Norway is now finally aiming to be the best country in Europe for startups! I fully endorse this ambition, and I want to contribute with my experiences and resources to push the flywheel towards building the momentum for achieving this goal – because I believe it is possible!
My experience is that as an inventor of an idea, or a Founder of a company, what is really the hardest to do is to prioritize your own time and focus. Products? Customers? Team? Business model? Finance? Do you work on what you love, or what is needed to get you to the next milestone?
Founders are typically 100% convinced that they are working for the best of the company, always, but the reality is that you are super smart if you actually are able to figure out what to do in all areas that are important on your own. I knew I was not this smart when I started Innotech Solar back in 2008. Here is what I did, and the ITS founding story.
Getting the idea
The story started actually in 2006 when I first had the idea about optimizing solar cells and becoming the solar cell defect expert. I was working in REC ScanCell as Finance Manager and had just started on a journey being in the factory management growing from 88 employees to 330. I was only 26 at the time, and full of enthusiasm over being able to work in such a professional, stock listed company, with super high-tech industrial processes, and getting so much responsibility. The first time I walked into the factory right after my job interview I just knew that solar was a perfect fit for me – all the robots, chemistry processes, thermal processes, advanced high-precision technology, smart people, and enthusiasm! Perfect match!
So, I got the ITS idea just months after starting in this position. Then what? I was excited of course, but I loved my job at ScanCell being really challenged and learning as fast as I could to get up to the right level. What a steep learning curve! But back to the ITS idea: I talked to the key technical people in ScanCell, and they liked the idea and said it should be feasible. I knew that I needed proof of concept if I was ever going to be able to make anything of this idea.
Getting proof of concept
At the time, there were a lot of companies wanting to work with REC, as we were industry leading in several parts of the solar value chain. I pitched one of the equipment vendors with laser and automation expertise when I met them at Intersolar in Dresden 2006. They were so eager to work with REC, that they were willing to do “proof-of-concept” tests for free, and they understood that this was key to being able to quote a custom-made machine that could do this work automatically. Proof of concept was demonstrated, and I got the quote, but it was 3 M$ in cost. I hoped that REC would be interested to invest in this, but the investment case with only REC cells was not profitable enough, and I could just not make economic sense of it as supply would be very limited. However, if the setup was as an independent company, where the supply could come from all solar cell manufacturers, the value added and volume could add up to a good case.
My problem: How to get >5 M€ to be able to develop the equipment, and get the right team in place? Building step-by-step was not at all possible.
I needed investors with deep pockets so that the business could get started, and I needed finance to be able to recruit senior people. And, I needed senior people, to get finance. Classic catch 22. But, how could I know that this was the right thing for me to do and use time and energy on?
Pitching the best
I decided to make an investor pitch to the best Venture Company in the Nordics, NorthZone Ventures. My research showed that they could invest early if the case was good enough. If I could convince them that this was a good idea, then it probably was good enough for me to seriously work on.
I called Karl-Christian Agerup, then a partner at NorthZone, who I had interviewed in my Master Thesis during my Master of Economics and Business studies when I was studying Norwegian successful Founders, and what the best ones actually did different and better. (maybe I can write a blog about that later). I was “well prepared”, and I said: “Karl-Christian – I am working in REC, and I have a great idea. Can I get 15 minutes of your time?” He replied “Only 15 minutes?”, and I confirmed as I did not want to waste his time. He said: “Can you come up immediately?”
Your primary objective with the pitch: testing and learning!
I had a 2-page document describing the key areas of the business that I could think of. No fancy presentation, just a good story and my perspective on the opportunity. Now, my thinking was not so much to convince NorthZone on the spot, I had no illusions about that, but I wanted to listen to their questions and thoughts. Here I got this fantastic opportunity to tap into 15 years of professional business development experiences from the best ones in Scandinavia, and get his thoughts for free on what he believed was important. And, what was important to him, was of course very important for me to understand. So, it was a self-test about how prepared I was, and how well I had thought things through.
