[foundation-board] Viderum Budget Proposal

Mon Apr 18 09:20:12 UTC 2016

Pavel, I am aware this is urgent so when do you need response by?

Jane, Helen, Tim - I definitely feel this is something I need you decision.

Also (*still*;-) awaiting feedback on Pavel's goals from you Helen and Tim.
Getting all of us on the same page on what we want from him feel rather
key.

Karin
On 14 Apr 2016 22:22, "Pavel Richter" <pavel.richter at okfn.org> wrote:

> Dear Board of Open Knowledge International,
>
> I am hereby asking you to approve the following proposal regarding changed
> to the business model and the budget of Viderum. You can find the same
> document as a Google Doc here
> <https://docs.google.com/document/d/1x3dqMivjA1MfWoKFjkkOCAEj2QLocKSeBsOkszMe8UA/edit>
> .
>
> ________________________
>
> Viderum Budget Proposal
>
> From: Pavel Richter, CEO
>
> To: The Board of Open Knowledge International
>
> CC: Mark Gibbs, COO, Sander van der Waal, Portfolio Director
>
> Date: 14. April 2016
>
> Summary: In this memo, I make the case for a change in direction for
> Viderum. I propose to move from a model that seeks to raise venture capital
> quickly to a model that bootstraps our efforts in developing CKAN in a
> viable business. The reasons for this change in direction are outlined in
> this memo.
> As part of this change, I propose to change the compensation package of
> the CEO of Viderum.
> We will evaluate the progress of Viderum along this new proposal together
> with an external consultant, within the next 3 months.
>
> Back in September 2015, when OKI hired Sebastian as CEO of what was has
> now become Viderum, all parties involved made a number of assumptions,
> based on available information.
>
>
>    1.
>
>    Assumption: OKI commercial has a working, scalable business model.
>    Reality: It turned out that this was not the case: The business model
>    was dependent on one-off consultancy projects, which put a heavy strain on
>    the sales approach. Sales was done by Rufus and through ckan.org.
>    Hosted sites were built on widely divergent, one-off  infrastructure with
>    complex support requirements.
>    What did Viderum do about it? Viderum designed a new  business model
>    with the team and built a cloud-based highly scalable unified
>    infrastructure to reduce cost of operation (ready in November 2015 -
>    migration of customers from old systems ongoing).
>    2.
>
>    Assumption: OKI’s commercial team (Jo, Arturas, Adria, Brook) will
>    join Viderum
>    Reality: Only Arturas accepted to join, others preferred involvement
>    in non-commercial efforts at OKI. This let to loss of domain knowledge for
>    Viderum, which in turn resulted in slower business development
>    capabilities. It also let to some morale-reducing priority conflicts and
>    time-consuming coordination tasks between Viderum and OKI.
>    What did Viderum do about it? They had to hire whole new staff
>    (currently one new product manager, one new project manager, two
>    developers) that needed onboarding and training on the technology used.
>    3.
>
>    Assumption: Most importantly, we assumed that OKI has a profitable
>    commercial services business in September 2015
>    Reality: The visibility into the actual financial situation was not
>    given for a long time, and only recently could we assess the actual
>    financial situation. It turned out that profitability of the OK commercial
>    services was dependent on heavy resource sharing and cross-project bookings
>    between commercial and noncommercial projects.
>    This made the search for VC capital over the last couple of months
>    impossible, because we were not able to show a viable and sustainable
>    business model to potential investors.
>    What did Viderum do about it? Worked with OKI finances to properly
>    account for commercial services and developed a business case that is
>    attractive to outside investors.
>
>
> None of these things are really show-stoppers; given the state of
> administrative processes of OKI in September 2015, and given that OKI never
> invested in commercial services as a sustainable business, it is no
> surprise that things turned out different than we expected them in
> September 2015.
>
> But this has two consequences, that OKI needs to address:
>
>
>    1.
>
>    We initially expected Viderum to be able to take on larger amounts of
