In this episode, Start it @KBC community manager Magali De Reu explores the impact of capital funding on a startup with two experts. What happens next? What are the new challenges and pitfalls? Magali asked Koen Schrever and Peter-Jan Brone. Koen combines his job as CEO of Bolero Crowdfunding with his responsibilities towards the KBC Start it Fund, while Peter is a blockchain developer at the successful blockchain startup SettleMint.
Subscribe to the Start it @KBC podcast now and don’t miss a single episode! Listen on soundcloud or check out our Anchor profile where you can subscribe to different channels (Apple podcast, overcast, ...)
Peter-Jan, how did funding affect your startup? Can you tell us about the steps that SettleMint took right after it raised seed capital?
Brone: One of the first things we did, was focus on the product. We have a core technology called Mint and we made sure that we fully developed it, so that it could be taken into production and we could start bringing in cash. The second thing we did was focus on sales channels in the Middle East. It took a lot of effort and time to get a foot in the door, to achieve local presences there. We also spent a lot of time on the development of the product and time on the road, basically.
Were there any challenges during that process?
Brone: One of the main challenges was sticking to our roadmap. In order to receive an initial investment, you have to be fully prepared to face the investors and draw them a fully-fledged roadmap. It’s hard not to get too excited and go on a hiring spree, but stay focused on the product and nail that down.
Koen, what are the most common mistakes or pitfalls for startups that just raised money?
Schrever: Startups are very optimistic in the beginning. But what often happens, is that they have to start hiring people once they have the money. And that doesn’t always go as smooth as they expected. They don’t see the problem, because they assume: “ok, without hiring extra people, we are not getting the revenues we should, but we’re not surpassing our cost budget either.” That’s right, but it means you’re losing time. It’s a common mistake. Very often, you’ll see startups underestimate the importance of hiring the right people straight from the get go, so that they can start generating business. That’s really key to me.
Hire fast and fire fast?
Schrever: Definitely. If you find the right people, hire them immediately. Especially developers and IT profiles are almost impossible to find. That’s really a struggle – not only in Belgium but in the rest of Europe as well. Another key issue is the lack of transparent communication towards all your stakeholders, including your employees, customers and investors. Be as transparent as needed and be optimistic.
How can startups get their priorities straight, after receiving funding? What are the first steps they should be taking?
Schrever: Working as a team is key, of course. Not just the team that’s doing the day-to-day job, but also the investors, pilot customers and so on. Secondly: stay focused. You tend to lose focus when trying to get as much business as you can. But really focusing and getting your priorities in order should be the first thing on your list.
Do you think Belgian startups are doing this the right way now?
Schrever: I think so. But we Belgians have to learn how to better sell and market our products. We are very modest and we try to do a lot of things under the radar. We’re not going to sell a product if we are not 100% sure it works. That’s another common mistake. If you are convinced that you will be able to manage something and build it in time, then sell it. Just sell it. Because you need those paying customers.
Brone: I think what Koen just said is one of the major pitfalls because Belgian startups tend to undersell or undervalue their own product, just to get their brand out there. That’s really dangerous. They start cutting costs or lowering the price of the product. And then you’re stuck, giving away your product for half of the money’s worth.
After funding, hyper growth can be a pitfall too. Startups want to grow faster and faster, eventually burning themselves. How do you believe startups can resist this?
Brone: One thing we do at SettleMint, is only hire out of necessity. Instead of going on a hiring spree we scale up our teams, each at a time. We’re not going to scale up the Development team to 20 people, when Sales can’t keep up. We look at the team that needs new members, and we hire those profiles.
Schrever: You have to look at the weakest spot in your chain and focus on that to take the next step. That doesn’t mean you can’t talk about the next parts of the chain. You can try to sell your product, or even oversell it, but just make sure that you’re also able to develop it.
Brone: Another important thing is keeping a variable cost model. Don’t put all your money in fixed costs, don’t try to scale too quickly. Those fixed costs are fixed. Especially at the beginning of a startup, it’s important to be lean, be able to adjust to anything and change directions. Keeping a variable cost model allows that.
How much time should a startup devote to maintaining the relationships with their investors?
Schrever: There’s one simple answer to that: as little as possible and as much as needed. I think the key thing is trust. If your investor trusts you, you won’t have many issues. They know what you’re doing and if they feel confident that you are open to their remarks, they will help you. On the other hand, if you communicate too little and start losing trust, they can become a pain in the ass.
If problems occur, don’t hide them. Be open about it, your investors will try to help you. If they know what’s going wrong, they will find a solution for the sake of their own money.
How much time does SettleMint devote to maintaining relationship with their investors?
Brone: Those arrangements are made before the investment. You set up a weekly or a monthly call, like discussed beforehand. At SettleMint we have a seed investment from Medici Ventures. My boss Roderik Van de Veer has monthly calls with them. Setting up face to-face meetings is important as well. Just a month ago we were invited to Salt Lake City to do a bitcoin programming course. We got to spend a few days with them. It’s really about gaining trust and over the years maintaining a good relationship.
Final question: do you think you can expand your target markets before raising capital, or should it be done right after?
Brone: If you want to explore new markets and you deem them as valuable, you should always do so. Try to get your foot in the door and try getting a local presence. As soon as you’ve accomplished that, go look for extra seed money. It’s a little of both. It’s always good to get a first feel of the market.
Schrever: Preparation is half of the work. You should always prepare for the next step of your company. But do it on the spots that are most important, whatever they may be. Even if you don’t have the money yet, being prepared is already half of the work. You can develop ideas, start talking to people before you hire them, build up a network with customers and try to get pilot customers on board, even if you don’t have the money. Once you have the funding, you will immediately have the right people on board.
Do you have a question for the Start it @KBC community you want answered in this podcast? Post it in the comments and we might ask them to our guests in the next episode!
This podcast was made possible thanks to our strategic partners – KBC, Telenet, Cronos group, Accenture, Mobile Vikings, Flanders DC, Joyn, Imec and Universiteit Antwerpen.
Subscribe to the Start it @KBC podcast now and don’t miss a single episode! Have you listened to the first 6 episodes? Episode four, about GDPR and data privacy, starred Dimitri Verhelst (Juru) and Tom Van de Putte (Bingli). In episode five, we invited Peter Wellens, ceo of the contextual messaging app Chestnote, to listen to his remarkable startup story. Episode six was all about digital marketing for startups, with Bert Van Wassenhove, managing partner of The CoFoundry and founder of Think with People, and Anneleen Hansen, marketing manager of Apicbase.
As a blockchain developer for SettleMint, Peter-Jan Brone is an expert when it comes to blockchain technology. SettleMint developed Mint middleware, which makes working with blockchain technologies easy for IT teams.