Home page of Milan Vrekic

Volta Demolition

Community is the framework

Posted on April 30, 2013

My Friends,

Over the next short while I will be transitioning from my role at TitanFile to a position of an Executive Director at Volta, with a goal of creating a place where entrepreneurship is celebrated and taking over the world is expected.

I was always passionate about startup community and after all the support TitanFile has received, I am now given a chance to give back.

Last 3 years have truly been a great journey and the biggest reward I received was to work alongside, and learn from, some of the most amazing people I have met in my life.

At TitanFile, I have seen the company attract top-tier talent, go on to receive some of the most prestigious innovation awards in North America and win over amazing roster of clients. Best part is that TitanFile is just getting started.

I will remain close to the company and I am really excited about all great things we have planned for Volta!

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Sell for 3 months ahead

Posted on April 28, 2013

When selling enterprise software, your solution needs to not only solve a problem, but still make sense after 3 months of “imaginary use”.

No one says “looks good for now! I am sure you will add rest of the features we need on time” no, they fast forward 3 months in their heads and make a decision.

This is why a lot of MVPs (Minimum Viable Products) fail. In a sense, they are not “true” MVP’s.

A “true” MVP has a limited set of features, but the features it has are thought trough and function well in a scope of a solution.

Here is an example: at TitanFile we have a files panel that lists all the files belonging to the associated user. It was rolled out without an in-panel search capability with a premise that “by the time users need it, we will have it”. Time went on and as we got more users, different things took priority. Needless to say, in-panel search was not there when users needed it.

Feature creep is real and hides behind every “wouldn’t it be cool if…” So if you want to build enterprise software, start by building less – but better.

Some of our Learnings from the Fundraising Process

Posted on April 18, 2013

This is my take on the fundraising process, based on our experience at TitanFile; We have raised $1.5M total.

When fundraising, you need to “paint the picture” and show the vision of the company future. If you are looking for a large round (VC) your vision really has to be large enough to move a dial (often a test question is, “how big you think this can be?” and if your answer is less than 100 million in revenue within 5 years they will show you the doors).

When it comes to methodology, fundraising is a full time job and you need to approach it as such. Cold emailing investors is usually a one-way ticket to self-select yourself out. There is noting better than an introduction to an investor from an Entrepreneur that investor has already invested in, or  someone that investor already knows and trusts who can vouch for you.

Do your homework. Make a spreadsheet of investors you want to go after and do research. Most of the investment firm web sites will say what kind of investments are they making (industry, size…) how involved they are with the companies (board, introductions etc)
and how the process generally goes. Be vary of those who do not have that information transparently in clear view. If possible, try to connect with someone from the companies that the investor already invested in. LinkedIn is great for that. Ask the Entrepreneur
openly what his experience with that particular investor or investment firm is, you will get frank answers.

You should count on 3 months minimum and 6 to 8 months maximum to close the round. Do not raise during summer. Just don’t.

That is a mistake a lot of people raising their first round make (we did too) as everyone is away on vacations.

Investment deals are like fruit baskets, if they stay on the open for too long they will rot. Or at least investors will think that the deal is rotten (ie. “This company has been looking for an investment for 9 months now, there must be something wrong with them”).

The first term sheet is the most important one. Investors are people like you and me. They wake up in the morning, put their pants on and go to work. Since Investors are people like you and me, that also means that they follow heard mentality. Once you get the first term sheet – rest will fall in line, no one wants to be the first there. Once you get that term sheet from Innovacorp, it’s a race against the clock and you need to keep the momentum going. Gust.com is a great way to find more investors and so is http://angeli.st

Make sure to take all the press clippings and press articles about your product and team with you as investors will always seek external validation but DO NOT include them in the pitch deck. Send them over after there is some definite interest. If you do not have clients to validate you, press is a great option B (i.e. “Someone else also thinks this is a good idea so I won’t look like a fool if I invest and this fails”) but no amount of press will replace a referenceable, paying client.

Cashflow analysis and projections are important but the exact numbers are not that important. It’s really a litmus test of how crazy you are. Going from 100k to 500k in revenue from year one to two is reasonable. Going from 100k to 100 million in a year is not. Once you close a round It will be months before you figure out where your head is and where your ass is. Also, NEVER use words such as “our estimates are conservative” :)

You should always aim to raise 6 months more than you need.

