Tag Archives: #Content in Context

10 Obstacles to Startup Funding in Australia

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The increasingly popular Lean Startup Melbourne kicked off 2014 with a session on Melbourne’s Startup Ecosystem. And while the tag of World’s Most Livable City is a draw card for attracting startup talent, the apparent lack of institutional investor interest in the startup movement is creating a barrier to funding options.

The Panel: Susan, Brendan, Leni - Chair: Indi Photo by @marksmithers via Twitter

The Panel: Susan, Brendan, Leni – Chair: Indi
Photo by @marksmithers via Twitter

After the traditional beer’n’pizza, an audience of around 300 people was first treated to a couple of lightning talks: Scott Handsaker’s presentation on Melbourne’s startup infrastructure was a great survey of the networking events, meet-up groups, co-working spaces, incubators, tech co-founders, angels and media resources. It also confirmed what everyone already knew, that the local startup community is thriving, and represents a positive force for change and innovation especially in the SME space (which is traditionally seen as the backbone of Australia’s economy). This was followed by Simon Moro’s guide to offshoring/outsourcing development and coding projects – including many helpful and practical tips.

Then came the main event, a panel discussion chaired by Indi from OutTrippin featuring serial entrepreneurs and startup gurus Susan Wu, Leni Mayo and Brendan Lewis. (For a brief but succinct write-up, see my fellow blogger Chris Chinchilla’s account.)

The main takeaways for me were:

1. Strong local infrastructure, but not yet as robust or scalable as Silicon Valley, London or even Dublin (Melbourne ranks #18 in the world)
2. Great community enthusiasm, but not clear what the role of government is or should be (e.g., should public money be used to “pick winners”?)
3. An established coterie of successful angels and VCs, but total lack of interest in the sector by institutional investors (e.g., still focused on investing only for profit, not in changing market behaviours)

In fact, the conspicuous absence of institutional investors at this type of event simply underlines why they actually represent a barrier to funding options for local startups. Here are 10 reasons why I believe instos have not engaged with the local startup community:

  1. They don’t understand the technology – this is not a new complaint; I have heard many entrepreneurs and corporate advisers bemoan the lack of appreciation for new technology developed locally.
  2. Not made here – conversely, there is suspicion about successful technology from overseas that is not yet proven in Australia (which is a challenge for local licensees seeking to develop local market opportunities).
  3. Preference for asset-based lending – partly influenced by regulatory attitudes, banks and other lenders prefer to lend against secured assets, such as plant, equipment or the family home. However, many startups and young entrepreneurs don’t own such assets (or their businesses are designed to be less capital-intensive). Instead, especially in the early stages, they would like to see funding based on cashflow lending linked to their current and future revenues (which are increasingly subscription and annuity based).
  4. Don’t understand the business models – with new technology come new business models, which traditional lenders and investors struggle to get their heads around. Traditional lending criteria are tied to traditional business concepts.
  5. Restrictive investment criteria – post-GFC, banks are more risk averse, and the regulators are also stifling investment product innovation with more stringent risk and regulatory capital management. In addition, institutional operating costs are eating into investor and lender margins, and local investment banking is diminishing, especially as foreign banks continue to scale back their local presence or exit altogether.
  6. Lack of a credible second board for smaller listings – if you don’t want, or cannot justify the cost of a full IPO on the ASX, then your options for raising wider shareholder capital are limited to platforms like ASSOB or NSX, neither of which have quite the same profile as London’s AIM or Hong Kong’s GEM.
  7. Restrictive crowd-funding options – yes, there are active crowd-funding platforms available in Australia (e.g., Pozible), but in most cases the “investor” has to be rewarded by tangible products and services (which has stymied some crowd-funding efforts by local film-makers), otherwise the financial market regulators might come knocking on your door. (This may change, if/when VentureCrowd begins to launch.)
  8. Tax structures can favour equities – without getting all technical, the use of franking credits by Australian companies offers considerable benefits to their shareholders via relevant tax concessions. As such, this makes equities (especially highly liquid stock) attractive to institutional and retail investors, and therefore inhibits the use of alternative funding options.
  9. Limited corporate bond market – most corporate bonds in Australia are bought by institutional investors, and despite various attempts to stimulate demand among retail investors, the vast majority of individual investors can only access these bonds via managed funds (which carry manager fees and other administrative costs), or more complex financial instruments such as hybrid securities. The institutional market itself is not especially liquid (there is limited trading activity), and if the federal government scales back public borrowing, this reduces the availability of treasury benchmarks for corporate bonds.
  10. Lack of loan syndication – it is common in many overseas capital markets to establish small syndicates of institutional investors to participate in corporate lending opportunities. This can help spread the risk for lenders, and diversify the funding base for borrowers. However, because of the loan sizes, and the highly concentrated banking market, there is little need or demand for loan syndication among Australian banks.

