”It’s not easy being a startup. Especially not in Europe, where most VC investors don’t have their own startup experience and consequently lack the empathy that would make the entire investment process more humane.” Jan Isakovič understands this very well, because he experienced all possible entrepreneurial cycles, the ups and downs, with his two startups. As CEO and cofounder of Cofound.it, which started its journey as a global reference accelerator for crypto startups and collected 13 million euros with their own ICO campaign in June last year, Jan is now working on developing a platform and protocol for automatically connecting the most interesting blockchain startups with users, consultants and potential investors. They also set up a seed fund, and started offering, for free, the expert consulting for which they used to charge. They’ve evaluated hundreds of blockchain startups, worked with dozens and, just last year, launched ten ICO campaigns. Today, they are pouring all these experiences and knowledge into code. The end goal is to have effective software support for blockchain startups in the first lifecycle stages, and attempt to actually improve the world with blockchain.
The Cofound.it team is attending this year’s PODIM Conference as a PODIM Challenge partner, looking for promising blockchain startups. The team will warm up the conference activities with an intense hands-on ICO workshop and the always incredible speaker David Prais, whose appearances enthral everyone who – also and especially because of blockchain – believes in a better tomorrow.
But before you actually meet them at PODIM in May and learn about their platform, which can transform you into a blockchain unicorn of the future, we invite you to read the interview with Jan Isakovič who, as CEO of Cofount.it, is sincerely striving to ease the pains of startup founders in their bloody battle for obtaining investments and the first users.
Always at the crossroads of business and innovation, your career path took you to both, established corporations as well as your own startups. Can you describe the key experiences and milestones that led you towards leading Cofound.it today?
Already as a student, I worked all the time. In 1991, I started with modems, we were issuing Windows shareware CDs, funny stuff like that. Then, still as a student, I started working at IBM, where I was at a stand, explaining that OS/2 is a great system and it will collapse everything for Microsoft. Then that didn’t happen and I went to work for Microsoft for a couple of years where I was also behind a stand, explaining why Windows 95 is great. Well, it really was … (laugh).
When did you tackle your own business projects?
After university, a couple of colleagues and I made a development team and we were developing an information system for the Nova revija publisher, not aware of its complexity until we started working. At the end, we created a customized ERP system that they, the last I heard, are still using today. After this story, I collaborated with Kristjan Pečanac, who was the first high-tech startup in Slovenia to obtain venture capital from abroad, and we worked on this interesting project called Sunsmission, but it unfortunately came to existence too early and Slovenia was the last country in the world where something like this could succeed. It presented sales support to companies that connect in a value chain, negotiate revenue sharing and together launch a new product to the market.
What was the story of the Artesia Institute, your first startup, with which you actually placed amongst the finalists for the Slovenian Startup of the Year award at PODIM 2008?
After the project with Kristjan, I went to Mobitel, biggest Slovenian mobile operator, as development project manager. I got to know the scene, relationships and modus operandi in big systems where, unfortunately, political interests interfere. So, I quit and went to Datalab, where I was the developer channel manager. Then with my now wife Alja, we started our first startup Artesia. Even before the rise of Facebook, we wanted to connect online advertising with users’ social profiles, starting with forums. We developed some plugins that would track what people post and analyse their behaviour. Because we didn’t get funding, we pivoted to consulting and worked for different clients. Then I went to NIL again, where I had spent some time as a student, documenting software, but now came back as someone who would help set up innovation processes.
When was it time for your second startup, Storesense?
Storesense was NIL’s spinoff and I founded it with two co-founders. We obtained a £150,000 investment from the Collider accelerator in London, founded by David Prais, who remains my mentor today and is chairman at the Cofound.it. In July 2016, I had to be honest with myself and admit that the story with Storesense isn’t going anywhere. We had a make it or break it moment. Even though I felt horrible then, I am happy today that we didn’t get a new investment round, because we would have continued to struggle with analytics for retailers and event organizers.
It was valuable for the Slovenian startup community that you honestly shared your fail story and what you learned from it …
It was actually great that we finished that story. Although I spent a couple of weeks laying on the couch, it was necessary to work through all of those emotions somehow … Then I started looking at how to move forward and went to SmartCom as innovation manager. It was the traditional startup cycle – you found your company, you try, you’re paid badly or nothing at all, you fail and then go into the embrace of a safer job. Shortly afterwards, the Business Daily Finance published a story on the lessons I learned from Storesense. Zenel Batagelj (AN: founder of Valicon, strategic consultant in Cofound.it, cofounder of the Datafun blockchain company and internationally established expert for crypto entrepreneurship) read the story and invited me for coffee.
What did you talk about?
He asked me if I wanted to work on a platform for ICO projects, and I asked him what is ICO?!? That was in August 2016. A couple of months earlier, Zenel came together with the ICONOMI team (AN: one of the first successful European ICO campaigns that collected more than ten million dollars by issuing cryptocoins), helped them set up the business concept and their crowdsale campaign. Since I already turned down one offer from Zenel about ten years ago, I said to myself – I regretted it then, I won’t regret it now, so I’m doing it.
