XING founder Lars Hinrichs launches HackFwd, a product-oriented pre-seed fund

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Like a Klingon Romulan starship de-cloaking in the middle of Europe, Lars Hinrichs the founder of LinkedIn competitor XING who exited for €48.3 million last year is putting his efforts onto a new startup investment vehicle dubbed HackFwd. But although the web site for the new venture is packed with advisors and mentors, HackFwd will take 27% of a company it invests in – that’s a sizeable chunk. In the US, Ycombinator takes around 6% but can do anywhere from 2%-10% while TechStars take around 6-10%, whereas the London-based Seedcamp takes 8-10%. However, those latter programmes only last months, while HackFwd’s backing will be designed to last a year.

Hinrichs is also clearly basing this calculations on how much a startup product builder might have to give away to a product marketplace, not an investor. He says: “We have done many tests and this resonated most. It’s actually in line with Adsense, Itunes and Google Marketplace.” But in return for taking 27%, Hinrichs also points out that “we give much more money than Ycombinator & Techstars,” and the funding lasts a year. This is likely to be a attractive to a number of founders not currently served by the existing startup programmes which put in seed funding but must be then backed by a follow-on funding round quite quickly, assuming they attract any.

Here’s the detail about HackFwd.

First thing to note: It’s not an incubator. Startups will get funding for one year, with the aim of roughly matching the founder’s current yearly salary. Founders keep 70% equity, with 3% going to advisors and 27% to HackFwd. However, that said, they then take care of “legal and admin stuff… so you can focus on your product.” Help is given with UX, marketing and brand “through us or our partners”. Since it is not an incubator, the startups they invest in are created wherever the founders are. “Quarterly un-conferences in cool places so everyone can share and learn,” are arranged instead to allow everyone to meet up. That should appeal to the distributed nature of European startups where distances are an issue.

Funding amounts to up to €191,000 (depending on the size of the team). A video to explain it all features a voice over by English actor and self confessed geek Stephen Fry, below.

Clearly HackFwd will now compete, after a fashion, with Seedcamp in London, Openfund in Greece, The Difference Engine in the UK, StartupBootcamp in Denmark and the TNW Incubator in Amsterdam (the unusual Incubator owned by the publishers of The Next Web blog), among others.

  • http://www.free-visit.net Thierry

    Wahoo !
    30% for (only) a 1year one-man paid salary !
    I find it at first glance rather expensive.

    It could be good for easy programing stuff.

    Imagine if after a year need again more money.
    –> So again a 30%. thus the owner get only 40%.

    • sophie

      Cool program. Although, as usual some may be hesitant on trying it. Hopefully, it won’t turn out to be a scam.

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  • http://CityandOut AndreaF

    Sounds a bit too much equity for 1 year salary. And who sets the salary?
    How flexible are the equity amount and the stake?

  • http://darrenstuart.com Darren

    I am not sure I agree with those saying about the 1 year salary amount not being to much. I am a IT contractor and I would be happy with one years salary to have a chance to build my own startup.

    a couple of things I’d like to know are?

    – do you need more than one founder?
    – how to you apply?

    • Snitzelglobin in liederhozen

      Do your homework. Seriously, if you have to ask those questions in a comments thread on a media blog, well, you haven’t got a shot in hell.

      • http://startupticker.com Darren

        actually I did do my homework and looked on the website and got no answers. Plus this stuff is normally covered in the press release stuff.

        As for asking the questions on the blog is helpful to others not just myself so get over yourself.

  • http://blogallalong.com Bashar

    That’s a nice service for those seeking VC. In Kuwait we’re starting to have government and companies offering kind of similar funding with salary and more fund to build the business. Government can extend to 280,000 EUR I think, though with companies, I think you come under their umbrella in a way, which I didn’t like.

  • http://hackfwd.com Lars Hinrichs

    andrea & Thierry, thanks for your comments. And we think we are a better alternative to anyhting what is out there. We are open & transparent about our process, so first of all it’s the choice of the geek if goes with our approach or not.
    Second Round financing depends on the product, even a HackFwd loan is an option, see blue print and our hackfwd offer document.

