[foundation-board] Viderum Budget Proposal
Pavel Richter
pavel.richter at okfn.org
Mon Apr 18 13:12:02 UTC 2016
Hi Jane,
thank you for your great comments, I will reply in more detail later. But
is it OK if I share them with Sebastian?
Pavel
On 18 April 2016 at 15:00, Jane Silber <jane.silber at canonical.com> wrote:
> Hi -
>
> Thanks for the thorough analysis, as always.
>
> I support the proposal but have a few comments/conditions.
>
> A. My recollection differ from yours on some of the assumptions.
> Specifically,
> 1. There was an assumption about a workable, scalable model. I think
> there were ideas to explore (e.g., SaaS) but the state at the time was that
> there was no scalable model. We had conversations about the current
> NRE/consulting model didn't scale. When I raised that concern I was told
> that part of the spin out idea was to give time and space to find that
> business model in a way that couldn't be done directly by OKI.
> 2. OKI team would join. I agree that this was an assumption, but it
> don't think it really mattered and is likely for the best anyway. I
> specifically raised concerns about the skills/temperament of those folks
> and whether they were right for a start up. I've never met them so this
> wasn't a performance review, but rather an observation that a commercial
> start up requires a different intrinsic motivation than OKI
> 3. I do agree that this was an assumption.
>
> B. I'd like a little more clarity on what will be achieved in the period
> up to July 2016. You say that you'll hire Irina as a consultant to give a
> second opinion. I don't think that's enough. If we're going back to
> basics, then we need to go back to basics with a business case, plan and a
> board level go/no-go decision in July. This may be what you mean be "a
> review in July", but I think it should be more explicit that there is a
> clear decision point on whether we reverse the previous decision to pursue
> Viderum or continue (and if we continue, what the plan/milestones are). We
> should avoid the slippery slope of funding Viderum in 3 month chunks
> because it needs a little more time/money to figure things out.
>
> thanks,
> Jane
>
>
>
> On 14/04/16 22:21, Pavel Richter 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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>
>
> --
> Jane Silber | CEO | Canonical
> Dir: +44 (0)20 7630 2472 | Mob: +44 (0)7899 891 943www.canonical.com | www.ubuntu.com
>
>
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>
--
Kind regards
Pavel Richter
CEO
Open Knowledge International
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