Flip startups are agile startups that aim to exit quickly. Unlike Lean startups, their priority isn't to learn in order to create a scalable business model. Instead, their goal is to create a promising product. For example, it could be a successful single app or game. The idea is to build a hit that would make the founder(s) an appealing and quick talent acquisition (sometimes referred to as an acq-hire). This is lean development without any customer development. The focus is on building. Recent examples include Blindtype, Hipster or About.me. All three were bought before or right after launch.

The many hackathons such as GameJam or Garage48 have shown that it is possible to create a viable game or Web service in 48 hours. In addition, channels such as Applifier, Appsumo or the Humble Indie Bundle have made it easy to reach large groups of users. There is a growing amount of microfunding platforms, such as Kickstarter, Appbackr or A-List Games.

The consolidation of the social graph by Facebook, the various app stores and the abundance of cloud-based services lower time to market. Lastly, large companies that seek new talent will likely hire promising individuals through a small exit. All these factors combined make it more likely for a single coder to create a one-time hit.

Here's a tentative methodology for flips.

1: Find a Simple Idea

If your goal is to exit quickly, your aim is to deliver an MVP as quickly as possible. This means looking for an idea that is easy to execute with a limited set of skills. In the case of Blindtype, the software was mostly based on AI and required no frontend.

If your idea is simple, it not only means it's easier to deliver, but also easier to sell: your app/technology is probably easier to integrate and meet another company's needs if it has a limited scope. However, an idea that is too simple and doesn't stand out will be difficult to sell.

Furthermore, if this project doesn't work, you'd like to be able to reuse some of its code, in order to iterate new ideas quickly, so you might want your code to be somewhat generic. Eventually, you should focus on an idea you can deliver, reuse, in a field you know really well, so that you require little to no outside help. This should also help valorize you in a acq-hire scenario.

2. Build It

The development part is similar to a lean startup: you want to be agile. The part where they differ is that lean startups will seek to implement analytics and track user feedback for their next iteration, whereas flips won't.

Build your product on top of existing blocks. You may have existing code lying around from earlier projects, or be able to use open-source components or libraries to make your life easier. Hosting can be pushed to public clouds, authentication to OpenID or Facebook; services like Launchrock or Optimizely can help create a landing page. The same goes for payments, analytics, emailing and more. Once you have those out of the way, you can focus on creating only your actual app, game or service.

Services such as Cabana or GameSalad let you easily create an app using drag and drop. There is nothing inferior about using such a tool to create something meaningful rapidly. However, this will impact the value of your IP.

3. Create Buzz

Every startup needs PR, but this is even more true of flips. No one is going to buy your product if they don't see potential in it. The key is that you want to create the promise of value and showcase your idea in the best angle. There's nothing wrong with hype; movie trailers do this all the time, after all.

Hipster got pre-registrations because of their name and the rumor they were working on something amazing. Blindtype posted a video on Youtube that showcased its technology. Creating quick buzz and social proof is not the same a developing long-term customer development, but it pays off.

A good way to get attention is to get catchy metrics. Being the most-downloaded app in a small country, generating the most traffic or the most downloadable content sells. For a small investment of money, you can get your friends and family to buy your product and extensions, and buy your way to top of the app store. Consider it a type of SEO investment!

4. Don't Pivot, Reboot

The vast majority of startups fail. At this point, you will probably think about what your next steps should be. The key for a flip is to make sure you don't put all your eggs in the same basket and diversify as fast as possible, to maximize your chances of success.

Think of yourself as a VC. You have a limited fund, bandwidth for deals you can work on, and a portfolio of existing code and skills. In that sense, lean startups are similar to a focused investment strategy, whereas flips are more like diversified, "spray and pray" approach.

How would you handle your failed investment? Do you have anything of value to get out of it, such as traffic, brand or technology? Ideally, you'd like to be able to piece the stronger parts together to create something event stronger.

5. Funding?

If things go well, you may want to persist with your idea, but do keep in mind that transitioning from a product built on a hunch to a scalable business is a risk. At that point, you should seriously consider becoming a lean startup.

