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Advices and strategies I learned from my first business attempt

Advices and strategies I learned from my first business attempt

My presentation in SFHMMY 2019. It contains advices and strategies from my first business attempt with Cyclopt PC.

Kyriakos Chatzidimitriou

April 21, 2019
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  1. ADVICES AND STRATEGIES I LEARNED
    FROM MY FIRST BUSINESS ATTEMPT
    Kyriakos Chatzidimitriou
    Cyclopt PC
    PhD in Electrical and Computer Engineering
    [email protected]
    http://cyclopt.com

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  2. PREAMBLE
    •My 1st attempt
    • No silver bullet
    • The presentation will surely harbor “Narrative Fallacies”:
    • Our need to find patterns in facts through narration just because as human we prefer it,
    simplifying though more complex links.
    • Take book thumbnails as suggested reading for that particular slide.

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  3. ABOUT ME
    1978 - Birth

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  4. ABOUT ME
    1978 - Birth
    1997 – Dept. of Electrical and Computer
    Engineering, AUTH

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  5. ABOUT ME
    1978 - Birth
    1997 – Dept. of Electrical and
    Computer Engineering, AUTH
    2003 – First job as a programmer in an
    R&D project, AUTH

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  6. ABOUT ME
    1978 - Birth
    1997 – Dept. of Electrical and
    Computer Engineering, AUTH
    2003 – First job as a programmer in an
    R&D project, AUTH
    2004 – Master of Science in Computer
    Science, CSU with Assistanship

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  7. ABOUT ME
    1978 - Birth
    1997 – Dept. of Electrical and
    Computer Engineering, AUTH
    2003 – First job as a programmer in an
    R&D project, AUTH
    2004 – Master of Science in Computer
    Science, CSU with Assistanship
    2007 – PhD Student @ ECE in RNNs
    and RL

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  8. ABOUT ME
    1978 - Birth
    1997 – Dept. of Electrical and
    Computer Engineering, AUTH
    2003 – First job as a programmer in an
    R&D project, AUTH
    2004 – Master of Science in Computer
    Science, CSU with Assistanship
    2007 – PhD Student @ ECE in RNNs
    and RL
    2010 – Greek economic crisis

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  9. ABOUT ME
    1978 - Birth
    1997 – Dept. of Electrical and Computer
    Engineering, AUTH
    2003 – First job as a programmer in an
    R&D project, AUTH
    2004 – Master of Science in Computer
    Science, CSU with Assistanship
    2007 – PhD Student @ ECE in RNNs and
    RL
    2010 – Greek economic crisis
    2012 – Finish my PhD, work in R&D
    projects, tech knowledge, awards with
    team Mertacor

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  10. ABOUT ME
    1978 - Birth
    1997 – Dept. of Electrical and Computer
    Engineering, AUTH
    2003 – First job as a programmer in an R&D
    project, AUTH
    2004 – Master of Science in Computer
    Science, CSU with Assistanship
    2007 – PhD Student @ ECE in RNNs and RL
    2010 – Greek economic crisis
    2012 – Finish my PhD, work in R&D projects,
    tech knowledge, awards with team
    Mertacor
    2017 – Low PoP stats

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  11. ABOUT ME
    1978 - Birth
    1997 – Dept. of Electrical and Computer
    Engineering, AUTH
    2003 – First job as a programmer in an R&D
    project, AUTH
    2004 – Master of Science in Computer Science,
    CSU with Assistanship
    2007 – PhD Student @ ECE in RNNs and RL
    2010 – Greek economic crisis
    2012 – Finish my PhD, work in R&D projects, tech
    knowledge, awards with team Mertacor
    2017 – Low PoP stats
    2017 – Cyclopt is founded

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  12. ABOUT ME
    1978 - Birth
    1997 – Dept. of Electrical and Computer Engineering,
    AUTH
    2003 – First job as a programmer in an R&D project,
    AUTH
    2004 – Master of Science in Computer Science, CSU
    with Assistanship
    2007 – PhD Student @ ECE in RNNs and RL
    2010 – Greek economic crisis
    2012 – Finish my PhD, work in R&D projects, tech
    knowledge, awards with team Mertacor
    2017 – Low PoP stats
    2017 – Cyclopt is founded
    2019 – 2/2 VCs said no to funding us

