Later this week we will start releasing material about a project we have been working on for over a year. We have learned a lot.
In short the idea is to make cheap, interconnected telecommunication boxes that can be deployed very fast to areas that have lost cellular connections for example due to earthquakes, flooding and the like. This way people in the area can get connected when their mobile phones still have battery power. It also provides secondary information for rescue teams to know where and what type of help is needed from the early hours of a catastrophe. [Edit: For latest details, please see blog The SMOS Project].
We, a core team of five persons, have decades of experience in communications, mobile devices, innovation and cutting edge technology. We have been better prepared compared to many inventors about what can and should be done when trying to promote an idea and starting a business. Still we found some elements that left us thinking whether something should be changed or different.
We are not saying this just because we did not get funded. We sadly have other evidence to prove our experiences.
We are asking questions about how we want to act as a society in the future.
WHAT WE DID AND WHAT WE DID NOT DO
It all started as a hobby and ended as a hobby. All of us had our daily jobs, families, house mortgages and the like that help in making decisions. Each of us defined the maximum sum of money we were willing to lose if everything goes badly. Risk for it was known to be high, regardless how good we were or how well we did our part. You could not buy a Ferrari with the sum, but at least a decent used car would have been possible.
We (over) analyzed our focus, needed technology, starting a business and everything we knew and basically could imagine. We also listed where we could get support when needed. After the first three months we were ready. We knew the idea and technology were feasible and even pessimistically calculated numbers showed we were onto something. Lesson number one: Do your homework.
We had internal discussions whether and when to start a company. Remember that most of us had and still have daily jobs, we never dreamed of getting rich fast. We had a three-day preparedness to have a company up and running when ever we would have needed one. When working with a small budget, a startup company would have created costs right away eating away our development budget and the like. Eventually we did not start a company, which was exactly the right decision then and now.
Person close to the project published a blog about start-ups and Finnish legislation, whether it makes sense to start a company and asked why it is seen as such a big thing. This kicked off a high-level academic blog debate that start-ups are a great thing for the future and we are just too scared to make that jump.
Lesson number two: People think there is always money in startups, and you get money when you start a company. It is irrelevant whether you actually know what you are doing. Right now big corporations in Finland are letting people go and are kick-starting startups. It is not a bad thing as such. But if you have no customers and do not know what you will be doing, it is a lottery.
A bad analogy could be borrowed where a man is on a burning platform and is given a lollipop to aid his situation before jumping. This results in a sea filled with startups holding their lollipops.
For us the lollipop was not the aim. We wanted to create something that works. We had no misconceptions about IPR and patents. That was one of the strongest assets we had in the team. We knew their role and that we were not a major player in the area. But we knew where to get help. The Foundation for Finnish Inventions was among the very best things we came across during the whole process. Two persons were especially helpful. You two do not even know how good a job you did and are doing and why your approach and attitude are exactly what is needed in this business. More often we have seen the opposite approach and attitude.
With the help from FFI we were able to get resources to verify our internal sanity checks. The results were favorable to us; patenting was a possibility. And we did not have to spend our own money to get to this stage! The next thing was to focus more on the business side and sharpen the business plans as the need and the technical solution were already covered. We had already received comments “this is needed”, “why this doesn’t exist already” and the like. We continued with our work.
We verified with patent companies that in order to protect the idea well, we’d need a small global patent portfolio. One patent covering the idea would not help in today’s world of litigation. Opening everything under creative commons license would be more effective than having a single patent. CC-license actually was our original fallback plan. By the way, a decent patent portfolio would have cost as much as a late model BMW. Lesson number three: Patents are crucial, but not everything.
From early days of the project we had a big open question and we worked hard to answer it. Where does the money come in and who is the paying customer? We spoke with experts who have potential to run and support a system we were building and providing. We had conservative numbers to estimate how many lives could be saved and/or other damages minimized with a solution like ours. We had no break-through answers for a constant cash flow. We tried to device a secondary business case that would support the main business. Every time we realized that we would be a small dog eating from a big dog’s bowl. The big dogs would eat us and finish the meal with our business plan.
