It required a lot of expertise to ultimately convince the authorities to use that name alone.
For the logo we had engaged a first-class graphic artist. We got the most important logos from global corporations like Nike or other top brands. Our logo should fit harmoniously in this prominent environment that has the power to stand in the midst of these big brands. We decided on a very simple font, a bold font, without any frills. If you look at the big brands, you realize that they are all very simple.
Above the lettering was placed a small boomerang, the symbol of the Bullroarer, the first communication device invented by the Australian Aborigines. With that we created an icon with the potential of the Nike Swoosh. Right from the start, this laid the foundation for a multi-level brand structure: first the Jajah brand, then the claim like free your voice. If you are well established, the claim can be omitted. If it is possible to reach the top, the logo can also be left out. The icon alone is enough to be recognized.
The next topic: which color? Compared to our competitors, we discovered that Purple is unoccupied. Controversy quickly arose because Purple has different historical and current meanings. In the ancient world it was the color of power, even in church history that of the cardinals, in the Art Nouveau period it was the most popular color of the artists, but is also considered the color of magic and for some decades as that of homosexuals. It stands in the field of tension between the cold, rational blue and the warm, emotional red. Already nuances change their effect. As a result of these findings, we found the right mix, close to the red. This purple transports our feeling for the brand today.
THE SEQUOIA DEAL
Sequoia Capital is one of the world’s leading investment companies based in Silicon Valley. Founded in 1972 by Don Valentine, Sequioa finances today’s major technology and Internet companies as well as sustainable energy and healthcare projects worldwide. What should this legendary company have with a small Austrian company in Vienna?
Mike Moritz, at Sequoia partner of Atari founder John Doerr, who also brought Yahoo and Google to the top, was on the job a lot. Once again he was sitting at the airport. Next to him, a banker was talking on his laptop. Moritz asked him how he did it, Skype would not work here. It was not Skype either. It was the new in-product: Jajah. The advantage of Jajah was so substantial and convincing that Moritz wanted to contact us immediately.
Sequioa tried on the first attempt to track down Jajah in Australia. Finally, when Haim Sadger, Managing Partner of Sequoia, ended up in Vienna correctly, he should sign our non-disclosure agreement before starting the conversation. We do not sign NDAs was the brief reaction of Sadger, who intended to stay in Vienna for only six hours. Roman and I wanted to start the PowerPoint presentation we had been working on for days. But Sadger had no ambitions to watch our show: Tell me about yourself and your ideas! Surprised, with the words we have the better Skype, but we do not care anymore, we started our statements. We will do something different. We make internet calling as easy as googling. Instead of a one-sided presentation, a workshop, an interactive brainstorming session, has now developed. In the end, we were all very happy with the results of this visionary conversation.
On the way back to the airport – it was already in the middle of the night – Sadger said that his parents’ house is in Vienna. Without further ado, we drove by with him and gave our new partner a very emotional moment before returning home.
With this deal, Sequoia’s first European investment was fixed – but with the requirement to relocate our headquarters to the US. A week later, all corporate rights were transferred to Jajah Inc., 2 weeks later flowed 3 million US dollars to Jajah in Vienna. All of this went so fast that the new account was not yet open, which was done in the face of the prominent US business partners but quickly through the bank, including a friendly overdraft framework, which was also fixed at $ 3 million.
That was the moment when it was finally clear that this was the once in a lifetime opportunity. From that point on, I knew everything else had to go. I had called all my business partners and told them that I would get out. The understanding was not too big. For most it was perfectly normal to dance at many weddings at the same time. But I did not want to waste a minute to solve someone else’s problems. I wanted to invest everything in my own goal – and also keep my mind free for the ideas that you need permanently on the way there. They come in the most bizarre moments, in the bathroom, in sleep, while driving. But as fast as they come, they are often gone. It is important to play freely, to grasp these ideas and to realize them consistently. Any distraction is a hindrance. Any thought that goes anywhere else is lost energy.
When we came to America, a photo of an Austrian mountain village with an arrow was published in the USA, from which we would supposedly come. Roman and I were the two Austrians who now spent the first $ 3 million in the same offices where Larry Page and Sergey Brin once made Google big. A huge leap forward – to the start of an even bigger challenge.
deoxyribonucleic acid (DNA)
We had a fortune in the company cash register for an Austrian foundation. For an international startup project that was just a jump start. But we had a fascinating idea that convinced everyone, everyone sensed that something special would grow here. So instead of money our partners got stock options and worked at cost price. Such an initial situation is the biggest stroke of luck for an entrepreneur: To put a strong idea on the table and share it with his people. Otherwise, the first phase with its enormous, often underestimated development costs is very difficult to finance. We set a minimum rate for our employees to live on in this phase – for example, 20. The rest, 80 received them at the current value in stock options. We held this iron rule for all suppliers. Anyone who wanted to work with us had to invest in our company. So all the co-entrepreneurs were working day and night on the common goal, as if it were their own company. And everyone has benefited from it: From the 80 were eventually 8 million.
This bundling, the joint focus of the whole force on a common goal is the most important DNA in my undertakings. This DNA must be lived by all employees right from the start. Incidentally, the DNA from the start-up phase is still in Jajah today, although the company now has 150 employees and is part of a large corporation. Those startups that fail to get their employees and partners excited, turn them into co-entrepreneurs have a problem they can not get rid of. This has happened to many colleagues, who sooner or later have failed due to the inadequate quality of their product, an uncontrollable cost explosion or an excessively long development time.
The first and most important requirement for strong DNA is that the company founder himself is the undisputed role model. Only then can the employees identify with him. The process starts with the first employee. He will observe his superiors, if he succeeds in winning him over with his own behavior and convincing him in the long term, the employee will imitate the behavior. If the boss is pragmatic and goal-oriented, careful with resources but at the same time uncompromising in the quality, the employee will do the same. The next employee already has two role models. All new employees will have more and more of these role models they can use to guide their behavior, and eventually this process becomes independent – and something almost spiritual happens: DNA becomes a cult. And a cult is characterized by resilience and survival. In the history of humanity, it has always been the high cultures that have survived millennia. Uncoordinated hordes of warlike barbarians quickly disappeared into the darkness of history after brief conquests.
Jajah energy drinks
The boss is the one in whom everything comes together, who sets up the financing and always has the big goal in mind. If the excitement is part of the DNA, the programmers come in with the sleeping bag in the hot phases in the company. And they only stop when their heads fall on the keyboard to continue their work the next morning. This also means that everyone knows and also feels that he is important. Everyone is extremely important in my business. Each individual makes a clear, visible and measurable contribution to mutual success. The core team, maximum of about 30 people, has to be sworn in ritual. For that I take a lot of time for each one. We spend many hours together and agree one hundred percent on the common project, the common goal. So that these people like me wake up at night and have an idea of how to solve a task in the project. Of course, everyone has a private life, hobbies, family or partner. But they must realize that they are gone for a while, like the sailors of the fifteenth and sixteenth centuries on their voyages of discovery. But they will come back. And they will take a rich booty.
In this startup phase of a startup everything else must be secondary. First up is the project. The willingness to get involved in it one hundred percent, I can see in the first interview. The hunger I have must have an applicant too. For this he gets in the project also the chunks, which can satisfy his hunger. Over time, this creates a strong common ground and mutual trust grows. These highly motivated people become the most loyal employees. And they also have the most loyal boss.
HEADCOUNT, FLOWERS AND CLOCKWORKS
A newly graduated economist will plan human resources as he has learned at university. Using the example of a florist: The boss produces 10 bouquets per day. Now he gets a new major customer and has to increase the output to 40. How many people does he hire? Who has thought now of 3, theoretically right and the Headcount grossed up. Practically, the world looks different. If the florist hires his first colleague, he may at best do one-third a day. So that the florist doubles his productivity, he needs three people. But three people have to be managed, otherwise the florist will not have time to make his own 10 bouquets. So he still needs a fourth employee. Four extra people for just twice as much output as the boss alone. An expensive fun.
Many young entrepreneurs have failed at this mostly late recognition. If the first new employee does not double the output, they will be disappointed or desperate, throw him out again and try the next one. Soon they realize that they can not get on like this.
If you really want to build something, you have to realize from the start that in the first phase, productivity drops. It’s best to think of the larger system right from the start: an organizational structure that can be expanded so that it also works for 100 employees. The key management positions need to be filled by people who are much better than what is needed in the first phase. You have to get the time to get used to the project. You may not be able to use your full intellectual potential until 2 years later. By then, however, something special happens. The project is now running by itself, adapting to all requirements and continuing to grow well.
The same applies to the programmers. Many founders think they need 10 programmers instantly, who need to be productive immediately. Rather, however, managers are required who take care of the tasks: For example. within the scope of quality and assurance, to coordinate the product functionalities according to the specifications, ie people who seem to be completely unproductive at the beginning. But they too are an indispensable part of a sustainable structure. At the beginning, they cost time, money and sometimes nerves, you feel like it’s all a waste. From about 50 employees, these people start to prove themselves. From now on, it will always be easier to increase to 100 or more.
At some point I came to the office in the morning. Shortly before I had the last area, the product management out of hand, which was previously a top priority. This day was about adapting a function. But this was done by my product manager. Like a current financial question from the CFO. So I sat there in my executive chair – looking at the calendar, checking my emails and wondering where I’m needed today. But the company was now completely self-contained, like a clockwork. I had absolutely nothing left to do.
Basically, the materials technology, finance and creativity do not fit together. Rarely that a person combines all these abilities. But they are indispensable. However, especially at the executive level, there must be people who cover all these skills, which means they are very heterogeneous. The most important thing for the interaction of these different forces is the hundred percent confidence. You should be able to marry any of these chief officers, the chief financial officer, the chief executive officer. Because with these people you spend more time than with his wife. These findings must be taken into account when choosing these managers.
We worked with our people for months until we fixed them, all aspects of the collaboration were closely monitored. Also the interpersonal level is extremely important, the emotions are as important for the functioning in the team as the professional qualification. If some people from other contexts have the best credentials, are highly intelligent, loyal and committed, that does not always mean they fit into the team.
When a company becomes known and grows fast, you are contacted by all sorts of headhunters, they want to recruit the top employees – and of course make a lot of money from it. At best this works in the field of technicians and programmers. At the top executive level you have to do it yourself. The best way to search is to use your own personal network. You have to spend a lot of time with these people, discussing all the tasks with them, giving them ongoing feedback, eating with them, socializing with them. It’s like a dating over the 6 month period. If everything fits, you can adjust it.
PRODUCT STRATEGY, PRODUCT MANAGEMENT, LAUNCH
At AOL, a board resolution is needed if the company color is changed by just a shade. Why? The reason lies in the many psychological dimensions of human behavior. For example, a little bit more blue can make our logo color Purple look too cold. A little more red, and the color effect is similar to that of blood, good Hollywood blood as well as real blood are never pure red but always contain a dash of blue. Then it works. Even though most people are unaware of these effects, they respond. There are also interculturally different requirements. The result can be read in the access and sales figures of the respective markets. So much potential is often only in one sentence: depending on how you phrase it, you get 10% more or less users. So we tried a lot, for example register now for free. The best sentence was: More than 10 million people can’t be wrong. 12% better than everyone else. You can not guess that, you just have to try it. Especially for Internet products with extremely high direct user contacts the question is, what is where and in which color of extreme relevance for the success of a product. The advantage is that these parameters can be easily changed in the user interface compared to other industrial products. Reno 10,000 VW Golf can be damn expensive. The rest, the complex product behind it is good craftsmanship.
