Keeping investors as informed as possible is the secret to ensuring they’ll be willing to chip in more money down the track, SafetyCulture CEO Luke Anear says. The health and safety software startup has just closed a $6.1 million series A funding round, valuing the company at $50 million. Most of the money for the new round came from previous investors including Atlassian co-founder Scott Farquhar. Diligently keeping these investors informed of the company’s operations, even when a funding round isn’t open, is crucial to keeping them on board in the long term, according to Anear . “It definitely helps when you’ve got existing investors supporting what you’re doing,” he says. “Some investors like Scott are much more heavily involved, but it’s important to keep everyone informed in terms of what the challenges and opportunities are. “When it comes around to making a funding decision, investors will feel more informed and they’re then able to make the decision to fund again. “Transparency is really undervalued. It’s important to have people feel like they’re involved as much as they want to be.” However, it’s important to make sure this doesn’t get in the way of running the business, according to Anear. “You have to balance what can be a distraction,” he says. “You have to find a balance between having their input and making them informed and getting on with running the company.” Checklist to success The $6.1 million funding round follows a $2 million round at the end of last year, and a $3 million capital injection in 2013, bringing the total amount of capital raised by the Townsville-based startup to over $11 million. The software development company’s flagship product is checklist inspection app iAuditor, which launched in 2012. The app allows users to complete mobile safety audits using a library of over 55,000 safety inspection checklists. The app now has nearly one million downloads worldwide. Anear says the new funds will be used to expand the engineering team, and begin work on the sales and marketing side of things. “We’re maturing as a company as we move through the different stages,” Anear says. “The seed round is very much a trial and error of understanding the market and customers, and iterating to a product that fits with that. “We’re now at a point where we have a team that has a lot of domain knowledge, and the next step is to grow the customer base and implement strategies to develop the company and take things further.” A focus on engineering The biggest part of this will be growing SafetyCulture’s engineering department, although Anear says they’ll still be adopting a lean approach. “The traditional approach is that you need massive teams to reach global customer bases, but then you look at very small executions like WhatsApp, where they did most of the work with 30 engineers,” he says. “There are some examples of how small teams can have a very big impact. “There’s every chance we could double the size of our team to 90. But we don’t necessarily see that we have to have hundreds and hundreds of people to deliver world-class products around the globe.” Want to grow your business with Instagram? StartupSmart School can help.
New user onboarding turns signups into successful users as quickly and easily as possible. Done well, it generates excitement about future use, provides learning by using the product, and takes care of basic configuration in a fun and engaging way. As a designer on the Atlassian Growth team, one of my responsibilities is coming up with these onboarding flows for us to test in our products. We run A/B experiments to determine what ideas will increase various success metrics like conversion, monthly active users (MAU), and usage minutes. Popularised by consumer products like Facebook & Twitter and the work that Samuel Hulick has been doing, user onboarding is taking the product design world by storm. It seems every startup in the valley is focused on delivering an incredible onboarding and setup flow to beat all others, all in the name of increasing MAU. However, I believe if a product is intuitive by default it should require no onboarding flow at all. The days of RTFM are gone; the best products don’t require hand-holding to understand core functionality from the get-go. Which begs the question, what makes a product intuitive? 1. A clear value proposition A whisk is a steel instrument. A bowl is a concave surface. A chicken egg is the unfertilised gamete laid by a female bird. This is listing and describing features. Instead what you need to do is show your customer how she can make an omelette. (Thanks to Jay for the great metaphor.) If you haven’t heard of the Jobs-to-be-Done framework from Clayton Christensen, I suggest you check it out. In short, customers ‘hire’ your product for a job they want done, and you need to succinctly communicate how your product will do this job for them. In the example above, our customer is after an omelette, so you need to provide not just the tools and ingredients, but also the recipe so she gets what she’s after. 