Hackfwd is a very important new way of bringing early stage, pre-seed investment to tech startups in Europe. Instead of having to navigate complicated financial deals, find VCs with just the right ‘fit’ and get involved in deciphering opaque legal agreements it is possible to have an open, clear and structured understanding of funding arrangements.
For the projects they accept, Hackfwd offers enough money (roughly a year’s salary) for the developer to be able to focus on a project for a year. The amount of funding also depends on whether it is an individual or a team up to the size of three.
The startups get to keep 70% equity. Another 3% is apportioned to advisors and Hackfwd takes the remaining 27%. It is as clear as that.
For a lot of highly focused engineers who are working night on day on their projects many aspects of running a company may be quite unfamiliar. To help with this Hackfwd offers continuous business and marketing advice and there are quarterly passion meets momentum get togethers. These are geeks only events where ideas can be aired and shared.
There are other ways of the way in which Hackfwd does business that separates it from a conventional funding setup, Angel investor, Venture Capitalist or otherwise.
- Standard agreement versus individual one.
- Standard valuation versus this whole idea of, “how much I give up is according to how much you trust me.”
- Standard amount of funding.
- A promise to say yes or no to the entrepreneurs in 72 hours.
- Progress is checked three months at meetings held in Majorca.
- Helping, not with investment managers, but helping with experts in domains, marketing product, HR, finance.
As Lars Hinrich, Executive Geek on the board of Hackfwd says, “It is a very different approach to anything that has been out there before.”
Yet another thing that is different at Hackfwd is in its use of social networks. You must be referred through their trusted network of referrers.
“It is a trust circle of people that we like and trust and only they can make referrals. The best geeks, in a way, have to hack their way into Hackfwd.
“That we are only targeting geeks is definitely something that is very uncommon. It is so much easier for an MBA from Insead or Kellog or wherever to get funding. If you look at European geeks and then imagine them pitching them to venture capitalists – no way.”
The Talent Gap
“The problem right now is that everything is close to free or is for free. Or it is in the cloud and therefore you don’t need infrastructure. The only thing you buy is talent. So, employing talent is one strategy. Making talent into entrepreneurs is another one.
“I worked for the last ten years with geeks and I do speak their language. I know what it takes and mostly I saw this kind of brilliance in them as they were creating completely new things. They are the first ones to imagine new things that don’t exist right now. Most others can interpret things they have seen somewhere and use it in maybe a different way for their companies. However, the really cool new ideas are mostly spun out from engineers.”
The Funding Gap
“If you look at the talent gap; the geeks don’t know how to set up companies or how to run them or how to do marketing. However, in this new web age all these things are data driven. It is much more logical then it used to be.
“Think of advertising in the two thousands or the nineties. You had to be super creative and make great artwork, etc. Right now everybody knows how to use Google and everybody knows how to buy traffic. It’s more about knowledge and execution than art. There is no mystery about marketing, it is data-driven.”
Product Execution Gap
“The most difficult gap is how to execute on product. I think we are kind of co-creators. We help to frame certain ideas. When we see great technology, with the experience of our group we say, “have you thought about this and this and this?” Suddenly the product changes a bit and we say, “this is really, really cool, let’s get it out.” We are active in the way that helps to shape ideas to the optimum.”
From an engineer’s or coder’s perspective a lot of what passes for traditional business practice, particularly marketing, can seem like magical thinking. For people who are used to controlling every part of their working environment bringing an idea market can seem akin to the journey home of Odysseus. Hidden and unpredictable perils seem to lie everywhere.
By using modern digital-age ideas of openness and transparency coupled with the ability to access and analyse data, clearly defined structures and methods can be used by all of us to handle the process of bringing an idea to market and a lot of the seeming mystery of business evaporates.
In its short time in existence Hackfwd has brought seven companies through its system and will have two more ready to progress in business by the end of this year. What Hackfwd has done is bring greater clarity, structure and methodology to what is already a very challenging task – bringing a product to market.
The present funding system, as it stands in all its capriciousness and uncertainty, has the tendency to put off and discourage the possessors of the great ideas that can change and improve the world from coming forward to show and share what they have. With emerging new business methodologies and philosophies such as this we now have a greater chance to access the ideas of genius that we may normally have never heard about.