Autor: Nils Seebach

  • Book Review: „E-commerce for advanced readers“ by Krisch & Rowold

    Hello – I am Anika and new to the digital world. After receiving a stellar business education at University of Rostock and spending some time abroad I decided to join the eTribes Framework team in Hamburg. I quickly needed to broaden my understanding of the digital world and therefore took it upon me to read a whole list of recommended books. Together with eCFO I am now publishing the resulting reviews/learnings from my reading materials.

    My first book ‚E-Commerce für Fortgeschrittene – 50 Denkanstösse für den Online-Handel’, written by Jochen Krisch and Sascha R. Rowold, I devoured within a few hours.

    The author Jochen Krisch is a well known e-commerce expert in Germany and also the editor of the internet-branch service Exciting Commerce.  In line with the editor’s motto „the exciting future of e-commerce“, the book presents the top 50 blog articles of 2009 to 2011 describing different kinds of business models and discussing the latest e-commerce trends due to new technologies and social innovations. The columns are cross-sectoral and broach the issues of among other things live shopping, mobile commerce, shopping systems and clubs, setting up shopping networks and applications, social shopping as well as Ebay, Amazon, Facebook & Co.

    Ebay, for instance, has progressively turned from an open marketplace to a managed marketplace (i.e. more fixed prices, professional sellers and new goods) in recent years. However, the expected increases in sales remained slightly down in comparison to Amazon. A return to the traditional retail auctioneering business offers eBay’s classifieds platform. But not only Ebay will evolve in the future. Likewise, the development of Amazon, Google, facebook or Zalando as relevant players in e-commerce is exciting.

    Also worth reading were the blog articles about shop systems. According to the authors, shop systems should no longer be based on catalogue models or be standardized. Due to increasing predatory competition and the online ordering saturation, online retailers are better adviced to find special, innovative shopping solutions. To be successful in the future and to achieve growth through a regular customer business, they must reinvent themselves and especially inspire their customers emotionally. Alternatively, online retailers should specialize in a market niche.

    What I especially like about this book is that subjects were taken up several times to identify and analyze new developments e.g. the business models of Vente Privée or Ebay. Thus, I got a feel how fast and in which directions the online world can change within two years.

    For eTribes and it’s stakeholders the book is a good read to learn about different business models. New trends and the rapid development in e-commerce e.g. the increase of online buyers from 45 percent in 2004 to 69 percent in 2011 show, that the retail is constantly moving to the internet. This means that companies have to adapt e-commerce solutions to their business models.

    Also this year, I am convinced that Jochen Krisch and his team will publish diverse pioneering articles about e-commerce on their website. The book incited me to think about future trends of e-commerce, too. I’m particularly looking forward to the developments in mobile commerce – how will mobile shopping be improved this year? How will Ebay’s new payment system will work out? – Let’s get ready to be excited!

  • Februar is launch month for eTribes

    So many new projects I thought I share them here as well. We have diligently planned for quite a while not to bring our new initiatives online. Here a quick overview what has been launched this month (and it is only the beginning of the month) and what else you can be excited about up as the „short“ February month continues:

    Here it is:

    Netshops Commerce relaunched their website!

    Localgourmet stands for meat for all and all for meat (fresh and delicious!) Localgourmet

    PreziDay Europe is upon us! Check it out!

    Competence Center for Digital Analytics now offering the first classes!

    Last and definitely not least:

    eTribes has launched a new offering together with an updated web presence.

    Still to come:

    launchwerk GmbH’s new web presence

    Developer Conference Hamburg 2013 sneak preview

    Netshops first appearance during CEBIT 2013 in Hannover, Germany!

    … and lots more!

     

  • Book Review: “Rework” by Fried & Hansson

    Rating: excellent

    Useful for: everybody

    “Rework” is an excellent book to read while traveling, in the bathroom or during short work breaks since it is separated into short, interesting paragraphs that are usually not longer than a page.  This book came highly recommended and out work library has no less than 3 copies of the book in English and German. We are also using some of the products the authors have developed: Highrise (CRM) and Basecamp (Project Management). Since both applications are very useful for a small to medium business I was wondering what the people behind these products had to say.

