Tag Archives: #Content in Context

3 Ways to Fund Your #Startup

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At a recent forum organised by Startup Victoria, co-founders and advisors discussed alternative ways of funding a startup. Part of Startup Week, the event was hosted by inspire9 and sponsored by BlueChilli and Slush Down Under.

button-41706_1280Bootstrapping

Doug English from CultureAmp talked about the benefits of bootstrapping, especially for B2B startups: “You have fewer clients, but with bigger budgets, and fewer of the hassles associated with a consumer startup.”

Initially, the founders used consulting work as a means of funding themselves, but focussed on specific market segments and customer domains – in short, they got paid to learn about their clients.

Having several co-founders was also helpful in providing “cheaper access to more labour”.

However, they have learned a significant lesson from those early consulting gigs: although they were able to secure upfront lump sum payments for client development work, they are still supporting some of those initial product features and functions, without necessarily getting paid for it. Whereas, if they had aligned product development with their client road map, they would have been able to generate recurring and iterative revenue from new product features. In short, annual payments and subscription fees help with the cash flow!

There was also the opportunity cost of bootstrapping, instead of bringing in external funding. The team realised that pursuing VC funding was always going to be a long haul, so they decided against it; but they then found themselves in the position of receiving an unsolicited approach from a VC source.

Note: CultureAmp recently closed a Series A round of funding for $8.1m.

Crowdfunding

Alan Crabbe, co-founder at Pozible explained how the team had seen a trend in crowdfunding projects in music (Europe) and film (US), and saw an opportunity in the visual arts. A key strategy was to use story-telling through video to help artists pre-sell their projects. Success can be rapid – one Brisbane project was funded within 3 hours. Globally, $5bn raised has been through crowdfunding – but beware domain name squatters…

Three trends have helped crowdfunding as an alternative funding platform:

  • Social Media – to provide critical mass
  • Online Video – experiencing exponential growth
  • Payment Innovation – e.g., PayPal etc.

Alan had a number of tips for anyone contemplating crowdfunding their startup project:

  1. Use social media comments, likes and other feedback to validate your idea
  2. Taking a more hands-on approach means they have a success rate of around 60%
  3. Find your audience first – typically among the FFF (“family, friends and fools”) and your other networks

As for equity-based crowdfunding, he observed that nothing happens quickly in Australia, but predicted it might be a reality within 6-9 months’ time.

Note: a couple of local platforms that resemble equity-based crowdfunding are already in operation: VentureCrowd and ASSOB – but as with anything of this nature, read the small print, and make sure the model is right for your business or startup idea.

R&D tax breaks

The final speaker was Sean Moynihan from PwC who talked about some of the R&D tax incentives available from the government. A major hurdle for many startups is that these tax breaks are generally only available to companies that have notional R&D deductions of at least $20,000.

Other programs such as the Export Market Development Grant are being phased out, and even incentives for product design must be able to demonstrate research activity and expenses. Since these initiatives can largely be described as “matching” programs, they can be summarised as “no taxable revenue, no grant available”.

PwC have launched their own service to assist companies navigate the R&D claim process.

Although an estimated $1.8bn will be made available in R&D grants this year, less than 10% will go to startups.

Note: the closing date for grant applications for the year ended June 30, 2014 is April 30.

Conclusions

Although there is a noticeable change in VC attitudes, most early-stage funding finds its way to B2C startups, because B2B is just “too hard”. However, even angel investors want to see an established client base, a revenue stream, and a well-defined team of founders.

With lower tech and product development costs in mobile apps and software tools, bootstrapping is a more realistic option for many startups, and the received wisdom appears to be to hold out for as long as you can before bringing in external funding.

Crowdfunding is gaining traction for specific projects or more tangible products (including some apps) – but legal and other restrictions means it’s not really a viable option for raising equity. (Maybe P2P lending for businesses will offer alternatives to a bank overdraft, a personal loan or even secured lending?)

Next week: Taxing the Intangibles – coming soon to a screen near you!

 

How to Survive a #Startup Weekend

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A rite of passage for any startup founder or budding entrepreneur is a weekend hackathon, and a Startup Weekend is probably the best way to throw yourself in at the deep end. As part of Startup Week, the York Butter Factory hosted Melbourne’s first fintech event. Here’s how I managed to survive the ordeal….

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Your correspondent in full flow at the Final Pitch…

Rather than provide an hour-by-hour account of my experience (the schedule is on the website and you can read the Twitter feed), here’s my thoughts on what it takes to participate and get the most out of the experience:

Courage

Take a leap of faith, step up and pitch an idea at the open mike session on the first night. Not only does this force you to craft your message, it also helps overcome any nervousness or awkwardness in joining a room full of total strangers with whom you will be working for the next 54 hours. My idea didn’t get enough votes, but it did spark several interesting conversations with other participants, such that I will probably take it further.