I only used 15 minutes and left the 2 pages. I knew how this could be good business. I knew the money language. But I went out from the meeting with a much better understanding of what the key issues were that I had to work on and be able to answer in a good way. And especially if I were to eventually give notice to ScanCell and actually go for this – then I wanted to be super sure that I had done a thorough due diligence myself to minimize the risk of failure.
At the time, I was not sold myself on the case, and I think that this skepticism was productive. So my pitch was actually that I wanted NorthZone to lead the case, but I wanted to work further in ScanCell because I loved my job. :-)
Your secondary objective with the pitch: Igniting interest
What happened at the end of the 15 minutes meeting was that Karl Christian wanted me to come back the next day, and give the pitch to Tellef Thorleifsson also. I knew then that I had sparked enough interest with them, that the case probably had a good potential. Good verification. That was the start of Innotech Solar, and a 7-years war-history together with NorthZone. How lucky I was to be able to attract, in my mind, the best investors to join in on my idea!
It turned out to be an extremely competitive market. NorthZone lost 150 MNOK (18 M€) on ITS in the end (!), but fortunately, they have other winners like Spotify in the fund making up for all losses in all the other investments in the fund. As they said back in 2007: “we know that 1 out of 10 makes it big, and pay for all the others, but we just do not know which one at the start.”
Their objective with the pitch:
What I did not really give a lot of thoughts at the time of the pitch, but what has struck me afterward, is that you think it is about the business case you are pitching, but what is probably the most important for them is actually YOU. Are you the right leader to lead this? I was very clear on the fact that the case needed a senior team to be able to succeed. Having already worked in a stock listed company, and visioning that I needed to partner with the big global companies and convincing senior executives, I just realized that I lacked grey hair being only 27 at the first pitch.
Based on my experience I encourage EVERYONE to start pitching very early, and let the guidance of those you pitch give food for thoughts on direction and priority. Best case, you find a great investor who will join you on the journey, like I did with NorthZone. And, are not those the kind of people you really, really want to team up with to tackle all the challenges lying in front of you? For me the answer was crystal clear: YES.
Now, to draw some insights out of all this: if you are a seasoned entrepreneur and having failed a few times, you know the value of people around you that give different perspectives to yours. For me “early pitching” is a key tool to learning fast and being challenged, and this is key for recruiting and getting finance – two of the most vital puzzle pieces for startups.
This goes hand in hand with the philosophies in the great books “The Lean Startup: How Today's Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses” and “The Startup Owner's Manual: The Step-By-Step Guide for Building a Great Company”, but maybe adding the finance perspective, which I think makes it “really lean”. These books are Founder’s ABC, and Silicon Valley “must-reads” before getting finance. Read them!
Knowing thyself is also a trait I think is valuable for a Founder. Know where you are strong, where you excel, and which areas others are much better than you. Your first 4 recruitments are really key. If you get the right people onboard, chances for success increase dramatically. The right finance partner is clearly a very important team member.
My perspective is that way too many companies fail, not because the business is bad, but because the right fundament is not in place early. Following my approach will enable companies to do more right things, and less wrong things early, and that should make a big difference! And it can get you a great team around you and finance. Pitching for a great team is as important as pitching for finance.
There is enough capital
Most people say that there is “too little capital” for startups. I do NOT agree to this. Capital is always seeking great returns, and will flow to projects and teams that can offer this. The capital is in constant search for great cases. So, I say, start with building the right fundament, and you and your team will find capital (even capital seeking you). But ensure that the capital you get is competent!
With that fundament in place, chances for success increase dramatically. It is all about the right people! If Norway could adopt this philosophy for startups and think not of Founders of startups as super-heroes, but how to create super teams, much is done.
Make sure that those that shall guide you have gone the way themselves. This is the difference of being led in the right direction, and being led astray. Experience matters!
Thanks for taking the time to read my journal! Please feel free to share thoughts with me back at email@example.com or give me a call at +47 99 62 41 40