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Sunday, August 14, 2022

Pivoting after (!) € 2 mln of funding

– how Riku Salminen convinced Jongla’s investors

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By Florian Kandler

Mobile messaging startup Jongla had raised 2 million euros but it started from the wrong platforms. “We did not anticipate the huge growth of Android and iOS early on,” CEO Riku Salminen admits. But with guts and decisive action, he planned out a fundamental pivot – and managed to convince all of his investors. In fact, all of them re-invested to support his new strategy. The story Riku told me in Episode 020 is educational and inspirational – because we all get stuck sometimes with our startups. Here are his key points.

The wrong platform

Jongla was a free app on Symbian and Java, making money from advertising. “Advertisers loved it. But our platform strategy was not right”, says Riku, CEO of Jongla. He did not anticipate the huge growth of Android and iOS. Furthermore, Riku remembers that when they saw the first version of WhatsApp in 2010, it instantly struck him: “That’s the future: mobile-first instant messaging.”

Small change or big change?

Jongla reacted: Riku made a switch and built their own messaging app, with a user experience aligned with what they saw working at WhatsApp and other apps. They had to move fast, so they built it on top of their existing technology. They launched in 2011 but had a lot of legacy issues. But can you throw out the whole technology and start from scratch? Especially with investors having committed 2 million euros and expecting fast results?

“Just before Christmas of 2011, I sat down with our CTO and asked for his honest opinion about our platform,” Riku recalls. They agreed that their legacy technology would never be fit for real-time instant messaging. They had to change drastically or would risk dying a slow death with an uncompetitive product.

How to convince investors to start from scratch?

Riku and his team started putting together a new strategy. First, they did a very in-depth analysis of the market and their competitors. They benchmarked, looked at their technology and analysed what worked and what did not. They looked at the growth rates and built a vision of how the market will grow in the future.

The founders then presented the case to the investors. “We have good news and we have bad news – this is how we presented it.” The bad news was, that their platform was a dead-end – it was coming to an end. The good news was that they could present precisely:

–          This is what we want to build

–          This is the technology we want to build it with

–          These are the people we will need to execute the plan

–          And this is how we are going to get started

With the detailed knowledge of the market, the competition, and technology roadmap, all investors supported the plan. “We were lucky – our investors really respected our honest opinion,” was Riku’s humble way of putting it.

All of his first-round investors put in more money to support this pivot. They also leveraged Tekes, the Finnish government fund and went into execution mode. “By April 2012 we were running at full speed with the new plan.” The beta came out in September and the official launch was in December of 2012. “And that’s the track we followed ever since”. Pivot complete.

Essential Learnings

  • Always keep an eye out for market developments – sometimes big changes happen fast
  • If you missed a trend, re-evaluate and see if a pivot or change of plan makes sense
  • Don’t feel obliged to stick to your old plan if you feel you are sailing a sinking ship. If parameters change, consider big changes – even if such changes mean throwing out years of work
  • Be diligent, do your homework, get a clear and updated view of where the market is going and your position in it
  • From day one, foster an honest exchange among investors and founders, so that when the day comes, you can present your reasoning and conclusion for a pivot
  • Alongside your reasoning and conclusion, present a concise and actionable plan

It was fascinating to hear Riku talk about this in such a relaxed and at the same time passionate way. You can get inspired, too – listen to Riku’s story on the Startup Milestones podcast.

Florian Kandler launched the Startup Milestones podcast to get experienced European founders to share their struggles, stories and success secrets with the European startup community. Florian founded or co-founded three companies to date, two of which received a total of over 3 million euros in venture funding. 

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