2. Unambiguous terminology Do you introduce a lot of bespoke terminology? Are you using words which most people associate with a different definition? Unless you’re Apple, you probably can’t invent a new word or change the definition of existing words. We have a product called Confluence which is a collaborative wiki and knowledge base. It’s kind of a hybrid between Google Docs, Wikipedia, and StackExchange for your company. Everything in Confluence lives within multiple ‘spaces,’ kind of like folders on a computer. The problem with the word ‘space’ is that it’s incredibly abstract and has many different definitions. Customers trialling Confluence are confused when they encounter it, so our onboarding flows spend a lot of time explaining what we mean by the term. Terminology like Share, Menu, Project, and Avatar all have distinct definitions within the context of software (and associated well-known symbols). When people interact with these words or icons in your interface, they expect one thing and are confused when you show them something else. Ensure your definition and usage is the same as what people expect, and try to use as little bespoke terminology as possible. 3. Well-designed affordances “An affordance is often taken as a relation between an object or an environment and an organism, that affords the opportunity for that organism to perform an action. For example, a knob affords twisting, and perhaps pushing, while a cord affords pulling.” — Wikipedia Put simply, affordances are the things your users interact with. Buttons, gestures, drop-downs, inputs. We have a Breville toaster and a Breville microwave at home. One thing I love about the toaster is this ‘A bit more’ button: This button is neat because it explains what it will do in a simple and human way, it is physically a button that can be pressed, it looks like a button differentiated against its surroundings, and it has a ring light that shows you when it’s on. It’s quite straightforward and simple. Contrast that with our Breville microwave: What’s the difference? The affordances on the toaster are clear and intuitive. I know what they’ll do; I don’t need a manual to tell me. The microwave on the other hand is interface voodoo: a myriad of bespoke icons on the display, inconsistent long presses and short presses, a multi-function contextual knob, and complex button labels. What does Time Weight Defrost do? Or the button simply labeled Microwave? It even has an oddly-specific, dedicated Potato button! Why? Does anyone cook potatoes in their microwave? It sounds obvious but it’s often overlooked: make sure your product has intuitive affordances like the toaster, and not the microwave. 4. Sane defaults There’s an old computer science saying that a computer should never ask you a question that it can answer for itself. In most cases your product should be able to determine a lot of configuration on its own; for example the user’s timezone and location. In the case of new users, you absolutely know that people don’t start with their own data in your product. When you create a new email account, it usually doesn’t come with a bunch of emails in your inbox. Your users will be looking at a lot of blank screens. Make sure you have well-designed empty states or sample data to catch them and highlight their next steps. For times when the product can’t easily know how to set itself up, rely on qualitative research and analytics to inform your default configuration. If you know most people have four steps in their workflow, the default column count on your task management app should be four. If you know most of your audience are signing up to design a newsletter, surface that above other options, like designing a birthday card. If you know most people are using two of your products together, perhaps connect and integrate them both by default. 5. Meeting expectations You have the ability to affect a potential customer’s expectations before they log in for the first time: you control the advertisements you run, the content on your marketing website, the emails you send, and what you post on your Facebook page. So if you’re saying one thing on your marketing website (“our product is great for thing x!”) and then don’t follow through in-product, you’re going to lose that customer because you’ve built up their expectations and then demolished them. How do you begin to address this? Conduct an audit of your whole customer journey from initial impression right through to success (whatever that is) and make sure you’re sending the same consistent message about what your product does the whole way through. This exercise is also a great way to surface differences of opinion in your organisation. Your marketing department might think your product does one thing well, whereas the product managers might disagree! You now have a good base for making your product intuitive. Once you feel that you’re satisfying most of the points I’ve outlined here, start iterating on the new-user onboarding experience through experimentation to further optimise each of these points. But if you’ve been nodding your head the whole way and saying, “yep, our product isn’t here yet”, then perhaps go back to the drawing board and aim to make your product more intuitive by default before throwing everything you have into new-user onboarding experiments. A/B experiments are useful for turning a good product into a great one through iteration, but not that useful when your product has a long way to go before it’s somewhat intuitive. Make sure you’re starting off at a certain level before iterating through experimentation, and remember, the best onboarding is an intuitive product by default. Benjamin Humphrey is a designer at Atlassian. If you enjoyed this post and want more of the same, you might consider following Designing Atlassian! This article first appeared on Medium.