MICRO AND MACROMARKET
In marketing theory, the so-called early adopters play a crucial role. They are the first to try out a new product, always want the best that is currently on the market and exercise in a large circle of friends an important advisor function. You are ready to deal in detail with the individual technical features in all details. Many startups are aiming for these early adopters with their complex, high-tech products and are not making the big breakthrough. What they did not consider in their two-step strategy: Only the absolutely enthusiastic early adopter recommends the product further. And that succeeds in the rarest cases. Many product categories are also not very emotionally charged and are not at the bottom of their essence, excite enthusiasm, they are still so good and thoughtful. The enthusiasm is reduced to the development team and will soon be replaced by the disillusionment of approaching bankruptcy.
A mass market can only be achieved with a product that is accepted from the start by the masses, which also works in small market tests and has a strong broad impact. That’s why we’ve eliminated the many video features our system had at the beginning. The core was the simple, reliable and cheap phone calls.
So if, as Marc Zuckerberg sees, an idea at the micro level, e.g. The university works first class, then you have a great opportunity. Now you have to put everything on it. You have found a gold mine. With a big marketing budget you can drive any product into the market. But if something already works on its own, if it is viral and grows by itself, then it has the potential to become really big by itself. It was the same with yahoo, google, youtube and facebook. They all had something that has already exploded in microformat, they all felt it’s on, it’s pulling up. All the investors I’ve talked to see that too. Of course there is angel money for startups with very speculative business models, but most investors do not even look at such projects. If one does not have something that works on a small scale and he can not prove that the market needs it now and here, he should go home and come back when he has found the right one.
LAUNCH 1: SILENT
At the beginning of 2005, Roman and I started working intensively to develop our telephony system, expand one function after another, and continue to perfect it. But eventually you have to go with the product on the market, otherwise the costs run away. If you have reached 80% of product development, you have to get out, because you will not be able to get 100% if at all in the first phase. Anyone who tries to do so hopelessly gets bogged down. I know a lot of startups who tried that. They only developed for years until they ran out of money and the market was already completely different, the product did not fit anymore. They have failed to seek contact with customers, to let them judge and to continuously optimize their product through their reactions. In many cases, one’s own idea of perfection completely bypasses the reality of the market, and often also of one’s own possibilities and resources. No wonder many burnout victims are perfectionists who are not about to reach their overly ambitious goal any more.
So we sat together and decided: Now we turn up. Without advertising, silent launch, just test how it works. The servers were on our office computers, the website was cryptic until then: Here comes something. On a Friday evening the website was put live. The remaining 20% of the product development nobody would notice, there was only in our heads. Whether you can send 10 animations, or only 5 is really no matter. We went to the weekend and let it go, a few people would already bite.
I came into the office Monday morning, turned on my computer. No Internet. I asked my colleagues if the internet was working for them – either. We called the provider to ask what’s going on here. That was not the point. It was not until we did more research that it was clear what had happened here. A blogger named Robin Good had found us on the internet. He still runs a blog called Master New Media, based in Italy. Everything he writes is automatically published in Tech Crunch, the world’s largest opinion-making platform for startup computer products. This Robin Good downloaded, tested and wrote our product: The new Skype Killer has arrived: Jajah. Because of this message, 70,000 people downloaded our product – on a weekend. Of course our servers were dead. In a night and fog action we tried to distribute the server load and at least find an interim solution.
STRATEGY 1: THE MUTANT
Checking the market is an existential requirement. You also have to look at each phase, what the others are doing – or will be doing. There are a lot of me-toos with every good product, who throw themselves on the market in the shortest possible time and try their luck. First you have to protect your product. Then you have to defend it. First, you have the first-mover-advantage, but there are others who can make it even better. Also we would have been with Jajah in the original version always the number two behind Skype. So we changed the strategy at a crucial point. It was probably a little luck in the game. Once again it was about using all the senses and how to pack the crocodile at the right moment.
I had a key experience. As so often, I once again sat at home in the basement and programmed, improving the voice transmission quality. We had the advantage over Skype that we could call from our client a real phone and not just a PC or laptop. You sit at the computer, enter the number and in America the real phone rings. Packet Switched Data Network, PSDN calls itself the technology behind it. So far, I had built all the essentials, written and programmed everything. We were already on the net, had after the server crash now high-performance server, were interconnected with the Telecoms. Normally, PSDN works by sending a command from the caller’s IP address to induce a call through our software client: This PC, this IP address now calls this phone. After many hours of programming, I was already fatigued, an accident happened to me. Not the IP address called the phone now. But a real phone called the other phone. I pressed the button and the first phone rang. When I picked up, the other phone rang. Suddenly I had an internet connection between the two phones. Technically, that was theoretically impossible. Master Zufall made it possible. Just as the whole evolution is based on chance. Since the beginning of life and the emergence of biodiversity, coincidence has produced genetic mutations. The better mutation survives. Because she is stronger and beats her competitors. Or because she is sexier and spreads her genome better.
What happened by chance at 2 o’clock in the basement is called a re-invite: I tricked our affiliated telecoms with the software, pretending that there is a telephone here and there. They made the connection themselves via their routers – and for me there were no costs. And every call, no matter where in the world. I was completely perplexed. Basically, the mistake was with the telecoms, who did not expect anyone to try. I immediately ran to my partner Roman to show him that, first ringing my and then his phone. He, too, recognized immediately:
That’s the real sensation.
As a user, you no longer had to work hard, disguised as an astronaut with a laptop, earphones and micro phone, but could normal normal phone or wireless phone in the bathtub, on the street in New York City or in Ulan Bator normal phone , And that at an unprecedented rate. The second advantage was that users no longer needed to download and install a complex program. That we could also run comfortably on our website. What we had now was as simple as it was ingenious: a website where you just entered your number and the number of your destination. Then ring your own and then the destination phone. That would really be understood by anyone in the world, with or without a lot of computer knowledge, early adopter or absolute beginner, the grandma in Vienna as well as the fisherman on Capri.
STRATEGY 2: MILL TONE
From that day on it was no longer about the many small functionalities and gadgets such as the Videoconference, which were just better than Skype. It was about the simplest, cheapest, most convenient and best quality phone calls on the net. That’s exactly what convinced our major investor Sequoia. That was just the tool with the really big potential, the product with the absolute wow effect – you press the button, suddenly the phone rings and you have a perfect voice quality.
Meanwhile, we also had the patent of the web-activated telephony, as we called it in the US called worldwide, this idea had to be protected as soon as possible. Incidentally, this term has become standard by the way and all telecoms support this service. Because, even if we had actually tricked them, incurred no additional costs. When Sepp Huber from Austria calls his friend Wanjiro Mutua in Kenya, the local router of Telecom Austria is connected to the telephone of Sepp Huber. In Kenya, the local provider is connected to the phone from Wanjiro Mutua. In between is only the internet. So no one has costs, only the last mile, these are two local calls. So everyone is happy: Sepp Huber is happy because he only pays 2 local calls and a small jajah serve which makes Jajah happy. The telecoms are happy because they can charge a conversation that they would not otherwise have received. Wanjiro Mutua is happy because he does not have to pay anything.
We’ve been thinking long and hard about which strategy we should pursue: we now had the Skype killer on one side, with all the gadgets – and we had the website with the simplest and cheapest international telephony ever. We came to the conclusion that we should focus. The entire client, which we had developed and released, which meanwhile had 700,000 users, we threw into the garbage can – erased, he was gone. We just ran the website, at the same address and told our customers: Down with the headset, all you need are two numbers, just type in and call – and nothing else!
Everything else, like video calling, had been fun for fringe groups like the techies and nerds, but that did not matter to the masses. The wanted and wants to just cheap phone calls. Of the previous users, only about 1% had used the video function – in relation to the enormous development effort an almost ridiculous number. We had learned one important lesson: our infatuation with the thousands of playful features did not really bring much out of a lot of work, it does not help the big mass market. The simpler, the better. We had now reduced Jajah so much that the whole site consisted of only 2 lines: one for the number of callers like Sepp Huber, the other for destination numbers like those of Wanjiro Mutua. A little later, even the internet could be left out, the principle is still the same today.
LAUNCH 2: AT THE LIMIT
Den Launch dieser zweiten Generation hatten wir mit einem großen Timer auf der Website vorbereitet, einer Uhr, die rückwärts lief: In 17 Tagen sind wir da mit der neuen Lösung. Ein technisch ambitioniertes Ziel. Das Programmierteam arbeitete Tag und Nacht und war völlig ausgelaugt. Das Timing war beim besten Willen nicht zu schaffen. Heimlich mussten wir den Timer zweimal nachjustieren, zum Glück hat es wohl niemand bemerkt.
Ich selber komme mit sehr wenig Schlaf aus. So durfte ich täglich miterleben, wie meine Partner neben mir zusammenbrachen, am Limit waren, nichts mehr essen konnten, sich aber immer wieder aufrafften und weiterarbeiteten. Mit leichter Verzögerung, völlig am Ende, mit zu Schlitzen verjüngten Augen, bleich und unrasiert schafften wir es schließlich und gingen live.
Am nächsten Tag rief der deutsche Fernsehsender RTL an, sie würden sofort zu uns nach Österreich fliegen und uns portraitieren. Alle hatten immer noch blutrote Augen und sahen ausgezehrt aus wie nach 2 Jahren als Geleerensklave, als die Journalisten und das Kamerateam in unserem Büro standen. Bisher hatten wir nie mit so einer Situation zu tun gehabt, hatten kein Medien-Coaching absolviert und keinerlei Handouts vorbereitet. Wir standen nur völlig ausgebrannt und zerknittert da und beantworteten wie in Trance die Fragebatterien der ausgeschlafenen und gestriegelten Reporter. Schon nach wenigen Stunden kam der Bericht in die RTL-Abendnachrichten. Eine sensationelle Starthilfe für Generation Jajah 2. Und eine erneute Belastungsprobe für unsere Server.
In Dublin stehen die besten und leistungsfähigsten Datencenter in Europa. Warum gerade in Dublin? Aufgrund steuerlicher Begünstigungen sind in Irland annähernd atombombensichere Anlagen entstanden, weltweit die oberste Liga hinsichtlich Sicherheit und Leistungsfähigkeit. Als wir die gigantischen Maschinen sahen, über die Ebay und Yahoo Europa liefen beschlossen wir, uns auch eine zu nehmen. Für die Startphase bekamen wir auch einen erstklassigen Deal. Die Preise würden erst steigen, wenn das Unternehmen wächst. Wir hatten zum Glück schon vor dem Launch 2 zugeschlagen. Doch trotz all dieser Vorkehrungen wurden wir wieder kalt erwischt.