    • http://CityandOut AndreaF

      thanks Lars.
      I guess my view is based on my current circumstances. We are two founders, one techy, one not. Neither of us is drawing a salary. We have a lot of experience under our belts in building and launching products and a site already up at http://CityandOut.com) but need more money to speed up development and many other things. Giving away 30% equity to have a salary for a year for the 2 of us would not accelerate our execution by much.
      I like the fact that you offer admin services as part of the package among the other things, but I still think 30% is a fairly big chunk.
      I would consider that if you covered all my costs (i.e. office rent, and additional staff according to our business plan) for 12 months, not just the founders’ salaries.
      Congrats on launching this initiative anyway. I think Europe really needs more of this and the fact that you are not bound to a particular location is very important in my view.
      If your terms are negotiable, please contact me via the website.
      Thanks
      A

  • http://leanentrepreneur.com/2010/investment-vc/meinung-hackfwd-inkubator-lars-hinrichs/ Meine Meinung zu HackFwd dem Inkubator von Lars Hinrichs | lean entrepreneur

    […] designte Webseite, die allerdings noch nicht so viel Tiefe bietet und nach der Ankündigung auf Techcrunch durch den Ansturm wohl ziemlich in die Knie gegangen ist (zumindest war sie gerade noch sehr […]

  • http://www.startupbootcamp.dk Søren Therkelsen

    This is great! This is what startup europe needs and have been craving. Solid help, network, money.. I want to build – but I don’t have!

    In Denmark we are building a similar thing HackFwd. Together with Tech Stars, Startup Bootcamp just launched. Same concept as HackFwd -just a shorter period of time and smaller equity – AND with an investor day at the end of the period. Check it out at http://www.startupbootcamp.dk

    I am glad to see HackFwd! We need more. Ill bet you that yCombinator is just around the corner for a launch in europe..

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    […] XING founder Lars Hinrichs launches HackFwd, a product-oriented pre-seed fund […]

  • http://www.DataHug.com Connor Murphy

    Hi Lars,

    Great initiative and well done on setting up HackFwd. Europe needs more ideas and innovations like this.

    I just wanted to highlight another new start-up program that recently launched in Ireland . It is supported by Enterprise Ireland and the founders can receive up to 50% of their previous years salary (up to €38K) plus mentors, offices, support and training in exchange for… zero equity. It is backed by several leading Irish Entrepreneurs and has a fantastic group of mentors and advisors.

    Check out http://www.endeavour.biz/ for more information on the program.

    Connor
    ~ CEO of DataHug.Com and current Endeavour participant

  • http://www.articlesinbox.com/startup-life-visualized-infographic/ ArticlesInbox » Blog Archive » Startup Life, Visualized (Infographic)

    […] can read all about the details of the project in Mike Butcher’s post on the introduction of HackFwd on TechCrunch Europe, but make sure you also watch the video at the end of the post, which does an amazing job at […]

  • http://twitter.com/PaulJoslin PaulJoslin

    The link to the founders salary seems a bit bizarre. It is not linked at all to the need of the start up idea or the equity that is given.

    So take two examples.
    1. A guy working for a startup in london is earning £30,000 – decides he wants to try out his own idea. Signs up to HackFWD and gets given £30,000 for a year and they take 30%.

    2. Another guy same age, is contracting and earns £65,000 a year. He has less ‘start up / business’ experience as the first guy, but is given £65,000 for a year and they also take 30%.

    The 1st guy has more of a passion for ‘startups’, plus more ‘startup’ experience having worked for one. Yet only gets £30k for 30% – valuing his start up at £100k.

    The second guy has just been ‘coding’ contractually and has no start up experience and is likely to make mistakes getting the basics right. However, due to his salary he gets £65k for 30% – valuing his startup at £216k.

    – There is no reason this should be the case. If anything the first guy is probably more valuable to the start up venture.