Stamina

Pace yourself. Yes, you could spend every available hour on finishing that customer validation, or refining the pitch, or making sure your demo site is up and running – all of which are important – but you also need to make time for rest, sleep, eating (all catering is laid on) and exercise. Again, 54 hours is a long time to spend on a single activity.

Open Mindedness

I had some idea from the program notes what to expect, but I still didn’t really know what it would it be like. So it was great to just go with the flow, to see what would happen. The format, structure and schedule (as well as the rules and requirements for the Final Pitch competition), pretty much define what goes on. But your attitude and willingness to be open to new ideas determine how much you get out of the experience.

I should also mention the value in having direct access to so many experienced mentors throughout the weekend – although I know from the experience, it’s hard not to get too defensive when mentors find fault with your project, and difficult to remain true to the idea when some of the feedback is contradictory.

Teamwork

Building teams to collaborate on a startup idea forms the basis of the hackathon model. As my own idea did not get enough votes at the open pitch, I looked to join a team that was a good fit in terms of the idea, the mix of skills to complement my own, and the ability to execute. As a “non technical” participant, I was extremely fortunate to be part of team that had a great balance of back-end and front developers, design skills and mobile deployment. Plus, given the theme was fintech, it was fantastic working with people from a banking IT background. (It also helped that several team members were veterans of Startup Weekend.)

Defining Roles

Although we didn’t spend a great deal of time creating or defining roles within the team, each of us played to our strengths, by self-determining what we would work on, and what our contribution would be. The only tricky decision was choosing who would present the Final Pitch to the panel of judges – but a process of elimination, preference and negotiation resulted in yours truly taking on the role.

Tools

In addition to the various software, hosting and domain name resources provided to each team, I was impressed by how many other tools the team plugged into – such as Trello, GoogleForms, Hangouts, ThemeForest, CanvasModel Design and Launchrock – most of which were free. We also spent some time reviewing competing and complementary products as part our MVP validation.

Less Is More

We could have spent a lot of time on customer validation – but we chose instead to talk to 3 or 4 key target customers for the MVP (qualitative), and run an on-line survey (quantitative) which generated around 100 responses overnight (not bad considering it was a weekend…). We also had more content than we actually used: the lean canvas business model was used sparingly, as was a competitor heat map; but it also meant that when we came to developing our pitch presentation, we had the luxury of being able to take stuff out and only focus on the important and most relevant points. Thanks, also, to a presentation template that one of the team had just used at a recent management course!

Practise

Having been chosen to make the Final Pitch on behalf of the team, and despite quite a lot of experience in making business presentations and in public speaking, I was extremely grateful for the coaching, feedback and rehearsals the team put me through. Getting to know the material, understanding the anchor points and how to navigate from topic to topic, helped me to give a presentation that flowed logically and hopefully demonstrated that the team had met the competition brief.

The Result?

Unfortunately our team did not win, nor did it place in the top 3. The judges pinged our presentation for being “too confident”, and for not demoing our prototype (we did briefly put up our beta website) – but given the working prototype mostly comprised some backend coding, it wouldn’t have been that interesting from a visual perspective.

Notwithstanding our disappointment on the night, the team is planning to get together to see how far we can take the idea, and separately I’ve been asked to join a new team at an upcoming hackathon.

(If anyone is interested, we designed a P2P payments tool called PayMee)

Next week: 3 Ways to Fund Your #Startup

Update: Health, AusPost, eTaskr and Slow School

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Over recent months, I have blogged about health and the digital economy, the challenges facing AusPost, the progress of eTaskr and the birth of Slow School of Business. Here are some updates on each of these topics:

IMG_0211Apple launches developer platform for health apps

On top of launching “Health” with iOS8, Apple has released a software tool called ResearchKit designed to help researchers and developers build and test new health apps.

I think that while we hear a lot about the Internet of Things (#IoT), health is one area where the connection of the physical and the digital will really deliver tangible benefits (not just a fridge with a screen…).

Australia Post plans to raise the cost of sending letters

In the wake of declining letter volumes (and poorer financial performance), AusPost is considering jacking up the price of letter postage, and introducing a 2-speed letter service.

