Startup learnings from a Greek Founder

Here are my two cents to all of you who are thinking to set up something new outside of USA!

Startup ideas can be popped up anywhere in the world and your “Eureka” moment might also be someone else’s “Eureka” at about the same time thousands mile away. This is certain, since the world is in a way flat and everyone is running towards the same direction; that of disrupting it so as to make it better. Do not worry if you are not based in one of the major startup hubs, like the Bay Area, when you start working on your idea. Actually, 91 out of the 197 alive unicorns, up to now, are based outside of the USA.

Since I already went through this process, I will try to share my learnings from my startup journey. I do not want others to try to reinvent the wheel, in case someone else has already done it and I, also, wish that someone had told me all these so as not to find them out the hard way.

My story started back in October 2011 when I founded Crypteia Networks, a cyber-security startup using artificial intelligence and machine learning so as to produce threat intelligence and behavioral analytics. This first chapter closed in October 2014, when we were acquired by PCCW Global, the international arm of Hong Kong Telecom.

Even though you might be outside of the USA, there are some best practises that you have to follow so as to be able to move there at a later stage. The basic idea behind these best practises is that your potential future investors, or even acquirers, are not willing to take any risk not associated to the product or the service, like country risk, legal or tax framework risk etc.

First things first, get a lawyer! It might sound expensive or awkward but when you start, especially with your first startup, you have your idea but in most cases you do not know anything else; like how to form your company, compose the contracts of your employees or define the terms of service for your customers. The reality is that it is not expensive at all, since most law firms that do business with startups have deferred service packages in order to cover for your first legal expenses and to provide you with the convenience to pay them later on. In our case we worked initially on retainer with a legal team in Athens, where the majority of our team was situated. Afterwards we enrolled on a “startup” package in Boston so as to handle our US issues; the latter worked really well for us since our due diligence list was executed quickly and accurately during the acquisition phase.

Step two, incorporate your company in Delaware in the US, regardless if you are based out of Athens, Beirut, Paris, Cape Town or Jakarta. In that way you can “comply” with what most Venture Capitals and potential investors are expecting to see during your due diligence phase. We could not think that when we started, so we incorporated in Greece. Later on, when we would try to raise money, both in Europe and in the US, the investors were thinking that we were coming from a different planet. Not to mention that during our exit in late 2014, Greek bureaucracy raised a lot of issues around the acquisition transaction.

When you start working on your product or service make sure that you are documenting your processes, methods and designs. All these can become a valuable asset in the form of Intellectual Property (patents, trademarks etc.) that provide you with credibility and differentiation when you discuss with potential customers or investors. Intellectual property can build barriers for potential competitors to enter your turf, as well as protect you from Patent Trolls, the infamous abusers of the patent system in the US. We used part of the deferred services we received from our Boston law firm to build up our Intellectual Property portfolio that had a very strong impact on the acquisition’s valuation. On top of that, these patents were very well received by customers, both existing and potential, since they wanted to purchase something innovative that could add value on top of what they had already in place.

At some point your product or service will be at the MVP (Minimum Viable Product) stage, thus ready to be presented to potential customers so as to get early adopters on your wagon. Here comes a difficult one; what you have developed might not be what your market needs or you might have focused on a very small market that blocks you from scaling. This should not be the end of the world. It is very much OK to make mistakes and try new things, as long as you listen to the feedback that people around are giving you. You do not develop something for the sake of developing it or solely for your local market, but for the sake of getting it to the global markets. That said, syncdev or lean product development practices are crucial for your success. Pivot is not a shame! We started as a professional services company that was acting as your go-to outsourcing partner in case you wanted someone to manage your network security and we ended up having to manage a plethora of different systems and vendors. That led us to our “aha” moment, when we realised that what was missing was a single pane of glass where your entire security would be depicted and all the knowledge available would be shared, in order to spot the unspotted threat. If we had stayed a professional services company we would never had attracted the interest of a global telecom operator.

All these iterations of product development cost a lot of money and resources, especially for young startups. This is one of the few points where companies that are primarily based outside of the big hubs have a strong competitive advantage. Offshore development gives you huge savings over time and this money can be better utilized in sales, marketing and business development. A software engineer in Greece, Eastern Europe or Middle East costs about a third from his equivalents in the US and in some places in Asia, Latin America and Africa she might cost even far less. In our case, when we were bootstrapping our venture, having our entire R&D and engineering teams based in Athens (Greece) gave us a lot of space to evolve our business in the US, without the need of constant funding. Today our team counts more than 30 people and keeps growing, since the company that acquired us was impressed by the quality of the available talent.

There is one last piece of advice I would like to share with you. No matter how desperate you might be for money at some points during your journey, avoid government grants by all means. Most of them are merely a destruction, due to the administrative overhead that will introduce to your day-to-day business and in some cases the fine print in their term sheets might complicate your intellectual property or investment options. We had a such an experience during our acquisition, when the Greek state penalized us for growing the company and eventually achieving an exit to a listed company. We were appointed with a fine equal to the the amount of the grant plus interest… Governments and bureaucrats do not care about growth; the red tape makes it impossible.

It is not necessary that all of these will be applicable in your journey, but these were the most impactful in mine. It would be rather useful to know all these when my journey began; instead of learning them through setbacks along the way. Unfortunately, back then mentors were a scatter resource in that corner of the planet and that is why now I devote a good percentage of my time supporting new founders on their entrepreneurship endeavours.

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