Now you’ve answered the question of how you were pulled into the world of ICOs and blockchain. But when did you first hear about bitcoin and what did you think about it then?
I’ve known about bitcoin since it first appeared. But I didn’t believe in it, just like I didn’t believe in Linden dollars or WoW gold. Just a virtual currency. The concept of bitcoin also didn’t attract me because the media was only reporting on how its value grew or fell significantly. In this reporting, there was no thought given to what is actually going on behind the scenes. When I started working for ICONOMI, it was my time to study everything related to blockchain, cryptocurrency, how they can change the world. But especially how they can ease the journey of startups. As a startupper, I understood very well that it is very difficult to come to early adopters and how strenuous it is to obtain funds – also because European VCs are awful.
Because the European VC ecosystem is dedicated to making startups go crazy. For example, at Web Summit, they charge a good thousand euros to founders who then get a half-square meter exhibition space for a day. They promise them access to I don’t know how impressive investors, who are then stationed in their own VIP area that startups can’t even access, they can only see the investors on stage. And then there’s a whole bunch of agencies that suck up money and promise you places that they’ll sell you to, but nothing comes out of it at the end.
But not being able to establish contact with investors at the event probably isn’t the only reason why European VCs are awful?
In European VC funds, everyone claims that they’re smart money. But they’re essentially the gatekeepers for those who actually have the money. And when these startups bow to you daily, begging for money because they desperately need it, you’d need to be a special sort of person for your ego not to grow. That only happens if you yourself used to be a founder and you know how the person on the other side feels. I don’t want to claim here that there is no smart VC in Europe or that all of them are incompetent. I want to say that they lack empathy. It’s all about the startups and it’s all about the founders. Investors are here because of startups. If you need a smart VC as a European startup, you should immediately buy a plane ticket for San Francisco instead …
How are you transferring all your experiences and opinions into the way you lead Cofound.it?
Through it all, I clearly saw that token crowdfunding is a way to ease the pain of a startup that’s looking for funding and the first users. Of course, not everyone who buys tokens is also a user, but there are still a lot of people who wish to understand blockchain-supported projects and use their services. Consequently, you can use ICO to excellently test whether people think your idea is so good that they are prepared to give some money to be able to use your service and product that do not exist yet …
How many of them are users that truly understand how blockchain works?
If I wish to give a startup feedback in the ICO process, I don’t need to understand blockchain and all this cryptomagic in detail. It’s crucial that I understand what it enables, not which mathematical functions are running in the background. Even managers don’t know what every employee is working on and how, but they do need to understand the value added that they bring. Some level of abstraction is always present.
To which fields will blockchain be applied the fastest, also from the perspective of startups that are planning ICO?
Finance is currently the field closest to the market. Fintech and insurtech.
When you are invited to events to explain how blockchain will change the world, what do you talk about?
Predicting the future is always problematic. When a new fundamental technology comes, the world starts changing in ways you can’t even know yet. That’s why you have all these futurologists who try to predict crazy insane things. I don’t even think that their task is to predict the future, their task is to force you to even start thinking about it and then you actually start changing the future! Blockchain is a decentralized system of trust where you can build certain units, certain pieces that talk with each other, that do something amongst themselves, without a centre, without a hierarchy. Who dares to predict how severely this will change the society?
True. Besides this, there are still problems with regulation ...
Regulation is one of the problems because the rules of the game haven’t been clearly defined yet. According to some rumours, Switzerland, which should be very liberal, wants to tighten the control over everything, and all foundations that have ICO as well as a headquarters and a bank, would supposedly get a notice that their bank accounts will be closed. The US is also increasingly strict, the boss of the main American regulator SEC supposedly even gave the opinion that all ICO tokens should be subject to the same rules as stocks. If this really happens, then it’s looking bad. All tokens, except bitcoin, would disappear from the American exchange bureaus. Besides this, IPO shouldn’t be compared to ICO, these are two different things that the company tackles in very different development stages.
The fact that the climate around cryptocurrency worsened is also probably due to the wild growth of its value and that people greedily and impulsively started to get in debt in order to buy it …
Before this euphoria, we had very well-educated investors. Those weren’t stupid people. They asked more detailed questions than, for example, any VC ever asked me when I had my startup. All this craze around the cryptocurrency trade is also one of the reasons why we are withdrawing from the ICO scene as we know it today. We recently established a seed fund with which we ensure equity financing to chosen startups and enable them to scale their business operations as well as prepare for the next investment round or ICO. We still advise them on tokenomics, regulation compliance, engaging the community, promotion … We’re connecting with accelerators from the whole world and help them recognize promising blockchain projects. Meanwhile we’re investing in them, help them issue utility tokens, a part of which we distribute in our community and encourage the people to start using them and evaluating the service. All the consultancy that we did helped us learn this entire protocol.