Until there is a better way to fund local startups beyond the initial rounds of angel and VC money, Australian entrepreneurs will continue to beat a path to Silicon Valley to raise capital. The irony is, a lot of Australia’s $1.6tn in assets under management are allocated to US money managers to invest back in Australia – in my opinion, this is an expensive boomerang. Instead, we need to build better dialogue (and more direct dealings) between the local startup community and our institutional lenders and investors.

5 Challenges for Performance Management

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I recently facilitated a round-table discussion on Performance Management, with senior executives from commercial, not-for-profit and public sector enterprises. Our topic was current practice in Performance Management, and was hosted together with my colleagues at Bravo Consulting Group.

At the outset, we posed a number of discussion points, including:

Are there direct correlations between Performance Management, Employee Engagement and Productivity?

How is Performance Management linked to Rewards, Recognition and Compensation?

Do your people understand the context for Performance Management?

We also discussed the true costs of Performance Management systems (time, resources, software, administration), as well as the different attitudes of management, team leaders, HR and employees toward current processes.

The good news is that all the organisations represented are running annual or semi-annual employee appraisals. There was also an increased focus on performance outcomes (i.e., it’s not just about effort expended on job-defined tasks, but more about what is being achieved and how). And our participants reported the importance of using appropriate tools to deliver effective employee communications around corporate strategy, organizational goals, change management and project roll-outs to ensure greater alignment with, and context for Performance Management.

However, we identified a number of key challenges and critical issues facing any organization that takes Performance Management seriously, or who wishes to increase the effectiveness of their current practices:

1. Negative Perceptions of Performance Management

Despite the widespread use and acceptance of Performance Management systems, there remains considerable negativity around the process, the context, and the even discussions themselves. There appears to be a sense of foreboding when it comes to the mid- or end-of-year appraisal, a fact that was borne out for me just a few weeks ago: I was in the furniture display area of a well-known department store, when I overheard the floor manager say to one of her sales colleagues: “Mike says he’ll do your one-on-one at 3pm today.” What might appear to be a fairly innocuous statement visibly filled the employee with dread, at the prospect of his annual review. Surely Performance Management discussions should not be fraught with such unnecessary anxiety or stress?

2. Performance Management Systems Are All Different, And Too Rigid

Our round-table participants all reported using different software (and paper-based) systems, which is understandable given the proliferation of HRMS tools that support Performance Management. But many of these systems resemble accounting or project management software, and lack more qualitative or cultural performance measures. Alternatively, systems tend to be rigid, process-driven applications that often take a checklist and compliance approach to conducting Performance Management. They can also suffer from a “one size fits all” solution, and don’t readily help organizations to develop meaningful performance measures or point-in-time indicators, mainly because they are backward-looking and use retrospective data. Shouldn’t Performance Management help employees move towards the job that they want (and towards their longer-term career objectives), rather than confining the discussion to current or out-dated tasks?

