Liquid State got some of the best minds in Australian business to advise it for free: here’s how and why12:32AM | Wednesday, 4 December
What do you do when you’re a fledgling Brisbane tech start-up, touting a product with the potential to wrong-foot all the big players in your industry? If you build slowly and steadily – growing your business and refining your product as your customer base grows – you could lose the early lead you had. Organic growth won’t do. You need to move quickly. You need to burst onto the scene. The sooner, the better. That was the challenge facing Liquid State, a digital publishing company launched in Brisbane in late 2010. It makes software that allows businesses to easily and quickly publish documents in a format that’s built for iPad. The leader in the business publishing space is Adobe. But when publishing a document for iPad using its tools, the end result can be clunky. The dimensions are wrong. That’s where Liquid State came in. Philip Andrews, Liquid State co-founder and CEO, says he and his co-founder Cyril Doussin knew there was a worldwide gap in the market for a product that allowed businesses to leave PDFs behind. “The businesses we had built before had always started small, built organically, gone regional then national,” Andrews tells SmartCompany. “We’d bankrolled that process, which is fairly typical in the publishing business. “But with Liquid State, because of the potential for the technology and the size of the market, as well as the size of the competition, we wanted to have an international profile very quickly.” How can a business go from zero to being competitive with Adobe? By bringing on the best advice. Shortly after formation, Liquid State formed an advisory board, and invited experienced business advisers to join it. They came on a pro-bono basis, with the understanding that they would have a stake in Liquid State’s success. Dylan Byrne, an accountant and consultant at BDO, was one of the first to join. He’s not getting paid for his help. But he tells SmartCompany he didn’t hesitate for a second. “There’s a huge amount of personal satisfaction as an advisor in helping guys like that achieve their goals,” he says. “I enjoy doing the financial thing, but the relationship side of things is the most satisfying part of my job.” Joining Bryne on Liquid State’s advisory board are several businesspeople with specific expertise, including a lawyer, a leading corporate director, and a marketing guru. They’re a calibre of person Andrews says Liquid State couldn’t afford to hire right now. But having them around has made the way ahead much easier. Liquid State recently scored a $785,000 Commercialisation Australia grant to develop their product. Andrews says they couldn’t have done it without their advisory board. “Companies like ours are often nimble and lightweight – and that’s what they try to be. When you’re dealing with larger businesses and agencies that can cause friction. You need really good advisers to get past that.” To get the grant, Liquid State needed complex accounting structures in place. Most start-ups would say that kind of structure is far beyond their capabilities. But Liquid State didn’t. Story continues on page 2. Please click below. “Dylan [Bryne] advised us to set up our accounts that way from the start. That meant the tracking that’s necessary for the grant isn’t a big deal for us – we already had those procedures in place. We could easily meet the reporting and auditing requirements.” Bryne adds another way the advisory board changed Liquid State. International start-ups often try to keep their intellectual property, revenues and costs in different companies, in a bid to protect the important things should their business hit some hurdles. But that has costs. “We suggested a simple structure, because it’s a better exit strategy,” he says. “It’s easier to unwind. If you’re a company coming in and wanting to invest, you’re right to ask what exactly you’re buying. It creates a whole lot of work. And we can manage the risks another way, while keeping the structure quite simple. “One of the other advisers, a lawyer who’s done a heap of venture capital and private equity work, was very clear on this. He said if you make your structure too complicated, there are problems down the track. It was great to have that expertise.” Ultimately, Andrews says, Liquid State was lucky in that both he and his co-founder were older, and have been involved in business for a long time. Andrews himself owns a Queensland-based publishing company, which he’s taken a step back from to focus on Liquid State. “When you’re bootstrapping a company, you have very little money for anybody,” he says. “These guys are helping us structure our business in anticipation of success. But it’s risky being involved in start-ups, and that can be a deterrent for people who hold such expertise. “We’re lucky that we’ve been in business for 20 years. Whenever we’re speaking with other businesspeople, we tend to speak the same language, and that’s not always the case with companies like ours, who can be led by young or inexperienced people. They can have a great idea, but not much business acumen.” Liquid State’s founder leveraged their existing relationships. All their advisers were acquaintances before they joined the board. That was the case with Bryne, who was introduced to Andrews through a work colleague. “We had a lot of rapport, and without trying, we became friends. “Then one day he rang me up and said he had an important question to ask me. When he explained the advisory board, I said yes in an instant. He already had my trust.” Sometimes, the advisory board’s counsel can rub against the grain. But Andrews says it’s worth it. “All the key players in the advisory board are super-experienced with much bigger companies and with far more international outlooks than we have inside our company. Even though sometimes it’s an uneasy fit – we’re an ultra-small company with big, international ideas – it was absolutely necessarily for what we’re building.” This story first appeared on SmartCompany.