While this is not a surprising move, it does seem shortsighted. Given the increase in parcel volumes, especially from e-commerce and small online purchases, I reckon AusPost would be better off with more refined domestic parcel rates. For example, using exactly the same dimensions and weight, I can either send an item as a “large letter” for $2.10 (which is perhaps too cheap?), or as a “small parcel” for $7.45 (which is incredibly expensive for an item that might cost no more than $25). Maybe different band rates of 50g, from 100g up to 500g (the current weight limit for a small parcel/large letter) or even 1kg  might be a better option, coupled with improved payment and lodgment automation? Just saying…

etaskr secures seed funding

Described as a “private label elance”, etaskr is a graduate of the AngelCube accelerator program, and was a finalist at last year’s Big Pitch organised by Oxygen Ventures.

Following their appearance at the Big Pitch, etaskr have recently closed $1.3m in seed funding from Oxygen Ventures. As mentioned in an earlier blog, etaskr is starting to see traction among corporate clients, including overseas markets, but the nature of the B2B sales cycle has meant that investors, incubators and accelerators are traditionally wary of such startups. Hopefully, this latest development will start to change market perception.

Slow School founder in the news

Finally, Carolyn Tate, the founder of Slow School of Business has been busy launching a new program of short courses (including Three of the Best) a new website and a new book. Oh, and she’s also become a B Corp. (Declaration of interest: I am a participant in, and adviser to, Slow School.)

Previously featured in Slow Living (required reading for the Slow Movement), Carolyn has taken a simple idea based on collaborative and peer-to-peer learning, and created a potentially disruptive platform for professional development and corporate training. Slow School is also tapping into the growing trend for people to work as independent contractors, freelancers and consultants (rather than permanent employees), and the dynamics of the digital economy where participants are also looking to make deep, personal connections rather than just online “friends”.

The new normal?

Post GFC, we’ve been told to expect a low/slow/no growth environment – that this is the “new normal”. I would add to that digital disruption, non-traditional commercial models and emergent ecosystems as being the other key influences on how we do business in this new environment. From what I have skim-read of the latest Intergenerational Report, the language is still couched in traditional terms of “jobs”, “productivity” and “industries”. Yes, there is mention of innovation, demographics, technology and flexible workplaces (i.e., deferring retirement?), but nothing that inspires me to think our political leaders understand what is really going on within the startup economy and the broader digital movement.

Next week: How to survive a Startup Weekend

It’s OK to say “I don’t know”

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Thanks to the example set by our media-groomed politicians, it seems that nobody is willing to admit when they don’t know the answer to something. Rather than reveal a gap in their knowledge, they prefer to fudge their way to a non-committal, irrelevant or even incorrect response, by trotting out a favourite policy slogan or party catchphrase. Wouldn’t it be refreshing (and more honest) if they just said “I don’t know”, and then figured out how to find the appropriate answer?

Image by: Alexander Henning Drachmann

Image by: Alexander Henning Drachmann

In previous posts, I have commented on my frustrations at poor customer service, and in particular, the inadequate customer service training given to front-line staff. My latest run-in with poor customer service training came at my local supermarket. Owing to an innocent misunderstanding at the checkout, I asked the checkout assistant to reverse the payment on my credit card payment and debit it instead from the cash balance on my store loyalty card.

“No, that’s not possible”, I was told. “It’s already gone through on your credit card. You’ll have to use the loyalty card next time.”

“Surely,” I replied, “it’s a very simple process to reverse the transaction, and process it again?”

My request was further denied as being “impossible”. Eventually, the checkout assistant admitted that she “didn’t know” how to do it, so she would need to ask her supervisor to do it. “Fine,” I replied, and suggested she could have said this in the first place.

Problem was, the supervisor had no idea either. “I’ll have to re-process your transaction by scanning and reversing each item individually, and then put them through again.” By this time, I was wondering why I chose to shop here, and seriously considering why I would ever do so again.

“There must be an easier way,” I suggested. “I can’t be the first customer to have had this issue.” After further hesitation and prevarication, the supervisor said she would have to ask her manager to show her how to do it, as she herself didn’t know the process.

Turns out, it took one transaction code to reverse the credit card payment, and then reprocess it on the loyalty card – and without having to re-scan my shopping.

I don’t blame the checkout assistant, as clearly she hadn’t been trained how to do it (although she should have admitted as much in the first place). I’m a little surprised that the supervisor didn’t know either (how did she get promoted?). But the real blame must lie with the manager (or his manager) for not making sure the staff working under him knew the process, or knew who could perform the transaction.

To me, leadership (in politics, in business and in the service industry) is about making sure people know how to do their job, that they have the right tools and information to perform their duties, and that they know what is expected of them in the role. In cases where they may not know the answer, then it’s better to admit “I don’t know, but I’ll find the answer”, rather than fumbling the issue.

Next week: Updates on Apple Health, AusPost, eTaskr and Slow School of Business