Sokratis Papafloratos

Lessons, updates and interesting finds.

Starting up again and the last couple of years

09/03/2013

Before I jump into what I’m working on, let me give you a quick update on how I spent the last couple of years.

Taking a break and fulfilling a dream 
Following the acquisition of TrustedPlaces, I had joined Yell Group. Once we completed the key pieces of work we had agreed, I decided to leave in the summer of 2011 and spend the next seven months in Greece. During that time I built an outdoor basketball court at my parents holiday place (a dream I had for years), picked up my day skipper sailing diploma, climbed mount Olympus twice, travelled across Greece, spent most of my time by the sea and generally had an amazing time with my family after fourteen years living abroad.

Itchy feet
As much as I love Greece, my family and friends, I couldn’t stay there. It’s not because of the crisis (quite the contrary). It’s because I am better when I’m surrounded by people who inspire me and there are more of those people in places like London and the US. So I packed my bags, came back to London for a few weeks, and then headed over to San Franciso via way of New York.

In the mean time I was also lucky enough to become a seed investor in two amazing companies: Secret Escapes & Calm.com.

Passion not optional
During my last few months in Greece I had been looking into a number of ideas with my friend Stavros. We moved to SF with a few of them in our minds and then settled on the biggest and most unsexy one we could think of: HR as a service for small businesses. Think Tribe HR or Zen Payroll. It’s a massive opportunity, with clear monetization and slow-moving incumbents – perfect for a startup to take on. We launched ourselves into it, but quickly found out that we were not making the progress that we would expect from ourselves building our MVP. Stavros (mainly) and I had created products over a weekend in the past, but this one was dragging on.

It boiled down to this question: ‘Can you see yourself working on this for the next 10 years?’. When we both answered ‘No’, we knew we had to move on. Up to that point I had believed that I could just will myself to go after any opportunity that ticked a number of ‘business plan’ boxes. Unfortunately, there is one truth that is implicit in any startup. The energy that is required to build a product people will love, can only be provided by a team that is fully committed and passionate about their mission.

Running a profitable business, which you have created, is extremely rewarding in its own right. The ‘problem’ is that in order to get there, you need to build a product first. Unless you care deeply about the core idea behind that product, you will either never manage to build it, or you will not build something good enough.

Getting healthy and strong
This is an aside, but one of the benefits of having time in your hands and living in California, is that you can engineer good habits into your life more easily. So, while I was not making that much progress on the business idea, I did a Ruby or Rails course, quit smoking and started strength training (eventually getting 1.5x body weight on my squat). All pretty handy investments for years to come.

Back to the drawing board
I discounted a ton of ideas. Some outright, some after some research and some after a MVP. I realized that for my next venture I wanted to focus on an idea that has global potential; can truly make a positive difference in people’s lives and that if executed well, the financial payoff can be life-changing for me and my team.

So what am I working on now?
A product for families to feel better connected through private sharing and messaging. Both Matt and I, have dispersed families and we found it hard to stay in touch. We wanted to easily share moments from our daily lives, through photos and general updates, but none of the existing solutions could be used by every member of our immediate families.

So we decided to do something about it and you can see the result here:  www.togethera.com.

Togethera_Beta
We’ve only just started and we have a ton of work ahead of us, but early signs on engagement are very positive. Matt Dempsey is the co-founder, we have  a small team and plenty of generous help from Stavros.

We’re also recruiting, so do get in touch if you’re interested.

I know that the current version of our product is likely to change over the years and that there is a lot of competition out there. These are the factors driving me:

  • Millions of people at both ends of the age spectrum are getting their hands on a smartphone or tablet for the first time. Their expectations around privacy and simplicity are different to expectations of the ‘Facebook generation’.
  • For some of us, existing social networks have become either too complicated or polluted for us to feel comfortable sharing intimate details of our lives. Some research even points to technology making us feel more lonely or worse about ourselves. We want to change that.
  • I believe that improving well-being is not just a noble cause. It’s what the next wave of technological innovation will focus on and where big businesses will be built.  Feeling more connected to those closest to you, is one of the most significant factors affecting your wellness.

What’s next?
I only remember one business quote and it summarizes perfectly the way I feel about starting up and entrepreneurship in general. It’s a response by Elon Musk during an interview that followed SpaceX’s third failure to reach orbit:

Wired.com: How do you maintain your optimism?

Musk: Do I sound optimistic?

Wired.com: Yeah, you always do.

Musk: Optimism, pessimism, fuck that; we’re going to make it happen. As God is my bloody witness, I’m hell-bent on making it work.

Pretty much sums it up. Thanks for reading folks and remember: we’re hiring!

Selling your first startup

04/18/2013

Last week I had the opportunity to discuss the lessons I learned from exiting my first startup (TrustedPlaces to Yell Group/Hibu) with a bunch of startups at the Collider12 accelerator.
Here’s a list of points I shared with them about the exit process:

Preparing from the start

1. The process starts from day 1
Don’t interpret this as building to flip or being in for the wrong reasons. It may take one year from start to exit, it may take ten. Be thorough on on every transaction and contract, keep your documentation in order and always have exit as an agenda item in your board meetings. (You may not spend any real time discussing, but having it there will focus you and your board).

2. Build relationships early
Selling your business will often be the result of a personal relationship, which you cultivated over a number of years. Don’t hesitate to reach out to competitors and incumbents in your space early on.