The good news is that the goal of a flip is aligned with VCs; their aim is to sell too, not simply to build a sustainable business. The problem is that they are also known for their herd mentality. Your idea might fit their portfolio or a hot trend, but your early traction isn't enough to be the basis of a healthy business. After all, you haven't proven any assumption yet.

One more thing to consider is whether or not you feel like turning your successful hobby into a full enterprise, and recruiting and managing a team. Do you want to stick to this idea in the long term and possibly gamble further, or fold?

Flip or Lean?

The decision to create a lean startup or a flip is entirely dependent on your ambition. If your goal is to show off your skills, create apps, make a quick buck and maybe get hired, flips are the way to go.

While I expect many supporters of long-term value creation to be detractors of this approach, I think it is safe to assume that we will see more and more small apps being built and propelled to success in this way in the coming years.

What remains to be seen is whether flips are dependent an environment where large companies are constantly making talent acquisitions and where apps can scale to hundreds of millions of users, or whether this methodology is sustainable regardless of industry trends.

Photo by nighthawk7

Garage48 Helsinki, the largest hackathon in the Nordics, took place last week. It gathered 120 hackers from Finland, Estonia and Latvia under the same roof and challenged them to go from zero to demo in 48 hours. Sixteen startups were created during the weekend. Together with Osma Ahvelampi (CTO, Sulake) and Teemu Kurppa (co-founder, Jaiku), I was a mentor to those teams.

At Garage48, the goal is to produce a small startup, rather than just a really nice hack like you would at a traditional hackathon. There is a requisite for each team to have at least one developer (frontend or backend), a designer and a marketing person. At the end of the event, we had a demo day where the teams showcased what they built. From what I saw, many teams ran into the same problems, which caused them to miss their objectives. Here are some tips to get around those blocks and shine during demo day.

Aim Low

Startups are all about delivering a simple product to a niche that needs it. Garage48 is nothing different, but there's only so much you can do in 48 hours. Aim low. Focus on technology you know. Some teams have problems compiling the tools they needed, so don't plan too many features. It's OK if it's unfinished, as long as you can communicate its concept.

This doesn't mean you should take the easy route and make a me-too idea. Build what's needed for a good demo. Nobody cares if your payment processing really works, you just need to show that you've built something meaningful. One example was Montroller. The concept was simple: motion based remote control of a robot using your mobile. They built their prototype on the first night, so they had enough time to port to more mobile platforms, prepare a nice video and make their Lego robot look better.

Don't Ignore Project Management

Most teams seem to ignore basic project management, apparently because they feel it is overkill. Instead, they prefer jumping into code and iterating. But without a list of deliverables, it is difficult to plan what will be built in 48 hours. You won't have any time to pivot, so you need to make sure that your whole team understands and agrees on what needs to be built. Set a clear, detailed objective. People often forget the need to sleep (at least eight hours in two days), eat and prepare for the demo.

Another problem is that without planning, designers or marketers won't have anything to do in the beginning. Also, make sure your team is a balanced team. Somebody needs to make a pretty website, GUI and write a blurb about your project. If you spend one hour planning ahead, your entire team can start working. Even then, you'll probably end up with some team members having more free time than the others, so why not put them into action?

For example, Blow'Em was on its way to have a working game demo, but it was going to be a simple proof of concept. The designers and marketers had nothing to do, so they started working on a promo video, more characters and funny names, which made their whole demo more catchy.

Everyone in the Same Room

Most of the problems that teams run into seem to be related to bad communication. In some cases, coders will go into another room than the designers and the team leader. In practice, this means that whenever you run into a wall, no one can help you. It can be frustrating to explain to an art student why you can't do 3D previews easily, but it's better than producing all the assets in an unusable format.

Make sure everyone knows what is being worked on, and why. One problem with piecing a team of random people together is that you're bound to have bad people in there. It's important to identify them. Some people make snarky comments, shoot down ideas, or don't listen; many teams waste time because of this. After all, you're there to have fun, so it's important you don't offend one member of your team. While you can't fire these people, you need somebody who can make the decisions and deliver results rather than to debate.

Go With "Good Enough"

A lot of people found it difficult to produce something just "good enough." It's difficult to pull the plug on a design or code instead of continuing to polishing it because you know it's not as good as it could be. Doing this can slow down the progress of the entire team.

