Questions and answers on startup’s dos and don’ts with Kristo Ovaska, Smartly.io

Kristo Ovaska, Founder and CEO, Smartly.io answered questions from the audience at Aalto Design Factory on Dec 16th 2015. The title for his presentation at Aalto Ventures Program was “Entrepreneurial Journey”. Kristo started with setting the frame for the discussion by introducing his background with two less successful and one very successful startup company providing software as a service for e-commerce customers. Then he casually requested the audience to ask him questions and spent the lecture hour answering them.

What did he learn from the first two startups that did not succeed?

  • You cannot outsource coding.
  • The founding team has to have a unified view on how to run and grow the company.
  • Do not focus on pleasing potential funders but focus on pleasing the customers. The time spent with investors is away from the time learning from working with the customers.
  • In order to understand customer needs you need end-to-end working prototypes and wireframes, slides are not enough.
  • Secure frequent feedback from the customers. It does not pay off to develop products that the customers do not need or want.

How to get the startup’s founders’ targets aligned?

  • This is most of the most challenging things and it has been said that 95% of startup failures happen because of this.
  • It does not really help that the founders discuss the vision among themselves. The vision keeps changing as the customers and the market develop.
  • The co-founders need to have aligned targets in life.
    • For those wanting to become millionaires there are simpler ways to riches than running a startup.
    • Those wanting there face in the headlines may find out that personal publicity does not result in a successful startup.
    • If both or all the founders want either of these, the changes of succeeding are higher but not too high. Aalto Design Factory
  • At Smartly.com the co-founders share motivation to learn new things. This, Kristo emphasized, gives them freedom to go always for the most challenging targets where they also can learn the most. The customers, investors and the team members should be selected according to from whom you can learn the fastest.

So what you should do when starting a company?

  • Do not try it alone, get a partner.
  • For a software company the essential aspects where you need to excel are R&D, marketing & sales and hiring. The founding team needs to have these competences.
  • Lacking software development experience in the starting point will slow down feedback from the customers and the startup will not be able to scale.
  • There are two camps on the competitive advantages that the founding team has to possess:
    • Solve your own problems – this may work well for consumer businesses
    • Customer development model by Steve Blank
  • Compensate the weaknesses with a diverse skill-set of the founders, e.g. a coder and a salesman-recruiter.

The turning point at Kristo’s entrepreneurial carrier was

  • Learning from the customers at the previous startup that there was a niche in the market opening new opportunities as Facebook advertising emerged alongside Google advertising and the existing vendors could not keep up with the phase of this change.

At this point, why did you start a new company instead of redirecting the focus of the existing compay Metrify?

  • The core team of Metrify had differing views on what the company should focus on. The options were to go for rapid software development and customer consulting or to start with offering consultancy work to customers. At this point the best decision was to split up.

What would Kristo do differently if he would be starting Smartly.io now?

  • Hire co-workers earlier. He had an extremely talented software developer who was risked to burn out because of the workload.
  • Prepare for the amount of coding work to triple from the initial estimate.
  • Early recruitment is an important cultural question. Problem solving, documentation, best practices, understandable syntaxes and processes will be developed more efficiently in a team.
  • The easier the code is to understand the faster it is to take new developers on board.

What is the right time to get investors on board?

  • [Never.] A quick smile on Kristo’s face.
  • If you focus on developing a product that fits the market needs, they will come to you.
  • The most important thing is not to waste time for getting funding.

How does Kristo take care of himself and the employees?

  • The recommendation is to limit work to 8 hours a day.
  • No working or e-mailing on weekends.
  • Employees are forced to take holidays without reading e-mails.
  • To remain as a creative problem solver you need to go away [from the work] from time to time.
  • One-to-one walks and runs.

How about office arrangements?

  • com is two years old, has six offices and international presence.
  • All the physical things take time, virtual things are fast.
  • It is important to have an office space to detach from work.

Getting back to financing the company…  

  • You should not burn anyone’s money as a company.
  • On personal level you need to avoid bankruptcy. The changes of succeeding are low and if you go bankrupt, they are even lower. When you are sure that you will succeed, you can ask for financing to support the early stages.

There are three types of presentations. Some make you feel worse (as you think that you would have better use for the time), some do not change your status quo (as you are browsing and not listening the presenter) and then there is this third category that Kristo’s presentation fell into: the ones that make you feel better. Why was this? My subjective judgement is as follows:

  • Kristo was invited as a speaker because of his success but he started off with openly discussing that he has made mistakes in this career, has learned from them and is willing to share the experiences and learnings. This made him easy to approach for the audience.
  • He treated the audience as a customer inviting us to ask questions from him. Later on when he was telling that he has learned by listening to the customers, this was easy to believe as he was truly interested in the question’s from the audience instead of pushing a predetermined agenda.
  • He gave only very positive comments on his partners, co-workers, customers, mentors and financiers.

Thank you Kristo, this presentation was worth attending!