The Journey of an Academic Entrepreneur. The Entrepreneur. The idea. Getting started

Transcription

1 The Journey of an Academic Entrepreneur The Entrepreneur Ulf Forsman got his B.Sc. (Econ.) from Åbo Akademi University at the age of 29 and went to work for the City of Turku. He worked there for 10 years and developed the City s first software application Turun Hansa, which is still used. After ten years he thought he needed something else to do and took his first sabbatical and wrote a book. The book was titled Fixing the municipality. With hindsight it was released too early. The solutions he suggested would have needed the Internet and the technology the web brought with it. In the early 1990s that was not available yet. Ulf decided he would not return to work for the City and went to work for a company as a consultant. Recession hit Finland in 1993 and he was fired. Ulf has always wanted to do research and applied for a position as a researcher at University of Turku. However, he needed financing for his research and that was done through consulting with a company called TE among others. The idea While I was doing some work for the company called TE the idea emerged. I helped them plan software solutions. The university billed the company and I got paid by the university. TE was active world wide. TEs product was language laboratories, but in the early 1990s their analogue labs were becoming dated and it was time to turn them into virtual labs. TE had primary been a hardware vendor and now this meant that they would have to become software providers. In other words, what we did was to develop some kind of new business system something which today may be called a CRM (customer relationship management system) although that word did not exist at the time. While at this, we started to investigate if there were ready-made solutions on the market and we found there were not. So, the idea of possibly doing this by ourselves instead emerged. We were beginning to toy with the idea that there might be a commercial interest in this. With the customer (TE) we decided that the technology platform would be Lotus Notes. It was Jari the other guy and I who sat and thought about this. Jari did the programming. I cannot program, I ve never done it. Getting started In January 1996 I and Jari made the decision to go ahead. But, who would we have with us? Who would own stock in the company with us? We needed somebody in here who would legitimize the firm. We got this one university professor and a few other guys. In March 1996 we sent the papers in for official approval by the authorities and in June 1996 the National board of patents and registration of Finland approved our firm.

2 We moved out of the university s premises and went into an incubator DIO. We got a room and FIM ( ) start-up support from the Ministry of Trade and Commerce. This money was to be used against costs not salaries e.g. it allowed us to buy a new server and some computers and a few other things. OK. Now we needed to start thinking about how to package our product or solution. When we worked with TE it had been tailor-made for their needs but we needed to get to some kind of standardization. We had no income other than what I got from TE and that was hourbased salary. We obviously needed money. We turned to TEKES, but what we wanted to do didn t fit with their worldviews. I normally say they only financed gadgets and we didn t have a gadget. We turned to Sitra and that was no good either. Finally, we turned to the organization which today is called Finnvera and finally someone showed some sympathies for our ideas. In November 1996 we got a loan of FIM ( ), with an absolute guarantee of FIM ( ) split among the shareholders in the company - if things would go wrong. The interest rate was reasonable and the first year we didn t have to pay off the loan at all. We had decided that we would not put our personal assets as pawns. If we wouldn t get a loan without personal pawns we would have killed the baby instantly and gone off to do something else. And, we though you should get a salary all the time. So we started paying salaries from July You see, you don t get rich on salaries! There are two very different things here; salary and getting rich. And we paid so much so that everyone would be able to pay off their debts. I ve never done any serious calculations but I did have a death s-head calculation on an Excel file which told me how long we d live on the cash. If we would have run out of cash we would simply have quite the exercise! Since the company was all the time in my head and took all time we moved apart my wife and I but we didn t get a divorce. This took place on January 2, 1997, I rented an apartment on Tavastgatan 14 and the first night I spent there I realized this won t work unless we start selling. The death shead calculation was showing the end would soon come unless We had sort of been living the idea that if we have this wonderful product the customers will just line up. Getting customers So, I had to learn to sell and find customers. I started by taking a basic course in sales given by Mercuri Urval. This course was part of the incubator activities and the Ministry of Trade and Commerce paid 70% of the fee. It was the best course I ve ever been on in my life! And this was really hard. I started by calling 5 potential customers each day in January 1997 I guess I had some intuitive segmentation. I took the phonebook and picked firms which I thought might be interested. But, this was really hard for me I have never been good with telling how good I am,