>    external funding from VCs in order to grow its business. But because
>    development of Viderum will take more time and effort than we expected, I
>    now propose to bootstrap Viderum until July 2016. Therefore, OKI needs to
>    make the decision to continue to support the development of Viderum. We
>    expect this process to be funded out of the current business of Viderum
>    2.
>
>    The contractual agreements between OKI and Sebastian (as CEO of
>    Viderum) were very much dependent on the key assumptions listed above. We
>    were expecting Viderum to get VC funding much quicker than it turned out to
>    be possible, and we expected the whole business to grow faster than it
>    actually did.
>
>
> Regarding the development of Viderum, Sebastian, at my request, has put
> together a budget that addresses the additional work and the new
> circumstances under which Viderum needs to operate.
> He has broken it down to three possible scenarios:
>
> Viderum Budget March 2016 - July 2016 (5 months)
>
>
> Worst
>
> Likely
>
> Best
>
> Revenue
>
>
>
>
>    -
>
>    One-time
>
> 118,300 €
>
> 313,300 €
>
> 400,800 €
>
>    -
>
>    Recurring
>
> 66,682 €
>
> 66,682 €
>
> 66,682 €
>
> Total Revenue
>
> 184,982 €
>
> 379,982 €
>
> 467,482 €
>
>
>
>
> Cost of Sales
>
>    -
>
>    33,902 €
>
>
>    -
>
>    130,152 €
>
>
>    -
>
>    152,027 €
>
> Gross profit
>
> 151,080 €
>
> 249,830 €
>
> 315,455 €
>
>
>
>
>
>
>
>
>
>
>
>
>
>
>
>
>
>
>
>
> Expenses
>
>
>
> Staff
>
>
>
>
>    -
>
>    Staff
>
> 127,235 €
>
> 131,631 €
>
> 144,818 €
>
> General Expenses
>
>
>
>
>    -
>
>    Technical
>
> 19,167 €
>
> 19,167 €
>
> 19,167 €
>
>    -
>
>    Marketing
>
> 5,500 €
>
> 12,500 €
>
> 25,000 €
>
>    -
>
>    Others (Rent, legal, supplies)
>
> 17,900 €
>
> 17,900 €
>
> 17,900 €
>
>    -
>
>    Accounting
>
> 15,266 €
>
> 15,266 €
>
> 15,266 €
>
>    -
>
>    Travel
>
> 5,000 €
>
> 5,000 €
>
> 5,000 €
>
> Total general Expenses
>
> 62,833 €
>
> 69,833 €
>
> 82,333 €
>
>
>
>
> Net income / loss
>
>    -
>
>    38,988 €
>
> 48,366 €
>
> 88,304 €
>
> For a detailed breakdown of these numbers, please see this spreadsheet.
> <https://docs.google.com/spreadsheets/d/1e27qBfXC-x8uS2dA3nQKalDWVhq70BjEK7ZMKypzIjQ/edit#gid=1821942248>
>
>
> Our new COO has been actively working through the figures that have been
> accrued against the projects that Viderum have taken over.  Although we are
> still having a difficulty to forecast we do perceive that the CKAN projects
> that are now in viderums portfolio would yield a net profit in excess of
> £30,000.  This would then mitigate a proportion of the perceived loss in
> regards to the worst case scenario listed above, further reducing the
> maximum potential loss to 9.000 GBP.
> Mark Gibbs is actively working with our auditors to define the best way to
> breakout that income from OKI.
>
> Part of this budget is a revised compensation package for Sebastian as
> CEO. Based on the positive case presented in the fall by Rufus (who was
> himself relying on an incomplete overview of the actual financial
> situation), Sebastian agreed to a considerable discount in expectation of
> external investment within six months. Since September, Sebastian earns
> just 2,500 € / month. His monthly pay would have been raised to 7,500 € as
> soon as outside investment would have been secured.
>
> Due to the factors detailed above, finding external investment has been
> significantly delayed. While Sebastian (and I) are still confident that it
> is possible, it will definitely require a more patient, long-game approach
> than anticipated.  Based on this new approach, I want to increase
> Sebastian's monthly costs to 7,500 €, which would give Viderum the needed
> management attention while allowing Sebastian to focus on Viderum
> exclusively. This is already part of the budget scenarios above.
>
> Both myself and Mark Gibbs believe that the above listed approach should
> be supported and then make a full review of Viderum in July 2016. In order
> to be able to make a full assessment of the potential of Viderum with this
> new business model, I am planning to hire Irina Bolychevsky as a
> consultant. She will be tasked with evaluating the business model and
> giving me a second opinion on the proposed way forward for Viderum.
> _______________
>
>
>
> --
> Kind regards
>
> Pavel Richter
> CEO
> Open Knowledge International
>
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