Der Blogger, Robin Good war schon sehr wirkungsvoll, mit 70.000 neuen Kunden an einem Wochenende. Kommt man in eine große Zeitung, kann man das noch übertreffen. Wenn man aber binnen kürzester Zeit in allen Haushalten sein will, muss man ins Fernsehen kommen. Hier erreicht man wirklich die Masse, auch im Internetzeitalter. Schon vor dem zweiten Launch hatten wir mit dem Beamer die aktuellen Teilnehmerzahlen groß im Büro auf die Wand projiziert. Laufend konnten wir den aktuellen Status und alle Anmeldungen live mitverfolgen. Jeder sollte sehen, woran wir arbeiten, jeder Programmierer sollte wissen, was er hier tut und wofür er arbeitet. Als RTL den Bericht brachte, verkürzte sich das Intervall für Neuanmeldungen von mehreren Sekunden auf 0,1 Sekunden, bis schließlich das Monitoring überfordert war und zusammenbrach. Dieser TV-Auftritt kam völlig überraschend, die enorme Kraft des Fernsehens, eines nicht-werblichen redaktionellen Beitrages hatten wir völlig unterschätzt. So kam auch unser neuer Hochleistungsserver in Irland an seine Grenzen. Doch in Dublin war unser Server nur ein Zylinder im Maschinenraum der Titanic. So konnten wir die entscheidenden PS zulegen: Fieberhaft schalteten wir neue Server dazu und konnten der Riesenwelle standhalten. Am Ende des Tages telefonierten 700.000 neue User über unser System.
LAUNCH 3: FROM MOUNTAIN VILLAGE TO SILICON VALLEY
Fortunately, we had planned the launch in America only in another phase. Europe was, so to speak, the test launch, the next target in March 2006 was America with a huge market of 300 million people. We informed the journalists about the planned start in America and agreed with them an embargo. Only from the day when Jajah is released in the US, should be reported. This time we felt well prepared and had increased server capacity.
For technical reasons, the launch happened exactly at the time sat in the plane. When we landed in the US, we were the topic of the day, all the relevant media, CBS, NBC, ABC, Bloomberg, all the big news broadcasters had reported live to us, all major print media like USA today, Financial Times and the New York Times were Article about us. It was the found food for the press, a story the Americans love. Two Europeans from the small mountainous region of Austria had received the money for the big breakthrough in America from the biggest financier, Sequoia.
We had rented offices in Sequioa’s startup center, in a largely secluded area where people were used to doing their business in peace and quiet. Not on this day. Already in the morning it was full of journalists of all possible stations, their assistants and cameramen. With the calm in the headquarters it was over. By the time I and Roman arrived in Silicon Valley in the afternoon, the completely unnerved Sequioa people had to look after the journalistic horde. Mike Moritz, head boss in the Valley had never seen such a thing. Sequioa brought the big startups up here. PayPal, YouTube, Facebook and Google. But no one had caused such a fuss, Moritz spoke only more of the cracy Austrians. Visibly influenced by the chaotic state of emergency, he called only weakly “Hi Jajah!” When he saw one of our employees.
We had already followed the first launch in Vienna with astonishment. We were ecstatic when RTL catapulted us into a 6-digit user area. What happened now exceeded our capacity. In a few days Jajah went up to 2 million users, a few weeks later to 10 million. Also this border did not mark an end of the ascent. At the time of sale had half a billion users worldwide.
When you start a business, you have a bare skeleton of plans and goals. Only when it is possible to breathe life, the company gets a magic that attracts other people, employees, customers and partners. A magic that becomes independent and permeates all areas. For this, the project must have charisma, all great and successful products have this charisma. We saw this challenge as a founder. Of course, a solid business plan is important. Data and numbers speak a clear language. But they can be rationally refuted. The Chrisma hovers one level above it. You can not be clear. It also can not be refuted or copied. It can not be fought either. It works in our subconscious – and from that it draws its power. But how do you breathe life into an abstract telephony computer program?
Of course we were asked again and again what Jajah means. Basically that does not mean anything – so that was not necessarily sexy. If you want to launch a really big brand, you need a story all around. An increasingly important topic, called Perception Marketing, creates a unique reality for the product.
We are back in Vienna, at the beginning of our startup, we had just agreed on the name Jajah. An empty phrase, an abstract combination of letters – now we were looking for a good story to bring that word to life. It took another bottle of wine to get the idea: Jajah Watamba III was born – the inventor of telecommunications. Watamba, Australian Aborigine, was in our imagination, and therefore in our history, a mainstay of communication development. His great-great-grandfather was none other than the inventor of the Bullroarers, the Schwirrholz, which made it into the public consciousness at the latest with Crocodile Dundee 2. In addition, Watamba was a university lecturer, an introverted communication philosopher, and in his own way a retired guru to many people who demanded “free communication.” Watamba was an Enigma.
Now it was time to take action on Watamba. First, we placed footprints on the Internet, let him discuss in forums, for example. He wrote a communication manifest and we built a web platform for him, the site was registered by Australian friends in Sydney. We performed Watamba together with famous industrial people and fabricated interviews. In a photo, where Bill Gates talks to a group of people, he is in the background. We created a follower that sprayed Jajah Watamba’s manifesto on house walls. And today (as of 2011) Watamba still has an existing Facebook page.
With this we have broken new ground in marketing. Internet companies are by nature young companies and have no history. There are one, two or more founders who have already achieved something and can report on their track record. The stamp itself is a white piece of paper. Jajah is the first startup to build a story around his brand, emotionally charging them. Jajah was not an Internet phone service with Watamba, but a movement – with the goal of all people access to free telephony to allow. So positioned we were fast the darlings of the journalists, because we could report more about us, than about new features or nude numbers.
If someone asks us, yes, there were moments when we actually believed that he exists. Even though the Watamba story generally produced a smile, something astounding happened: international media reported on him, he received invitations as keynote speaker for renowned symposia and repeatedly interview requests. Even if you research the history of telecommunications, you will find our Jajah Watamba, the inventor of the Bullroarers.
The key message of his manifesto is that communication is limited today: if you want to make a call, you have to pay. If someone is an expat, emigrated somewhere, he can not just talk to his family. All communication in the world depends on how much money someone has, it is regulated. These barriers should be broken with Watamba’s Manifesto:
Unfortunately, Watamba was very audience-shy and asked us to represent his vision of free communication on the market. He still lives very withdrawn in the outback, only very rarely does he appear …
MASCOT AND RED HERRING
We already recognized the importance of emotions as part of the Watamba story in Vienna – even with completely rational products. Watamba was myth and intangible, so a few months later we decided to create a jajah mascot for public appearances in the US. A small male with a big head, big eyes, short legs and arms, so childlike proportions and sympathetic laughing. It should activate another human primal instinct: that’s cute, I have to protect that. First, we had the figure drawn by a graphic designer, so that you could, for example, could use in an animated movie. Then we made a costume in Europe that would suit a short human.
Transportation to the US turned out to be surprisingly complicated. When we landed with our mascot in San Francisco, we were immediately fished out of the crowd and first had to spend hours at customs. The customs officials could not believe that there are no drugs hidden here. What else should we do with this crazy pink dwarf costume? Why do two basically normal-looking Europeans fly into the US with an infantile, hollow rag doll?
It took a pack of unsuccessful drug detection dogs and a lot of linguistic persuasion to finally get the entry permit.
Even at the first public appearance should show that this bizarre effort has paid off.
The Red Herring is the most prestigious annual prize for top US startups. Hundreds of hopeful submitter hope to get the media attention of the most important broadcasters and print media with this stage for their company. Luckily, we made a splash on arrival and got a stage in Monterey, south of Silicon Valley, an enchanting place as part of the awards gala. 15 minutes we had time to introduce our project. As always, we wanted to do everything a little differently. The other participants had prepared the usual Powerpoint presentations, which were read more or less down. Our performance was built like an interactive theater. Instead of Powerpoint we had produced creative short films in Asian design, which had shot two young, highly professional Japanese artists. We cast a short-lived actor in our mascot costume – he suddenly came on stage and disturbed our presentation. A pizza maker ran into the crowd and distributed pizza. With that, we were able to catch the hearts of the hundreds of people who had previously been bored and served one foil after the other. The people had a blast – and all the journalists wrote about us. And: We also won the first prize. Once again, I was able to experience what happens to a Hollywood star. Throughout the evening, the journalists followed me at every step, everywhere an endless line formed. At first it’s fun, still in the frenzy of the euphoria of the first prize. But sultry heat, flashes of lightning, voices, always the same questions bring even a grizzly bear at some point in the falter. Finally, with the last of my strength, I was able to escape to the hotel room, completely exhausted and unable to give even one answer. But it was worth it. The traffic to our website jumped suddenly that night to unprecedented heights.
FOOTBOARDERS AND COPYCATS
Only a week after our launch in the US, a strikingly similar product called Jajah.cn appeared in China. Cleverly, young Chinese programmers had copied our product externally 1 to 1 and put it online. Asia was not our target market, credit cards were not accepted in much of the continent, so we had not secured the domain. In the US and Europe, too, the copies sprang up like mushrooms. But in the end, they could all only reach marginal numbers, maybe in a whole month of sales, which we generated in a few hours. They did not have our sophisticated technology, they tried hard to put together the individual phone calls. Of course, they also had much higher costs and efforts, if it worked at all, many customers soon realized that there was only a hollow façade and quickly jumped off again.
In a first reaction, we tried to stop the events via our patent attorneys. Ultimately, however, a strategy of cooperation proved to be more successful: we offered all these freeloaders the opportunity to go on the market with their own mask and their own name and thus to do their own thing. But in the background, they should do everything about our technology, so everyone could benefit. This model proved to be an absolute hit.
Today, most of the telephony business is handled via Jajah technology. This also explains the fact that some connections from other providers are offered cheaper than at Jahah, although they use our technology. If someone calls today on Yahoo Messenger, that’s about us. AOL, ICQ, everything is going through Jajah. Everything except Skype, which at that time satisfied the needs of the video sector. With our business principle, the entire VoIP market was cleaned up, ultimately only a handful of competitors remained of the hundreds of telephony lucky knights. Our technological advantage secured us the global market – albeit indirectly and in the background.
Even with our $ 33 million investment capital and really fat partners like Intel, German and Canadian Telecom we had to realize that the market can not be singularly supplied by Jajah at the front line. The global recipe for success was to provide the central technology platform based on the leading technology and to bring every existing and new entrant into the system. For example, competing products such as SIP Phone and Gizmo Project were originally operated at the same level until they ran out of air, when we bought and integrated them. So it was possible to assimilate the entire market from below in a short time. We had so-called termination endpoints in 55 countries, 3 data server centers worldwide – a global telephony network. We made this available to the others through a multitude of individual contracts, which ultimately benefit everyone, right down to the consumer, today. From small dating sites to huge giants like Microsoft Messenger, everything runs through our system – and everyone else is doing good business. The defense against the me-toos was to make them a partner.
When you launch a new product, like Web-activated-telephony in our case, and people realize that it’s a really good product, a really good idea, not only freeloaders but also professional copycats will come in no time at all: These people copy the idea, whether you have a patent or not.
We had planned to incorporate our technology into websites, such as in LinkedIn, met with one of the founders, invested a lot of work developing a prototype, designed screens that should show what it looks like when one contacts from one to another Partner is made. In parallel, we negotiated with the German Samwer brothers, the founders of the German auction hare Alando, regarding an investment. The brothers are absolute copycat professionals. They had seen that Ebay comes out big in America and developed its own online auction platform for Germany. As planned, Alando managed to sell to Ebay 6 months later. Most recently, they succeeded in creating the same model with the City-Deal project, which is now successfully marketed under Groupon. Groupon offers every day a new leisure offer in the respective city of users with up to 50% discount. If a minimum number of prospects register for the same deal before midnight, they will all receive the appropriate voucher. Through this large number of definitely interested participants they get discounts that would otherwise not be feasible. Another project was StudiVZ, a social network platform similar to Facebook, which was developed specifically for the German market. Business model is to see what’s going on in the American market and just launch it in Germany. Then they reckon that the “big American”, when he comes to Europe, buys the company to have a start-up advantage. And the Samwer brothers are full professionals.