3. Formal Processes Are Disconnected From Informal Processes

By making it a “process” (and an infrequent one at that), Performance Management becomes artificial, and divorced from day-to-day reality. This can result in performance issues being stored up and only “discovered” during the formal appraisal – which will add to the anxiety and stress if long-term resentments about manager-employee behaviours and relationships are only brought to light during the Performance Management process. A common outcome from the formal Performance Management process is a corrective or punitive response, due to the absence of continuing efforts to manage and direct performance. Why should employees only hear feedback about their performance at the end of the year, when it might be too late to address the issue, leading to knock-on implications for remuneration, recognition and promotion. Shouldn’t Performance Management be part of the everyday dialogue between colleagues?

4. Many Managers Are Simply Ill-Equipped To Have The Performance Conversation

Without the appropriate skills to foster meaningful and open dialogue with their direct reports, managers end up having to manage the Performance Management conversation, rather than helping their people self-manage their own performance. This awkwardness is compounded if there is a lack of organizational context for Performance Management; worse, poor performance is ignored or circumvented because managers do not feel confident to start the dialogue, which is not fair to the individuals concerned if they are not given the opportunity to discuss what might be the root cause of a performance issue. If there is no dialogue around Performance Management, how can employees know what they are being held accountable for, or appreciate the consequences of not meeting performance goals and objectives?

5. Performance Management Systems Ignore The Middle Majority

Most Performance Management systems (certainly the ones I have been exposed to) end up using forced bell curve distribution analysis to classify employees according to high, middle, low and under achievement categories of performance. I recall one former colleague who used to cite Garrison Keillor when annual appraisal ratings had to be allocated according to the expected distribution curve: “Well, that’s the news from Lake Wobegon, where all the women are strong, all the men are good-looking, and all the children are above average.”

When we asked our participants “what keeps you awake at night?”, one CEO commented that he worries about the middle 60%-65% of his employees – the bulk who “do a good job” – because more of his attention and focus is on the high and low performers (the top and bottom 15%-20% respectively). This “bias” can distort management perspective, and lead to disaffection in the middle band, unless there are adequate ways to recognize and reward solid performance independent of annual compensation or promotion. (This issue is particularly acute in Australia when we consider the impacts of slower economic growth, comparatively high wages and sluggish productivity – yet, employers face a war for talent as new and highly valued skills become harder to resource.)

Conclusion

If Performance Management could become a continuous dialogue, backed by meaningful performance criteria and underpinned by a greater emphasis on employee self-awareness and self-directed Performance Management, then organisations could spend more time on strategy and execution, and less time on managing individual performance. Not only would this create greater cost efficiencies in the Performance Management process itself, it would likely lead to improved productivity outcomes because there would be more clarity and engagement around goals, outcomes and incentives.

Pause : Edit : Delete – My new year’s resolution for content management

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Last week, Apple confirmed it had acquired SnappyCam, an iPhone photo app that is capable of taking 20 frames per second.

At first glance, this seems like a great improvement on the iPhone camera function – until you start to think about some of the implications:

1. Does this mean we’ll be creating (and uploading, sharing, archiving) 20 times more digital photos than we do already?

2. Does Apple intend to remove some other functionality from the iPhone to make way for this enhancement (on the basis that they have just about packed in everything they can in the current iPhone 5S, and processing power and memory capacity are relatively finite)?

3. When will we ever find time to look at all these superfluous/supernumerous photos that Apple will be encouraging us to take?

For myself, I realise that I actually take far fewer photos than I did 10 years ago. In fact, I have never owned a digital camera, and basically lost interest in photography when it became virtually impossible to obtain film for my Nikon APS SLR camera. Previously, I had been using one of the very first Canon IXUS APS models, and before that, for many years I owned a solid and reliable 35mm SLR camera – a Praktica that was made in the former East Germany.  And while I have been using an iPhone to take photos for several years, I do so much more rarely than with any dedicated camera I have owned, even though the smart phone camera technology is much easier and more immediate.

Perhaps the ease of use is part of the problem with digital photography – there’s so little effort required, and practically zero cost involved, so it’s natural that some people just snap away with very little thought or consideration. Besides, if we don’t like a particular photo, we can just delete it. But I wonder if we are being disciplined enough in consigning our mistakes to the Trash icon. Yes, we save, upload and share our better attempts (and maybe we will look at them more than a few times over the years), but do we cull the rest?

