BUSI­NESS

Silicon Luxembourg - - CONTENTS - NASIR ZUBAIRI CEO, LHOFT

How to Scale Your Startup: 3 Key Ar­eas

Ex­pert Busi­ness Ad­vice The Right Sup­port at

The Right Time A Game-chang­ing Part­ner­ship

Regtech & the Dis­rup­tion of Com­pli­ance

ICO!? Comic Strip Se­ries

AT THE LHOFT WE HELP FOUNDERS TURN THEIR IN­NO­VA­TIVE IDEAS INTO STAR­TUPS WITH A TRANS­FOR­MA­TIVE EF­FECT ON THE FI­NAN­CIAL IN­DUS­TRY. WE ALSO HELP ES­TAB­LISHED STAR­TUPS EX­PAND INTO EUROPE AND BEYOND, GROW­ING THEIR REACH AND MAR­KET PEN­E­TRA­TION.

In talk­ing with founders who fall into the lat­ter group (es­tab­lished and ex­pand­ing) we have iden­ti­fied three pri­or­i­ties when at­tempt­ing to scale af­ter find­ing ini­tial trac­tion:

FO­CUS ON THE NUM­BERS MAIN­TAIN STRATE­GIC AGILITY HIRE THE RIGHT PEO­PLE

We con­sulted some lo­cal startup ex­ec­u­tives to share their in­sight and ex­pe­ri­ences in or­der to bet­ter ex­plain these is­sues:

RAOUL MULHEIMS, CO­FOUNDER & CHIEF EX­EC­U­TIVE OF­FI­CER, FINOLOGEE

NI­CO­LAS BUCK, CHIEF EX­EC­U­TIVE OF­FI­CER, SEQVOIA TI­MOTHY NUY, EX­EC­U­TIVE DI­REC­TOR, MYBUCKS, & DAVE VAN NIEK­ERK, CHIEF EX­EC­U­TIVE OF­FI­CER, MYBUCKS

1. FO­CUS ON THE NUM­BERS: KPIS & UNIT ECO­NOM­ICS

One of the more cyn­i­cal com­ments about the dot-com bub­ble was the joke “we lose a lit­tle money on ev­ery cus­tomer, but we make it up on vol­ume.”

This refers to the trend in which 2000era com­pa­nies fo­cused on rapid scale and user ac­qui­si­tion over a sen­si­ble mon­e­ti­za­tion strat­egy. Grow now, worry about profit later. This ap­proach is jus­ti­fied with three as­sump­tions:

1. ECONOMIES OF SCALE OR NEW TECH­NOL­OGY WILL IN­CREASE MAR­GINS FUR­THER DOWN THE LINE

2. OP­TI­MISM ABOUT USER'S LIFE­TIME VALUE

3. RE­LIANCE ON USER AC­QUI­SI­TION GAIN­ING MO­MEN­TUM IN THE FU­TURE & RE­DUC­ING COST

One or more of these as­sump­tions may be true, but it is a mis­take to rely on them with­out a ra­zor-sharp fo­cus on KPIS for ac­qui­si­tion and mar­gins. There needs to be warn­ing signs as early as pos­si­ble if progress is slow rel­a­tive to burn rate and run­way.

“The fact that you have to have full con­trol of rel­e­vant met­rics at all times goes with­out say­ing…in my opin­ion, the CEO has to be the ‘chief num­bers guy,' so he's able to both chal­lenge ev­ery team mem­ber and im­me­di­ately have the right an­swers for in­vestors, clients and part­ners,” Mulheims said.

Sac­ri­fic­ing mar­gins for growth can also ham­per your abil­ity to in­no­vate and adapt. Hav­ing the fi­nan­cial ro­bust­ness to fund any­thing, from a new fea­ture to a com­plete prod­uct pivot, can be the dif­fer­ence be­tween life and death for a startup.

“Our sales cy­cle can be up to 24 months so there is lit­tle room to get it wrong in terms of mar­gins. Also, the in­no­va­tion of to­mor­row needs to be funded by the rev­enue of to­day,” Buck added.

Nuy ex­plained Mybucks prag­matic ap­proach to prof­itabil­ity from the out­set and how that en­abled them to con­tinue de­vel­op­ing and adapting.