The Nitro story: How to grow a software company from five guys to over $25 million in annual revenue10:51AM | Friday, 4 October
Taking on the “gorilla in the room” competitor doesn’t always end well, but it seemed like a great idea to the founding team of now international software company Nitro when they squared up to Adobe in 2005. Since then they’ve grown into an international software company of over 120. Cofounder and chief executive Sam Chandler told StartupSmart they’ll bring in more than $25 million in revenue this year. PDF software may not seem sexy, but it was a major pain point for the five co-founders of Nitro when they first started kicking around start-up ideas. “We had come to understand that Adobe was generating over $600 million at the time in Acrobat revenue on the desktop alone and was growing rapidly. We could see it was going to be a billion-dollar software category,” says Chandler. “We thought it was an industry space that was really ripe for innovation and disruption, and thought that going after the gorilla in the room was a pretty attractive strategy as we thought there wasn’t a lot of love for Adobe out there.” They launched their first PDF software product in 2005 and made their first sale 45 minutes after launching the website. They’ve gone on to release a series of productivity-boosting document management tools since then. They had built their user base up to just under 100,000, generating $1.6 million in annual revenue in 2007. The growth was mostly due to PR campaigns that focused on being the first real Adobe alternative, but growth was beginning to plateau when Chandler decided he was ready to catalyse the business. He pitched a then-emerging strategy that would become ubiquitous for software companies in the coming years. “I proposed a strategy at that time which I struggled to get board support for initially. Essentially it was the concept of ‘freemium’ (free capped service with premium, paid options), but this was before it was a word, or even a concept,” Chandler says. The plan was Nitro would launch a new series of fully functional products with capped use. “So our user acquisition would skyrocket, and we assumed that a certain percentage of those users would need to do more, and when they did they would pay for the premium version.” They did. In 2008 the company made over $4 million. “Freemium has driven most of our growth, although at the time there was a sense that maybe this was just a massive roll of the dice,” Chandler says. “It was basically an SEO strategy. We called it the ‘all roads lead to Nitro’ strategy. Anyone who was searching for anything PDF or document related would find us.” While the idea of giving away software for free was new at the time, Chandler says when he weighed up the potential to reach millions of users against the cost of the media and marketing spend he would need to reach that many via more traditional routes, he says it was a no-brainer. “People really struggled back then to get their heads around giving away software for free,” Chandler says. “The platform has now got over 8 million users per month. Only a tiny, single digit percentage of those pay, but our user acquisition cost is very low. This means our job is to convert the users into customers when they’re ready to do more.” Nitro’s strategy for converting users to customers uses automated, targeted email software, which is the second major factor Chandler attributes their growth to. “The best way to look at the marketing function in a modern software business is to view it like a big funnel with prospects at the top. You then invest in a range of strategies to bring users through the funnel to ultimately become customers,” Chandler says. “We were then, and still are today, quite ground breaking in our uptake of marketing automation. We do a lot of very targeted and relevant email around particular user flows, and that can be customised quite dramatically.” On top of the targeted email marketing, Nitro uses strategies such as interactive product experiences and feature discovery campaigns via free tutorials for non-premium users. Despite the consistent growth, Nitro has experienced some “catastrophically bad” product releases and cashflow issues that put their business at risk. In the video below, Chandler talks about the time they came closest to losing it all, and how they navigated their way back to growth. In 2008, Chandler went across to the United States to launch their office there in January 2009. “I went across on recon, and felt like I was starting again because I was again one guy in a room,” Chandler says, adding he’s from Tasmania and always wanted to play in a big pond. “We looked across to Silicon Valley, saw the talent pool, and realised if we were going to hire dozens of great people, that was where we had to be.” The San Francisco team has now grown to 95 people, and Nitro will be launching an office in Dublin this month to drive growth in Europe. Their hiring and growth plans were brought forward after they received their first venture capital ($3.5 million) funding in May last year from Starfish Ventures, and another $3 million in the May this year. Chandler says the next 12 months will be focused on the launch of a new product and international expansion. They’re hoping to get to 100 million users within three to five years. “We’re trying to build what we call an IPO-able company. My vision of a great company is one that makes 100 million or more in revenue and has 30 to 50% operating margins,” Chandler says, adding while they’re not planning on floating the business on the NASDAQ anytime soon, it’s the most likely exit strategy in the next five years. Chandler adds even though it’d be hard to “give up the baby”, he’s undecided about his own journey with Nitro if it became a public company. “I would have to ask myself, do I want to be a public company CEO? I’ve always been focused on building, and managing is just part of the business getting bigger,” Chandler says. “But when you come very close to losing it all, and we’ve had a few cashflow crises in our earlier years, you’re suddenly more appreciative of what you’ve got.”