Idea is that it will take another 6 months to close the next financing round if you need one, so it is always better to have extra cash in the bank. No one ever had a headache from too much money, but a lot of people had a lot of headaches about having too little. Keep in mind that you need to be able to explain and justify your valuation. If you say 1 Million – cool, if you say 10 million – cool. It is really up to you convince an investor that your valuation is “correct” (ie. “each engineer ads 500k to valuation, Our MBA guy takes away 250k from valuation, we have X patents that add another 1 Million, we already have signed purchase orders for Y and that adds another 5 million etc.).

Finally, deal is not closed until cash is in the bank.

Vitamin and Painkiller

Painkillers, Vitamins and habit in product design

Posted on March 17, 2013

If you talk to an early stage VC or an Angel Investor, they will often ask you to declare if you product is a “Painkiller or a Vitamin” product. What they mean by this analogy is “does your product solve a pain or you are making something that is solved – better”

There is really no sharp divide between solutions that are “vitamins” and solutions that are “painkillers”. It’s more of a continuum.

“Painkiller” products by definition have a quantifiable market, they can be monetized from the get-go and they solve a pain people know they have.

“Vitamin” products in contrast, appeal to the emotional need, not efficiency; they usually have an unknown market at the launch and they often start with “Wouldn’t it be cool if…

If we look at some of the largest web applications on the internet today (Facebook, Pinterest, Instagram, Twitter…) it is easy to state that those products are “Vitamin” products as they have no pain component to them. If I said that the very first time you saw Facebook you could not see yourself using it more than once in a while – you would most likely agree.

Now, what Facebook and the best examples of the “Vitamin” products do well, is engage in a habit creating behaviour where the user comes to the web-site for pleasure seeking behaviour and over the time, the habit becomes so strong that NOT using the product becomes a pain. This is easy to illustrate again using the Facebook example: Just think about how you feel when you see a new message notification and you do not know who is it from?

For our brain, unknown is a fascination. We are wired to connect cause and effect.  Similar effect is exploited successfuly by some of the biggest dating sites. You create your profile for free, you receive a message from someone and in order to see the message, you have to upgrade your subscription.

The brilliance of  these companies is that over the time, they build habits that create the pain and then – sell you the remedy;  combining the nature of both, “Vitamin” and “Painkiller” attributes in a company.

So, if you have a “vitamin” product, how do you add a bit of  a “painkiller” in the product design cycle?

1.) Implement variable reward. Intermittent rewards INCREASE the response rate (did someone say gambling?) and the main driver is dopamine. Every time you receive an unexpected reward -your dopamine levels spike. Great practical example of this is Pinterest. Pinterest is designed in a way that entices you to scroll. One scroll is all they need to start the habit building process. Each scroll is a chance to be rewarded with a picture (pin) of something you like… so you just keep scrolling… When rewards are predictable, they become less rewarding. Zynga games are a good example of this, they have massive initial adoption rates and also a huge churn rate shortly after.

2.) Understand the motives for desired behaviour and build triggers to exploit them. People have seeking and avoiding motivators. Seeking motivators are pleasure, hope and acceptance. Avoiding motivators are pain, fear and rejection. Your triggers (popups, emails, calls to action…) must align with the right motivator. People join Facebook to seek social acceptance from their friends and avoid rejection by the group (think of all the Facebook organized events and parties that you know about just because of Facebook).

3.) Increase the action potential by making it easier to perform a desired action. Doing is easier than thinking. To understand this better, look into the Dr. BJ Fogg Behaviour model grid. Great example of this is evolution of the dropbox and twitter home page over the years:

4.) Negative emotions are painful and people will seek a “painkiller” to alleviate them. Depressed people check email more often. You can make an argument that email is what makes them depressed but a more likely explanation is that they check email looking for something that would “lift” their mood. This is where good UX comes into play, in competing products, identify negative experiences that would result in negative emotions and make sure that your product addresses those from the get-go.

This is by all means not a comprehensive list but it will get you started and pointed in the right direction. 
 
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