We knew that not only we needed a customer, we needed a big customer. To achieve that we had to prove our point first by building a working system. Then we could talk about becoming a supplier. This all of course requires money. Our calculations had shown all along that our small used car budget was not enough to get everything done. In the first phase we would need one BMW and later closer to production two Ferraris.
Our case was handled in the FFI Business board. They were the number one candidate for helping us out financially. First we wanted to protect the idea, so that nobody could stop us from helping people with our system. And more importantly we needed to finish the system prototype instead of just individual components that prove the thing to us but not to anyone else. That was the plan how to get the customer, demonstrate a system that works and later productize the technology.
We later heard the discussion had been very lively with two different views. The first one saw this as a great idea to help save lives. The second one saw it as a competing idea to what telecom operators were doing. Operators would have shared interest and that’s why they would crush and eat us like the big dog would. Eventually the second opinion won and we were not given funding.
We were back at the used car lot. We had been presented with two questions that could turn the decision over to our favor: prove the point that our claimed 72-hour window of opportunity exists and there is a customer. First one was as easy as said. You just need to have 20 years of experience and a world-wide network to get connected to world-class experts. Just email some the of your friends, and they will reply. And actually they did! Top experts of their areas spent days to go through our material and questions. FOR FREE! We got our proof that such a 72-hour window exists, there really was a need for our solution. The next phase of proof would be to actually deliver the system. Lesson number four: It is good to have a network or to have money, but even better to have both.
By this time we had been thinking about the customers and secondary and tertiary business plans for more than six months. We picked all the brains we could to come up with fresh ideas. We ended up having the same 5-15 ideas and questions presented. At one point we were told it would be better to make games for mobile devices. It might somehow save lives, but I guess people hit by an earthquake don’t find games to be their first priority and a new way to kill their phones’ battery. We had to come up with something else.
What do you do if you don’t have money to buy a Ferrari or even a BMW? You tune what you have. Luckily we had an engineering and design company up in our sleeve. They not only had experience building (actual) folkrace cars, but also Linux-based and other embedded systems. We made a gentleman’s pact: they’ll check if they can pimp our ride for free to compete with the Ferraris. Very big thanks to Offcode, please pimp our ride! Depending on the result we then of course would have compensated them by turning them into millionaires, if possible.
Unluckily Finland is a cold place in January and not all results are heart warming. We got the assessment that it is possible to build our idea. However, a key part of the code was proprietary. Owned by the big dogs. Everything else could have been probably bypassed, but not this part. The cost for the missing piece of software would have been a BMW and a set of wheel covers.
But the cost itself was not the main obstacle. The first one was related to available persons and competencies. The second one was related to an open-source activity bypassing the proprietary code. It would be finished at the same time or slightly later compared to our implementation. Best option would be to wait for a year. Or two or three, at that point the code would probably be available for free. But even small dogs have to eat several times a year. Lesson number five: Be lucky with your timing.
We had visited the used car lot, and knew we could not compete with the Ferraris this way. It was time regroup once more and think about the original fallback plan. We just did not want to give up without trying remaining options that would match our budget. What do you do if you don’t have enough money for a car and you want it badly? You ask your parents. In our case we did not do that literally, but we went again to the Foundation for Finnish Inventions. They had promised that if we can provide the needed facts, they can help us. All for us left to do was to show there was a customer. Lesson number six: Do not give up.
There was and is a customer. It is huge, in the same league with United Nations. We have verified several times from their internal and cooperating sources that they don’t buy powerpoints or vaporware. They buy proven solutions. We just need to prove our point to negotiate further. Daddy, will you give us money? FFI had its hands tied, we had answered most of the questions but not all. They were still there for us, but we needed to prove there was a real customer to match the proposal. Lesson number seven: You will be continuously asked about your customer and business plan, know your main facts and numbers.