It was in mid-2006, we negotiated with them for an investment – as well as with the operators of LinkedIn. Both talks were rather sluggish despite our commitment and lost sometime in the sand. Soon we knew why: Suddenly, a few weeks later there was a new telephony software solution. At least superficially, she could do what our software can. Behind it was the CEO of LinkedIn, funded by the Samwer brothers. Usually, an NDA, a non-disclosure agreement or a secrecy agreement is agreed upon during each conversation. At our first meeting with Sequioa in Vienna, the NDA was rejected on a genuine basis of trust by Haim Sadger and a wonderful cooperation developed. In that particular case, we had missed the NDA, perhaps out of stress or in memory of that positive experience. The new company was called Jackster, so also started with the same initials as Jajah. Jackster tried to attack us aggressively in the market. They also managed to visually make an appearance that made them appear much larger than Jajah.
How should we react now? Like everyone else in such a situation, we faced the question: Fight it or embrace it. The first option would have been to use our patent and sue it. Here we would have had to deal with the problem that the process takes forever and Jackster would continue to clear away. The positive thing about it: It had to be a really interesting idea, otherwise the brothers would not have copied it. The technique alone would have brought the highly accomplished brothers dangerously close to our level comparatively quickly. But we had meanwhile achieved another advantage: Worldwide, all Internet operators were fighting billions of dollars in losses. We had developed a payment system that reduced these losses to a minimum. Finally, Jackster agreed.
STRATEGY 3: PLATFORM OF THE GIANTS
This point marked the third change in strategy in our history: First, we were a better Skype. Then came the next technical innovation with the web-activated telephony. Now we finally became a telephony platform for all providers. At the forefront we still had our product Jajah.com on the market, the proof of our efficiency. We also grew fast, in the first year to 2 million users, in the 2 year to 10 million users. We also got so strong because we were able to adapt to the market again and again through reinvents. We have repeatedly focused our activities on our strengths. The third strategy change has succeeded in absorbing almost the entire market. More and more small suppliers came on the market, were either connected to us, bought by us or disappeared soon, there was a natural clean-up, which is often observed in such phases. So our platform grew up to partners in sizes like Yahoo Messenger – the largest, internationally acclaimed milestone in our history was laid. But this chunk proved to be particularly heavy.
Yahoo had over 96 million users, which we took over in one fell swoop. The whole deal was again worked up very broad medial and brought us a huge image gain: The Internet giant Yahoo trusts two Austrians from a small mountain village, a maddened pink cloth mascot and a cranky, unshaven hermit in the Australian bush. But all resentment of the group topped out after long, tough negotiations ineffective. The dynamic speedboat Yahoo had become a sluggish oil tanker. The group needed urgent refresher. The entire department was taken over by us, Yahoo operated only the client, payment, support, all underlying functions were handled by us. The project had previously been publicly advertised. But all the suppliers had their teeth broken, we were ultimately the only ones who could offer everything completely. The others could either offer only the telephony, the payment or the support. And, another advantage: Only we had the payment system under control and were able to reduce the chargeback rates caused by global payment fraud to a minimum. But that’s another story, more about that later. It took a year to complete the Yahoo deal.
THE CURSE OF THE ROBIN GOOD
For Skype we were a Skype killer, as blogger Robin Good called us on the net, from the beginning competitors. This image remained with Skype to us. They resisted cooperation, despite better voice quality and lower chargeback rates, they did not succeed in getting them on our telephony platform. When Skype planned to go public, it was considered to take over Jajah. Economically and technically, it would have made sense to run the processes through our system, which at that time was objectively verifiable the most technically mature. But also in large corporations often irrational psychological motives prevail. The old enemy Skype Killer prevented a merger. We already serve half a billion customers around the world, Intel, Deutsche and Canadian Telecom, Yahoo and Microsoft, dating sites like eHarmony, hundreds of large and small telephony vendors like Gizmo and SIPphone, all were with us. Just not Skype. From this we were able to gain insights. In the role of friendly, cooperative partners we were more successful than in the role of the killer.
Our story has taught us to basically go out with friendliness and openness to the market. With the announcement to kill someone, you get many more enemies. Even if not blogger Robin Good invented the Skype Killer back then, he was not without consequences. We had also launched a counter initiative and clearly positioned ourselves as a friend of all telephony providers and were thus extremely successful. Because, what about the perception of companies such as Deutsche Telekom, which were already on the traditional, analogue telephony market: The revenue cake roaming and international telephony is large, so these companies make big money. Suddenly providers such as Skype and Jajah and nibble on the cake with properly. A few traditional vendors soon realized that Internet telephony is a tough issue, immovable, enduring, and not a short-lived trend. You have to arrange with it. There was no time and know-how to set up a competitive system. For example, some vendors have tried to forcibly block Skype traffic using near-criminal methods – without success.
Much better have developed those who have made deals with Jajah or Skype. This compensated for the loss of customers quickly. They have lost a few traditional telephone customers to Internet telephony. But they have gained many new, hopeful, young customers. Ultimately, that’s why we were eventually bought by a traditional, large telecommunications company.
MICROCOSMOS, TIME WINDOWS AND GERM CELLS
Every startup company is faced with the question of how it builds its business. If you want to start making sales right away, you should first engage in large scale market surveys to get an accurate analysis of your customers – or rather build something that works right out of the box. What is the right way? Based on my experience, I think that the plan to plan a company on the drawing board in Google’s scale is fundamentally wrong. Many people come to me again and again and tell me about huge markets that they want to conquer. The chances for it behave in my view like a lottery six, with 6 out of 45 it is exactly one to 8.145.060. None of those I know who run these large corporations today originally had the plan to become that big. She just wanted to make things better for everyone in her smallest environment. That’s it. Facebook founder Zuckerberg originally wanted to improve only communication within Harvard, his micro environment in which he completed his education. The same thing happened with Yahoo: David Flo and Jerry Lang were Stanford students, and in 1994, as content on the Internet rapidly increased, they wanted to develop a catalog for themselves and their friends that made a simple overview possible. Me and my friends wanted our women to be able to make their long-term phone calls more cheaply. If you succeed in finding a good solution for such problems that works on a small scale, then it will grow by itself if you succeed in building up a solid corporate structure on a continuous basis.
However, it is also important that this microcosm is a representative model market for the mass market. A sheltered mountain village will not be suitable for such personal studies. Of course, it’s also about getting the right time. We knew at the beginning that the cost of telephony through the internet will eventually go to zero. Again and again in economic history there is the phase in which an innovation creates a new market that is crowded by hundreds of suppliers. Then there is a consolidation in which the strong remain, as it was, for example, the hardware vendors, Internet providers and also in the Internet telephony.
Anyone who thinks about setting up their own business should also consider the cycle of technology and ask themselves where it is at the moment – and will be when it launches its product. Most of them only jump up when it’s already too late. I had made the mistake myself as a hardware dealer and had to pay bitterly. All those have no chance to consolidate and become big enough to sell successfully at some point.
If you are too early in the market, you also have a problem: you probably do not have enough air to bridge the time until the product is suitable for the mass market. So there are always only a few slots, time windows from half a year to one year, in which you can successfully launch a product. But not only the time, also the place plays a crucial role.
There are always new markets that hold great potential. And there are always places where ideas for capturing these markets arise. When it comes to high-tech, it’s enough to go to Starbucks in Silicon Valley. If you observe what people do there, you immediately know what is trendy – and what hardly anyone else knows. Foursquare, a social network application for mobile devices that always lets you see where someone is, started in New York – nobody knew it outside. Meanwhile, it is already driving through the roof throughout America.
But technology alone is not enough to predict success. It must also be a social reality behind it. When Facebook hit the market, many people said it was something completely new – in fact, it’s just a digital version of an ancient, deep-rooted human drive.
Parallel to the idea, however, an economically fertile soil must also be found. It is certainly more difficult in Central Africa than in California. So there were many other video platforms around the world before Youtube started up from Silicon Valley. They had no access to capital, not enough funds or mobility to change location and grow their idea.
Especially in Europs there are great fears among founders that their idea is stolen, someone else implements it and makes it big. One hardly dares to talk about it and thus does not put his idea into constructive criticism. But the vast majority of humans are not evil aliens. They are basically good. If you develop a product and go out with it before it’s done, maybe 80%, and tell people, look what I’ve done here, help me to finish it off, you’ll be helped for sure. These people will be happy to help shape it. Again and again we have the experience that people, customers or users are basically good. They do not want to cheat but under normal circumstances are correct and helpful, especially if you are not arrogant.
REALITY VERSUS VIRTUALITY
I know a furniture dealer. He runs a website and is surprised that she does not bring him a new business. When you look at your website, you see nothing but a catalog that has some moving images. Even if you ask people on the street what a website is, they describe most as a moving catalog. If you put such a website on the real life, it looks like this: You have a sales outlet – then comes the customer. But no one is there, no one speaks to him, he is alone in the big business. Inside there is then a thick, heavy catalog irdendwo. But he will hardly look at him. He will not buy anything either. He will go again and not come back.
What a good website can do is digitize real life. You come in, find also like-minded people who shop there, is friendly received, asked, what wishes you have and exactly where the desire is fulfilled. You can get info, if you want it – or be left alone if you just want to look around. That said, a good website is different formulated as a social medium.
So if you only talk about social media in a narrow context, you overlook the fact that the Internet as a whole is social and is becoming increasingly social. Social ties are among the strongest human needs – only now they are increasingly being imaged on the Internet. Of course, it will never be the same as in real life. For example, Facebook depicts the stage when, as a student, you used to show photos and slip small notes in class. But Facebook is still not the big party, where you have fun in the group, socializing and lobbying, even if there are model experiments. Technologically, this was not solved satisfactorily.
Behind seemingly simple solutions is always a lot of development work. In so-called A / B testing, you take your start page and test different ways of approaching your customers. For example, you want someone to register via a button. Above the button is a headline. As reported, we had found that the sentence 10 million users can not be mistaken works best. This closes the circle to the history of the furniture retailer: the knowledge to be here with so many others gives a comfortable feeling and tells you that what is offered simply has to be good. An ultimately simple effect, called in the American flow, which is used successfully over and over again: a wave, by which all are carried, which unites them all and brings in a great common state of mind. Every shop owner knows this when it just works and buys a lot of people like crazy.
Another aspect is the question of the basic benefits. It is always the same human dimensions of service that a business model fulfills. Either you have a monetary advantage – can make money, win or save money. Or it fulfills a need in the context of the reproductive instinct. You feel sexy or it gives you better access to the opposite sex, you get publicity. Or you just have fun. Or it makes one’s everyday life easier, fulfilling the need for comfort.
