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Thoughts on European Start Ups

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Thoughts on European Start Ups

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Cash Management

Image via WikipediaWithout entering the great debate of the moment regarding the length and depth of the recession and how specifically it will affect the tech start-up world, we at TAG have been providing guidance to our investee companies for the past 3 weeks - via circulars to their in boxes.
Much of the advice has surrounded 'right-sizing' the business and focusing on lengthening runways etc.
Our most recent one is about Cash Management and we've decided to publish it here for the benefit of any and all.
"All businesses have turned their attention to cash management - whether they have piles of it and/or are generating lots of it.....or not.
I thought it would be helpful to set out some simple guidelines for effective cash management.

Cash Management

One of the most important disciplines to instill into the culture of a company is the obsessive management of cash.
This is often neglected in early stage companies because they have no bank debt and are typically funded by piles of investor's equity.
Equity is not cheap and in loss making companies, it diminishes daily.
Preservation and management of cash is essential.

Some tips:
1. Make cash a KPI.
1. Get a daily email. Just 4 numbers - Yesterday's opening balance, add receipts, less payments, closing balance. Comments against any unusual movements in receipts or payments.
2. This will keep your finger on the pulse, trigger actions related to large or unusual payments, build awareness of the dynamics of cash
3. Set monthly cash targets and beat them.

2. Working Capital
1. Accounts Receivable, Customer Receipts.
i. Look at ways you can accelerate these. For example, if you are negotiating an annual license with a corporate or doing any customisation, strive to get payments up front – annually, quarterly etc. Even offer handsome discounts for this [after all other negotiation is complete of course].

ii. You may have noticed if you are a subscriber, that LoveFilm regularly offers a big discount for payment of annual subscription in one lump sum – up to 3 months off. This always proved very successful in locking subscribers in and generating large amounts of cash.

iii. Monies owed to you on account. Collect these firmly and strictly in accordance with the terms of your sale (check your standard T&Cs and ensure that clients have accepted these). Make collections a routine process done by 'someone in finance' not by your relationship person. Ensure there is a rapid and decisive escalation process for slow or late payments

2. Payments. Creditors.

i. Reputation is everything. Always pay on time. BUT on-time means the time you negotiated at the time you had leverage – ie BEFORE you placed the order.

ii. Suppliers want certainty and reliability of payment. To get the contract many will extend credit – stick precisely to the terms agreed and use regular good suppliers as references if needed when negotiating those payment terms.

3. Stock. Inventory. (books are written about this)
i. Don't carry it. If you have to then,
ii. Clear slow-moving fast and decisively. Use slow stock to run aggressive promotions generating revenues and customer engagement.
iii. Have suppliers deliver directly to customers – or little and often.

Managing your API

Technorati Tags: API,mashups,mashery

To get full benefit of the network effect of the internet, most web 2.0 companies have been developing an API (application programming interfaces) enabling others to use data and link effectively them.

APIs let software applications talk to each other, push/pull information, etc. It's how developers build third-party clients, apps for Facebook, Google Maps (GOOG) mashups, and more.

Now even the giant mainstream retailers are making their data available. For example, Best Buy, the giant US electronics retailer (and partner of Carphone Warehouse), just announced its own A.P.I., called Remix. Web developers can now draw on any information from the Best Buy Web site – product specs, prices, photos, user reviews – and port it over to their own sites.

The protective walls around information are slowly crumbling. Although of course the use of the API is carefully managed and controlled. In Best Buy's case managment of the API is done by Mashery on their behalf.

Mashery, is working with old-line firms like Hoover’s, Reuters, and even the New York Times, to develop A.P.I.’s.

The New York Times ran an interesting article on this subject a couple of weeks ago, with CNet following.

As many companies have found, doing a commercial deal with a business partner is the easy part of the relationship, getting systems to talk to one another, accounting for the traffic and seamlessly integrating presents a more difficult challenge and one that diverts scarce development resource. This is particularly the case when you need or want multiple partners - sometimes in the hundreds.
San Francisco-based Mashery, helps companies manage their APIs
using its fully-hosted, scalable on-demand infra-structure.

Mashery now numbers amongst its clients:
MTV, Trulia.com, compete.com, calais.com, linkedin.com, whitepages.com, daylife.com, lonelyplanet.com, zemanta.com, zoominfo, reuters.com and shopping.com

The company raised $2 million in new funding at the end of June to help build out its product, add more customer support, and hire more sales and marketing staff.
.406 Ventures led the round; Salesforce CEO Marc Benioff participated, as did previous investors First Round Capital and Formative Ventures. The company has raised $5.2 million to date.
TAG has been invested since July 2007.

Related articles by Zemanta

• Mashery Raises $2 Million More For Web APIs
• Data-sharing service provider Mashery raises $2M, as more companies look to share data

Koodos partners with Daily Mail to launch the Fashion Boutique

 

Daily Mail Online and Koodos have launched a major discount Fashion Boutique

The Boutique, www.dmfashion-boutique.co.uk, offers stylish women’s and men’s clothing and accessories at savings of up to 70 per cent, starting with over 2,000 styles.

The Boutique is integrated into the Mail Online website with its own look and feel, in contrast to affiliate deals where shoppers are taken off to the partner’s website to make a transaction.

The koodos proposition of fashion deals seems to be resonating with credit crunched consumers. In less than two years it has become one of the top ten most popular fashion websites, according to recent Hitwise data. Under the shared revenue deal, koodos is providing the Daily Mail Fashion Boutique’s product, ecommerce platform, customer service and fulfilment.

Product is sourced by the koodos team of European buyers.

The Daily Mail readers are affluent but savvy and love a fashion bargain. FeMail has long been a core section of the newspaper and has built for the Mail very strong fashion credentials. Readers look to the Mail for fashion advice and offers and launching an online store was an obvious development.

Partnerships of this nature depend very much on getting strong support from the offline media and decent placement on the partner website. It will be interesting to see how this evolves.

 

Technorati Tags: fashion,koodos,ecommerce