Tuesday, October 14, 2008

"Mobile Crunch" -New rules for Mobile Start-ups in today's economy

Extremely well-timed Mobile Monday Barcelona session last night focussed on Mobile Start-ups in Times of Crisis and how to manage through a financial and/or economic downturn.

Panelists Oscar Farres from Debaeque Capital, Sergio Perez from Caixa Capital Risc and Marcel Rafart, from Nauta Capital, gave their take on the current situation and offered guidance to young mobile start-ups.

Their main points:

  • The rules of engagement have changed -risk profiles have shot up and banks are retreating to safe investments, those that generate revenue or profit already (but preferably both). Fundamentally, for young start-ups the message was 'forget the banks'.
  • Start-ups should outsource or plan to outsource whatever activity can be externalised, as these leverages the company's cost base and reduces risk from an investor point of view.
  • Focus on burn rates-cut out any expenditure that is not strictly essential
  • These are tough times, but also times of opportunity for those companies able to stick it out throughout the crisis.
As Rudy de Waele put it eloquently, 5 years ago there was no Facebook or Twitter or myspace...times of crisis allow for a natural selection of only the very best concepts and businesses. Start-ups should really ask themselves what unique benefit do they offer that no-one else offers?

I asked the VC guys what % ROI they expected to still consider making an investment and the rule of thumb was 25-30% y-o-y.

Interestingly, Oscar Farres highlighted what he considered to be the big growth opportunities in the market (independently of recessionary pressures) and Location based services was up there amongst the chose few sectors.