The topic of comfort is also the basis for designing a website. You have to pay attention to the ease of use: create as few barriers as possible. If someone has to climb stairs in a shop and has to open a hundred doors left and right until he finds something interesting, he will not buy anything. The waterfall, where you lose your customers, needs to be analyzed carefully. Using analysis tools you can determine exactly where the customers are lost. The Amazon has solved very professionally. You do not have to search everything, just ask somehow. Then you get a few suggestions and choose one or more – so maybe more than you had previously intended. The more you approach the deal, the fewer options there are. Until only one button is in front of you: Complete the purchase. So you’re taken by the hand as if by a virtual sales consultant and led to your destination. If one then receives due to his profile suitable further book tips, also corresponds to the function of the salesman. Amazon has managed almost perfectly to represent real sales situations virtually. The last remnant, the small piece of social interaction, however, has not been shown yet. That’s a question of technology and a matter of time. Previously you had subscribed to newsletters and then e-mails, today it’s on the Twitter channel. In the past there were sub-sites with polls, polls and chats, today everything is done centrally via Facebook. But despite everything, much is still stone age. Some things are already technically possible but not yet accepted.
Of course, there are also limits to the digitization of reality. Scientifically proven is the existence of mirror neurons in the human brain. In personal contact they are activated by the perception of the person and let us feel how our partner is doing, we experience a feeling of empathy and show it on our part through body language impulses. These processes will never be displayed on the Internet.
Even via video telephony this will never work completely, although many – including us – have tried. Intel has sunk half a billion research funding for this topic. They wanted to become pioneers in the field of video telephony. Everyone knew Starship Enterprise and thought that they should see each other in the future on the phone. The first problem was the technology: Due to the enormous amount of data, the projects involved a huge amount of development work. The second problem was only recognized when a lot of money was already burned: The users do not really want that. They do not want to reveal their whole identity. I also do not want to be called by a CNN reporter early in the morning and have to look at the camera half naked, with a swollen face, messy hair and unshaven hair. I’m not going out on the street until I’m dressed and feel like it. When I open the video channel, I’m on the street. That’s why you like chatting and texting instead of talking to each other. We all need ways to restrict our public as needed. On the one hand spatially, but also in terms of time: With the SMS, I can think about what I’m writing in peace, so that it is certainly very cool, funny or apt. Even the recipient can wait until he can calm down. This protective function of the communication media also lowers the inhibition threshold, for many people a big, anxiety-ridden topic. One dare to say things to each other, which are suppressed in personal dealings. An opportunity even for shy people to make contacts. With success. Meanwhile, every fourth relationship is threaded via the Internet. There used to be fairs, desk phones, single parties, newspaper advertisements. Now almost everything is online. Of course, there are also dark sides: Meanwhile, Facebook and Co are responsible for 20% of divorces.
Another human driver is Fame: you want to present yourself, exhibitionieren and get a touch of fame. The basis for the success of Youtube, where everyone could create their own TV channel. But fame is also exhausting – think of the Red Herring story and the tragedy. So there is already a countertrend again. Recently you wanted to have as many Facebook friends as possible, first it was at least 100, then already 500 or 1,000 up to 1,500. But who really has 1,500 friends? Maybe there are 5 really good friends and 15 to 20, with whom one meets from time to time, who are more likely to belong to the periphery. Anyway, at 1,500 there is already too much news and feeds, you are showered with information, most of which are rather irrelevant: Sitting right in the bathtub, feed the hamster, your comments commentary like me. Non-reaction is often interpreted as ignorance. Many people are already thinking about how to reduce this increasing burden again. The trend is from Facebook to a kind of family book, where only the family or really good friends meet. It’s really social. What is happening in the field at the moment is a hype that passes by in this form – but certainly remains in a temperate form.
There will always be coexistence between reality and virtual space. Both worlds will assume different functions for fundamentally equal needs.
While the history of video telephony, contrary to all expectations so far for Skype did not bring the big breakthrough, the situation begins today by the explosion of new devices such as smartphones, Ipad and Internet-connected television or networked Blue-Ray players back in favor of To change video telephony. For example, at the beginning of 2011, 40% of all Skype conversations will again be video-based. In business, however, video telephony has so far hardly prevailed. Regular economic crises in which expensive air travel for company visits had to be saved new hopes for the comparatively cheap video telephony. But again and again the companies had the experience that their newly purchased video equipment was little or no use.
What was written off in 2009 as a technology that will not prevail, sees Skype since 2011 as the next front of the development of the telephony. In general, online telecommunications have long been the number one international long distance international phone number. Of the 520 million international daily call minutes, according to Skype CEO Tony Bates a market share of long distance calls of 25%, take place 40% of all minutes of video. Significant was the launch of the iPhone app for Videocalls: Within 24 hours Skype Video was downloaded four million times. For New Year’s Eve 2010/2011 was already a million minutes of video calls, according to Bates. So video calling is again one of the key areas for Skype’s future development, according to Bates. This is also the reason for the acquisition of the previous competitor Qik. It offers a range of Skype technologies, most notably video, such as Skype apps for other smartphones and technology to record, stream and repeat video calls.
IDEAS, OPPORTUNITIES AND MODELS
What succeeds in successful Internet startups is that changes in the real world are recognized, that draw needs, which are then mapped in digitized form. Take the example of communication. Basically every human being has a right to communication, as can be read in the manifesto of Jajah Watamba. What happens today: Everyone has a mobile phone, mostly with organizer functions. So the daily communication with the friends to stay in touch is greatly simplified, you do not have to physically meet them anymore. Even processes, like I’m going to coffee now, are already automated, as in Foursquare. The friends see that, the question is whether they will get there too. In any case, this technology saves even the phone. All in all, in the real world, we become more lonely as more of our true social interaction is digitized. That’s a very strong trend. But this loneliness will create new business models that may help us organize our real life together.
But not every business model is internationally suitable for mass production. Despite globalization trends, markets around the world are still very heterogeneous. Japan works differently than China or Central Europe. The change in technological or legal framework conditions can also have huge consequences. In India, for example, compulsory education was introduced in 2009. If someone is looking for a huge business, they can think about what that means for the future.
In the middle of the 20th century it was comparatively easy to start a business. The world wars had destroyed so much that almost all markets were then demand markets. Whatever one produced, if it was reasonably fit, one could sell it. With only a little business understanding, it was possible to build a prosperous company. If you could somehow make a fridge together, you were there. The markets were very regional and extremely manageable. Today we have the exact opposite. Almost everywhere, there is an abundance of everything, markets have become very global and there is a strong supply overhang. But there are always new sample markets that you can recognize and analyze. This works best if you try these insights on the business model on a small scale but really live with them. Only analyzing the data, facts and figures in a purely abstract manner is not enough to develop the right feeling for this market.
An interesting aspect of a business model is also the turnover per user. The differences among global mass providers are amazing:
Sales per customer
Only if one recognizes this aspect in good time and adapts the business model accordingly, ie adapts the costs per user, will it succeed to operate sustainably successfully. A good example of this comes from the field of pricing, the question of the evaluation of a service or a product. The best solution for a business is usually subscription, with monthly fees, like a gym membership. Then you have a lot of people who pay for a service, although many do not use it at all. So the subscription model is the holy grale of business, you can do really good business on that basis. On both sides, because even for the customer, who really makes use of the service, it is favorable, because all others pay: they finance, for example. the rents, costs for the permanent staff and the development costs and do not cause direct performance-related costs.
To set the right tariff, there are thresholds for every product of any size and on any market that customers are just accepting. These are very different per region. Especially in developed markets that works well, those who are not active users will be sold with the membership a kind of affiliation – you could always, if you wanted. An example is the American video download service provider Netflix. Subscribers can download 3 files each within a certain period of time. Millions are there, it costs almost nothing, but only a few use the service on a regular basis.
So, when people really see a benefit, they’re willing to pay for it on the internet – even if there are many competitors offering everything for free. This worked well on iTunes, although there were many free exchanges. 99 cents you are ready to pay quickly if you like the title.
There are also interesting concepts for offering a product without a fixed price: it is up to the customer to pay what they are worth. The model was used by a German CD dealer on a trial basis. So you could get the CDs for free. The result has also surprised the trader: The vast majority of people are honest, the vast majority pay voluntarily. So today he makes 30% more sales than before, when he had still offered at market prices. So basically, it’s not like you have to be scared of being ripped off by everyone. There are now also restaurants that work with this model. You can drink anything you want, in the end the waiter comes with the box and you give it what it was worth. One thing to note, however, is that such models work above all for the broad masses of consumers within the Western culture and on similar conditions of prosperity. In poorer countries, such as Egypt or China, you would be scrounged to death immediately.
INNOVATORS AND PATENT TROLLS
As I said, the good ones outweigh the business life. The bad guys are in the minority, but can still be damn annoying. If you found a company in America and go to the market, you can set aside a few hundred dollars. Only very few startups know about it. There are so-called patent trolls, derived from the evil dwarves of the sagas, which will pursue one mercilessly. The trick is always the same: these companies hold a lot of patents without using them. If you are a young start-up who gets a bit too much and the trolls are paying attention, they call you and claim you would violate your patent. Then you have your patent attorney review the case and come to the conclusion that the opposing patent may be similar but not a threat. That does not really matter to the Trolls patent. Either they sue you and you pay, even if you’re in the right $ 250,000 in court fees. Or you give them $ 100,000, then they are satisfied. It is a thriving business model in the US, and we have been hit four times. These patent trolls also look at exactly how much sales you make and how much you can get out of it. In total, we had to pay $ 500,000 to such poison gnomes.
Compared with the real competitors, it is with the patents as well as with nuclear weapons in the cold war between Russia and the USA. You have a patent and the opposing company has one too. Everyone has a weapon, but no one shoots at the other. One agrees, for example, on cross-licensing, the mutual permission to use the license of the competitor. There are hardly any escalated patent wars on a grand scale.
The strategic threat posed by competitors is also the number one on the market. As a first mover you have a great start advantage. About 80% of the interested parties access the first product on the market. When you copy the idea, you always run after it. At the beginning of our market entry we had a competitor named Rebtel. Every feature we launched was also launched in a short time by him a few weeks later. When we had already changed the strategy, and were fully focused on developing the telephony platform, these features were already commercially meaningless to us. To get rid of the annoying competitor, we went out with press releases about new features that were not programmed at all. Rebtel launched the programming machine and tried to catch up with us. When they had already gone in a completely different direction, we launched on the phone platform in a big way. Then it was already too late for Rebtel to jump on this market.
It is always the real innovations that drive the market. As studies by Morgan Stanley show very nicely, the top brands, which have recently come to the top, are always the very young and not the existing brands, which will eventually work their way up. The real innovations always come from the young newcomers. The greats have become way too sluggish to really innovate. One exception might be Apple, a company that has always been innovative for decades and is constantly developing absolutely sensational products. Only here is not a completely self-sufficient organism, which basically carries the germ of innovation in itself, but a highly dependent on the person Steven Jobs and driven by him system. Jobs is a gifted innovator and uncompromising perfectionist. When a prototype of the MacBook Air was presented to him for the first time internally, he took it examining into the hand and spontaneously said it was 5mm too thick. His developers blocked the proposal, figuring it out in all detail, that would push the price up $ 300 apiece – which Jobs soberly stated, no matter, they should just make it 5mm thinner. Only then was it a real sensation on the market. This merciless professionalism is reflected in all its products.
But a truly innovative company should evolve on its own, carried by all employees. There are many different approaches. The most effective and sustainable one is sure to build an innovative culture within the company. Concrete measures such as kaizen or KVP originating from Japan, continuous improvement processes can also be implemented. You can involve external coaches who analyze the company and develop ideas for new ideas with employees. At Jajah, additional innovation days were introduced, where everyone in the office could do their own things and experiment. So the innovation cycle could always be maintained.