What kind of a protocol is it?
A protocol that will enable startups to collect funds as well grow their business. A part of the protocol is also leading, management. Our goal is that we don’t carry this out. We build the elements of the protocol, find out what the best mechanisms that work are, and then hand over everything to users to control. At the end, we will be sort of like a janitor who ensures that the motor is running, that it’s well-oiled, but the car is driven by someone else. Similar to Ethereum, where everyone can use the platform. Our vision is to create something that everyone can use for simpler business operations and maybe eventually also for the better world. Even today, such a vision strongly connects the blockchain community, the people who really want to do something, the people who know two things. First of all, the world sucks. And second of all, perhaps we can now actually make it better.
Who will use your protocol?
It will be used by startups in order to connect with early adopters. By accelerators to find the most suitable startups, by bigger investment funds to find interesting forms of financing. Startups, for example, will be able to call function “create legal for me” and the platform will do everything that they need for this. By using blockchain, we can support technically complex processes, which wasn’t possible before. We are, for example, setting up a protocol that will enable functions for assessing startups, finding the most interesting services according to the community, or providing funding, not only through ICO, but also with traditional VC funding. All that we did and today still do manually enabled us to learn how this works in the blockchain world, and now we are gradually pouring this into code. Our final goal is to effectively support the beginning stages of a startup’s lifecycle, with software, using a platform that connects startups and financing sources. In short – the world of ICO and the world of VC will very quickly become one, with the best elements of both, also and especially due to our protocol. And Cofound.it will be one of the leading global companies in supporting these startup projects.
When talking to you, it is very apparent that you sincerely wish to make startups’ lives easier …
Yes, we really do want to make their lives easier, optimize certain interactions, rationalize financing. When we got an investor from England for Storesense, we obtained 150,000 pounds and spent 20,000 funds on lawyers. A lot of hours, energy and work went to us arranging investment conditions instead of doing what a startup needs to be doing, namely finding customers. Founders always piss blood and I hope that we will finally get VC funds that won’t be so fucking annoying. And that these funds will give some reasonable money. With Storesense, the money we got was enough for us to spend a year and a half breathing with gills. I couldn’t afford to live in London. Four days a week, I rented various Airbnb rooms, where I experienced all kinds of things. I couldn’t afford to work mostly on sales and business development, and hire at least two people who could help me with it. That’s why I want for all these sources of financing to become more humane.
You say that you wish to revolutionize startup financing and their entire incubation process. And that you’re looking for teams that truly want to do something with blockchain?
We’re looking for experienced teams that have already developed a version of their service, that already know which market they’re targeting, and that understand what they really wish to do with blockchain. What isn’t interesting for us are companies that do the same things as before, but wish to collect money with ICO. When you ask them what their token model will be, they answer revenue sharing. That is to say, those who buy their tokens will get a part of revenue that the company creates by doing business. And when we warn them that they are security tokens, everyone is surprised. In short, we’re looking for projects that have blockchain in their blood!
Is it possible for Slovenia to become one of the first countries in the world to truly have clear regulations for financing companies with crypto tokens?
Despite the goodwill and proactive activities of many people – on the startup as well as political scene – I don’t think that will happen. And that’s why as a country, we are truly missing out on huge opportunities. The timing is bad, elections are before us and it seems that the government will change. If the elections were a year later, we might have succeeded.
What do you think will be the future of all these tokens that don’t really have any real value behind them?
Valuations, as they stand now, are actually absurd! I believe in blockchain, but I don’t believe in such absurd valuations. This is also the example of Cofound.it. In the second half of last year, we had four-and-a-half million in turnover and two million in profit. This year, this number will be significantly smaller because, as I said, we are focusing on development based on the experience we’ve gained. We proved that it can be done. At a certain point, our valuation reached 130 million dollars. That’s insane! These values are overinflated and the moment of sobriety will come! The same as with the dotcom balloon. In the end, only the good ones remained. Such as Amazon. An additional problem is the fact that startups, as long as the value of cryptocurrency is growing, have an unlimited runway. There is no selection. Your day ends with the thought that you have enough money for, let’s say, eight years and when you wake up you realize that your runway is nine years. I don’t know how all of this will impact the startup world, because there is no evolution anymore.
Do you personally invest into ICO projects?
So far, I’ve invested into all Cofound.it projects and a couple of others, but now I’ve given it up because in order to invest into ICO, you need to very seriously evaluate the team and all other matters – business or token model, market potential … That’s why I invested into Cofound.it projects, because it was already done well. Now I’m running out of time for all this, my focus is on our business operations and developing the Cofound.it platform. It’s time to change the world!
Get in touch with the Cofound.it team!
Startups, if you’re interested in the support of the Cofound.it team, you can submit your application here
or write to Matjaž Slak at email@example.com