The latest intake to AngelCube‘s accelerator program presented at the recent Startup Victoria meetup event. It was interesting to see that all 6 pitches were aimed at B2B audiences, since I have heard several angel investors and startup advisers express a strong preference for end-consumer products (or those with 2-sided markets). Perhaps there is more appetite for enterprise solutions, despite the longer lead times for sales, and the challenge of strategies required to displace incumbant products.

Whether there is a new interest in B2B startups, or whether more founders are identifying B2B opportunities, there’s probably some further analysis to be done. Meanwhile, here are the 6 fledgling startups in the order they pitched on the night:

1. Peer Academy

Peer Academy aims to “change the way professionals learn”. It does this by offering students access to open enrollment classes via an online market place. The classes are conducted by facilitators and experts (“hosts”) who have been “screened” for quality by Peer Academy, with a focus on “soft” management and leadership skills.

Peer Academy hopes that students will act as “warm leads” for corporate sales, by taking their classroom experience back into their organisations, and acting as champions or brand advocates. With follow-up introductions to training and HR managers, Peer Academy then curates programs for corporate clients, by matching training needs to individual users.

I like the notion of “peer-to-peer” learning (although I presume that the hosts are expected to have more advanced and developed skills than their students), and there is certainly a trend for alternative learning platforms. At least one major bank has expressed interest in sourcing corporate training via Peer Academy, who take a 30% commission on course sales.

A huge challenge will be to engage corporate clients who already have established relationships with trusted training providers, or who have existing panels of approved organisations, or who outsource training procurement to third parties.

2. Jack

Workplace wellbeing is becoming big business ($5bn and counting?), and in the process, sedentary workers are in the firing line. According to Apple CEO TIM Cook, “Sitting is the new cancer”, and hence the recent fad/trend/fashion for sit-stand desks which is driving market interest in ergonomic solutions. The team at Jack have built a device that can monitor how much time people are sitting or standing, and even provide some feedback on user posture.

As you would expect, Jack uses cloud connectivity to monitor user activity, and to relay data via cross-platform apps and dashboards. It also uses elements of social media engagement and gamification, and has already launched a pilot scheme with several desk suppliers, as well as a paid beta at a well-known payments provider.

Customers will buy the device plus pay for a monthly subscription service. There is a direct competitor, but Jack claim their device can be retrofitted to any sit-stand desk. The unit price is much higher than, say a Fitbit, but since this is not a consumer product, Jack is confident it can sustain current pricing.

Finally, with the data it aims to collect, Jack reckons it may even be able to help reduce insurance premiums, although this will no doubt be subject to actuarial scrutiny, Work Cover and OH&S requirements, as well as data privacy issues.

3. Coin-Craft

In the professional services and consulting sectors, tracking project costs and resourcing have become highly demanding activities – witness the plethora of project management, costing, billing, ERP and time-tracking solutions on the market. Based on personal experience, the founders of Coin-Craft have identified a specific need among architects, and have built an all-in-one tool for Project Management, Cashflow Analysis and Resource Planning. Built “for architects by architects”, Coin-Craft is designed to help clients stay optimal, by managing staff over/under utilisation, and tracking cashflow projections.

The system also claims to integrate with third-party accounting software, and has around a dozen firms using the service, with another 30 in the pipeline. Although Coin-Craft have chosen a niche client base to protect their market entry, they claim the solution can also be adopted by engineering practices, graphic art studios and project management firms.

However, feedback from the audience suggested there are already similar, mature products that are tracking individual billable hours against specific projects, so Coin-Craft may need to work on their value proposition and differentiation.

4. CurveUp!

As social media and content marketing become more ubiquitous (if not more sophisticated), companies need to understand the value of their direct marketing spend. Mostly, they can do this via web analytics, e-commerce tracking, campaign conversions, and cost of customer acquisition. According to CurveUp! however, measuring the ROI of your PR activity is not so easy using “conventional” social media monitoring tools. For example, CurveUp! claim they can deliver tailored reports to show which blog post or article converted to a ticket sale for a concert or event.

Currently using web and online sources only, CurveUp! track mentions and link this to customer data. Some platforms, such as Instagram, are harder to track, and even via a possible API solution, it will only be possible to monitor the number of views and shares, but otherwise little or no data will be available.

However, at least one online market place has expressed interest, and CurveUp! has the potential to integrate with Facebook and Google, so that clients could possibly use campaign codes to track referral activity from mention to firm sale. Overall, the service will need to align itself with the ROI outcomes linked to PR campaign goals – which will vary between clients and markets, depending on organisational KPIs around brand advocacy, share of wallet, products per customer and customer satisfaction.

5. TribeGrowth

In a similar vein, the team at TribeGrowth claim to have built “artificial intelligence for social media marketing“. Their goal is to help clients build an audience and get customers, via the use of “intelligent engagement” to generate conversions.

Initially targeting startups, professional service providers and the hospitality sector, TribeGrowth offers a tiered monthly subscription service, and claims to be a (cheaper) alternative to agencies or even Twitter ads.

Currently in private beta (and so far, only designed for Twitter and Instagram), TribeGrowth focuses on audience growth by careful selection of connections and influencers. According to the founders, this is not “pay & spray”, but uses machine learning to refine audience outreach and engagement.

6. SweetHawk

Finally, and in what was probably the most technical presentation of the evening, came SweetHawk, which is building “voice for e-commerce”. I have to confess that, although I had previously heard about this product, I’m still not totally clear how it works.

In essence, it’s an outbound platform that enables companies to have more focused/targeted real-time conversations with warm sales prospects, namely people who are visiting their websites. Personally, I would find that a bit spooky, if I was browsing a site and suddenly a widget popped up asking me if I wanted to receive a call right there and then. Isn’t it a bit like stalking?

The business model is designed to offer tiered services in return for monthly subscription fees – depending on call volumes and functionality, such as workflow tools. I would see it as sitting somewhere between an outbound sales call centre and a SaaS-style inbound helpdesk solution.

On the plus side, I do see the opportunity to deliver superior and more responsive customer service, except that SweetHawk appears to be a sales and prospecting platform, not an after-sales or support solution. I’m also used to live chat tools that pop up on various software and other service sites I use, so I would probably engage with a similar offering if I was browsing to purchase.

Final Thoughts

While none of these pitches has so far demonstrated anything truly disruptive (but let’s not criticise them for that), they all seem reasonably sensible and logical solutions using a mix of digitally-driven technologies (cloud, mobile, social, peer-to-peer, data analytics) that we are all increasingly familiar with. So, rather than major game changers, I see each of them building on established platforms. By refining the potential that new technologies and business models are creating, they are tapping into better-defined client needs rather than taking a “build it and they will come” approach.

In conclusion, I was generally impressed by the 6 pitches on offer, although some of the presentations will no doubt be reworked in light of the audience feedback and Q&A, and before the plucky founders hit the investor road show organised by AngelCube.

The event was hosted by inspire9, and sponsored by BlueChilli and PwC.

Next week: More on FinTech – another look at data and disintermediation

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.

Bootstrapping

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:

Use social media comments, likes and other feedback to validate your idea
Taking a more hands-on approach means they have a success rate of around 60%
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!

Content in Context

Exploring the information age…

Tag Archives: PwC

3 Ways to Fund Your #Startup

Bootstrapping

Crowdfunding

R&D tax breaks

Conclusions