3 so I had cold sweat on my forehead every time. I really overcame a tremendous personal psychological barrier here. I still feel like WAU when I think about it. But, boy was it hard. And, I sometimes wonder should we have had to start selling earlier? It was not until May 1998 that the customers started falling in. So, getting the first customer took over a year! But, then they literarily fell in. We got several small and large customers. The jungle telegraph started to function too. People were suddenly contacting us. We got a local breakthrough within the Turku Area including Salo and Nystad. Many companies, you see, were building their intranets on Lotus Notes or Lotus Domino, so there was suddenly a demand for our solutions. In May 1999 we reached break-even and to get there we had invested FIM ( ). The Big Leap So, here we were standing on the edge of the chasm. Either we grow or we remain a micro-shed providing us with a salary. We thought we should go for the big leap and aim for growth. We had fixed seed financing ourselves, so why wouldn t we be able to do this? So, now we needed to find the VCs ourselves as well. I took care of that. Jari and Pasi (another guy who had joined us) took care of the programming. In July 1999 we started to look for VCs. I traveled around Finland and Sweden. This was again a totally new experience for me and it was exciting. It looked promising. The fall passed by negotiating. We had to learn how to make a business plan and we had to learn to sell our business concept to the financers. Rumors were out there that we were looking for money and this was during the time when any financer was desperately seeking investment targets. So, we had some 5-6 wooers. And, we had FIM 10 million offers from two VC. But, it was at Tavastgatan 14, December 19, 1999 at 5.25 pm that I decided we were going to sell the company. I ll never forget that moment. Selling the Firm So, again it was about learning to do new things. Negotiate a Letter of Intent. We had two candidates. Lots of negotiations and it was hard to learn how to do it. But, in February 2000 we signed with Digia, which was a kind of Symbian competence centre. Now, we had to learn how to do due diligence. Guys like KPMG came into the picture I had never been part of anything like this before. It was about non-disclosure agreements and all in one package. I worked day and night. The buyers didn t want the university professor any longer. He had just been an owner but not active in the company and the buyer only wanted active guys. So, the professor only got money, we got money and stock in the buyer company, which was some kind of compensation for 4 years of hard work, I guess.

4 Digia had completed their first round of financing with Eqvitec Partners and Sonera among others, So there was a price on their stock and, of course, this was in the hey days so Digia would go for their second round and then eventually for an IPO, so the stock we got was supposed to be worth a whole lot eventually. In April 2000 we signed all papers and now started the process of fully integrating TA-Workware with the new organization. That was again something new because Digia had a totally different organizational culture. This post-merger integration process continued and was de facto completed in February Inside the Tornado I became a member of Digia s executive management team and the second round of financing was the following task. This time we needed to get up on the international finance market. Again, a new experience and we worked day and night. It sure paid off! In December 2000 the firm got 33.6 million, which is the second largest risk financing in Finland to this date. Leaving Digia decided to quit offering professional services and we started MBO negotiations for that, but that did not work out and went on the rocks in August And we were not the best of friends anymore. Again I was confronted with a new experience of which I had no prior experience. This time I was to experience how you terminate an activity; to terminate all agreements and empty facilities and negotiate my own resignation. Istanbul and a new start In December 2001 I decided with my wife we were back together and I no longer lived on Tavastgatan 14 I had moved back to Biskopsgatan to take a one year sabbatical. We went to Istanbul for a year. But, before we left I bought a small company, which I would activate when we returned. And this time I would only have fun. I own the company 100% and I m the only employee. I have a new product but I still don t have a financer. The past year I have been mainly consulting new start-ups and it is so much fun to help young entrepreneurs get their ideas straightened out. I am really enjoying life now. Epilogue Not long ago there was a story in one of the business papers claiming that Digia came to the stockmarket via the back door. Well, they merged with Sysopen who was already on the stock exchange. The company is today SysopenDigia employing some 800 persons. It s the second largest software company on the Helsinki Stock Exchange. The VC.s were paid off and are out of the way and Digia is again offering professional services.

5 The original idea of TA-workware is also continuing in another independent company. When asked if Ulf would do things differently today he agrees that with respect to the incubator he would certainly do things differently. The Incubator gave some legitimacy and the FIM , but otherwise nothing. There was for example no real networking between the firms in the incubator. Ulf thinks a virtual science park would be a much better solution this physical one just sucks up lots of money. Ulf draws parallels between the Science Park and former communist systems. The government wanted more entrepreneurs and therefore TEKES, Sitra, and science parks have been established. In reality only a hollow shell has been created. The starting point is not the entrepreneur and the idea, but rather we have money and we need to spend it because otherwise we won t get it next year. What we have at the science park is a pack of government bureaucrats, university bureaucrats, and industry bureaucrats. This is not an organizational issue this is a cultivating (farming) issue. It is essential to fertilize a positive entrepreneurial environment and that we do not have in the City of Turku at present but it can be found in the City of Tampere and that s where I would go if I was to do this all over again. There is SCHWUNG in that City and a very positive attitude towards entrepreneurial activities. I would absolutely go there.