    Since the book is split into several main sections, which consist of a catch-phrase and a quick explanation I am going to highlight the ten “commandments” I found to be most interesting.  This is a highly subjective view and each of the short sections will probably be of varying interest depending on a reader’s perspective.  Most importantly you can tell that these guys are strongly product focused and therefore some sections apply less to other business models such as service businesses.

    These ten principles highlighted below really hit home for me and I will be integrating them into my daily business routine.

    Learning from mistakes is overrated (p. 16)

    I love this statement. I guess in Germany people take this approach anyhow since an entrepreneur who has failed will very rarely gets another chance. Nonetheless, I believe that celebrating mistakes will often lead to not fully understanding why a business failed. This is especially true in the US / venture funded start-ups where burning through millions of investor money seems to be a rite of passage for an entrepreneur. Being good at spending money is very, very easy – being good in making money is a totally different game.

    Why grow (p. 22)

    We have scaled down whenever we could. Each time we got to be more than 20 people we founded a new business with a separate CEO who would focus on growing a specific aspect of our business. We are currently again downsizing from 30FTE to less than 4 FTEs and I honestly believe that building a valuable and lasting business has nothing to do with growth. Profitability and client satisfaction are the only measure that counts. If you cannot profitability keep one client happy you will also not keep 1000 clients happy – and should you?

    Outside money is plan z (p. 50)

    I could not agree more. Lots of post on my blog deal with sources of capital and honestly bootstrapping or “robbing through the mud” (as we call it) still has the greatest appeal to me. Who do you respect more: the elite single ninja who relies on his skills and resourcefulness to reach an objective or an over equipped tank that just drives somewhere through pure scale?

    Interruption is the enemy of productivity (p. 104)

    Yeep.

    Say no by default (p. 153)

    The hardest lesson we learned so far. As an entrepreneur you will tend to see opportunities everywhere and you will always be excited about following up on them.  It will almost always turn out to be a disaster. Focus, focus and more focus will lead to success and focus is only possible if you say “no” to almost everything.

    Welcome obscurity (p. 167)

    Haven’t been famous yet but I sure know that being outside of the limelight while testing our business model and various ideas has been a blessing.

    Hire when it hurts (p. 204)

    Not a second earlier. It is always easy to hire but damn hard to fire. Not having external financing helps with taking this commandment serious.

    Decisions are temporary (p. 250)

    Nothing is forever… keeping enough flexibility to change decisions is a key aspect of being an entrepreneur.

    What do I not agree with:

    Planning is guessing (p. 19)

    Deep down I am a CFO and I will always be a CFO – so please do not expect me to agree with this statement J I believe that over planning is guessing but coming up with a range of estimates to evaluate our day-to-day achievements is educated guessing and therefore legit.

    Hire managers of one (p 220)

    Well, if you are really not planning to grow this is the way to go. Yet I believe that these managers of one are very hard to find. Very, very few people are able to solely manage themselves without supervision. Most who do poses this skill will already be self-employed or entrepreneurs. So following this example will limit your hiring pool significantly.

    So here is a quick impression of the book. My recommendation: MUST READ!

  • Book reviews!

    Trying to read while going full throttle at work is often difficult. Luckily enough, there are holidays and less busy periods that allow for some interesting reading. I find reading books pretty recreational but it also helps to evaluate operational decisions and to provide perspective. Therefore, I am going to provide some quick feedback on books I have recently enjoyed. Each review will contain a quick rating and evaluation of the most interesting topics.

    In addition, Anika Radder, will also publish her reviews for you to enjoy!

  • Great video: ENTREPRENEURSHIP

    In German only from the University of St. Gallen! [youtube=http://youtu.be/qaXuHlRqTes]

  • What consequences does this bring for VC funds, which have fully invested their current capital?