This can be especially problematic in group decisions. Many teams did not know where and how to look for domain names efficiently and thus spent a considerable amount of time trying to find a good name for their site. Focus on getting things done. If something unexpected happens, don't just try to fix it for hours, talk to your team or the other teams. Maybe someone else solved it before. Drop extra features if you get stuck.

It's All About the Demo

Last but not least, make a good demo. After all, it's the only thing that others will see of your project. Make sure you test it before you ship. Videos are always difficult, because you need to make sure they will load, the sound will be on and the video can be shown in full screen on demo area's second screen. Mobile demos are tricky, because cameras can't easily capture what's on a small screen from far, so you may want to consider using a web version, an iPad or slides.

Lead photo (members of LapLab, the winning team) by Ragnar Sass; bottom two photos by gunarsg

What was once a quiet forum has been disrupted, for better or worse as power users such as Louis Gray (and the other usual suspects) brought their large followings. This seems to skew the dynamics of the site:

• several people notice the power users' answers,
• these answers will receive considerably more votes than anyone else participating in the discussion,
• other users add their grains of salt, either to get attention or simply to join the conversation,
• the quality of replies tends to decrease, since by definition not everyone is an expert.

It would be unfair to criticize influencers for driving interest in the service. In the case of more casual services such as Friendfeed or Google Buzz, the added flow is clearly beneficial.

But this is different for a service that thrives on quality rather than quantity. What can be done to Quora's mechanics to prevent noise?

There are several ways around this problem. SomethingAwful is known for charging its members to participate in its forums. This has the merit of filtering out trolls and passive users. ASmallWorld relies on referrals to create the impression of a tight-knit network. Wikipedia has a group of administrators who are selected from among its most active and reliable contributors.

Restricted voting, Posting Limits

However, these alternatives might be perceived as drastic by the community. They might not even work in this case. What possible solutions would fit Quora's DNA? Giving users a call to action might be a different approach. For example: showing questions that need more followers, encouraging users to add questions in topics that are not active, or to add questions or tag friends to certain topics. One way to de-clutter the feed would be to separate questions, votes, answers and friend activity, which would make top users appear less frequently.

On Quora, quality means more readable answers from insightful people. It might make sense to limit the amount of answers one can post in a day. Voting is another thing to consider: On Digg, the friend following feature led to an oligarchy where a few power-users such as MrBabyMan would dominate the front page.

To avoid this, why not restrict voting only to people who follow and have contributed to a topic? Maybe also limit or group the amount of posts by one person in the feed at one time? Or why not make answers anonymous? If all else fails, maybe they should request that influencers vote up one humanitarian post per day!

Should Quora become more democratic or try to remain an aristocracy? As I explained in a previous post, the startup community is a meritocracy, so it might make sense to build a system that reflects it. This millennia-old question has no simple answer. What better place than Quora then to ask: How do you think the it should evolve?

To my surprise, the ideas and technology behind that startups were not superior to the ones we have in Finland. The incubators and co-working spaces are on par with what we have. The business environment, however, is vastly different: Schools such as Stanford facilitate and encourage entrepreneurship. The market is larger, less fragmented, the consumers are earlier adopters. Startups are keen on business development and will seek partnerships.

There are probably 10 events equivalent or larger than Le Web throughout the year, as well as smaller events every day. We regularly ran into Robert Scoble and other major blogs, and they were very keen on listening to us. Local event organizers were even eager to help make a Finnish Angry Birds event happen and to introduce us to hundreds of people!

Readjustment of Expectations

These elements fit with each other and form the ground for growth business to happen. The old continent often looks up to the Valley as a sort of Eldorado of IT. Countries such as the UK, Russia and Finland are trying to replicate its ecosystem, to stimulate their local industries. Silicon Valley is a hub. Its value lies in two generations of people with unique know-how that are given all the tools necessary to create growth. No amount of EU or taxpayer money is going to recreate this perfect storm.

Not Businessmen, Entrepreneurs

We Europeans think of entrepreneurs as businessmen. This might be valid for lifestyle, predictable businesses, but the job of a startup entrepreneur is different: to test assumptions, to learn, and to create something new.