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  13. GENERAL ADVICE #1
    Life is hard and full of problems
    To be happy and for the problems
    you can choose, choose those that
    you like solving.
    By working on the 10K hour of
    more…
    …you will be too good to be ignored
    and you will achieve that by focusing on
    deep work and working on difficult
    problems
    Positive feedback loop,
    where good things happen

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  14. CYCLOPT P.C.
    • Founded on November 2017
    • Aristotle University of Thessaloniki spin-off
    • Our last app is our bot (for analyzing JS projects)
    https://bot.cyclopt.com
    • Free to install:
    https://github.com/apps/cyclopt

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  15. PRODUCTS
    We support also 3 open source projects:
    1. npm-miner: Web app with analysis of npm packages
    2. jssa: JavaScript Static Analyzer
    3. js-starter-kit: JS web app starter kit for the MERN stack
    along with a software development lifecycle proposal
    Quality assessment reports
    Quality-as-a-Service Bot

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  16. THE TEAM
    Dr. Kyriakos Chatzidimitriou
    Manager & Tech Lead
    Dr. Andreas Symeonidis
    Research Lead
    Dr. Themis Diamantopoulos
    Software Reusability
    Michalis Papamichail
    Software Maintainability
    Ilias Ouzounidis
    Branding Design &
    Digital Promotion

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  17. WHAT IS A COMPANY?
    “…a business is a repeatable process:
    1. Creates and delivers something of value…
    2. That other people want or need…
    3. At a price they are willing to play…
    4. In a way that satisfies the customer’s needs and
    expectations…
    5. So that business brings in enough profit to make it
    worthwhile for the owners to continue operation.”

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  18. CREATES AND DELIVERS SOMETHING OF VALUE…
    http://www.paulgraham.com/startupideas.html
    Few users Many users
    I need it much
    I need it a little
    Strategy # 1 (and the one we used)
    Google now
    Made-up
    startup
    Harvard Era
    Facebook

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  19. MARKET VALIDATION EXPERIMENT
    ­ Created 2000 quality reports for top open source JavaScript software
    projects
    ­ Send them to their developers/maintainers
    ­ Pareto principle
    ­ ~ 20% opened (400)
    ­ ~ 20% clicked (80)
    ­ 34 answeres our questionnaire, while we had replies like:
    ­ “Anyone else just get spammed by cyclopt…”
    ­ “Thanks for your email. It's very interesting.”
    ­ 1 connected

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  20. PIVOT
    • Source code quality reports à Monitoring code and teams
    • From developers à To managers
    • Lesson learnt: the obvious: startup business plan != reality
    • We stared with zero knowledge on what it means to sell a new product
    from zero…
    • Strategy #2: spent time learning it (10Κ hours? By for example
    working in another startup) or bring in someone who has done it
    before
    A startup is a human institution
    designed to create a new
    product or service under
    conditions of extreme
    uncertainty

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  21. PROBLEM #2: COSTS
    Let’s write down the basic monthly costs for 2 co-founders in a Private Company so that they
    say they have a company:
    € 200 - Coworking space
    € 150 – Accountant (€0 if co-founder, €300 markup price)
    € 84 – Yearly company tax
    € 130 – Basic insurance for the manager (if no other activity)
    € 50 – Some basic expenses (domain name, business portal, bank expenses,etc.)
    € 614 – monthly without fixed costs, cloud costs etc.
    With seed capital € 10Κ à Less than 16 months runway
    So that business brings in enough profit to make it worthwhile for
    the owners to continue operation.

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  22. FUNDING
    Savings
    Friends – Family – Fools
    Competitions
    Clients
    Angel Investors
    VCs
    Grants, i.e. SME Instrument etc.

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  23. SAVINGS
    For a 10K seed capital and 2 co-founders
    If I save 200 euros per month … I have to work 25
    months or 2 years to regain them.
    Is it a good investment?
    There is the notion of expected utility:
    Lottery A – the startup
    UA
    = 0,01 (€1.000.000) + 0,99 (0) = 10.000
    Lottery B – Bet on the home team with 0% rake
    Home: 2,00 – Draw: 3,75 – Away: 4,28
    UB
    = 0,5 (€20.000) + 0,5 * 0 = 10.000
    Lottery Α – also win: life lessons, knowledge
    Lottery Β – also win: a possible heart stroke if the away
    team is in front during the first half
    But this simple utility functions are if you don’t have a
    sense of money.