    As discussed in the previous post – times are tough for VC funds – but what implications does that bring? Funds need to start lasting value creation to attract new capital! As a first step I think that VCs need to reevaluate how they select investments. So far the industry has a way too high failure quote – I even think that VCs with their general herd behavior often miss interesting opportunities. Secondly, they need to increase their target range. There are lots of successful start-ups outside of the Silicon Valley and SV like hubs that would present interesting funding targets. Thirdly, they really need to develop beyond pure capital providers. Almost all of them will tell you that they are really value add above and beyond capital – that is generally just a statement but far from reality. Increasing number of start-up accelerator programs indicates that pure venture capital financing is not successful. More skills, support and knowledge are necessary. Investing in a VC environment is incredibly hard and finding the right investment criteria and sticking with them is quite a challenge. This is nicely described in Paul Graham’s “Black Swan Farming” article. Source: http://paulgraham.com/swan.html

    Small is beautiful

    VC firms should also stop raising larger and larger funds. Even if they successfully invested their smaller funds it does not meet that they should now double or triple their fund size. In several articles and also in the conclusion of the Kauffman Foundation report the authors argue that only smaller VC funds are able to provide decent returns. In addition, they focus a lot on the compensation structure and clearly show that having a significant amount of “skin in the game” is necessary to get solid returns from a VC management team.

    „The incentive for small funds is aligned with investors and more achievable. A $100 million fund could buy 20% of 25 startups and handily outperform the public markets by building four to five companies into $400 million exit values, or a broader set of successes across the most typical venture exit values of $50 million – $500 million. Annual fees keep the lights on in the meantime, while the potential profit share from generating 300­400% gains provides the prime incentive.“

    Source: http://venturebeat.com/2012/08/18/lean-vc-why-small-is-beautiful-in-venture-capital/

    Compensation for the industry should also be changed. Funds will have to proof that their management team is not only investment savvy but also resourceful and has significant skin in the game.

    While we agree on Kauffman’s recommendation on looking beyond large funds, a deeper analysis suggests the need to look at the risks and returns in the fund structure — the profit share of each partner, the spread of capital committed per partner, and so on — and remove the reliance on a heroic grand slam as the only, yet unlikely, path to outsized results. Other qualitative factors include structurally leveraging all partners’ expertise across the portfolio, and garnering meaningful returns from more than just a few deals. These are among the many critical and structural advantages of the smaller venture fund.

    Source: http://venturebeat.com/2012/08/18/lean-vc-why-small-is-beautiful-in-venture-capital/

    If these challenges are met successfully VCs will continue to play a significant role for start-ups – if not it looks like the industry’s funding sources will dry up and soon start-ups will have to look for funding elsewhere.

  • Venture Capital – does it still work?

    Previously, venture capital as an asset class has been critically discussed by Jochen and Alex in their respective blogs excitingcommerce.de and kassenzone.de.

    Source: http://www.excitingcommerce.de/2012/09/vcs-und-die-hohe-wahrscheinlichkeit-des-unwahrscheinlichen.html and http://www.kassenzone.de/2012/09/12/venture-capital-funktioniert-nicht/

    In his last blog Alex already hinted that I am working on a more detailed analysis of the subject. Why do I find this interesting? Well, after having worked in the PE and VC industry I always wondered how it would feel to change sides – become an entrepreneur and learn the nuts and bolts of daily operational challenges. It has been very interesting and I am tempted to claim that “professional” VCs who have been in banking or consulting all their lives and therefore represent the favorite MBA trained elite that joins VC/PE firms on a junior level – know next to nothing except how to draw pretty slides, talk in “investor” slang at fancy conferences and run after hypes like a crazy bunch of headless chickens. This is clearly an exaggerated view but overall the question remains if  venture capital is an asset class with a future. The question is, if the more experienced senior staff has the ability to find deals and make investments that are profitable. In addition, I am wondering if only a select few sometime „get lucky“ or if this is a sustainable industry with a risk/reward ration that should be attractive to investors.