“I’d love to see an Atlassian mafia”: Why this entrepreneur left Atlassian to launch her own startup5:16AM | Wednesday, 27 May
Software startup Atlassian has consistently been ranked as one of the best places to work in Australia. However, just a few months ago one of its product managers decided it was time to pull the plug and launch her own venture. Natasha Prasad is the co-founder of FitSessions, a platform similar to ClassPass in the US but playing to Sydney’s strengths by specialising in outdoor fitness classes and bootcamps. The startup is on track to launch in June, with customers paying a subscription fee of $100 a month to access any of the classes or boutique studios the company has partnered with. While a number of subscription fitness startups have launched in Australia following the success of ClassPass, Prasad says her almost two years of experience at Atlassian will help her develop the right product. “Atlassian has obviously been around for more than a decade, but it is a company that is very good at innovating and staying on top of new product developments, thought leadership and where the market is going,” she says. “So one of the things I’ve definitely learnt is how to genuinely innovate and not just follow. And the way you do that at Atlassian is through a lot of testing – so using a lot of data and putting products out there and taking every piece of feedback you get and iterating rapidly and going through that cycle of learning and building.” Prasad says Atlassian also teaches people how to work in a collaborative environment, which will be another leg-up in a competitive environment. “Atlassian is all about teams and teamwork, so building a high-functioning team and stepping up to the market and product challenges is another thing I really learnt,” she says. “Product management is being like a founder or CEO; you’re doing a bit of everything… so the whole philosophy of product management is really valuable. To be perfectly honest, we don’t know what the uptake of this model will be – we’ll have to iterate and pivot quite a bit.” Prasad moved to Australia from New York two years ago, and says the local startup ecosystem here has come a long way in a short amount of time. “It’s just been really great to see it grow and more startups take risks and people take risks by quitting their job to do this,” she says. “That certainly wasn’t the case 18 months ago. I’m sure we’ll see a lot more people leave to start their own thing – I’d love to see an ‘Atlassian mafia’ that comes out in the next 12 months that really executes and builds the next Australian tech success stories.” Do you know more on this story or have a tip of your own? Raising capital or launching a startup? Let us know. Follow StartupSmart on Facebook, Twitter, and LinkedIn.
Labor announces $500 million Smart Investment Fund policy, startups welcome move to ease funding crunch5:22AM | Friday, 15 May
The startup community has welcomed Labor’s intention to increase the amount of capital available to startups, but some have questioned whether a proposed $500 million startup investment fund is the right mechanism to achieve that goal. Opposition leader Bill Shorten outlined plans to create a $500 million startup investment fund, in partnership with venture capital firms, in his budget reply speech on Thursday night. “I believe Australia can be the science, start-up and technology capital of our region: attracting the best minds, supporting great institutions and encouraging home our great expats,” Shorten said in the speech. “Labor will create a new, $500 million, Smart Investment Fund, to back-in great Australian ideas like this. “Our Smart Investment Fund, will partner with venture capitalists and fund managers to invest in early-stage and high-potential companies.” Aus has a great pedigree in startups that have bootstrapped: Atlassian, 99Designs, Envato, etc. - but, today, most need VC $ to grow fast — Adrian Stone (@SmallTimeVC) May 15, 2015 Alongside the Smart Investment Fund, Shorten proposes to create another new body called StartUp Finance. “Labor will work with the banks and finance industry to establish a partial guarantee scheme, StartUp Finance, to help more Australians convert their great ideas into good businesses,” he says. “We will enable entrepreneurs to access the capital they need to start and grow their enterprises.” AVCAL chief executive Yasser El-Ansary told StartupSmart the secret to success for a program such as the Smart Investment Fund is a bipartisan commitment and certainty. “The big handbrake on Australian innovation has been that policies have chopped and changed every three years or so. Venture investment is about backing a company for five to 10 years, and changing policies every three years means hitting the reset button. You go back to square one and have to consider a new set of policies and rules,” El-Ansary says. “Innovation policy should be one area everyone agrees on. Everyone agrees we want new jobs, the best employees in Australia and new industries. What’s missing is a bipartisan commitment. “So the opposition leader’s comments are very positive. The next logical step is for the government and opposition to work together, and to work with industry, on a common set of policies and principles. That way, it doesn’t matter if we have a Coalition government or an ALP government, Australia’s innovation policy moves in one direction.” @jrmck @apglo true - & unlikely as "funded" - but hell, it's a bold statement that tech skills investment is needed or Aus is fucked. — Mike Cannon-Brookes (@mcannonbrookes) May 14, 2015 El-Ansary says the Smart Investment Fund appears to be similar to the Innovation Investment