One of the most crucial traits you need for starting a venture in Stockholm is staying power. Your peers in Silicon Valley need it too, of course, but not to the same extent. Why is that? Well, there are a number of reasons, but here are three of them.
First, the accessible amount of seed stage money in Stockholm is less. We don’t have the same fools, friends and family tradition to fund startups; the number of business angels and the sizes of the amounts they can invest are less; and we only have a handful of VCs that make seed investments. The lack of competition among the VCs allows them the luxury to place their bets once the startups have made it passed the most critical validation points. Good for the VCs, but as an entrepreneur you need to take the company longer with less money.
Second, in Stockholm failure is really not an option. Most startups need to pivot a few times before they find their recipe for success. This means that you have to be prepared to experiment and learn from failure. In Silicon Valley, as long as you fail fast, failure is embraced, cradled, and even encouraged. In Sweden, I’m afraid that we still have to learn that we can learn from failure. Thus your pivoting must be carried out preferably in stealth mode and with money from your own pockets or possibly with soft funding.
Third, Sweden as a target market is too small for most startups to justify VC funding. The Swedish market is excellent for testing and validating new business models, but as a Swedish entrepreneur you need to think globally from day one. Many startups underestimate the effort it takes to build an international presence. We think we are so cosmopolitan, but are we really?
So, here is some advice to extend your staying power:
- Don’t quit your daytime job too early. There are probably a lot of the customer development, alpha prototyping, etc, that you can do in the evenings and on weekends. Try to validate as much as possible before you trade time for salary.
- Apply for soft funding (long) before you run out of your savings. This is of course true for all funding, but first timers tend to miss this. In fact, you can often use the money you invest yourself to match government grants/loans. You can´t do this retroactively, though.
- Stay lean. Don’t try to build a new Ericsson from day one. Be even leaner than your Californinian peers. Read the book “The Lean Startup” by Eric Ries. Focus on the minimum viable product.
- Understand what unique values your business brings to the market. Everything else should preferably be “components” that you buy off the shelf.
- Value your own time the most. A trick is to set a high price tag on you as a consultant working for your startup. If you are charging say 10 000 SEK per hour, you will surely only do the things with the highest priority.
- Be frugal. One of my favorite entrepreneurs built his first prototype with garbage container findings.
- Trade speed for equity. You shouldn’t give away the whole company, of course, but you can’t afford to miss the window of opportunity either. Find the best co-founders and pay them with equity.