Learnings from the Venture Partner Summit in Potsdam 💯…

Several weeks ago I had the pleasure to attend the SAP.iO Venture Partner Summit. The Venture Partner Summit is an event organized by the SAP.iO Scouting & Acceleration Team for Venture Partners and Mentors for internal SAP start-ups and early-stage teams. It’s an awesome opportunity to upskill your start-up skills as well to meet new colleagues from all over the world. As a consequence, I’d like to share my learnings and insights which are applying to the broader scope of Venture Capital, and not only to the SAP internal ecosystem.

Teams make or break your venture! — team composition and their long-lasting implications.

• One of our first-day lecturers had a very interesting example of the importance of teams. His example was the South Pole race. The two teams, led by Roal Amundsen and the other by Robert Falcon Scott, were very different in resources and skillset. Even though they had kind of a similar starting point, only Amundsen’s Team made it first to the pole and more important also back alife. The point our lecture was trying to make is that your team needs a T-shaped skillset and redundancies in the most critical ones for this kind of endeavor. An example you can see is figure 1. Start-up A is having a generalist with Person B who is having every skill, but no redundancy in skill 2 which is the crucial one. Start-up B is far better because ever person is having skill 2 and additional they covered every other necessary skill. Additionally, resources are often not decisive, because of the complexity to manage them. A constraint in resources can be a lever to think simple and get to your target more efficiently.

Figure 1: Team skills

• The first people you hire will have a tremendous impact on the team culture but also the strength of your company. This is due to the strong networks of professionals. If your first team is weak in marketing because you’re not having established relationships into this scene your company will likely stay weak just because you can’t tap into the right talent pool. A-Player attracts A-Players. B-Players attract C-Players and scare of A-Players. A great question to test if somebody is having a network in his profession: If we could hire two of you, who would you recommend? or Who is the best (developer/designer/marketer) you’ve ever worked with?
• One statement was eye-opening for me. I’m always the type of guy who thinks he can learn the stuff which is required on the go or I’d like to develop people. In the context of venture capital and start-up world, this is going to kill you. You compete with several other founders and don’t have the time to develop the skillsets of your people. From the start, you need the required skillset. I’m not saying that the growth mindset (being convinced that you can learn the required skill) which Carol Dweck describes is worthless. The point I’m trying to make is that you need to hire people who have already the currently required skills and, in the best case, additionally the growth mindset. While the required skill set will help you in the beginning. Does the growth mindset help you in the long run when roles and requirements have changed.
• Team tightness is a crucial factor for successful start-ups. Funny enough, an angel investor( practitioner)and a professor (researcher) had the same opinion. The angel investors’ indication for a tight team was that the team already stayed 12+ months together and had their first fight. The professor had nice graphs that showed that people that worked already worked together, are more successful. Somehow obvious, but cool to see that research solidifies it.

Mentors don’t tell you what to do, they tell you how to find out what to do! — Have trust in the process and journey.

• As a mentor and angel investor, you should know the journey for a start-up pretty damn well. Otherwise, you can not guide them successfully. This is also an important point for founders per se. Mentors don’t have to know the answer to the next steps, that’s the job of the founder. Mentors help you figure out how to do the next step and what might come after that.
• The framework our lecture and angel investor used was used from the book “Four steps to epiphany”. The four steps described: Customer Discovery, Customer Validation, Customer Generation and Company Building. For each of those four steps are certain milestones to hit otherwise you’ll not be successful in the next stage. Better you read the book than to follow my crappy summarization.

Keep your venture flexible, yet focused! — The opportunities you see are the opportunities you get.

The entrepreneurial skill is simply said: applying technological capabilities to a market with a specific demand. Sole technology does not create value. To understand the conditions of start-ups a little bit better it can split into “Horizons” which figure 2 is illustrating. Starting with Horizon one where you already have a lot of facts and few assumptions, ending with Horizon four where you have a lot of assumptions and few to non-facts. Start-ups play usually in Horizon three and four, while established corporations play in one and two. Assumptions and facts, in this case, can be of any kind. Assumptions on the market, customer, technology whatever. The overall goal is to fulfill a demand.

Figure 2: Horizons

• Horizon one: Is established tech and you want to improve the operations. Put in a verb, you defend.
• Horizon two: Is a resource initiative. You want to build on top of already established products. In a verb you build.
• Horizon three: Is the uncertain opportunity. In a verb, you bet on options and try to minimize the risk as best as possible.
• Horizon four: This is an add from one of the participants. It’s basic research. What are you doing in research? You guess and get from a hypothesis to a fact.

As a venture, you create several skills in horizon three. The magic is that you can apply those skills and capabilities to other more adjacent markets and business opportunities. This is the core concept of “Where to play” from Marc Gruber. The framework follows a concept of identifying capabilities, scoring them in terms of market potential and risk, and then mapping them out. This is crucial to see the big picture and opportunities you can go after with your start-up.

If you can keep your venture flexible and adaptable the probability of success is much larger. For sure it’s not fun to pivot from one idea to another but if you mapped your opportunities out, it’s much easier and more importantly, you are prepared. Said in the words of Charles Darwin: “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change.”

Generall remarks and nuggets I found useful:

• Founding a start-up is a speed and competition game.
• Venture Capital is like rocket fuel. You don’t put it anywhere else than in a rocket and even rockets are going to explode.
• Amateur business vs professional business: Deciding to work in a start-up means you automatically are in a professional business if you take it seriously. What does it mean? It means you’re also doing the not so fun parts e.g. firing colleagues.
• If you are an employer posting a role, you must have an idea under which circumstances does the employee gets fired. It sounds harsh, but this is the bare bottom-line and sets a fair expectation for the employee as well.
• “Why would the 20th person join your company?”. It is a powerful question because you have to think more longterm and strategic.
• Red flags in start-ups: Outsourcing the core competency, Not working full-time, geographically distributed team.

If you stayed till here, thanks for reading! In case you need support on some ventures to approach me over LinkedIn. Happy to help!