This is just the beginning

The news of Google closing down some of its non-profitable services is just the beginning of what we will see during the coming times. Either popular websites and services will start to be closed or something has to change in how they make their income.

Sure, web services are closed down all the time because of non-existant revenue models, bad management, small traction or other reasons. When that happens, many say, no big deal. What is different this time and the months and years to come is we will see closure of many good, popular, loved sites which have become part of our life.

Many consumers consider it self-evident, that we can use free web services, not thinking who pays for developing and running them. We do forget, that companies are giving us expensive gifts and not getting much back. “$0.00 is the future of business,” wrote Chris Anderson for Wired. At the same time Google kept developing and running close to 50 services, which bring them nothing more than fame and losses.

What Google under their new CFO has done is effectively saying: “You were not paying for what you got, we were making losses, it was not fair to us, so that’s the end of it”. Sure, closing Google Notebook or Jaiku might not matter to many. Pulling the plug on Youtube, Picasa, Orkut or hundreds of other top services, still loss-making, either from Google or others is a different matter. But these things will happen to some of them.

It was fun, while VC money was pouring down the skies. Free was sexy. During the recession, now that CFO’s rule and profitability will be the key, nobody cares about sexy. You make losses – you either restructure or you kill it.

Sure, investors and enterpreneurs will suffer. The bigger problem is that the consumers will suffer. The only reason to that is being used to the “Church of the Free”. We’d rather see things we love going down the drain than being willing to find the $1, $10 or $100 to pay for what we consume. After all, The Church said the right price is $0.00 and someone else should pay, the mystic Advertisers.

The solution? I am not sure, but I do believe we have to start paying more for what we as consumers use and charge more for what we as web startups provide. The payment systems have to evolve, either in micro-payments or subscription models. Our mentality must change in being willing to pay.

The question is not just about startups and more mature companies surviving or profiting. It’s all about continuing innovation, creating value by people who get paid and find motivation to do something. It’s about media investing into journalists, photographers, videographers and us as citizens having quality news sources, based on deep research, in addition to yellow entertainment news snippets produced cheaply by cut-down media organisations under the pressure of decreasing ad revenues.

Free will not disappear and everything will not become paid. But unless there is drastic change in the current online advertising models and mechanisms, what we have become used to in the last few years will not be sustainable. Seeing that innovation in online marketing is something we should wish for, both as web enterpreneurs as well as private consumers. Until that day, follow the news of your loved ones biting the dust.

Join ArcticEvening Tallinn on January 28th

Together between ArcticStartup, Connect Estonia and OpenCoffee Tallinn we are organising a kick-ass tech startup event: ArcticEvening on January 28th in Tallinn.

The evening will include pitches from 2 Estonian and 2 Finnish startups, a panel between Sten Tamkivi from Skype, Allan Martinson from MTVP and a special Finnish guest, followed by drinks and networking.

From the interest people both from Finland and Estonia have shown, it promises to be a great event. Feel free to join us either a participant or submit your startup pitch to be among the 4 lucky starups to promote yourself there. You’ll meet an international bunch of enterpreneurs, tech people, VC’s and others. And it’s all free!

The number of seats is limited to 100, and in half a day half of these are already “sold out” so to join us, register on the event page already now – we might be full in a few days!

See you in Tallinn!

10 reasons startups love recession

Love and hate go hand in hand. Today there are many negative thoughts among tech startups because of the global recession. At least here in Estonia I believe things will get even much worse during the next 6-18 months. So to create some positive aura, here are some thoughts (in no certain order) why we should take the current and coming months on a positive note.

1. Downturn makes you think. Management of a startup often feels like being a “rat on a wheel.” Now is a good time to sit back, relax, look into the ceiling and think some deep thoughts. What could be changed? Where are the inefficiencies? What are we doing wrong? What could be done better? Taking some dedicated time to (re)think on these issues you can come up with new ideas and solutions that you can then use to take your startup to the next level. Many people need this push from the external environment to take the time for this kind of thinking.

2. Good M&A opportunities. Most of startups still have cash or are in a good operational situation. Why not use these times to see which other startups to buy or merge. Even if they are also just starting, have just a few employees or only tens of thousands of visitors, they could be a good addition to your team, product or service. And don’t think badly of mergers even if you are a smaller party. Having a small piece of a great company can be great fun. At least much better than going out of business or not reaching your dreams.

3. Availability of great people. Hiring will not stop, even when there are layoffs. Letting unproductive people go is something that happens at all companies and that should be often done even in good times, now it is just much more visible. At the same time there are many great people available on the market, so go out and have them join your team. Today they might be even much more reasonable about their terms, willing to take more in shares than in cash or looking more at the long term perspective.