I reflected on this as I began the process of clearing out my attic prior to an imminent house move. I found a large box of photographs, all neatly arranged in albums (by chronology and geography – no option to “tag” who was in the shot), representing a major investment in time and money over the years – the cost of the cameras themselves, the effort in composing each and every shot, the cost (and anticipation) involved to get the prints back from the developing lab (plus the mix of sheer horror and pleasant surprise with the results – and those frequently patronising labels telling me the film was under/over exposed… And while I do recall looking at some of these photos from time to time, for much of the past 10 years they have sat ignored and untouched in that same box. I’ll be the first to admit that not every picture was vital, essential let alone unique (for example, how many other tourists have taken photos of the Great Wall of China?), and while many of them still evoked vivid memories, and most of them conveyed a sense of narrative, I realise that I had to impose a more stringent editorial policy on what was deemed worthy of keeping.

So, in the age of digital content, when it seems we can take an infinite number of photos, capture endless hours of video, stream non-stop music and download whole libraries, I am resolved to adopt the following approach to my own content management:

PAUSE

Before saving/archiving any new content, take stock and consider whether I am ever going to want to view/watch/listen/play/read it again.

EDIT

Having decided it is really worthy of taking up space on my hard drive, catalogue it appropriately for easy retrieval. In addition, undertake regular culling of the archive. (What I found to my taste 5 years ago might not appeal today…)

DELETE

Anything that does not survive the above processes must be erased (not just backed up to the cloud or to another hard drive).

As businesses and organizations, we would also do well to apply a similar pruning process to our own operations, especially when we are facing certain constraints on capacity and resources. For example, before embarking on a new project or launching a new product, shouldn’t we be asking ourselves: what projects/products can we discontinue? When setting annual budgets and targets, shouldn’t we be questioning our assumptions on “continuing operations” – just because “we’ve always done it this way”, doesn’t mean we should continue to do so. When we reflect on what is important, can we really be sure we aren’t carrying any excess baggage? Part of this process will be driven by the need to prioritise resources, part of it will be determined by understanding what our customers and stakeholders truly value. Ultimately, what remains will likely be determined by its purpose and its relevance.

If you haven’t looked at that photo on your smart phone in over a year, what is it still doing there?

New Year Wishes: What I hope for in 2014

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A new year normally brings with it the usual predictions for the 12 months ahead. Sometimes, as with political elections, the World Cup, fiscal budgets and the Oscars, most informed commentators can usually hope to get at least one or two things right. But as a former colleague once wrote, anticipating new developments in technology is like “trying to predict the unpredictable”.*

Rather than attempting to gaze into a crystal ball, here are a few of my personal wishes** for 2014

Politics

I think it’s interesting that in 2013, two of the political leaders that generated most of the news were Margaret Thatcher and Nelson Mandela – and in both cases, it was their passing that dominated the headlines. Neither had been in power for many years, yet in death they were more noteworthy than most of today’s world leaders. Why? Well, a lack of truly charismatic politicians could explain it. But I rather think the lure of holding political office has been undermined by the need to micromanage the machinery of government – so rather than attracting visionary leaders capable of projecting big picture thinking, we mostly get a collective mediocrity blinkered by the spin doctors and party pollsters, and rarely willing to tell the public what they actually think or what they personally believe in, for fear of offending voters in marginal electorates. Whether or not you agreed with or liked their particular brands of politics, it was pretty clear that both Thatcher or Mandela actually believed what they were saying when addressing parliament, giving interviews, or delivering campaign speeches.

In 2014 it would be wonderful to see the return of political leaders who were not simply trying to avoid defeat at the next election. Even better, wouldn’t it be wonderfully refreshing to hear politicians willing to amend their policies because they have been persuaded by informed argument, prepared to admit that they might have got it wrong, and able to speak their mind without being accused of knee-jerk reactions or heretical u-turns; situations change, so shouldn’t our politicians be entitled to adapt and clarify their thinking accordingly?