Fund, which was introduced early in the term of the Howard government, and scrapped in the 2014 budget by the current government, following the Commission of Audit. He also cites similar program in the US, which have been in place for over 50 years. “The concept is very similar, and there are runs on the board. For example, Seek was created with funding through the IIF. We know programs like that can deliver, but they need to be in place for the long term,” he says. “Behind the recommendation from the Commission of Audit was momentum away from industry handouts, driven by the car industry. In deciding not to support the automotive sector, all industry programs were seen as being the same of working the same way. But that’s incorrect. [The IIF] was more akin to investing in a business than to handing out a blank cheque.” Startup Victoria interim chief executive Scott Handsaker told StartupSmart there are potentially other, better policy options for promoting startup investment. “While I am usually in favour of anything that helps more investment funds get into the hands of early-stage companies, I really think there are better levers for the federal government to pull if they really want to drive economic outcomes and job growth,” Handsaker says. “To fund match up to $500 million into Venture Capital companies will increase the amount of capital available, but in and of itself it’s not a game changer. We would prefer Labor look at instead replicating the tax incentives available to early stage investors in the UK, which have been extremely successful in getting high net worth individuals to put their money into startups. “So encourage more money into companies, but do it at seed stage and do it through encouraging individuals to invest, rather than large VC’s. In my opinion, you will get a far better outcome for Australia.” Looks like the ALP is trying to establish a new base of supporters in the Australian startup ecosystem. A small number but loud voices. — Alfred Lo (@apglo) May 14, 2015 It’s a position echoed by AirTree Ventures partner Craig Blair. “VC fund matching may not be the panacea everyone is expecting,” he says. “Past schemes such as IIF have largely failed to develop a sustainable VC ecosystem and there are encouraging signs that the recent crop of VC funds will get the right support from the private sector for the right reaons i.e delivery a healthy return to investors.” ilab director Bernie Woodcroft says he’s reserving judgement until more details emerge, but says he believes Australia’s startup ecosystem does need policies that make it easier to access investment. “What I would like to see is a differentiation between startup opportunities, and disruptive knowledge opportunities, from small business opportunities, and creating a clear distinction between those. Because that is something that isn’t clear in a lot of the political debate at the moment,” Woodcroft says. “For example, strong investment into new businesses that seek to be disruptive is rarely profitable early on, and so things like tax deductions or write-offs are not really relevant. So what we need to see is things around easier access to investment, as well as investments into an education system that supports STEM jobs.” Do you know more on this story or have a tip of your own? Raising capital or launching a startup? Let us know. Follow StartupSmart on Facebook, Twitter, and LinkedIn.
Australian software success story and former Smart 50 finalist Atlassian has acquired San Francisco-based Hall, a team chat messaging app for businesses, for an undisclosed amount. Hall, which allows teams to real-time chat and collaborate, will be taken into Atlassian’s stable within its HipChat division, the company's team communications platform. It is the latest acquisition for Atlassian, the $US215 million ($270 million) company founded by Aussies Scott Farquhar and Mike Cannon-Brookes in 2002. Bernardo de Albergaria, vice president and general manager of collaboration at Atlassian, told SmartCompany the deal, which has been in the works for the last few months, will strengthen Atlassian’s push into the mobile space. “We’re really excited about this space. The amount of growth we are seeing and our competitors are seeing is just unprecedented,” says de Albergaria. He says HipChat’s growth has been exponential since Atlassian acquired it in 2012 – jumping from one billion messages in the first years of operations to five billion in the last six months. “Mobile is not a fad, it is here to stay,” he says. “We do believe this is the way internal team communication will evolve for every single company.” While not aiming to take over the humble email, de Albergaria says mobile messaging apps for business drastically reduce the “inefficient” use of emails and internal communication. Until recently, HipChat has largely appealed to technical teams, such as developers, but de Albergaria says Hall’s “beautiful” interface will help make the platform more appealing to a broader range of businesses. “We have consolidated our forces to make a beautiful experience for everyone,” he says. Another drawcard for Atalssian was Hall’s personnel, according to De Albergaria, including its engineers, developers and product managers, who will now all come across to HipCat this Monday. He says Atlassian has successfully used a combination of organic and acquisition growth to underpin its success and will continue to look at further takeovers as a part of its growth strategy. This article originally appeared on SmartCompany. Do you know more on this story or have a tip of your own? Raising capital or launching a startup? Let us know. Follow StartupSmart on Facebook, Twitter, and LinkedIn.
