[foundation-board] Viderum Budget Proposal

[Pavel Richter]

Karin,

thank you for raising this!

Yes, the Budget is rather urgent; we are speaking about the March to July
budget, and we have now end of April. I was not able to provide you with
the budget earlier due to problems in getting together the actual numbers
from our current financial system. But now we need to make a decission.

It would be really, really great if you could reply asap, but not later
than Thursday this week, if at all possible?

On 18 April 2016 at 11:20, Karin Christiansen <karin at karinchristiansen.org>
wrote:

> 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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>>
>>
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>


-- 
Kind regards

Pavel Richter
CEO
Open Knowledge International
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