4. Focus on sales. As a CEO, founder or just an employee, today is the day to think how to get 50% more out of your sales actions. Reach out more to potential customers. Use your network, even friends and relatives to get new potential customers. If your main revenue source is advertising, consider having more special one-off solutions that you can propose to your customers in addition to standard banner and text ad spaces. Talk to customers 50% more than yesterday, ask them more about their needs and desires and urge all of your people to do the same.

5. Creative marketing. Now is a good time to save money and at the same time achieve more. A dream come true for any marketer. Use less standard solutions. Experiment. Try out new things, both online as well as offline. Partner with service providers that are also startups, hungry for business and willing to go that extra mile to do something innovative for you. Measure. Kill things that do not work.

6. Focus on long-term product development. This comes back to the “rat in a wheel” and short-term plans and execution. While in some areas like sales and marketing there is now more urgency to achieve more in less time, in product and service development you could dedicate more time now into things that have to be “ready” or reach maturity only after 1-3 years. Of course this means you have strong enough warchest or are already profitable. If yes, focusing on bigger long-term projects can mean much bigger rewards when the economy gets better after a few years.

7. Strong get stronger. Less clutter on the market makes good companies like yours stand out more. Do the right things. Stay alive and show your usefulness to your customers. Darwin knew his business. There is a reason in nature why the weak and stupid die.

8. The money is out there. The funding is still there. Angels still have their money, ask for it before they spend it all on yachts and space travel. VC funds still have their money. Stupid ideas get less funding. More is left for you, your good ideas and perfect execution.

9. Companies built to last. Forget exits for a while, this should not be your goal (although you can let the investors think it is). Take a view of where you want to be in 3-5 years. Try to be cash-flow positive, grow from your revenues, from the money you get from customers, not investors. Build a strong company, where you would want to stay for years to come and not even want to sell.

10. New startup opportunities. If you still have a dayjob at an established company, this might be the best time to leave that and follow your dreams. You might be ready to market just when customers are ready to buy what you have to offer. If you already are at a startup, try to come up with some innovations or new ideas that could be put into action there.

Probably you can add many reasons and potential actions yourself. Feel free to add them to comments.

We have good Baltic examples of great companies coming out from the last downturn as well. One of the best examples is the biggest Baltic social networking company (Forticom), which was basically bankrupt back in the beginning of the century. Now it is valued at hundreds of millions of euros thanks to perseverance of its founders and management. A job well done in tough times.

If you are good, you should be positive and full of optimism. I am. Times have never been better.

Future OpenCoffee Club Tallinn events

OpenCoffee Club Tallinn is celebrating its 1 year anniversary soon, yipee! The recent events have had over 50 participants, both old and new. So if you happen to be in Tallinn, why not drop by and meet both local and foreign tech people and investors.

The best way to get event notifications is to join our Facebook group here – we have 207 members now.

The next events are scheduled on November 6th, December 4th and January 8th. I would bet that a 9 AM event on January 1st would not be too popular, unless some drinks are involved.

Interview on ArcticStartup

Antti from ArcticStartup (the best blog on Nordic and Baltic startup scene) was recently nice enough to do an interview with me. If you are interested on opinion rather than facts, I suggest you scroll down to the second part of the posting. Stagnation and domination of large telcos and media companies among top Estonian websites are something I would like to touch on in the future also in this blog. For OpenCoffee, we also have different goals here compared to established startup markets, which I described on ArcticStartup.

The guys from ArcticStartup will also be soon in Tallinn for the Nordic Mobile Media Conference and are looking to organise an event here, hopefully that will work out.

OpenCoffee Tallinn on June 5th

Once again the OpenCoffee Club Tallinn event takes place in Tallinn, Estonia. We meet on the first Thursday of the month at Scotland Yard Pub, Mere pst 6E, on June 5th, 9-11 AM.

Opencoffee Club Tallinn events are usually attended by 20-50 persons from all areas of startups and technology, a bunch of great people.

Our official event announcements are posted on our Facebook Group ( which as of today has over 130 members. Feel free to join to have the event invitations sent to you each month.

OpenCoffee Tallinn this Thursday

Our second OpenCoffee Tallinn Club event will take place already this Thursday, 9-11 AM, at Scotland Yard Pub, Mere pst 6E, Tallinn. The OpenCoffee Club was started to encourage entrepreneurs, developers and investors to organise real-world informal meetups to chat, network and grow, and the movement is now active in over 78 cities across the world.

Everyone active on the technology scene is welcome, like always, just show up any time between 9-11 AM, grab a cup of coffee, introduce yourself to others and just let it flow from there. The first event in Tallinn was a blast, with around 40 people from various fields (startups, VC’s, academia, government etc) showing up.

CV Market jobsites sold for up to 8.9 mEUR

CV Market, a regional network of Baltic and Eastern European online recruitment sites, was sold last week to a group of investors consisting of Digital Sky Technologies Limited, Tiger Global Private Investment Partners IV ja Bexley International Investments Limited, according to news published in Estonia.