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  24. EXPECTED UTILITY
    Lottery A – The startup
    0,01 x U(Sk+1M
    )+ 0.99 x U(Sk-10K
    ) =
    0,01x 44,96 – 0,99 x 1,55 = -1.0849
    Lottery B – Betting
    0.5 x US(k+10K
    ) + 0.5 x US(k-10K
    ) =
    0,5 x 1.39 - 0,5 x 1.55 = -0.08
    Lottery C – Do nothing
    1.55
    Mr. Beard’s Utility Function
    U(Sk+n
    ) = −263.31 + 22.09 log(n + 150, 000)

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  25. STRATEGY #3
    If you start with your own money (and a similar utility function like that of Mr. Beard)…
    Create the need before you found your company…
    Create something to show around…
    Create content/SEO around your product/presence to increase trust (these guys know what
    they are talking about)…
    And only if you close some deals then found your company (just to start billing) or go for
    other sources of funding. Because investors are looking for 3 things:
    1. revenue,
    2. revenue,
    3. revenue.

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  26. FUNDING
    Savings
    Friends – Family – Fools
    Competitions
    Clients
    Angel Investors
    VCs
    Grants, i.e. SME Instrument, etc.

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  27. COMPETITIONS
    We got 2.5K from competitions
    I have heard of as much as 70K
    Strategy #4:
    Try 1-2 for starts
    If you get an award continue going, broadening your geographical horizon. (Local, National,
    European, US, Global)
    If you don’t … stop going for that idea.
    Wins: Free-equity money, dissemination, experience in pitching, feedback, possible a client from
    the sponsors
    Losses: Time (one more presentation, business plan etc.)

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  28. FUNDING
    Savings
    Friends – Family – Fools
    Competitions
    Clients
    Angel Investors
    VCs
    Grants, i.e. SME Instrument etc.

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  29. VENTURE CAPITALS
    • Equifund
    • After many emails, skype calls, presentations, demos, meetings etc.
    • 0/2
    • Other than market validation (revenue, revenue, revenue) two other basic things I
    say they were looking where:
    1. Defensibles
    2. Scaling
    • Advice #2: Before going to VCs, solve those three prerequisites.

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  30. DEFENSIBLES
    • Secret sauce…something that cannot be easily copied
    • Patent (difficult in software)
    • One in every country
    • The software must have a further technical effect (i.e. ABS)
    • A large company has the personnel (legal/technical) to do something similar without
    infringing your patent
    • Other things:
    • Annotated data by experts
    • A specialized ML pipeline
    • An Expert database
    • In general in software it is a good idea to get first out in the market, have a
    good timing and your defensible will be that early start.

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  31. SCALING
    Assumption 1: A company is sold 5 times
    its revenue
    Assumption 2: VCs will like to exit within 5
    years
    Let’s say that a VC funds 20 startups with
    seed capital 200Κ for a 20% percent
    equity
    Statistics say 1 out of 20 startups
    succeeds
    ­ Others say 90%, 95%, 99% failure rates
    What revenue should you have by the
    end of the 5 years?
    So, from the 1 company they will have to
    get 20 x 200K = 4Μ+ to break-even
    4M+ for the 20%, thus the company must
    be sold 20M+
    Thus its revenue must be 4Μ+
    With this scenario the 200K seed capital
    must be made 4M+ revenue within 5
    years
    Obviously you cannot predict how much you will sell, but now you have a target and an idea what the VCs
    want to do with your idea…to scale it.
    A simple exercise from the VC point of view

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  32. VC INTERVIEW QUESTIONS CHEAT SHEET
    • Which problem are you solving?
    Which KPI are you improving for the
    users?
    • What is your go to market strategy?
    •Competition?
    • What are your defensible assets?
    • Total addressable market?
    • What have you done so far with your
    idea?
    • Describe us the perfect customer.
    • If we fund you what will you do in the
    next 6, 12, 18 months?
    • What are the strong points of your
    tema? Why you? What is your track
    record?
    • What are you missing as a team?
    • What is your next milestone?
    •Customer Acquisition Cost (CAC),
    Customer Lifetime Value (LTV)?

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  33. Strategy #5: Good Luck
    [email protected]
    www.cyclopt.com

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