Leadership

Which brings me to my next wish – a willingness to openly embrace situational leadership. Yes, organisations should have a clear purpose, stated objectives and well-articulated means for achieving them, but there also needs to be flexibility and the ability to adapt and evolve based on changing circumstances.

We hear a great deal about the need for diversity on boards, among executive teams and across the workplace generally. Much of the diversity debate centres on gender and ethnicity – which is fine, but we require organisations with greater cognitive diversity. Such diversity could help avoid group-think, constructively challenge the status quo and counter the underlying causes of institutionalised inertia.

Business

Unless you are a single-product company, with a unique and proprietary production process, a guaranteed market monopoly, and an endless supply of materials and customers, your business cannot afford to exclude alternative thinking or ignore external perspectives on your industry, your markets or your products and services.

Equally, in a low-growth/no-growth market environment, companies have to develop or acquire better strategic growth skills. Expansion via capturing market share (usually achieved by competing on price, and resulting in lower margins) will be hard to sustain, and will likely result in a race to the bottom.

My big wish for 2014 is that businesses in general, and service industries in particular, will recognize what their true value proposition is, and build strategies for competing on quality (not just on quantity). For example, unless you understand your cost structures, and can relate those to your customers’ perceptions of what they are paying for, you will either waste resources on stuff customers don’t value, or miss opportunities for serving them better.

Technology and the Internet

It’s hard to think of any significant developments in popular technology or on the Internet during 2013. Sure, there was some consolidation among social media platforms, and product rationalisation at Yahoo! and elsewhere; but apart from launching iOS7 and the iPhone 5, Apple did not bring any major new products to market. Although Apple’s global share of smart phone sales may be declining, it may simply be market maturation rather than any product advances from its competitors. (There is also evidence that in key markets, iPhone 5 has boosted Apple’s smart phone sales, and the iPhone 5 itself lays claim to being the most popular model.)

The Internet continues to grow exponentially, largely driven by social media and user-contributed content. But I’m not sure that our collective knowledge and wisdom have improved at a corresponding rate. (Plus, targeted and streamed advertising means it takes much longer to watch YouTube clips, resulting in a lower return on the time we invest in consuming content.)

I’m hoping that 2014 will herald the launch of Internet 3.0 – an on-line environment that is more informative, more insightful and more interactive, and which connects more intuitively between my desktop and mobile devices. (For example, various upgrades to iOS and their associated back-ups forced me to transfer manually a large archive of Notes from my iPhone 4 to my iCloud account, simply because Apple unilaterally changed the way legacy content was “recognized” between my iPhone and my iMac.)

Culture

Perhaps we should also wish for a slightly kinder and more caring social media environment in 2014 – and as I heard one media commentator observe this week, professional sports people and other celebrities should probably refrain from using social media after 11pm, even if they are only slightly inebriated. Anyway, at the risk of revealing some of my own prejudices and preferences, this is what I expect from 2014 in Culture.

First up, I don’t want to see any more of the following categories of movie: sequels, prequels, comic-strip franchises, CGI extravaganzas or anything containing anthropomorphism (unless it’s a Director’s Cut of “Animal Farm”).

Second, I eagerly await the end of geo-blocking for digital content – copyright owners, music labels, publishers, licensors/licensees, distributors and on-line retailers please get your act together, and don’t make it unnecessarily difficult for me to buy your content just because of where I happen to live.

Third, I’d like to advocate a special tax on reality TV shows – the proceeds of which will be directed towards alleviating human suffering, solving important world issues, or nurturing genuine artistic/culinary/terpsichorean talent.

Finally, I hope that David Bowie’s return to form with 2013’s “The Next Day” was not a fleeting reminder of past glories….

NOTES:

* Anthony Kinahan in his introduction to “Now and Then 1974-2024: A Celebration of the Bicentenary of Sweet & Maxwell” (1999) a collection of essays on the future of legal publishing

** Aside from, of course world peace, the end of poverty and a global commitment to address the negative impacts of climate change