We had been hit by a brick wall months earlier and while leaning against the old wall, there was another brick wall about to squash us. But we didn’t give in easily. We piled everything we could as a last effort to stop the crushing wall and pleaded for help to climb over the wall. This would be our last stand.
We approached several companies and institutions for starting very deep cooperation and building the thing with them for free. We could have let them own and control the patents. So we continued with the discussions with everyone we could, right up to the last minute. This had been a professional, coordinated effort and would end as a professional, coordinated effort. During some of these negotiations we were attacked for not having a customer, but that was a fact we already knew. We also knew that customer alone was not enough, contrary to some beliefs. But we acted professionally. Lesson number eight: Act professionally and you will be treated professionally.
It looks like there is a Catch-22 here. To get the money to build a demonstrator, you have to show the demonstrator. And to show the demonstrator, you need the money to build it. And for the big customer you need more than just a demonstrator. That money is not in the used car league. It is in the BMW league and then some. That money we do not have. So, sorry, we have made the decision that we will not risk two BMWs or half a house and fly around the world knocking on doors on the off-chance of finding a customer. This was based on our early decision of acceptable losses. Lesson number nine: Define your boundaries and risk taking capabilities early and compare against them later.
So we have now made a decision to fold. We have learned a lot, now we try to share that information. This decision to quit turned out in the end to be rather easy mentally, because during the way we made a sad finding and a fact. During our last attempts to both prove our point and remove all hindsight, we came across some scientific and newspaper articles. Those made us really sad, if a bit relieved, but also angry. All at the same time. It was not actually anger about what happened to us. There was something deeper.
For us, the proof was in an article in Finnish (Immonen, Rantanen 2011). It studies ICT business potential in crisis management. The main conclusion is that disaster communications is a severely fragmented field, with too many players and too much politics. This was beginning to be our hunch also, but seeing it on paper gave us some closure.
But there was other proof as well. In discussions we received first hand evidence from (struggling) startup companies in the disaster prevention and management area – they are not doing well and are not getting funded. It is seen as a task for the government, but the government does not have the capability to do it. We had also identified potential companies in different countries to partner with our technology. Despite their nominal success and lives saved, most have ceased their operations.
We also learned there is a term used in business to describe work like ours – according to Thomas Landauer (The Trouble With Computers 1995). Welfare benefit is used to describe a thing that is good for society but not for a company. To a small degree we, together with our findings, are a living proof of the phenomenon. Which begs to ask a totally different question.
WHAT NEXT
But what next? All our checks for other types of cooperation and next step funding have failed. We have only one question without an answer, just like we did 11 months ago. We have had some very positive negotiations during the last months. But in large organizations there are other shorter term considerations that have worked against us, once again. It is certainly true that we have not approached absolutely everyone and have not turned every stone. However, we have now totaled one car – gone past the budget we had set for ourselves – and now is the time to stop. We are not bitter, but of course another outcome would have been better. Lesson number ten: Know when to stop.
We beg to differ that economics is the only viable way to look at things. We acknowledge that numbers are important, but many successful companies have proven otherwise by being stubborn and playing their game. We know that many have failed. We are very stubborn, but we also pick our fights. We know that some of the other ideas we have may have better business potential. Last lesson: Be stubborn but be flexible.
Could there be other ways to promote ideas that are for the common good? Are we too much engineers and scientists that we just cannot think in business terms? Do you always need to have a proven business case before you start? If so, is it too obvious or known already? Based on this and other similar cases, I wrote a half-serious article on “Innovation lottery” (which I will translate into English eventually). Something totally different like that just might be the best chance for crisis prevention ICT companies to get funded.
Or should we as a society think what is ultimately more important – making money or saving lives?
So Aaron Huslage, you were not alone (Tethr: Getting online in a crisis). But are you alone soon?
P.S. Our member’s 4-year old daughter started her own online business 10 months ago selling jewelry that she designed. She has gathered more revenue and profit than we have. Well done Maija! Perhaps she will hire us.