“Our fo­cus when we started the busi­ness was to en­sure that we were gen­er­at­ing profit from the on­set. We had a ba­sic busi­ness model, which we im­ple­mented, and then built a prof­itable foun­da­tion. This foun­da­tion en­abled us to raise cap­i­tal, de­velop our tech­nol­ogy fur­ther and grow the busi­ness or­gan­i­cally, in ad­di­tion to cal­cu­lated ge­o­graphic ex­pan­sion and se­lected ac­qui­si­tions,” he said.

2. STRATE­GIC AGILITY: CON­TIN­U­OUS LEARN­ING & ADAP­TA­TION

Mil­i­tary strategist and United States Air Force Colonel John Boyd de­vised a sys­tem to de­fine agility in com­bat op­er­a­tions re­ferred to as the OODA loop: Ob­serve, Ori­ent, De­cide and Act.

This sys­tem has been ap­plied to the startup world for about as long as there have been star­tups and is the pre­cur­sor to much of the logic be­hind The Lean Startup ide­ol­ogy. The loop pre­scribes that af­ter each ac­tion the user re­turns to ob­ser­va­tion to eval­u­ate con­se­quences, and then the process be­gins again.

This ap­proach pre­vents star­tups from in­vest­ing too much time and money into de­vel­op­ment strate­gies that ul­ti­mately aren't achiev­ing the de­sired ef­fect. It is tempt­ing to be­lieve that poor re­sults can be reme­died by dou­bling down on in­vest­ment, but of­ten this is an ex­am­ple of the sunk cost fal­lacy. It's im­por­tant to stay hum­ble, and avoid be­ing pro­tec­tive of your con­cept. Mulheims of­fers two key con­sid­er­a­tions: “First, fo­cus on the prod­uct and in­deed make sure to chal­lenge your strat­egy, your fea­tures, your pric­ing… ba­si­cally all prod­uct in­gre­di­ents at all times. Se­condly, don't al­ways go by the ‘How to Build my Startup' book. You have to take some short­cuts, make ed­u­cated guesses, trust your gut feel­ing, oth­er­wise you'll be too slow. Chal­lenge your strat­egy with a few peo­ple that you trust, ei­ther for their knowl­edge of the in­dus­try you're in or their solid back­ground in prod­uct build­ing.”

This is par­tic­u­larly rel­e­vant to the world of fi­nan­cial tech­nol­ogy where the speed of in­no­va­tion is not only driven by the multi-di­rec­tional evo­lu­tion of tech­nolo­gies, but also by rapidly chang­ing cus­tomer ex­pec­ta­tions and im­pend­ing reg­u­la­tory re­quire­ments. As men­tioned in re­la­tion to track­ing unit eco­nom­ics, this can make early prof­itabil­ity vi­tal in cov­er­ing un­fore­seen costs re­lated to de­vel­op­ment changes.

“Be­ing a fin­tech, the en­vi­ron­ment in which Mybucks op­er­ates is ex­tremely fast­paced and dy­namic. With new in­no­va­tive fi­nan­cial tech­nol­ogy be­ing re­leased on an al­most daily ba­sis and ever-chang­ing reg­u­la­tion in its mar­ket, Mybucks can­not af­ford to be slow in re­spond­ing to these con­di­tions. Hence, to re­main rel­e­vant and com­pet­i­tive, flex­i­bil­ity at Mybucks is core across the board,” Van Niek­erk added.

On the flip side of the coin, Buck warns about the risk of over-en­thu­si­as­tic agility dis­tract­ing from long-term goals and prod­uct roadmaps: “Ap­ply­ing great tech­nol­ogy to a busi­ness model takes time. Flex­i­bil­ity is a word that cuts both ways. It is both nec­es­sary and im­por­tant to keep cus­tomers in the loop in terms of prod­uct de­vel­op­ment, but the big pic­ture and the road ahead is very much about con­vic­tion. So no de­fin­i­tive an­swer on that one.”

3. HIRE THE RIGHT PEO­PLE, TREAT THEM WELL & OF­FER SMART IN­CEN­TIVES

In­dus­try mag­a­zine Busi­ness In­sider cu­rated in­sights from 28 top CEOS about their hir­ing prac­tices. Broad themes in­cluded the re­cruit­ment of nat­u­ral op­ti­mists who will be able stay pos­i­tive dur­ing chal­leng­ing times; the im­por­tance of proac­tive at­ti­tudes; and valu­ing raw ma­te­ri­als rather than ex­per­tise. Hir­ing for fin­techs brings its own set of chal­lenges. What kind of bal­ance do you want to strike be­tween tra­di­tional fi­nan­cial ex­per­tise and en­tre­pre­neur­ial in­no­va­tors? Do you want cre­ative risk tak­ers or crit­i­cal thinkers who know reg­u­la­tion in­side and out?

