IDEO and Lars Hinrichs
HackFwd is an early-stage investment company designed to fuel tech innovation in Europe.
IDEO and Lars Hinrichs
It’s early days, but we’re excited to see HackFwd’s potential to bring new start ups to market. As a service it addresses a niche audience, geeks, by deliberately removing barriers to building a start up, focusing on the financial support, infrastructure and expertise they need along the way. HackedFwd is well executed – simple and transparent – and it continues to evolve as it learns!
1. Summarize the problem you set out to solve. What was the challenge posed to you? Did it get you excited and why?
Internet icon Lars Hinrichs came up with the idea for an early-stage, pre-seed, evergreen (no fixed funding cycle) investment company for top technology talent across Europe. His vision: free the best developers and coders from their corporate jobs and help them build their own game-changing companies.
Hinrichs, who previously founded XING (a popular social-networking site for professionals), asked our designers to help him turn his vision into a reality. Together we developed the business from scratch.
HackFwd accelerates the route to beta, profitability and success by enabling entrepreneurs to focus on what they do best and by providing support for administrative and tasks that do not drive value. With HackFwd, Hinrichs aims to revolutionize the European tech industry, increase the number of successful start-ups in the region, and put Europe on the global innovation map.
Hinrichs saw that most start-up innovation was happening in Silicon Valley and wanted to unleash the tech sector’s potential in Europe. His strategy was to put the needs of developers and engineers (or “geeks”) first. “The geeks know things much earlier than the rest, like what works, what doesn’t, what is the newest technology,” he explained to The Financial Times in October 2010. This would mean developing an early-stage investment company from the ground up—or designing a brand-new way of doing business in the financial industry.
2. What point of view did you bring to the challenge? Was there anything additional that you wanted to achieve with this project or bring to this project that was not part of the original brief?
The challenges we faced hinged upon three major factors:
1. Technological Advances. Development tools were once cost-prohibitive/slow, but as technology becomes more accessible and cheaper, it’s easier to conceptualize and prototype. Online platforms/networks enable developers to reach a global audience and to experiment with little cost. Innovations like cloud computing enable individuals to build companies with close to zero capital expenditure.
2. Limited Venture Capital (VC) Models. A design team member explained to Wired UK:
“Most venture-capital firms have been built around their constraint…raising capital. This is reflected in many aspects of their design—for example, their websites are designed to sell a great story to investors and the partners are chosen for previous investment success. It is rare for the sites to address start-ups’ basic questions and concerns.
However, across all industries it’s the end consumers who realise the value...we looked at the established VCs through the eyes of start-ups, and concluded that their fundamental needs weren't being met, and that we might be able to meet them in a new way. Those needs included an experienced support network, confidence to take risks, transparency and simplicity of deal terms. HackFwd was designed to meet these needs in a completely new way.”
3. Cultural Barriers. “Early-stage tech companies in Europe are hampered by lack of funding,” Hinrichs explains, adding that “Europeans always want to get it perfect.” This quest for perfection creates internal barriers to funding for many. HackFwd is designed to minimize these barriers.
3. When designing this project, whose interests did you consider? (Discuss various stakeholders, audiences, retailing, manufacturing, assembly, distribution, etc., for example.)
The design team began by interviewing developers and coders throughout Europe and the US to understand what these professionals wanted and needed most. Their input provided valuable insights into how to build a truly revolutionary company. As big believers in the “power of beta,” the team started prototyping and testing possible business strategies right away. As a start-up, they knew the “final” strategy could evolve and grow over time.
From there, the team designed HackFwd’s business model, financial model, organizational structure, hiring strategy, tools to vet and build investments, brand strategy and identity, and events to cultivate a strong sense of community, encourage sharing and collaboration, and provide inspiration. The team began development with four start-ups, called HackBoxes, and experimented with every aspect of the start-up experience to see what resonated and needed further iteration.
4. Describe the rigor that informed your design. (Research, ethnography, subject matter experts, materials exploration, technology, iteration, testing, etc., as applicable.) If this was a strictly research or strategy project, please provide more detail here.
HackFwd works like this: Prospective developers and engineers submit business ideas through a referral network, which makes selections, based on an individual’s or group’s passion and on whether the idea meets a clear consumer need. The ideas must be pioneering, scalable and ready to beta-test within six months. To eliminate the heavy early negotiations of the traditional VC model, HackFwd’s model features a fixed investment, depending on the team size, against a fixed stake in the business. If chosen, HackFwd roughly matches current salary of those behind the idea and brings them into a network of highly experienced digital entrepreneurs. These advisers review and offer input over a 12-month period. During that time, the individual or team launches a beta product or service and receives critical user input to help determine how best to move the business forward.
HackFwd handles most of the administrative load, including legal set-up, payroll, and accounting, and helps each individual or team find talent when they are ready to scale up. This allows the “geeks” to focus on their expertise. In exchange for the financial support, creative and strategic advice (from a board of experienced entrepreneurs), and the help of promoting and marketing the product, HackFwd takes 27% of the equity, the founders keep 70%, and advisers who assisted the team receive 3% in options.
A start-up can be located anywhere in Europe. Although they operate independently, they can rely on support from the HackFwd core team and its network of experts. In addition, once per quarter, all start-ups meet with the HackFwd team and selected experts in Mallorca, Spain, for workshops and team-building.
5. What is the social value of your design? (Gladdening, educational, economic, paradigm-shifting, sustainable, labor-mindful, environmental, cultural, etc.) How does it earn its keep in the world?
Since launch in 2010, HackFwd has invested in a total of eight new companies from several hundred submissions.
An agile business model.
In just months, the HackFwd team was able to iterate its strategy, using feedback and reactions from target users. The Phase Two Generator, a business model visualization tool, streamlines the processes of business-model planning and applying to the HackFwd program.
The value of a good network.
The referrer network has proven to be a significant asset for HackFwd, even more than planned. The referrers are the academics, industry experts and entrepreneurs in the countries that HackFwd aims to invest in. They a highly networked group, whose connections greatly increase HackFwd’s reach. Each referrer has a distinct area of speciality, which allows HackFwd to tap into expertise in any aspect of technology or online and mobile business.
A flexible approach.
The companies HackFwd has invested in are already demonstrating how this new VC model can succeed. Any investment in a good venture capital portfolio must have both an amazing idea and an excellent team to execute it. Even if the concept does not meet expectations or cannot be developed, a stellar team can learn on the fly and change directions quickly in order to develop something new.
Focusing on the target user.
Selecting to fund only “geeks” has had a cultural importance, ensuring that people in the organization figuratively speak the same language and share the same expectations, even with a highly distributed model and only four annual gatherings.
6. If you could have done one thing differently with the project, what would you have changed?