CAPITAL AND FINANCING
At first glance, you might think an internet project is a website with a few features. But a big internet project is a company with all departments. From quality assurance to controlling, marketing or sales. This aspect is often severely underestimated. One of the key features is the branding policy and the associated effort that must be made to publicize the brand. The Internet presence alone is usually not enough, you have to use depending on the product and traditional media such as newspapers, television, print and even poster and outdoor advertising.
Only if the brand quickly becomes known, they can also grow quickly and ensure the advantage over the competition. The period for this growth is often underestimated. Google took a total of 10 years to grow to today’s size.
I do not know anyone who has launched a successful, large Internet project and made it into the black, without a minimum investment of 10 to 15 million dollars. The only company that did this on a grand scale was Cisco Systems. Back then, as a small hobbyist team from Sequoia, they received $ 2 million and managed to keep up with this relatively small amount until the IPO. Google, for example, totaled about $ 24 million, Facebook by 2010 about $ 900 million.
It must be clear from the very beginning, with which one earns his money in the long term. In order not to become totally dependent on the funds, there must be an emergency plan at every stage. You never know in advance whether there will be another banking crisis, for example, and then suddenly the planned financing will be gone. On the other hand, it is not enough to only finance over 100,000 users and grow fast enough. However, this funding can be enough to survive stormy times, knowing how to reduce the effort in such a phase.
In any case, at the beginning should already be the consideration, which headwind is expected. Every project will inevitably come into conflict with other projects. So it is important to position yourself so skillfully that these friction points are reduced as early as possible.
BURN RATE, VC AND BUSINESSPLAN
I can also remember an entrepreneur who wanted to start his company in parallel with us. He spent about $ 200,000 a month without earning a penny. That was the burn rate, the amount you have to pay each month if you do not have any sales yet. He told me that he still had money for exactly a month. If he could not do it, it might be over. Everything is there, nothing but debt on the neck. The memories of my crash in the hardware business came over me again. In his place I would be a bundle of nerves – but he was quite relaxed. He sat there and told me that they would manage anyway. This colleague was Chad Hurley. His company received further funding and was sold to Google six months later under the name Youtube for $ 1.3 billion. Hurley is still CEO of Youtube today.
Here are also the different mentalities between Americans and most Europeans. For the Americans, it is not a big problem to fail. You just start again with the next project. An Austrian, for example, would panic in the same situation, go bankrupt and be branded forever.
What can one learn from the case of Chad Hurley? The risk of being undercapitalised is always very high. Most projects do not fail because the idea was not good. Most projects fail because they are undercapitalized. After the financial market crisis, especially after the Lehman bankruptcy, there was virtually no money for a year. Every start-up company that depended on the next round of financing had to lock up at that time. That means you can just be unlucky. In addition, the timing is also extremely important. But you should also realize that you can not start up a large Internet project with 1 to 2 million dollars in the rule. Also in the first phase we got 3 million from Sequoia, then another 5 million. The advantage was that we had a very prominent initial investor, so other investors ran for us for the follow-up financing the door. With the 8 million we managed to become so strong that another round of financing followed with 20 million. With about 30 million, we made the breakeven point, then put in another 3 million in, so in total we needed 33 million dollars. But we really needed that amount. With less money, the project would hardly have been possible in this quality.
The assessment of the required capital is a difficult topic. Common for large Internet projects is a so-called A-round with 2 to 3 million dollars. But at this point you have to be successful. It is also practice to sell 40% of the company in the A round. A B round is then already at a good 30 – 40 million dollars, a C round is 100 to 150 million dollars.
Where should so much money come from? You can not go to a bank with an Internet project, you will not get any money here. On the one hand not in this dimension, on the other hand, the bank can not judge the business model, this is not their business. It is the business of venture capital funds to make such companies successful. What you have to do as a company founder right from the start is to research the best and most suitable funds. You look closely at the portfolio of the fund, look at which customers and other investments it has. There should definitely be synergies in the portfolio. For example, if you write software for compressing data, there should be no rival companies in your portfolio-ideally, they should be potential customers or production or distribution partners. Once the fund is found, you look for the right partner and contact him with the idea. Of course, this must be done very early, months before the actual financial requirements are met.
If the idea is good and well prepared, if a prototype has been created and successfully tested with family, friends or business angels, the VC managers take only about half an hour to an hour to deal with the idea. In this phase you should not act aggressively, but rather understand it as a coaching conversation. These people do nothing more than constantly look at business models and know very well what works and what does not work on the market. The inputs that you receive in such a conversation are extremely valuable for your own company.
Classic business plans over 1 to 3 years with sales forecasts, as they are common in Europe, there is not the VC funds. If you have not even finished the product, you can hardly know what the company looks like in 3 years. We ourselves could not guess at the beginning that we would mutate from the video telephony adopter to the telephony platform.
Common to VC funds are compact 90-day plans. This is a manageable period in which you can make a difference and is also well-suited for start-up company management. Here you can define reliable milestones, clarify what you want to create in marketing, product development or sales. Including all operational activities such as appointments with partners and consultants, ie detailed breakdowns in the form of concrete tasks. After 3 months, you then sit back together, comparing the requirements with the actual achievements. Above that is a rough one-year strategic model with the estimated costs – but not the sales. If you continue to grow, this 90-day model can also be converted into a bonus model for employees. Each employee defines what he can do in the next 90 days. When he reaches his goals, he receives a bonus, e.g. 80% of the achieved performance with 80% of the bonus. There is nothing under it. But you can also overperform: At 120% there are whopping 120% of the agreed bonus.
This model has proven very successful. In many companies, these models are only used in sales because they are particularly easy to calculate. Above all, however, in a development phase of a company equally good incentive systems can be introduced. The prerequisite is always that the performance is measurable. This also applies to lower staff levels, for example when it comes to the number of inquiries. As the company continues to grow, divisional managers will agree and review additional plans for employees on an additional level based on their negotiated plans. In order to keep track, it is advisable to discuss the course and the situation with the divisional managers one day a week. The rest of the time can be fully invested in the development of the project and later in the sales activities, thereby relieving the burden on the management and reducing the effort to a minimum. Especially the sales phase is extremely time-consuming for the top management. At this point in time, the operating business must already run by itself.
How should one prepare for such a conversation? There is no universal rule here. Some VC managers have checklists that they go through. Others look at your person very closely, such as how expensive your shoes are. If you have leaked rubber titrators around $ 40, that’s not good. But even the 800-dollar welted custom-made shoes are not necessarily good. The expectation goes in the direction of Entrepreneur – a person who is hungry to make a difference and on the other hand also has the know-how, for example from a technical point of view. A sense of self-confidence is also required to present rhetorical skills, the ability to present, to convince, to defend his idea. It must succeed to put his idea in two clear sentences in a nutshell. You also have to face all the others, like the customers or employees. Classic, introverted programmers or extreme freaks are no longer in demand here. They can be an ideal complement to the team, but for this job you need a strong frontman, a true entrepreneurial personality.
After the first conversation, reference checks are performed immediately, for example, the VC managers immediately call business partners of the startup, ask how the collaboration has worked. From appearance, the idea and many small impressions and information created as a profile of the company founder.
If you succeed in finding the right VC fund in the start-up phase, you can establish contact from the very beginning and establish a solid basis of trust. You can constantly exchange information, get feedback, and tune your direction. In most cases, it is highly appreciated when VC managers are involved. This also creates an emotional bond between the VC and the project until it is ready and the A round is just around the corner.
Here every VC manager wants to hedge and attracts a colleague. You always have to deal with 2 partners. One alone will not decide, now you have to focus on 2 partners. There is no point in wasting time with any other staff of the Fund. Each VC usually has its partner meeting on Monday, where the new deals are put on the table. If both say ok, we will do it, it will also be funded. It was a bit more complicated with Jajah because we were the first overseas project – all partners in the VC fund had to agree.
These partners are also to judge exactly with regard to their intention: Is he already crazy spoiled by success, or is he still hungry. Better is a partner who is hungry, who also wants to pull a really big fish ashore. Here you can see that the partners within the fund are competing against each other. One can compare this process with a strategic campaign. None of the VC managers wants to miss a good deal. Just as you work out a plan on how to get to the customers you also need a plan how to get your money. It must be found the partner who drives the value of the deal in the final phase by heating up the internal competition.
An important aspect is also the creation of a balanced balance of power. We were completely dominated by Sequoia in the first phase. That has its good sides. A technically highly specific, successful fund like Sequoia wants to dominate in principle, he wants to control the company positively and on the basis of his experience. Above all, it is extremely active in the first phase when the company is formed and only then in phase again when the company is sold. In between, little input is expected. But having just one fund also has disadvantages. Conflicts of interest can arise, and this was the case with Jajah at the beginning. The principle is that the fund has, for example, over $ 200 million being serviced by the partner. If he has the chance to sell the company at an amount that refinances the fund, he will not run the risk of growing the company even if it has the potential and much more money Deal would be. So if these VCs want to sell then you have to sell too. If you want or not. In our case that happened. We wanted to buy more competitors and bring the company to billions. This strategy seemed too risky for Sequoia.
If you have another VC partner on board, who has already made three exits with billions, he will say for sure, OK, we’ll make the company even bigger. Google, for example, had chosen the best two funds: Sequoia and Kleiner Perkins. Here a good form of balance could be achieved. As a rule, this is a better constellation. This can be an A-round with a financing for a whole year to bring about and then for quite a while do not worry about the money. You do not have to focus on the business if you’re constantly forced to run around and look for financiers.
If you have done a good job in the A and B round, you can choose your partner at the C round. In any case, the C round must be planned in good time, not only when you run out of money and you are under pressure – that’s what the VC funds are feeling and they are taking advantage of the weakened bargaining position. We flew to Barcelona in the course of the C round, to a VC conference and have simply invited all interested parties every hour, presented at all. Then we could choose the fund partners according to their wishes or strategic added value. In the specific case were the telecommunications company, but also chip manufacturer Intel – with the ulterior motive that the telephony would come on the chip in the future. This has not happened yet. At this conference, we managed to earn $ 20 million and 140 million reviews.
At this stage it is important that the project is not already exhausted. It still has to be hot. That means you can not talk to too many partners. Under no circumstances should you be desperate. As with any Dating then certainly nothing.
LOANS, SHARES, CONTROLLING
In the US, there are interesting mechanisms such as double equity: Assuming that a venture capitalist lets $ 3 million loose in the A round, one can immediately go to specialized double-equity funds and negotiate for another 2 to 3 million. This is a loan that is secured only with company shares. So you already have 6 million in one fell swoop. There are also so-called asset credits if you need a lot of hardware or machinery. It is important to get the stamp from a first prominent investor. This makes you creditworthy for other investors.
How do you evaluate the company shares that are being negotiated at all stages? There are very widespread mechanisms in the Anglo-Saxon area. The rating itself is secondary. It’s about clauses like the liquidation preference. Without this, no financier will extricate anything. A fair liquidation preference is 1x, one x. For example, one sells his company for $ 100 million. Previously, 10 million have been paid by the fund. At 1x the 10 million go back to the fund and the 90 million profit is divided into shares. But beware: There are also very sneaky VC funds. At times of economic crisis, I have seen liquidation preferences up to 6x, with interest of 10%, quite small at the end of the contract. In the same example, this means that for the 10 million, 60 million plus 10% interest must be repaid per annum. So as an entrepreneur you have to be very careful not to fall into any of these traps. With such conditions, it is no longer worthwhile to continue working at all.