    This is why the application processes for things like y combinator ask for previous relevant experience / skills. Also with things like y combinator the equity is tailored to the needs of the start up and how much money they take. Y combinator is also designed so that at the end of the 3 month program you have found an angel investor willing to put up enough money to fund you properly for a while.

    Overall the biggest problem is that 30% is a lot of equity to take for a small amount of seed capital (unless you earn £100,000 a year and they match it).

    The reality is, if you get your venture up and running for the money they give you that year, you will probably require extra funding for growth and expansion after the original year (or during) – which will require extra equity to be given away.

    Here is an interesting article regarding equity and how much founders are typically left with after funding stages – http://www.gabrielweinberg.com/blog/2010/06/paths-to-5m-for-a-startup-founder.html

    Therefore, I see hackfwd being great for small ideas which only have 1 founder and never need more funding (go profitable within the year) – but apart from that, I see many founders being left with little equity by the time they’ve grown into anything substantial.

    Either way, it’s good to see Europe is starting to get some more attention on the start up scene.

    • http://twitter.com/PaulJoslin PaulJoslin

      – In hindsight after thinking…

      To value anyone’s (non existent) start up at £100k or £216k is quite generous.

      I guess this could still appeal to people who see the biggest problem being lack of time (or support from mentors).

      – I still think 37Signals opinion in Getting Real (or Rework), of bootstrapping in your spare time until you have a product worth something and then looking for investment is a good way to go – to avoid losing a lot of equity.

  • http://www.seedcamp.com Reshma

    Just to clarify, although the intensive part of the Seedcamp program is over the course of the initial 3 months, we actually work very closely with the companies for at least the following year and after that. The alumni of Seedcamp have access to the program and support well past the 3 months.

  • http://maxniederhofer.com Max Niederhofer

    Duuuude. It’s the Romulans who have cloaking devices, not Klingons.

    I am once again *incredibly* disappointed in Techcrunch and am considering *never* commenting here again until such time as this has been fixed and an official apology has been made.

    Also, are you implying HackFwd is the enemy?

    :)

    Max

    • http://www.hanno.de/blog/ Hanno

      http://memory-alpha.org/wiki/Cloaking_device

      As every serious Star Trek fan knows, the Klingons do have cloaking devices. They acquired the Romulan cloaking device as an exchange to several D7-class battle cruisers for the Romulans during the Romulan-Klingon Alliance.

      • http://maxniederhofer.com Max Niederhofer

        I stand corrected.

  • Marco

    way to expensive. 30% equity will scare all the reasonable entrepreneuer away

  • http://internetandstuff.com José Matías

    German readers correct if I’m wrong: I understand that in Germany, if you’ve worked at least 2 years for a company and quit or get fired, the unemployment insurance pays you 70% of your current salary for up to a year. If that’s the case, I don’t know if I’d give up a whole 30% of my idea to get the extra 30% of salary plus advice, network and administrative support. Unless I’m not entitled to get that unemployment insurance, of course.

    • German

      This is correct.

  • http://www.neunetz.com/2010/06/08/die-funktionsweise-des-neuen-deutschen-investorenprogramms-hackfwd/ Die Funktionsweise des neuen deutschen Investorenprogramms HackFwd

    […] über das heute von XING-Gründer Lars Hinrich gelaunchte Investoren-Programm […]

  • http://stephan-uhrenbacher.com Stephan Uhrenbacher

    Great approach!
    I much rather would have a product focused setup like this than the many other outfits giving dubious “use our network” hunches. There are many admirable details and great names on the board. And I do particularly like the “no copycats” approach.

