How I Spent My First Million

Stephan Noller is the CEO of blockchain cyber security startup uBirch — a company hubraum has invested in — but this isn’t his first rodeo! Prior to this, Noller founded the marketing tech startup nugg.ad, which he sold to Deutsche Post and which five years later was sold to Europe’s online fashion giant, Zalando. To this date, uBirch has raised over 7.5 million euros in funding in angel investment, pre-seed and seed funding. We spoke to Stephan about what exactly he did with uBirch’s first million in investment.

Let’s start with the basics. Where did your first million come from? 

We received seed funding from a group called SchneiderGolling from Dusseldorf in the beginning of 2018, plus an investment group from London called Breed Reply. These two investments gave us just over a million. However, the Breed Reply guys from London wanted us to participate in a kind of programme — they wanted us to check out some training resources and carry out specific steps. At least from a founder’s perspective, these sorts of programmes are not generally massively helpful, but in this case it was really worthwhile, which was a bit surprising. 

The only other condition we had to fulfil was adhering to a set of some softer milestones  — product development-related stuff, market sales, securing three more clients etc. In comparison to our business plan, it wasn’t very ambitious but this was a really smart approach — generally, things always turn out slower than you expect. And this is a good tip for anyone starting out — milestones tend to be a decent indication of how serious investors are about your company. If they’re setting lots of very rigid, difficult-to-meet milestones, they might not be the right fit for you. And very strict milestones are not good for early stage-business as such – because you need the freedom to shift resources and operate as flexibly as possible.

SPENDING

600,000€ — PRODUCT DEVELOPMENT

“We hired four developers who were employed to write code to extremely short-term targets – following a typical scrum-approach. Every two weeks or so we’d set new targets and review the product so far using continuous deployment — uploading the latest version to the servers. During this time period, we developed the core components for the product and also developed new adaptors for other blockchains, since we wanted to be able to write in as many relevant blockchains as possible.

We knew we’d struck gold when Trackle (trackle.de), a femtech company which uses bio-sensors to help people get pregnant, forwarded us a very cool email. We’d been working with Trackle to help keep data on the sensors secure so people would feel comfortable about sharing such intimate bodily data with a company. It was from a couple who had been trying to get pregnant for years confirming that with the help of the sensor, they’d finally done it. We had tears in our eyes — it was a very moving moment, suggesting our product was contributing to real change.”

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266,000€ – SALES

“I always advocate for spending money on sales and marketing as early as possible. One major disadvantage for European — and especially German startups — is that they don’t seem to grasp that salespeople and marketing make a lot of sense even early on. German tech companies tend to adhere to the principle that ‘good technology sells itself’ which, in my experience, is virtually never the case. 

We spent more on sales than marketing. We hired two really senior guys, which maybe not every startup would do at such an early stage, because salespeople at a senior level don’t come cheap. We also hired three more mid-senior level guys. The sales people were operating pre-coronavirus, so they were going to trade fairs and working on our booths there as well as going to events and doing congress participation. Important trade fairs for us included Hannover Messe, Barcelona World-Congress and 5G CMM Expo.”

134,000€ – MARKETING

“We spent money on LinkedIn adverts because since we’re B2B, this was clearly the right social media platform for our product. We used an agency to produce a proper website for us — that doesn’t come cheap. While digital is great, I’m also fond of using printed marketing material because if you’re going to trade fairs, you’re there in person (or at least, we were prior to coronavirus), and it’s smart to have something well-designed to pass over and which will remind the person you spoke to of your conversation.

We also spent money on what we call “demonstrators,” which are physical objects that you put on the table and plug in to demonstrate how the product works. For example, for Mobile World Congress in Barcelona we created something like that for our partner Giesecke & Devrient, which was shown at their booth in Barcelona and we did something similar in Milan for an internal trade-fair coordinated by the Reply Group.

Besides that, I hired one full-time marketing employee and also hired a PR freelancer (I think PR is also vital). Plus, a big chunk of the marketing budget went towards hiring a marketing agency.”

THE SURPRISINGLY EFFECTIVE EXPENDITURE: 200€ ON DIGITAL DEMO DAY 

“There was this one regional startup event called the Digital Demo Day and it’s held in Dusseldorf. We’d been approached about whether we wanted a booth and my colleague was advocating for us to go. I didn’t really want us to attend — we’d done enough regional startup events by this point, I thought, and I was opposed to wasting the time away from the office my colleague would need to travel there and back. In the end, he convinced me and two amazing partnerships came out of that. In terms of the outcome, it was one of the most successful events we’ve done so far.”

BEST LESSON LEARNED FROM HIS FIRST MILLION

“It’s easy to operate entirely in terms of measurables, how many contracts you bring in, etc. but thinking purely in numerical terms could mean you miss out on slower gains. 

For example, sometimes it’s hard to evaluate how successful marketing is. I’d argue going to an event is a marketing tool. But you often come home after an event and you say, “Was it worth it? We stood there and only a few people came by our booth.” but then three months later or even six months later, you think: oh, but wasn’t it at that event that we first met this person or that company who later became a customer?

Immediate contracts don’t tend to arise out of these events for startups, but they create connections, which end up being crucial further down the line.”

Want more great insights on European venture capital? Stephan will be one of the speakers at our On Air event on October 29, where he’ll be sharing his learnings from the fundraising process. Click here for more info!

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