A trader on Wall St. can make money circulate without ever creating anything of value. In contrast with a startup such as Kiva, the drive to fix real problems, make and impact and give to the community makes traditional business feel vain, and startups all the more inspiring.

Down to Earth

Hearing and meeting thought leaders such as Eric Schmidt, Paul Buchheit or Steve Blank gave me a lot of food for thought. I have yet to see a Nokia executive at a startup event; these people on the other hand were approachable, down to earth, and relaxed. The pursuit of quality people makes this a meritocracy. Quite the contrast with our local successes who tend to behave like suits. Talent takes precedence over nationality or title, which would explain why Loic Le Meur and Om Malik are so well integrated, and Carol Bartz isn’t.

Cultural Edge

We received better customer service from Taco Bell and the police department than from Stockmann, the top tier department store in Finland! One time, a bus driver was more comfortable at speaking than most startups I’ve heard pitching. It seems they are more comfortable with small talk with the customer.

This tendency to be more outspoken could also be seen in networking and pitching, where there was much less awkwardness than with Europeans. Though it rarely feels genuine, it certainly is more effective.

Bigger is Better

More events, money and startups, means more competition, making it all the more necessary to stand out by hiring outstanding people, being more ambitious, more risk-taking. Unsurprisingly, this seems to weed out the less passionate people, while encouraging others to put in sweat equity in their own ideas.

This is something I feel we Europeans aren’t very good at. It’s compelling to start in your home country rather than aiming big, because it feels safer. The last thing you want when you launch is to tailor to several languages, cultural differences, distribution channels and small blogs and other media. You can easily get complacent when you succeed in your own country, but if we mitigate risk, we place the odds against us from the start.

Access to Finance

The most striking difference was to see a fully fleshed out capital market, where hobbyist and professional angels, superangels, top tier VCs and smaller firms compete for the more attractive deals. This makes for a more fluid deal flow, with more standardized and competitive terms, with more contacts and experience on top.

It wouldn’t surprise me if there were more angels and VCs in the region than on the entire European continent. In 2009, business angels invested 160 times more than their counterparts in continental Europe. It is also unclear whether we have any superangels (e.g. we don’t). Like our startups, our VCs tend to aim locally or regionally. Many of them aren’t reviewed on TheFunded, so there is little track record to refer to. With major exits being few and far between, the amounts of money reinvested as well at the experience offered is less.

Still Insular

At times, the Valley feels like a bubble, its inhabitants sheltered from the real world. Foreign markets seem to be an afterthought, space for local startups and copycats. It is unclear whether foreign companies can realistically raise money from where they're at: though Accel invested in the Lithuanian company GetJar, and more recently Esther Dyson invested in Finnish Valkee, I was also told that some VCs would only invest in startups within a short drive.

U.S. legislation is not on the foreign entrepreneur’s side. For some odd reason, it is easier to get a visa by being hired, than by establishing a U.S. company and creating jobs. Hopefully, the Startup Visa can correct this in the near future. This process should be streamlined, as I believe many European startups have a lot to offer.

3 Choices

Silicon Valley is an unfair advantage for startups. Its ecosystem serves as an accelerator for world-class growth business. In comparison with Europe, lesser teams with lesser technology have access to more resources and will get further, faster. Ambitious European entrepreneurs face three choices: should we aim smaller and within our comfort zone, take greater risks in the Valley, or try the hard way in the old continent?

Photo by luigig

My job as a coach is to encourage, challenge and provide feedback to the 10 teams that were selected. In early July, they were mostly wild ambitions and ideas-on-paper, but after one month of working on their prototypes, meeting mentors and taking part in a pitching competition, they have become early-stage startups. Being a startup founder myself, I find it very easy to relate with them. However, this is my first time on the other side of the table, and this new perspective taught me a few points I would like to share.

Be contagious

Focus on a Vision

Because of this, they try many different things, and see how that affects their offering. One of our teams, Incspark put it very well: "It's a bit like we're building something random, take a few steps back and say, 'It seems that we have been building a car!'"

Stop Thinking - Deliver

Instead of thinking what your users might want in the future, start gathering users now and ask them. Don't overdo plans, but be lean, focus on building a prototype and lower your development cycles so you can keep pushing updates and learn.

