Monday morning guest speaker Ari Backholm hails from Smartner, the turn-of-the-century Finnish startup for mobile email solutions, later sold to Seven in the US. The path, however, was not as straightforward as that:
The story meanders from three tech students forming a company, financing the day-to-day with consulting and random projects to bringing in a hired gun CEO, closing domestic VC funds, stepping up the international game with the acquisition of the Cambridge-based Comtag and the following Amadeus Capital investments and finally an exit to the California-based Seven, where Ari is currently working.
Quite a journey, huh? We recommend to watch the talk in full below to get in on the details of this one. Taking part in the discussion is also Will Cardwell, currently of Aalto Centre for Entrepreneurship, who saw the development of Smartner from the point of view of the emerging Finnish VC market, being at the time an investor at Smartner-partnered Eqvitec.
In the case of Smartner, the business idea took a while to develop: The thought process followed the line of “what’s universal across enterprises?” The founders had a vision of being in the business of repeatable software services, something that one can figuratively speaking gift-wrap and sell to the customers.
The early days were filled with intense market research and combining studies and own ventures in a practical manner: Ari wrote a business plan for Smartner as it was a required element for a course he was taking on venture development given by the then-HUT Professor Erkko Autio.
In Smartner’s industry, the field is dominated by the big operators and device manufacturers, and newcomers must have a lot of credentials to get in on the game. That was one of the reasons why an external CEO was brought along, with more experience and an industry background. Once the idea of and decision was made to focus on mobile email, the following growth was quick: As Ari remarks, Smartner won the footprint war of singing up as many new customers as possible.
With a new CEO, business model and an angel investor on board, the VC side developed quite nicely as well and Smartner found themselves a VC partner in Eqvitec. Eqvitec’s involvement was to a great extent based on personal confidence in the team -seeing how committed and hard-working the guys were and their ability to re-engineer on the fly made Eqvitec hang around despite Smartner’s incapability to meet original plans and a continuous capital intake.
Customers are the key for measuring success. Nicer products, better technology or more captivating story are all secondary to winning that first deal, getting a first reference. As Ari says, you can’t wait until you have something to sell to start selling. One can only hope that customers will solve your problems. Furthermore, Ari emphasises selling inside the organization as well -first and foremost, each employee, investor and advisor needs to be excited! Otherwise, they will disappear at the first sign of something going wrong.
Ari points out that, contrary to the at times dominant perception, selling companies abroad is in fact a good thing. Most likely it’ll enable to continue employ the people and to continue the innovation activities domestically. In the case of Smartner, the company has in fact grown its operations domestically after being sold. While it is not an end goal in itself to exit, Ari remarks that becoming an IPO candidate is one of the primary reasons of existence of a startup.
Although a bootstrap entrepreneur no more, Ari’s business life shows no sign of calming down. Says Ari of his recent experiences of cooperating with Samsung: “If you thought working at a startup is long hours, that’s nothing compared to working with Koreans!”
Finally, Ari advices the teams that personal networks are the most important asset you have -utilize them accordingly. Remember that beg-borrow-steal always starts off with your friends! Thanks Ari for the visit and we hope to see you again -either in Otaniemi or the Valley.