    In addition, Germany has seen a significant increase in venture capital through the Berlin „hype“. Now, with the entire industry under fire it becomes extremely interesting to see how the industry is going to develop. Even more importantly I am certain that these new analysis will have an impact on the rapidly developing European start-up environment.

    Based on a range of studies it has become clear that the venture capital industry in general simply sucks at being investors and even more importantly sucks as an investment vehicle for their Limited Partners (“LPs”). Returns of venture capital as an asset class are simply not sufficient to continuously attract new capital.

    How bad are returns?

    The Kauffman Foundation, a highly reputable Limited Partner in many venture capital firms, has published the following facts based on their significant, long-standing venture capital investment history.

    “Only twenty of 100 venture funds generated returns that beat a public-market equivalent by more than 3 percent annually, and half of those began investing prior to 1995. 

    The majority of funds—sixty-two out of 100—failed to exceed returns available from the public markets, after fees and carry were paid.

    There is not consistent evidence of a J-curve in venture investing since 1997; the typical Kauffman Foundation venture fund reported peak internal rates of return (IRRs) and investment multiples early in  a  fund’s  life (while still in the typical sixty-month investment period), followed by serial fundraising in month twenty-seven.

    Only four of thirty venture capital funds with committed capital of more than $400 million delivered returns better than those available from a publicly traded small cap common stock index.

    Of eighty-eight venture funds in our sample, sixty-six failed to deliver expected venture rates of return in the first twenty-seven months (prior to serial fundraises). The cumulative effect of fees, carry, and the uneven nature of venture investing ultimately left us with sixty-nine funds (78 percent) that did not achieve returns sufficient to reward us for patient, expensive, long- term investing.”

    Source: http://www.kauffman.org/uploadedFiles/vc-enemy-is-us-report.pdf

    There are also other articles and reports that are based on the Kauffmann analysis and the inability of venture firms to raise new funds. Limited Partners have finally woken up to the reality that blindly investing in larger and larger venture capital funds no longer makes sense. Why is that? As Fred Wilson states in a recent MIT technology review interview:

    “Because the returns haven’t been very good in the venture capital industry for a long time. I think if you talk to the investors in venture capital partnerships, they’ll tell you that they’re very much on the fence on venture capital, and if venture capital continues to put up mediocre returns, they’re not going to stick with it forever.”

    Source: http://www.technologyreview.com/qa/428869/fred-wilson-on-why-the-collapse-of-venture/

    At the moment Berlin delivers a wonderful live case study to prove my point. The current hype, number of horrible investments and general herd behavior of investors in Europe’s new venture capital “capital”. Where are the actuals businesses that are supposed to generate lasting returns in the current “hype-cycle”? Where are the returns, exists or just simply lasting value creation? A small elite group of investors such as the Samwer Brothers are highly successful but from my impression the overall industry does not generate lasting value.

    The Kauffmann report goes on to argue that actually LPs should re-evaluate their investment behavior and focus on other key value drivers within the VC industry.

    • “Invest in VC funds of less than $400 million with a history of consistently high public market equivalent (PME) performance, and in which GPs commit at least 5 percent of capital;
    • Invest directly in a small portfolio of new companies, without being saddled by high fees and carry;
      • Co-invest in later-round deals side-by-side with seasoned investors;
      • Move a portion of capital invested in VC into the public markets. There are not
enough strong VC investors with above-market returns to absorb even our limited investment capital.”

    The Kauffmann report also has an interesting title:

    “MET  THE  ENEMY…  AND  HE  IS  US” – Lessons  from  Twenty  Years  of  the  Kauffman  Foundation’s   Investments in Venture Capital Funds
and The Triumph of Hope over Experience“.

    They consider the problem the be the LPs – they need to change their asset allocation in order to substantially alter industry behavior and subsequently the return rate for the industry as a whole.

    The previously listed investment recommendations are only one side of the equation. I think that there is a general consensus that due to the lack of returns and the issues outlined by the Kauffmann Foundation the VC industry will change.