The deal size is announced as “up to 8.9 mEUR.” 75% of the company is being sold now and the buyers have an option to buy the remaining 25% by January 1st, 2010. “Up to” probably means being dependent on next 3 years results.

CV Market 2007 is forecasting revenues of 1.9 mEUR and a profit (not sure if net profit or EBITDA) of ~0.38-0.45 mEUR. That means a valuation of 4.7 times current year revenue estimates and 20-23 times profit estimates.

The biggest share of revenues for CV Market comes from Estonia, where it operates under the name CV Keskus, followed by the Latvian and Lithuanian subsidiaries.

Earlier this year Tiger Global acquired a 30% share in one of largest Romanian jobboards, with a valuation of 32 times EBITDA.

The acquiring companies also hold interest in, a Russian online recruitment company.

Disclaimer: The author of this post is a co-founder, ex-employee, current small shareholder and supervisory board member of CVO Group, a partially competing regional integrated recruitment services network.

Nagi 9 months after launch &

AldasK asked in my Nagi launch posting’s comments: “Have read the post about the launch of with interest. More than six months have passed since the launch, though. Can we expect an update on how the service is doing? ” We have been busy, but here is a quick update.

Back in March we raised 100k EUR in seed financing from Moonfish Media, a Baltic online media group active mostly in the field of real estate and job classifieds as well as online auctions.

9 months after we launched, here are the key stats for Nagi:

  • 850 thousand photos and 18 thousand albums have been uploaded
  • 10 thousand users have registered
  • 35-45 thousand visitors come to the site each week
  • 25th-30th position in the TNS Metrix official stats for Estonian websites
  • 31% of users in age group 18-24 and 29% 25-34

3 weeks ago we also bought the largest youth photo site, which will be kept separately for younger audience. Here are the numbers for

  • 2,4 million photos and 58 thousand albums have been uploaded
  • 26 thousand users have registered
  • 45-50 thousand visitors come to the site each week
  • ~25th position in the TNS Metrix official stats for Estonian websites
  • 40% of users in age group 18-24 and 46% up to 18 years of age

Since we launched Nagi we knew, that we want to target more mature (above 20-22) audience and that younger (up to 20-22) people need something different. The quality and content of the photos depend a lot on your age. And the community aspects are different. So we had the option of either to start a special youth site next to Nagi or buy some market share, and we chose the latter.

We are quite happy with the numbers, considering our sites are purely in local language for the Estonian market of 750 thousand Internet users.

While we are happy with the statistics, we have not yet actively started ad sales. Hopefully with an audience of 90 thousand weekly users for the two sites we will be now more attractive for the large advertisers and media agencies (through which most of Internet advertising money in Estonia goes).

Over the next months there is a lot to do to improve software, transfer it to Nagi back-end and improve the user interface and functionality. That is our focus for coming weeks and months – as well as starting the ad sales, so we can grow our team further and reach break-even as soon as possible.

Estonian Rate Solutions conquers Europe

Social networking company Rate Solutions, which runs the hugely successful MySpace-like in Estonia, has launched their first Western European sites Alfa in Finland, Zamba in Belgium and Limpa in Netherlands. The goal of Rate is very ambitious, to be the leading social networking player across Europe with their local sites, entering a very crowded market. The Polish site will be launched soon according to company officials media statements. The company is saying they will expand to 15 countries during a few years.

The expansion is supported by 1 mEUR investment from Estonian-Finnish VC MTVP, which seems more like an amount for not more than 1-2 new countries. Also the marketing team is very thin for now. The company will put a lot of hope on viral marketing and organic growth, keeping the costs low that way. We will see how far that investment will take them and if they have some results in the new countries during next 6-12 months to support new investment rounds.

The .fi/.nl/.be sites are up and running, with only around hundred or a few hundred users and photos for now (and some latest photos pages giving errors, hopefully to be fixed soon). They must be still in testing mode. Also many of the registered users there are their own people and friends from Estonia.

In Netherlands they compete with existing large players like Hyves, CU2 and Superdudes/Sugababes. Not sure what the situation in Belgium is? None of European markets are empty, so there must be something to outcompete the existing players.

Rate in Estonia is the largest website, having over 330 thousand registered users and 120 thousand daily visitors (out of country’s population of 1.35 million) mainly in youth segment. Last year Rate sold 51% of the Estonian site to the largest local mobile operator EMT for around EUR 2.5 million. Still being no 1 in one of the smallest European countries has a lot been based on luck and being in the right place in right time.

Rate also runs Face in Latvia (92 thousand users), Limpa in Russia (88 thousand users, although a lot of the Russians from Estonia and other Baltic countries) and Point in Lithuania (46 thousand users).

Time will tell, how good their people, marketing skills and management expertise will be in going to new uncharted markets. Like all of us know, technology plays only a tiny part in this kind of business, it is all about people and users perception.

Good luck for the founders, investors and management team in making this a success!