Pas­sion, not just for the in­dus­try, but for the spe­cific project it­self is also very high on the list of de­sir­able traits, in fact it's at the top of the list for Mulheims: “The first thing [we look for] is that they re­ally want to work with us. Not just the in­dus­try or in any ran­dom startup com­pany, but they should have a good idea of what they will get into, and show some true in­ter­est for what we're do­ing. The se­cond check we ap­ply is ac­tu­ally a pretty clas­sic one: peo­ple we hire have to have a truly solid skillset.”

Van Niek­erk de­scribes how their hir­ing prac­tices en­sure that the right peo­ple are put into the right roles, mak­ing the best use of their back­grounds: “We em­ploy ‘in­dus­try mav­er­icks' in our tech­nol­ogy, cre­ative and lead­er­ship roles, and we place the ‘con­ser­va­tive thinkers' in our gov­er­nance, risk and com­pli­ance roles. This bal­ance en­ables us to meet reg­u­la­tory stan­dards and at the same time be in­no­va­tive, agile and a cat­a­lyst for dig­i­tal fi­nan­cial in­clu­sion.”

Of course, hu­man re­sources isn't just about hir­ing. It's about en­sur­ing your em­ploy­ees are in the most com­fort­able and pro­duc­tive en­vi­ron­ment. We al­ready men­tioned the two ends of the spec­trum found in fin­tech: en­trepreneurs ap­ply­ing tech­ni­cal in­no­va­tion to rein­vent old so­lu­tions and fi­nan­cial vet­er­ans with an in­ti­mate knowl­edge of the sec­tor and its op­por­tu­ni­ties. Buck high­lights the need to make sure those groups share knowl­edge and un­der­stand the other's prob­lems: “For us as a regtech in the funds space, we need to get the mix right – in­dus­try pro­fes­sion­als and great techies – and we need them to share and work to­gether. I think that is prob­a­bly the big­gest chal­lenge – to get the flow of ex­per­tise in the dif­fer­ent ar­eas of the busi­ness mov­ing. What we don't want is prod­uct de­vel­op­ment to say that the techies don't un­der­stand the funds in­dus­try.”

FI­NAL THOUGHTS

We have out­lined and ex­plained the three most sig­nif­i­cant con­sid­er­a­tions for growth by lever­ag­ing the ex­per­tise of lo­cal star­tups. That brings up a point that could su­per­sede those three: com­mu­nity and men­tor­ship. If you are part of a col­lab­o­ra­tive ecosys­tem – in­clud­ing gov­ern­ment stake­hold­ers, in­vestors, cor­po­rate part­ners and other star­tups – you ben­e­fit from a wealth of knowl­edge and wis­dom shar­ing that would take you decades to ac­crue your­self. Oth­ers have made mis­takes you can avoid and they will hap­pily share their suc­cesses and ad­vice, much like they have in this ar­ti­cle.

Above all the strengths we ben­e­fit from in Lux­em­bourg, the spirit of col­lab­o­ra­tion comes first. We can rely on lo­cal sup­port for the fin­tech ecosys­tem and a gov­ern­ment that rec­og­nizes that fi­nan­cial tech­nol­ogy is cen­tral to the coun­try's fu­ture.

LUX­EM­BOURG IS A GREAT PLACE TO DE­VELOP A BUSI­NESS. IN­CRED­I­BLE THINGS CAN BE DONE HERE, SIM­PLY BE­CAUSE THE LO­CAL PLAY­ERS, IN­STEAD OF JUST WANT­ING TO GROW THEIR OWN BUSI­NESS, WANT TO AND ARE ABLE TO COL­LAB­O­RATE AND DO SOME­THING GREAT FOR THE WHOLE COUN­TRY.

TI­MOTHY NUY

NI­CO­LAS BUCK

DAVE VAN NIEK­ERK

RAOUL MULHEIMS

Newspapers in English

Newspapers from Belgium

© PressReader. All rights reserved.