  • Brad Marshall

    agree that this is too expensive and i also find the association w/ current salary bizarre……clearly not intended for a few guys in a garage (or dormroom) ala ycombinator….this program is only suitable for a very narrow margin of people

  • http://i.never.nu/hackfwd/ I never knew » Blog Archive » HackFwd

    […] Startups will get funding for one year, with the aim of roughly matching the founder’s current yearly salary. Founders keep 70% equity, with 3% going to advisors and 27% to HackFwd. However, that said, they then take care of “legal and admin stuff… so you can focus on your product.” Help is given with UX, marketing and brand “through us or our partners”. Since it is not an incubator, the startups they invest in are created wherever the founders are. “Quarterly un-conferences in cool places so everyone can share and learn,” are arranged instead to allow everyone to meet up. That should appeal to the distributed nature of European startups where distances are an issue. Funding amounts to up to €191,000 (depending on the size of the team). —XING founder Lars Hinrichs launches HackFwd, a product-oriented pre-seed fund […]

  • Dude

    Unless they invested the full 191k I wouldn’t accept the 27% term. That’s still only a valuation of 707k… kinda crappy for a company needing seed investment.

    For anything under 50k I highly suggest european entrepreneurs look at the small-business loans where the government stands as guarantor. Much more effective (several countries have these).

    • Dude

      To add to that… I predict desperate entrepreneurs will end up in their fund. They’ll end up with a sub-quality portfolio this way. The other type they’ll attract are those incapable of finding other sources for lack-of-trying reasons. Again not the succesful type.

      Best of luck with the fund, 99% of your investments will end up in the deadpool.

    • http://twitter.com/ethanpierse Ethan Pierse

      While I think the education gained through the networking and support structure it sounds like HackFwd would enable adds significant value to the offer, I agree that there can be plenty of other local financing/guarantee options. Here in France, France Active and Oseo can help out with support, loan guarantees and/or financing options. We have also received local funding through Cantal Initiatives / Cantal Expansion. (The Cantal is extremely forward thinking and is investing heavily in tech and economic growth)

      It can be difficult getting the banks to understand or be sympathetic towards your idea, but as an American entrepreneur in France, I’ve found that there is no shortage of organizations interested in working with tech entrepreneurs and good ideas…you just have to work at putting it all in place.

  • http://whella.org/?p=120 Startup Life, Visualized (Infographic) « Whella – Latest News on Wireless Topics

    […] can read all about the details of the project in Mike Butcher’s post on the introduction of HackFwd on TechCrunch Europe, but make sure you also watch the video at the end of the post, which does an amazing job at […]

  • http://www.neunetz.com/2010/06/09/lesenswerte-artikel-9-juni-2010/ Lesenswerte Artikel 9. Juni 2010

    […] XING founder Lars Hinrichs launches HackFwd, a product-oriented incubator “But although the web site for the new venture is packed with advisors and mentors, HackFwd will take 27% of a company it invests in – that’s a sizeable chunk. In the US, Ycombinator takes around 6% but can do anywhere from 2%-10% while TechStars take around 6-10%, whereas the London-based Seedcamp takes 8-10%. However, those latter programmes only last months, not a year.” […]

  • http://phasevariance.com/2010/06/10/hackfwd/ HackFwd | Phase Variance

    […] Now, if only I could thing of something decent to write… read more here. […]

  • http://eu.techcrunch.com/2010/06/11/techcrunch-5th-year-anniversary-meetup-in-london-tonight/ TechCrunch 5th year anniversary meetup in London tonight

    […] HackFwd, the new startup seed programme in Europe. Read all about it here. […]

  • http://www.b-to-v.com Florian Schweitzer

    Dear all,

    I am not familiar on the „real rules of the game“ in the US regarding valuations. In Germany however one thing is granted for sure: If guys like Lars Hinrichs want to get 20% of the company at it’s creation for 20k EUR they get it. Usually those „angels“ tell the founders that they will help them become the next big thing and maybe they really do. In most cases they don’t (because they tend to have a lot of those investments).

    My clear conclusion: If a techie gets his last salary but more importantly: the entire setup of the company on a silver plate including dealing with lawyers, finding THE top team, first distribution deals etc etc. – there will be very smart people joining that port, focusing on their great product and still owning 70% of a real company. No?

    • fedd

      > finding THE top team

      from which source the top team would be well paid?

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