A Melbourne-based start-up has been named one of the coolest vendors in human capital management by international technology research group Gartner. CultureAmp’s key product is Murmur, an online platform for managing staff and tasks in fast-growing organisations. The software-as-a-service is used to gather and provide ongoing feedback, track progress and use data to help companies understand their workforce. Founder and chief executive Didier Elzinga told StartupSmart CultureAmp’s success is due to a shift in how people work. “The key to unlocking productivity and getting value out of people is culture and creating an environment in which people can and want to operate,” he says. “If you look at the work we’re asking people to do these days, it’s cognitively driven. So there is a really, really big difference when someone who is engaged and enthusiastic.” With team members in Melbourne and San Francisco and a client list boasting big names such as Hulu and 99designs, Elzinga attributes their growth to having an idea right at the heart of several trends. “We’re on the right wave. A lot of our customers are in Silicon Valley, and what they’ve all got across the board is they’re using data everywhere. And they’re building companies at a ridiculous pace, and the hardest thing to build in a business is people,” Elzinga says. The idea for Murmur emerged during discussions about the lack of innovation in the human resources and people management sector. “In the world of marketing in the last five to ten years, there has been a torrent of new innovations and people doing cool stuff with data. But if you look at HR, there’s been nothing new and different since 1993,” Elzinga says. “It was about taking marketing analytics to how we listen to our people.” The CultureAmp team is focused on developing its core engineering staff in Melbourne, and then developing a presence in Silicon Valley over the coming years. Elzinga says being an Australian start-up can be challenging, but it also helps create the attitudes needed to scale globally. “It’s hard but also good that we don’t have a big enough market here, so we’re forced from day one to think global,” he says. “It’s there if you want it – go and get it.”
The tech industry has been left disappointed after major companies including Apple and Microsoft at last week’s parliamentary inquiry into pricing in the IT sector didn’t deliver any sufficient explanations as to why local consumers pay so much. The organisation which helped push for the inquiry in the first place, Choice, said the companies involved didn’t necessarily offer appropriate explanations and, in some cases, gave “bizarre” alternatives. “Adobe gave some bizarre comments around the personalised nature of its website, and how that somehow justified charging people $1,200 more for its Creative Suite,” spokesperson Matt Levey told SmartCompany. Choice spokesperson Levey said while the pressure placed on these companies by having to appear at the inquiry is in itself a positive outcome, Choice wants to see a recommendation on geoblocking – a tool used by companies to prevent local users from accessing prices used in other countries. “We’re think there’s a strong case for that to be looked at, and we’d like to see some strong recommendations there,” he said. Three major companies appeared before the inquiry – Microsoft, Adobe and in a rare appearance, Apple. Firstly, Apple local managing director Tony King, who is rarely seen in public, shifted much of the blame from the company onto the local rights holders. As a result, he said, local users pay more for iTunes content than in other countries. “Apple must pay the rights holders to distribute content in each of the territories in which the iTunes store exist,” he said. “The retail pricing of digital content is based on many factors and foreign exchange is not a major factor. The main differentiator is the wholesale price.” Apple has faced scrutiny in the past due to the price disconnect between countries. Users in Australia often pay much higher prices for music than customers in the United States. Levey said while this argument did carry some weight, he likened Apple’s market power to the same kind used by Woolworths and Coles to reduce the price of milk. Microsoft took a much more defensive stance, with local head Pip Marlow saying the current prices were set and if customers were unhappy, they could shop elsewhere. “If they don’t like it, they vote with their wallets,” she said, adding there wasn’t a “silver bullet” for addressing pricing issues. Finally, Adobe game some aggressive answers in which it suggested customers could even fly to the United States and purchase products if the end result was cheaper. Local managing director Paul Robson told the inquiry the company’s policy of geoblocking, in which customers are directed to the local store and cannot access lower prices in other countries, is completely valid. “The personalisation is relevant to the experience you get when online. One of our key interactions is to allow [buyers] to talk among themselves and ask them to contribute to the future of our product,” he said. Levey says the inquiry provided “three different approaches but no real explanation”. This story first appeared on SmartCompany.
After months of deliberations and refusals to appear before the Federal Parliament's probe into IT pricing, tech giants Apple, Adobe and Microsoft have been summoned to appear before the inquiry and its board.
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Start-up entrepreneurs are always looking for ways to get a sales spike, and a resultant boost in profit. It’s never easy, but one way might be to give your product away – or at least some of it.