There are two different categories of stocks. As an entrepreneur, you only get common stock, ie normal shares. Investors always receive preference shares, ie preferred stock with special voting rights, liquidation preference, majority rules with which one can be blocked, for example by want to start another business.
An important distinction is that in pre- and post-money. Again, the mostly young and inexperienced entrepreneurs like to be led around by the nose. Pre means the value of the company at the beginning, post so the value afterwards. For example, if 3 million are paid by the fund, it makes a big difference if the valuation is 4 million pre- or 4 million post-money. 4 million pre-money would be a fair deal, which would mean 4 plus 3 million, so in total 7 million company value. 3 million belong to the VC fund, ie about 43%. If it had 4 million post-money, only 1 million would be pre-money and the fund would own 75% of your company.
For the contracts, you should first learn the jargon in addition to fluent English and always hire a lawyer. These do not have to be the most expensive, there are also good small, affordable law firms. Usually, the contract from the A round in the B and C round is continued and not changed on a large scale. However, there are prominent cases of failure: for example, Eduardo Saverin, co-founder of Facebook. He signed a contract and celebrated hilariously all night. It was not until the next day that he realized he was holding only 0.8% instead of 30% of the company. So you should trust only a good lawyer, who also reads the fine print.
A major cost factor for any startup is time. We had excellent technicians and programmers who could ultimately complete everything in a period of 3 weeks before or after the planning goal. This corresponds to a framework with which one can count in this industry and which one must first calculate. So you can keep the costs reasonably under control. However, that does not always succeed. Also mistakes have happened to us, cost traps lurk everywhere. In one phase, we offered free calls to increase our brand awareness. In fact, that talked fast. In a few minutes, people had already phoned out a quarter of a million dollars, fortunately we were able to stop that in time. If you do not pay attention here, you can ruin yourself. The constant control of all cost centers is top priority. Even if you get a high financing commitment and think that you now have a secure cushion, you should still lose track of the moment.
THE 4 MAIN MISTAKES
The biggest mistake, as discussed earlier, is that you are undercapitalized. If the capitalization does not succeed, it is best to ask two questions at the beginning: Either the idea is bad or you are not an entrepreneur and therefore can not manage to raise the money. If this case exists, you will not succeed later. Then it is better to look for a job.
The second mistake is that you are a perfectionist and have developed too long. Anyone who messes about forever and three days and never gets done, will certainly run out of money. This shortcoming can be counterbalanced by finding a partner to complement, having strong management skills and always keeping track of what is important and distinguishing between the important and the unimportant.
The third mistake is to try to launch an idea too soon. The idea may be good, but to bridge the time until the market is ripe for the idea, no one holds through, at most a large corporation, which can prepare the market with a lot of money. As a startup, you have to produce something that people need today, not just in 10 years. There are many visionaries, but very few are getting rich. Test the ideas best on a representative, small market.
The fourth mistake is the overcomplexity of the products. They are not simple enough from the point of view of consumers. Simplicity is an important factor in being accepted in the marketplace. Simplicity is a question of holistic product design, from the external appearance through the user interface to functionality. The appearance and ease of use are the most important. So rather less functions, but this neatly designed. Again, the feedback from the test market, experts and partners helps.
LEADERSHIP, SPIRIT, STYLE
Before you go to the investor talk, it is worthwhile, once in the circle of friends -. to be tasted by a friendly banker. With each conversation you will continue to learn. Of course, personal appearance always plays a decisive role. The investor asks himself the fundamental question of whether the young founder is capable of building up a company in the millions of dollars and a 3-digit number of employees. This requires a strong entrepreneurial personality, absolutely reliable, confident, not arrogant, sympathetic but not too nice. You have to be aware of this personality image and consistently communicate it to the outside world. Of course, ultimately, it must also be authentic, grounded in the actual abilities and capabilities of that person. Too many people believe that they can become entrepreneurs, embrace those skills. But not everyone can learn that. You have to bring along the most important qualities yourself, you can compensate for the weaknesses by taking the right partners on board. It’s better than fooling around on its weaknesses forever, you’ll never get really good at it anyway. Practice has shown that teams of 3 entrepreneurs are best suited to bring about something big. They should complement each other well, for example, the technician, the other the commercial manager and one brings the ideas. Google with only 2 people or Facebook, which was built by Zuckerberg alone, are the exception. If you work on your own future story, you should not only look at these singular exceptions, but go a little more broad and also look at the countless successful startups, which were sold in the order of $ 50 million. That too is a great achievement.
I’ve never met a businessman who did not succeed if he really wanted to. It usually takes several attempts, but if one has a basic intelligence and entrepreneurial personality, has the economic skills, knows how to finance, and has a good idea, from whatever source, he will succeed, if successful want. If you invest all your energy into the project, sooner or later it will work. Those who do not often do not bring certain readiness with them. You may be too comfortable or unwilling to move on to the project, leaving everything else behind. If, on the other hand, every cell of the body is aligned with the target and you absolutely want it, it is only a matter of time before the right grain falls on fertile ground and begins to grow.
CLEANING THE HOUSE
No matter how much you as a startup look to save costs and not invest too much, over time a certain amount of negligence creeps in again and again. At least once a year it is therefore absolutely necessary to sit down together and put everything out properly. Travel costs, credit card statements and all sorts of small bills add up, quickly $ 20,000 are spent on things you do not actually need. Not only on the part of the employees, even as an entrepreneur, one often overlooks the fact that an issue is not really necessary in everyday life. Of course, that also applies to the workforce. I know very radical CEOs who assume that once a year, a quarter of the workforce has to be mined – the business would go on just as well without them. Although fraught with conflict and resentment, it is an important aspect, especially when there is no more clarity: there are employees in every major organization who, although very well staged, but generate little output. When such a showman is gone, nothing changes at all. Then there are the invisible, who hardly notice when they come into the office in the morning, do not make a sound all day, but do great things and are indispensable. It is the art of the entrepreneur to be able to make this distinction, for which one must develop an eye. It is also important not to be afraid to exchange employees. Such employees will not be really happy in their function and are probably better off. At the beginning of Jajah we had hired and changed a lot of people until the team was perfect. As a rule of thumb, someone who is not there after 6 months of training where he should go is no longer able to get there. Incidentally, the fact that not every employee brings his own performance is also budgeted. These over 6 months spent costs are therefore also estimated and calculated. Nobody can only find good employees. But almost all forgot to consider this circumstance financially. Not to mention, it also delays the launch, each month after one month means additional costs and a loss of expected sales.
How can I, as a supervisor, find out what’s really going on in my business? Of course there are targets, the business theory provides a whole lot of control tools. However, these numbers are not suitable for all areas and are not always suitable for shorter measurement intervals. Interestingly enough, employees usually know each other very well who is really committed and does a good job – and who only has the big mouth and basically hardly gets anything done. What helped us a lot to get a good picture about our team was the private contact beyond the scope of the work. We went with the teams in the evening for a few drinks. In this relaxed, informal setting, our people then told everything. For example, we had a Mochito day where everyone loved to be there. The next day we knew again what’s going on in the company. Of course, this only works up to a certain company size, then you can do it only with the board and managers of each area. The 90-day plans are in addition to the activation effect a good corrective to all this informal information, which of course can also be distorted and supported by personal resentment. So a balance has to be established between these sources and between the forces within the company.
I got to know a partner company where the targets were lived even more consistently. Each employee was able to set his own ambitious goals and set some of his salary as if he wagered on them. This is a risk for both sides. The consequence of this, however, is that the employee purposefully delivers a high level of performance, develops an entrepreneurial attitude to the job, assumes personal responsibility and also enjoys it.
EXPERTS AND NETWORKS
Immediately after signing the contract with Sequoia, we started to set up an expert advisory board. Basically, these are always top-class industrial specialists who have crucial know-how for their own project. The Americans call the Advisory Board – this is of course not an official, long-term function as with a CEO or an institution, but a purely advisory. However, a contract is concluded, not against payment, but against shares. Typically, the expert will agree to help with info, contacts, or ideas – for which he will receive stock options of the company, on average 0.25%. depending on the high caliber up to 0.5%, he is less prominent, the lower limit is about 0.1%.
For example, we had Guy Kawasaki on the Advisory Board, a former Apple Evangelist and author of many books – the next section is followed by a short portrait of Guy. He had a tremendous fan base and a strong blog where he introduced our project. As in this example, we got specialists from every area, e.g. from the fields of law and finance. Renowned people, even if they are not known around the world. In every industry there are these people, often they are no longer active. Those who are still fully in business, find usually no time for such a function. It depends on who you want to have. If you want Larry Ellison, it’s going to be difficult, and he’s hard to come by as the active CEO of Oracle. But there are industry veterans who are eager to pass on their knowledge and experience, such as Tim Berners-Lee, the inventor of the Internet, or eBay founder Pierre Omidyar, who has dropped out of operations.
One point, however, is to be considered: one should think beforehand, in which league you want. Is it the league in which Microsoft plays – even Bill Gates is on some advisory boards – gets the young startup the Microsoft stamp. This can either be very helpful – or a major obstacle. If the startup wants to Sell to Google, it has no chance in this case, Google is nemesis of Microsoft. So you have to think in advance which future sales scenarios or partnerships you want to aim for and which strategic impact you can achieve with your experts.
How do you get to these people? A big step is to have a strong venture capital fund, which opens the doors to the future, and of course, is keen to boost performance at all costs. We got an intro from Sequoia in just 2 days so we could talk to some important people in the café. It is then up to the entrepreneurs to inspire these experts with their idea and to encourage further advice in the advisory board. We also got some people cold, we wrote them on LinkedIn, introduced ourselves as startup entrepreneurs, and managed to get appointments.
Networking is therefore the most important activity outside the company. Of course, finding key people is easier when you’re in Silicon Valley. There you will find these IT-Grands practically on your doorstep – you know each other and know how to approach the right people. In Austria, for example, you will perhaps only find a total of 3 such persons.
Networking should be systematic. In Silicon Valley, these are the events that you have to visit consistently. For the purpose of networking, events are organized here quite casually, such as the Churchill Club or the Stirr Mixer: these are weekly events in a bar where startups meet and present their projects. Subsequently, they discuss with each other, different information is exchanged. For example, if you are looking for a CTO, ie a technical director, you have a good chance of finding the right one there. By no means can one occupy such a position with any inexperienced, purely technically qualified technician. The people at these events are incredibly open and open-minded. While you tend to sit around in Europe and everyone tries to cook your own soup, everyone there is actively trying to help everyone, communicating, sharing their knowledge and experience.
Some of these events are sponsored by the VCs, here you have the opportunity to go to capital search. Others are organized by the lawfirms, so the lawyers, here you can get help in legal matters and looking for the right partner. You have to visit these events, preferably with a stack of business cards, then you should immediately connect via LinkedIn, preferably with a personal note, otherwise it may be that the other no longer knows who you are: We have today at the Stirr -Mixer hit, find your idea very well and would like to push this further.
It has proven useful to create a list with these people, to carry out an appointment management so as not to let anyone forget, to keep writing an e-mail and to build up an effective network.
In addition, there are also industry-specific events – but they are so big that you as a startup hardly have a chance to get to the right people. For example, if you’re developing a consumer electronics product and driving to consumer electronics in Las Vegas, you’re going under all the big ones. So better to visit the small events with 40 to 50 people, there you will find the right experts and also be heard, these events are perfect for networking.