3. Skill up
You will be dealing with pros on the other side. They know the tricks of the trade and have done this before. You haven’t. The key skill to master is negotiation, which is useful in running your business anyway. I loved ‘Secrets of Power Negotiating’ for its playbook approach and would highly recommend it.

4. Manage your cap table and funding terms
This is the hardest one to get right, but you need to be aware that the capital you raise and type of investor you raise from will often dictate possible/desirable outcomes. Watch out for liquidation preferences with >1 multiple and make sure you understand what ‘participating preferred’ means.

Preparing just before the first real conversation

You will rarely get someone calling up saying ‘I want to buy your business now!’. Chances are you will have a few informal chats with someone at the right position, you will receive and send the right signals and at some point things will get serious. The transition from flirting to getting in bed can happen quicker than you think and you need to be ready for it.

5. Think deeply about the outcome you want
It seems obvious, but it’s very easy to let this one slip or not think deep enough. As a friend had told me ‘you’ll only sell your business once’. Make sure you get what you want out of the exit.

6. Align with your investors
You won’t get the process to work unless everyone is behind it. Have a very clear common outcome agreed with your investors and get as much help from them as you can. Howzat Media (Hugo, Sascha and Lars especially) were incredibly helpful. However, I should have done a better job getting more help from them by preparing better and doing more of the following.

7. Rehearse, rehearse, rehearse
It may sound silly, you will cringe, but just get it done. Run through the playbooks, visualize the meetings (who you take with you and who will be there from the other side), how you respond to their offer…get as much prep as you can afford and get your investors to help you with it.

Managing the process

8. Understand the journey
Here’s what a typical one looks like.

  • First conversation
  • Deliberations
  • Verbal offer
  • Emailed offer
  • Deliberations
  • Final offer on email
  • Heads of Terms – this is where things get real. Anything else is foreplay.
  • Due diligence and negotiating of documents
  • Completion

It took us nearly two months from heads of terms to completion and a similar amount of time for the previous steps.

9. Prepare your lawyer and accountant
Give them as much warning as you can so they can be prepared. Talk to them to fully understand the different types of acquisition (asset vs equity sale) and their respective tax implications. Go back to your articles of association and firm up their understanding before conversations get real (points 5 & 6).

10. Get acquirer to agree to cover legal costs if they walk away
They should be happy to do this if they’re serious. Agreeing the specifics will be the first hurdle you need to negotiate and agree. Have fun! You only have a million more such points to cover.

11. Negotiate the highest sounding title you can get away with.
It will matter when it comes to getting things done in your new organization.

12. Keep everyone focused on the business
Not all acquisition conversations end up in actual acquisitions. The biggest mistake you can make is lose focus and distract your team. An aborted acquisition can hurt morale so make sure you share with the people you need to, when you feel the time is right and set the expectations at the right level.

13. Take care of yourself
Stay healthy and in shape. Responding to an email the next day won’t kill the deal and most things that seem huge and massively important are often not. Being relaxed and composed will help you run a smoother process and get a better deal in the end.

I have made mistakes on most points above, which I hope the post helps you avoid. If you’ve picked up any lessons yourself or would like to go deeper on anything mentioned here, hit me up on twitter or leave a comment below. This is just an overview on the points I feel are the most important for a first time founder. At some point I’d also like to cover the negotiation and management of the post-acquisition phase and expand on how to create competitive tension before and during the acquisition period.

Update: I’m preparing a workshop on this subject. Leave your email below if want to be notified when it launches. 

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Calm.com is live

02/27/2013

calm.com

Calm.com is now live and you and you can download the app here. Alex and the team are building a fantastic product and I’m proud to be involved, along with a great bunch of investors. There is a big vision behind this idea, a massive market to cater and a real, positive impact to the user. Can’t wait to see what’s next.

 

Writing well

02/25/2013

I set this space up as training ground for writing. Consider the collection below as my motivational posters on the wall.

David Ogilvy’s rules on writing, found through Brainpickings:

The better you write, the higher you go in Ogilvy & Mather. People who think well, write well.

Woolly minded people write woolly memos, woolly letters and woolly speeches.

Good writing is not a natural gift. You have to learn to write well. Here are 10 hints:

1. Read the Roman-Raphaelson book on writing. Read it three times.

2. Write the way you talk. Naturally.

3. Use short words, short sentences and short paragraphs.

4. Never use jargon words like reconceptualizedemassification,attitudinally,   judgmentally. They are hallmarks of a pretentious ass.

5. Never write more than two pages on any subject.

6. Check your quotations.

7. Never send a letter or a memo on the day you write it. Read it aloud the next morning — and then edit it.

8. If it is something important, get a colleague to improve it.

9. Before you send your letter or your memo, make sure it is crystal clear what you want the recipient to do.

10. If you want ACTION, don’t write. Go and tell the guy what you want.

David

 

Brainpickings has plenty of inspiring content on writing. Another one of my favorites is Kurt Vonnegut’s 8 Keys to the Power of the Written Word.

I always enjoy revisiting the classic: How to write in plain English, by the Plain English Campaign and lastly, this post by Andraz on ‘nothing left to take away’, which nudged me into starting this.

First post

02/24/2013

I’ve been meaning to set this up for a while. Apart from using a domain that completely matches my name, I also wanted a place to practice my writing and share things I find important, interesting or both.