Step Up to Your Role

It's important to define your tasks and to have an idea of who makes the calls on certain topics from the start so you can delegate to the right person.

Build a Great Team

What makes a great team? Experience helps, but keep in mind that you need balance (where do you have gaps?), communication skills (divas are difficult to manage), ability to commit to plans, to deliver and to learn. But more than anything, make sure you surround yourself with people who will complete you and stick around when the hard times come.

Learn to Listen; Learn to Fail

Listen to people's complaints, however negative, badly formulated or nonconstructive they are. Sure, they are criticizing your baby and it hurts, but keep in mind that your users are not paid to give you hints on how to make a better product. So don't try to counter-argue with them and explain how they are wrong, or convince yourself that they are wrong and wouldn't have liked your service anyway.

Pitch With Passion

A pitch is not about convincing, informing or educating and it doesn't have to be formal. It's not a keynote or a presentation - it's a sales argumentation wrapped up in a show. People most likely aren't experts in your field or understand your technology. You need to convince them to invest their time, contacts, content or money in your idea. Win them over with a value proposition and a story that sounds strong, memorable and believable. Give a great demo, deliver on bold claims and don't sound like a tool.

Summer of Startups teams meet Jaiku founders

Don't Seek Funding (Yet)

The problem is that, without experience, or even a prototype, you're unlikely to get good terms, and risk getting diluted and burnt very quickly. If your burn rate is buying noodles and living at your parents, you don't need to raise money, so focus on creating value first!

Do Your Homework

Before you meet people, try to learn something about their agenda on LinkedIn or Facebook, maybe you can help, maybe they're on the board of a competitor. When you scout for VC, look them up on TheFunded.

Prepare yourself, so you can ask the right questions, offer the right things, and filter the bullshit.

Be Visible

Network, attend events, share your thoughts with others, bounce ideas, blog about your daily progress, share your story with others. Don't postpone it because you think that your product isn't ready or that people will judge you. Tell the world about your passion, and they might just be willing to listen.

What I Learned

I think that anyone with experience has a duty to help the newcomers. I've learned that the role of a coach is not so much to encourage people, but to continuously push, question and challenge them, so that they can find their way by themselves. In that sense, my role is to help recognize failure and success. If those of us with experience do this early and often enough, maybe we'll see less of the former and more of the latter.

Success stories include Sulake, owner of Habbo Hotel (one of the largest virtual worlds, with tens of millions of users, and pioneers of micro-transactions several years before Farmville) and Irc-Galleria, which is the largest social network for Finns.

There was the $1 billion exit of MySQL to Sun, as well as Dopplr and Jaiku (the Finnish Twitter that was bought by Google and used as a basis for Google Buzz). Star Wreck was started by a group of friends from Tampere, and ended up having thousands of contributors and 8 million viewers, making it the most successful Finnish movie ever and the first major crowdsourced movie production.

The Finnish ecosystem is facing many of the same challenges as other small European countries (I've made a list of the 10 major ones here). There is a lack of entrepreneurs. Only 3% of the population wants to become entrepreneurs, and only a fraction of them want to create startups. Joining or starting a new venture is seen as a very risky thing, and there is still a strong stigma that people who are self-employed probably couldn't find a "real" job in the first place.

As is often the case in Europe, failure is perceived as extremely negative, rather than a learning opportunity. There is also a lack of visibility for Finnish startups. The local press and TV mostly ignore them, and blog coverage mainly comes from Arcticstartup, as well Nerdstalker.

Venture investments are fewer and comparatively smaller than with U.S. companies. However, there is strong government support to improve things. For example, Tekes provides grants and low interest loans to tech companies. Vera venture is a "government VC" that will follow investments made by others. There is also a program called Tuli, which gives "free money" to students to explore ideas that could become startups.

Despite the hurdles, there is still a vibrant, creative startup community in Finland. During the past year, there has been a growing number of entrepreneurship societies in the major cities. Their goal is to get students excited about startups, have them meet role models, hear stories and help them get off the ground with their ideas - and even give seed funding through government support.

