INJO4 – Kapow Technologies

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Good Old Trend

I’m at Stanford! I’ll be holding a presentation at the Innovation Journalism conference later on today, but I wll also try to to live blog the conference as much as I can. Please check out the programme and let me know if there is anything specific that you want me to catch and I’ll try to write more about that.

The first session was from Stefan Andreasen, CEO and founder of Kapow Technologies. His topic was “Taking a European startup to the US – The Entrepreneur’s perspective”.

Not familiar with Kapow? Neither was I, even if it ringed a bell somewhere. Basically, what they do is help making mashups or create new relevant feed streams. Today, mashups are still difficult because of the lack of relevant API’s to use. So what Kapow does is to create RSS feeds and similar standardised formats automatically from a large variety of sources – directly from webpages or in databases. Sounded a bit like Yahoo Pipes, but you don’t have to have the initial RSS feeds. Clever.

Kapow started as – a one stop shopping site for real estate, cars, boats etc. Andreasen explained that they unfortunately were about five years ahead of its time, as real estate agents thought they were stealing their profits more than anything else. Because of this, the company died with the dotcom-death of 2000-2001. Fortunately they could reuse their technology to create a product which could be sold to Danske Bank and used the money to fund their new company, Kapow Technologies.

Making the shift over the Atlantic started when Kapow realised that all current partners, and potential partners, were to be found in California. Also, is was considerably easier to find investors when you are in a market where the growth potential is larger, i.e in a larger country.

Andreasen listed a few key points in finding the right investor:

    Understanding of Danish/European culture
    Understanding the US market
    Transatlantic investor became the goal
    Understanding of our market segment and our challenges
    Show real involvement, “smart money”
    Good Connections

The partner they found was Kennet, and with help from them they today have 75% of their business from the US.

Andreasen also listed a few lessons that he had learned from moving your company to the US:

    Moving to the US has saved Kapow technologies
    Having a “cultural fit” investor is key
    Creating a new market segment is very difficult and things has moved slower than we anticipated
    As the company grows it also outgrows what you before considered key employees
    Not reading the market can be very costly
    Beware of cultural differences
    Even the most promising deal can turn out to be a failure

A good and humble presentation from a person who obviously knew what he was talking about. I’ll definitely be looking out for Kapow ahead.

* * *

Next up was Javier Rojas, Managing Director of Kennet that presented with the title “European Innovation & succeeding in the US – expansion strategies for European entrepreneurs.”

Kennet Venture Partners
is a VC firm focusing only on American and European innovation. They have moved several companies from Europe to the US, and are used to the problems that may occur. The companies that they look for have a revenue between 4-50 million US dollars. Usually their commitment is between 3 to 6 years.

An interesting point was when Rojas said that there will be a split in managing content and managing your audience. He argued that newspapers (and others) had to open up to other sources of content, and also let their content go to other hosts. Good point, even if I think it will take quite some time for the newspapers to accept. Rojas gave this a time frame of five years. For this, Kapows technology would be perfect, he argued.

As for the pure VC point of view, Rojas held a good presentation, but there was so many points being made that it was very difficult to keep up. He basically went through their entire investment logic in 20 minutes. Very interesting, but basically unbloggable. I’ll make a few summarizing points below to try to catch the main frame.

Rojas focused on one major challenge for the European markets: – it’s not homogenous, and therefore each country is insufficient in size to support a global vendor domestically. This creates a very expensive business environment. He gave an example of having three sales people that covered the entire US – one on each coast, and one in the middle. In Europe they had to have three people just to cover Great Britain and Germany. The equation for sales that he used was one salesperson for every 1.2 million US dollars revenue at 60% gross margin.

He continued to explain that entering the US market typically costs around 5-15 million US dollars. In order to be successful here Rojas emphasized the importance of having key management living in the US. A lot of European companies fail in not willing to relocate their management, and miss out on many opportunities because of that. For instance, having the VP Sales in US was essential Rojas said.

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