    Therefore, there are a lot of questions that remain:

    What are the implications for start-ups? What consequences does this bring for VC funds, which have fully invested their current capital? Will prices for start-ups significantly change?

  • Web Future Awards in Hamburg!

    Web Future Award is now open for applications. Any new start-up in Hamburg should not miss this great PR opportunity BUT be warned… though judges, including our own TAREK MÜLLER, will evaluate your ideas: http://www.hamburg-media.net/awards-webfuture-jury/

    Applications: http://www.hamburg-media.net/awards-webfuture-bewerbung/

     

  • Google Analytics Summit Hamburg

    Last week the first German Google Analytics Summit took place in Hamburg (http://www.analytics-summit.de). Certainly, a must-attend event for the online marketing crowd but for eCFOs, controller and such this event should have been a must-attend as well.

    I was astonished when Moritz Habermann, senior key account manager at Google, asked whether there were any controllers present. Out of 350 attendees none raised their hand – so nobody from the financial analysis side was present. This is a huge mistake. Google is at its hard a data collection and analysis company that has many uses for financial focused employees. No longer can data sources like Google be for “marketing & sales” only. I really liked what Moritz continued to say – he mentioned the difference between financial KPIs and KPIs collected by Google Analytics and similar tools. The difference is that financial KPIs show success/failure at the end of the month/year but that non-financial data allows for day-to-day monitoring and steering of the business.

    He still portrayed financial and non-financial data points as separate things but in reality they are the two sides of the same coin. It is essential to combine these data points! Google Analytics or other tools such as the Track Board from Trakken (http://www.trakken.de/) are great tools for an eCFO.  A business analyst should focus on displaying non-financial and financial KPIs in such a fashion that a business can be monitored, steered and managed by just looking at a single dashboard.

    I am excited to see the next conference and I hope that more finance guys will start focusing on Google analytics and other web tools.

  • (b) Digital real estate investments

    Google Insights for Search:

    Address: http://www.google.com/insights/search/?hl=de

    Preparation: Estimate a number of key words for your vacation rental

    There are a couple of important variables you can see here:

    1. Seasonality – if the search volume is impacted by seasonality you will see it going up and down as shown in the screenshot above. So your property will be more likely to be fully utilized when search volume is up.
    2. Regions – with the second screen shot you can see where most of the search volume comes from. This is important for advertising purposes and to understand if demand is driven regionally or through other factors.
    3. You can add other variables and compare it to your search volume. You can see that ice cream has seasonality (screen shot 3)

    Google Keywordtool

    http://adwords.google.de/

    In order to check which specific key words people are searching for you can use Google’s keyword tool.

    Enter an initial keyword such as “Pocono Mountains” and add a “#” symbol. Google will not only provide the specific search term, but show a range of suggestions based on what people have been searching for. Here you will see the monthly search volume and also see if competition for advertising based on these search terms is either low, medium or high. Play around with this tool for a little bit to get a feeling for numbers – for example compare the screen shots looking for “Pocono Mountains” with a search for “Marthas Vineyard”.

    Local digital competition analysis

    Access a range of online booking agencies (Wimdu, AirBnB, etc.) and find out how many properties are listed in the region. Note down certain differentiating aspects (number of bedrooms, proximity to regional attraction points, coast/lake etc.) and the average weekly/monthly prices. This should provide you with a good understanding of regional pricing.

    Depending on the time you want to spend you can also check their calendars and available opening for the next two months to see if there is a high demand for rental properties.

    Local booking/vacation agencies

    Call local vacation rental agencies and tell them that you have a property you would like them to manage. Find out how many bookings they are willing to guarantee on average and what they charge as a management fee. In addition, ask them about regional aspects, seasonality and their experience of managing local rental properties. Use these factors to improve your online research and analysis.

    Investment decisions can now be supplemented with free and easily accessible data that only a couple of years ago was only available to sophisticated large investors. Now you can use this data to make better investment decisions!