The leading group is called Aalto Entrepreneurship Society, which has 5,000 members, has helped with the creation of 40 startups last year and organized excursions to Silicon Valley.

Other entrepreneurship societies include HUES, Hankenes, Boost Turku and Stream Tampere. Together, they're organizing a program similar to Y-Combinator this summer called Summer of Startups where students can receive seed money to create a startup, rather than getting a summer job.

Photo by Skazama.

Who are the Finnish startups?

I've compiled a list of 30 that I find most interesting and active. Keep in mind this is in no way a definitive list. There are plenty more in stealth mode or really early stage and hopefully you'll hear from them soon.

• MySites: Millions of photos, videos and documents uploaded and shared every month. Also provides cloud storage and media hosting for startups.
• Xihalife: The world's largest multilingual social network. Recently received 1 million euros in funding. Jyri Engerstrom (formerly of Jaiku) is on its board.
• Muxlim: One of the largest Muslim online communities. Has received an Internationalization Award form the president of Finland.
• Dazzboard: iTunes for Android (and everything else). One of the few Finnish startups to relocate to the U.S.
• Wreckamovie. From the makers of Star Wreck (the most watched Finnish movie ever), a collaborative moviemaking platform. 100-plus movies in progress.

• Everyplay: Makers of Kamu World and Kamu Town. The founders also happen to organize Assembly, the largest LAN party in the world!
• Ironstar: Makers of the virtual world Moipal. Graphically, think Maniac Mansion graphics meets Farmville. Funded by Monty Widenius (creator of MySQL).
• Heiaheia: Social game mixed with exercising. Get achievements and badges for grinding in real life. Started by ex-Nokia people.
• Huikea: Social and mobile game developer, founded by Teemu Kurppa, one of the founding members of Jaiku.
• Relationship games: Social game for couples, where the game suggests tasks to please your partner. Game design helped by members of Sulake (makers of Habbo Hotel). Video here.

• Hitlantis: Spotify for indie bands. Provides a visual music discovery engine to find new bands.
• Sofanatics: Social TV for sports. Lets you watch sports games together with friends online.
• Widsen: Think Google PowerMeter but add RFID chips to your power plugs so you can shut down your devices directly from the Web. Winner of the Bootcamp program. Video here.
• Foodie.fm: Smart grocery list. Tells you what ingredients to take, in which amounts. Browse recipes.
• Bambuser: Technically Finnish/Swedish/Norwegian. Live video streaming service. Nice Facebook and Twitter integration, plus chat. Used by the number one TV channel in Finland, YLE.
• Shobble: Makes it easier to find and rate shops to order from around Europe. Video here.
• Lucsens: Augmented reality dictionary for Japanese and Chinese characters. Video here.

• Finderbase: Lost your keys? Found a wallet? Post it online, get rewards. Video here.
• Eat.fi: Yelp for Finland. Find and review restaurants near you.
• Netcycler.fi: An online place to give or trade your old stuff instead of just throwing it away.
• Kassi. Still in private beta, no link yet. Post messages, offer services, find stuff in your community. Video here.

• Scred: Manage payments for your site, association or band. Keep track of expenses, send invoices and get stats. Video here.
• Flowdock: Real-time chat with tagging. Helps groups, bands and communities talk more efficiently. Video here.
• Hammerkit: WYSIWYG editor for Web services. Also lets designers create Web pages from their creations more easily. Video here.
• Breezetags: A service to share links by SMS, email and social bookmarking sites.
• Audiodraft: Allows collaborative music creation through a Web-based audio editor. Video here.
• Microtask: On-demand, scalable labor. Similar to Crowdflower but aimed at solving more difficult tasks.
• Balancion: Bank account as a service? Manage your account, get stats, ditch your old netbank.
• Gigswiz: Allows bands to find where their fans are and find a place to play their gigs, together with analytics.
• Hipui. Still in closed beta. Developing a platform to host and stream cloud apps to any device - think Onlive or Gaikai for apps.
  ]]> http://readwrite.com/2010/06/03/never-mind-the-valley-heres-finland http://readwrite.com/2010/06/03/never-mind-the-valley-heres-finland Never Mind the Valley Thu, 03 Jun 2010 16:00:00 -0700 Ramine Darabiha