There are also some interesting events in Europe – for example the Digital Life Design (DLD) conference of the Burda media group in Munich, which, however, has already reached a critical size or Le Web in Paris. In these big events you can refresh existing contacts well, to make new contacts, they are rather not suitable.
You should start networking right from the beginning, not just when the product has matured. You get a lot of productive input and you do not have to worry about the idea being stolen here. You have to put off this fear, the inputs are much more valuable and weigh more than the low risk of being copied through one of these events. These people all have ideas that they want to develop further. This open, unconditional exchange works especially in the US, in Europe one tends, as already mentioned, to hide and not let anything leak to the outside – and often overlooks essential things. Allergies do not work in all cultures. In Asia such an open communication would be really dangerous, here copying is part of the culture and in no way offensive. There, it would actually happen that one’s own idea is immediately taken up by someone else and implemented in the shortest possible time, even if not in the planned quality.
As already discussed in detail, it is particularly important that all employees are committed to the common cause right from the start. A very important help in this is to make current events in the company transparent to everyone. Anyone who has ever worked in a larger organization knows how demotivating it is to feel that all decisions are made behind the backs of employees, that they are not informed in advance, that they are not involved, no opinion can deliver. So you do not seem to be important. At some point one whistles to the management level, the commitment is reduced to a minimum, it enters a state of internal dismissal. In the morning, breakfast is served for a long time in the office and read online, followed by an extended lunch break, in the afternoon you surf on your own – holiday booking, new car – on the Internet and at 5 o’clock in the afternoon you go home.
This flow of information is therefore an essential factor for motivation, commitment and goal-oriented performance, and ultimately for the well-being of the entire team. How can you keep your people up to date? We had developed a so-called cockpit, which showed the current status: How many new users per second, the current sales, where are we in which publications – this current information was always projected large in the office on the wall. Technically it was a small website where all data was merged. Every employee could also access this website at home. This cockpit was extremely important for motivation in the team. For example, when the marketing team sent out a press release and then a message came on TV, everyone sat closed in front of the cockpit and looked at it, happy about the success and then watch the huge increase in traffic. This creates a feeling, as when pulling together on a rope, all power goes in a common direction.
Every startup entrepreneur has to ask himself the question of whether he will eventually sell and withdraw completely, or whether he wants to continue working in his role. Basically, the managing directors are bound by the VC contracts to the company, otherwise they can not be sold. The management team has the most expertise and the most know-how. The entrepreneurs must therefore live by contract and die for their company. An exit is only possible if the company has been built in such a way that one eventually becomes superfluous: high motivation at all levels, self-responsibility of the divisional managers, transfer of all relevant knowledge.
But you also have to want that. Many CEOs feel a sense of power when they are the sole owners of certain knowledge, only they maintain the important stakeholder contacts. They feel indispensable, want to have a say in every decision. In fact, everything runs together with them, they are overwhelmed with reports, phone calls and e-mails. Nothing works without me here! This state is then retained. Often a business life long.
Therefore one should ask oneself as early as possible the question, which type one is. Is it the entrepreneur, who enjoys creating an idea, designing it, shaping a company, and raising it to 150 employees? For me, this is the most exciting task. From this size, in the phase of further expansion from 150 to 200 people, the task area changes completely. It’s like steering a big tanker that just lazily changes course. For the tanker captain-type entrepreneur, it’s probably a nice feeling to be high on the bridge of his ocean liner year in, year out.
So everyone has to decide for themselves which function is best for him.
KAWASAKI, MORITZ, ELLISON
Guy Kawasaki, born in Hawaii in 1954, grew up in a rugged neighborhood called the Kalihi Valley. He made it to the elite university, graduated in Stanford in 1976 from his psychology studies and still attached a law degree to it. About his Stanford colleagues Mike Boich, also famous Apple Evangelist Guy came to Apple. As Marketing Manager of the Macintosh, he contributed in the years 1984 to 1988 significantly to the rise of Apple. As a member of our advisory board we owe him part of our success with Jajah.
In recent lectures, Guy Kawasaki gives a lecture on the following 11 theses, which provide tips for founders as well as experienced managers:
- Make Meaning: Making money should not be a priority. It’s better to focus on creating something meaningful.
- Make Mantra: Instead of a ellen-long, generic corporate mission statement rather formulate a short but succinct mantra that describes the basic values of the company in a maximum of three words.
- Jump to the next curve: Being able to look beyond one’s own nose and jump over one’s own shadow is of great importance for long-term success.
- Roll the DICE
- Deep: A product needs depth; Features that go beyond the usual.
- Intelligent: Consumers should realize that they have really thought.
- Complete: Great products simply feel complete.
- Elegant: Design is not an insignificant factor for success.
- Do not worry, be crappy: If you always wait until something is perfect, you can miss good opportunities.
- Let a hundred flowers blossom: No matter how well you’ve done market research, it can always be that the product mainly arrives well outside the intended target audience. It is important to take advantage of this situation and not fight it.
- Polarize people: You can never please everyone. Better to serve a small, loyal fan base than to offer the crowd something mediocre.
- Churn, baby, churn: You should always have the will to improve yourself and the product. Absolutely listen to ideas and suggestions of the consumers.
- Niche Thyself: The more unique the product or service and the greater the added value for the customer, the higher the chances of success.
- Follow the 10 20 30 rule: Absolutely learn to present! The 10-20-30 rule means: 10 slides, 20 minutes, 30 point font size.
- Do not let the boos grind you down: Just do not let the pessimists and flat heads pull you down.
Mike Moritz is the so-called crown prince of Sequoia, he discovered Google, Yahoo and Youtube and brought them all the way up. He is a brilliant mind, was originally a historian and time-journalist, later career changer in the venture capital business and was voted one of the 50 most influential Americans. He is a bizarre appearance. He came to our office wearing violet trousers, his shirt only in the front, he had forgotten it in the back, his hair disheveled and his glasses slanted over his face. He does not care. Even for the US, where everything is a bit more casual, it is an unusual phenomenon – genius and madness are close together here. He is also very eccentric for a venture capitalist. Typically, the VCs enter the business with the goal of reselling as fast as possible and with as high a profit as possible. Very different Mike Moritz. He would prefer not to sell at all. He prefers real long-term investments that eventually go public, building strong, large companies. He is always on a longer journey behind the company. Maybe this very characteristic has made him and his companies so successful. Google should have been sold ten times, successfully resisted with the help of Mike Moritz and became what it is today.
Larry Ellison, the founder and CEO of Oracle is one of the most successful Internet entrepreneurs of all time, currently ranked # 6 of the richest men in the world, in 2000 he was # 1 ahead of Bill Gates. He is always in a good mood – but a very unusual guy, always totally focused on some thing. When he walks through a mall, everyone else has to dodge because he does not even notice people. On the other hand, he has a very engaging demeanor, is a notorious playboy, fanatic sailor, and privately flies a fighter jet when he’s not on one of the largest private yachts in the world. At his last wedding, he wanted Steven Jobs as a photographer – and he even agreed. With his unusual nature, he is now also used at Stanford University as a study object. In any case, he is highly successful in his own way, even though he is not a role model for many with his eccentric nature and many also can not imagine working with him. It is also always a question of the type of entrepreneur, who wants to be one yourself and who is looking for a cooperation partner.
First, we were happy about the great sales. Only then did we realize that many of these sales are lazy.
Everyone knows that credit cards are used on the Internet. Everyone also knows that one or the other time credit cards are stolen and then the numbers on the Internet are used for fraudulent purposes. But hardly anyone knows that the damage caused by card fraud on the Internet is $ 200 billion. As much as the total power consumption of the US. So it is only the payment traffic on the Internet a gigantic global problem.
Basically, there are two different types of credit card transactions. The first is called card present, you go into the shop and pull the card through. The unproblematic variant, the map is on site. For example, you have a pizza shop, set up your credit card terminal there and the guests can pay conveniently. If someone with a stolen card pays, which is very rare, you get your money back from Visa or Mastercard.
It looks different online: card not present. Like all the other major internet providers, we at Jajah had never really seen or held a credit card from our customers. We did not know if the customer was actually the authorized holder of the card data. The fraud risk was with us: If someone had paid with a stolen card, we had to pay back the money back to the credit card company. Not content with that, we and everyone else had to pay a kind of $ 40 toll back charge fee for this extra transaction, which was of course also costly for Mastercard or Visa. But that’s not enough of the inconvenience: if the number of chargebacks exceeds a certain amount, an additional fine is imposed – up to the complete exclusion of this kind of credit card transactions, for some Internet companies that means ruin – because the fraudsters are extremely successful.
There are criminal organizations that are technologically extremely sophisticated and specialized. They have managed to obtain tens of thousands of credit card information through a variety of illegal channels. They have everything from their victims: the credit card number, the CVV code from the back of the card, the billing address – everything to buy and pay with. And above all, they are constantly looking for new ways to get cash from this credit card information. They prefer to choose virtual commodities. These are things that everyone needs such as airlines, hotels – or the telephony. You load e.g. One hundred dollars on a Jajah account. Then they sell the $ 10 sign-up on the street – it’s a profitable business for everyone: one earning $ 10 per login, the other earning $ 10 for a $ 100 phone call. This is also the reason why these cards can be used cheaper than directly over Jajah.
By conventional means one can not fend off this fraud. Typically, you invest 15% of your revenue in teams that check each order, analyze customer behavior, and identify typical criminal patterns. 15% of the revenue is a damn lot of money. And yet you still have high chargeback rates. Yahoo had 8% before the Jajah takeover and Microsoft a whopping 12%. All in all, these billion-dollar companies have lost a third of their turnover. Until they came in contact with us.
The Jajah chargeback rates were sensational 0.2%. By joining with us, for many, as well as for Yahoo and Microsoft, the business suddenly became profitable again. Our trick was simple, but extremely effective: we knew that these criminal organizations had tens of thousands of different credit card information. What they did not have were the associated phone numbers. But you need to call. These trumps played us these gangsters but with each telephone call in the bag.
So we connected the credit card information with the phone number. There were 3 credit cards per phone number. For the development and programming of this function, we hired a highly qualified Israeli team. They developed a system based on artificial intelligence. This system scanned our database and analyzed the behavior of the fraudsters. If suspicious new business cases were discovered, we were able to block them in the first step and not immediately forward them to Visa or Mastercard. In the second step, we examined the case personally. If it was a cheater, it was simply turned off. With the combination of these two methods, we reached the extremely low rate of only 0.2% – 60 times lower than the 12% of Microsoft Messenger. Thus, we had built up the highest level of competence in the payment area at that time. And we knew the cheaters.
With our detected information, we came across an internationally highly successful gang of 30 swindlers operating from Pakistan. Extremely professional people who constantly changed their identity. We passed our evidence to all relevant authorities. Then we passed it on to the credit card companies. But nothing happened. Because we and all other vendors carried the risk, which does not matter to everyone.
Without our knowledge, our dedicated Israeli team tried to act on their own. They flew to Pakistan to track down the fraudsters and catch them in the act. But they had already got wind of the matter, had disappeared without a trace and continued their business from another base.
This case shows that conventional methods of law enforcement on the Internet are largely unusable. It is rather to prevent the fraud with all means in advance. This competence in the payment sector proved to be the key to a new entrepreneurial future: Jumio & 42