Back in September 2020 we received an email asking if we wanted to be part of the TV show “2 Minuten 2 Millionen” - which is kinda the Austrian version of “Shark Tank”. Most of you will not have seen it, but since we were on air we think it is important to talk about.
First let us look at what this is about: in these type of shows, start-up founders pitch their company to a board of investors. At the end of the pitch the founder offers parts of the company in return for investment money. Some negotiation can occur, and naturally both sides can say no. But if everyone agrees to the terms, a deal is made directly in the show and then further discussed after to “turn the handshake into a legal contract”.
Naturally, we were careful with this invitation. We own 100% of Safing for a reason. We do not want anybody to gain influence to the company who does not or might not stand behind our values in the future.
Venture Capital in particular is not known for being privacy friendly. Investors are no charity, they want to get back more money than they spent. And the easiest way for them to achieve this is when a major player just buys out the company. Like when Facebook bought WhatsApp, they bought out all shares of the early investors too, which made big bank that day.
But what is not always so obvious, a change of ownership also means a change of ethics. And in the age of surveillance capitalism this mostly means worse ethics. Back to the Facebook example, of course they kept none of their promises and have exploited privacy of WhatsApp users ever since.
So the main goal of Venture Capital is not to make a business profitable or to respect user privacy, it is to sell the company to a big player to get a juicy return of investment. This path is often legally enforced with contracts signed by the founders early-on. When they realize all of the strings attached, it is usually too late, they are forced to sell out.
With all of that in the back of our head, we acted carefully. First off, we were up-front with the involved team. We told them that we were really not that interested in selling parts of our company. They were not bothered by this and still wanted us to be on the show.
Having confirmed there were no strings attached, we went ahead and evaluated the positive sides of the gig: First, this would be a good opportunity to train our presentation skills. And more importantly, this would also expose the viewers to privacy and its importance. Even though raising awareness is not our main focus - which remains software development - it is part of the formula to reach a better future.
As a company you have a set amount of tools you can work with. This is the same for every company, at least for those who obey the law. How to hire, how to manage, how to do business, all these are skills required to run a company successfully. Connecting with other founders and companies to exchange experiences is important. So even though we choose not to use the Venture Capital tool, there are many other areas where we can and want to learn from others.
Being on such a prestigious TV show - even though simple or even irrational - adds more credibility to our company in the eyes of other entrepreneurs in Austria. It already was a door opener to get advice from a bigger company. Specifically they also have experience with FFG fundings and gave great input on that. And we are counting on this networking benefit to continue.
Adding all of these factors together we decided to be part of the show. Our next step was to decide who should go and do the pitch. We initially wanted to have all founders represent Safing, but being located in Sweden, David was quickly ruled out due to the required travel - which was really not worth it during COVID. And with Daniel we concluded his time was too crucially needed to continue development. Still, we were happy to send Raphael solo and were confident he would do a great job.
So on we went to write the pitch, which had the hard requirement to be under two minutes. David and Raphael worked back and forth and got a nice result, with its communication being clearly directed towards the viewers and not so much the investors.
And then the tricky part. How should we end the pitch with a serious offer, which respects the investors but also does not compromise our integrity? Turns out we could use a simple trick.
To create a thoughtful offer, we got some external help to evaluate Safing’s current worth, which turned out to be around 2.5M €. With this as a baseline we could genuinely make an offer of 4% for 100.000€.
With this, we already knew that it was unlikely for them to accept. Due to the legal situation (at least as we understand it in Austria) any investor who owns below 5% is a legal minority and has no say. 5% is one hurdle and 25% is another big one where an investor gets a lot of rights.
It came to no surprise that they declined our initial offer, but it did not end there. Some of the investors were genuinely interested in our business and made a counter: They wanted to acquire 25.1%. Naturally, as explained above we do not want external parties to gain influence so we thanked them for the offer and said no.
Looking back at the shoot in October and watching it now, we did enjoy the experience. We were encouraged to see the film crew having genuine interest in what we do and what we stand for. They were all ears as Raphael was on-set in the waiting area and talked about Safing. Another fun thing to experience was how TV shows are run. Product placement is a thing and even some censorship was part of the mix: we were not allowed to mention that the Portmaster blocks ads or talk about ad blocking in general.
Anyway, we hope to have raised a bit of awareness and know we learned stuff along the way. Now back to what matters: developing great privacy tools for the masses with no-one coming in between!
April 6, 2021 • Written by David