Atlassian calls out “shady” backdoor listing as increasing numbers of businesses take the shortcut to the ASX4:19AM | Thursday, 9 April
A growing number of businesses are opting to list on the Australian Securities Exchange through the “backdoor” in a trend Atlassian co-founder Mike Cannon-Brookes describes as “shady”. Backdoor listing explained A backdoor listing involves the acquisition of a private company by a defunct listed shell company in exchange for shares in that company. The private company then becomes the new owner of the shell company, which it uses to list their business. The use of backdoor listings by Australian businesses seeking to float quickly is growing, according to figures obtained from the ASX by SmartCompany. In 2014 there were 30 backdoor listings and 109 standard listings on the ASX for the year. 2015 is on track to surpass these figures with nine backdoor listings already in the first three months of the year. Growing numbers of backdoor listings Year ASX listings Backdoor ASX listings 1 Jan 2015 -31 Mar 2015 18 9 2014 109 30 2013 83 19 2012 83 22 2011 133 27 Concerns about backdoor listings It’s a growing trend that Cannon-Brookes says is of concern as he works towards Atlassian’s listing in the United States. “I worry about the number of backdoor listings going on and it seems like a shady way to get to the market,” he says. “The quality of the market seems suspect.” Cannon-Brookes’ comments follow a warning from the Australian Securities and Investment Commission last year over the growing number of backdoor listings. ASIC Commissioner John Price said the trend highlighted a number of regulatory issues, including some companies not fulfilling their legal obligations to provide audited financial reports. ASIC also expressed concerns about the failure of some companies to adequately disclose their business models or business plans, especially when it comes to whether or not the business will need to raise additional capital and how this might affect shareholders. Mike Boon Plener, founder of Funding Connector, told SmartCompany backdoor listings are “a very, very dangerous road”. “The problem with backdoor listings is that unless you have the revenue that warrants that kind of exposure and presence then it may not be in your best interests as a company,” he says. “Backdoor listings are neither good nor bad, it is just a vehicle, but there are a number of dangers associated with it which people are ignoring in the excitement of getting on the stock exchange.” Boon Plener warns listed companies have very different levels of governance and exposure. “You sneeze and you have to report it,” he says. “When you run a private company you can sneeze all you want and nobody knows. It’s a different level again.” In defence of backdoor listing Boon Plener concedes there are advantages to backdoor listings for businesses. “If you are ready for it, you have the revenue to support it, it’s certainly cheaper than a full-scale listing,” he says. Matthew Gibbs, spokesperson for the ASX, told SmartCompany choosing a backdoor route is a commercial decision based on the circumstances of each business. “Importantly, backdoor listings must satisfy the same admission requirements as frontdoor listings,” he says. Last year, data security company Covata raised $15 million through the biggest ever backdoor listing on the ASX. Covata completed a reverse takeover of failed uranium explorer Prime Mineral in order to list. At the time, Trent Telford, Covata’s founder and chief executive, said doing a backdoor listing provided certainty. “We looked at front door versus backdoor but it gave us some assurance the transaction would complete,” Telford said. “Sometimes people say ‘Will this or won’t this happen’.” Backdoor listings in 2015 2/01/2015 Dubber Corporation Limited Perth 19/01/2015 Crowd Mobile Limited Perth 22/01/2015 Aminoca Brands Corporation Limited Perth 6/02/2015 Spookfish Limited Perth 17/02/2015 3D Medical Limited Perth 18/02/2015 NewZulu Limited Perth 24/02/2015 Quintessential Resources Limited Perth 24/03/2015 Manalto Limited Melbourne 31/03/2015 Blackrock Resources Limited Perth This post was originally published at SmartCompany.
Early stage tech startups are the focus of changes to the employee share scheme legislation introduced into Parliament on Wednesday. Small Business Minister Bruce Billson tabled the bill on Wednesday morning, saying the reforms will “restore and rebuild” startup incentives, which were taken away by the previous Labor government. Speaking to StartupSmart after the second reading, Billson said an effective employee share scheme framework is an important ingredient to any healthy economy. “There has been a consistent and loud chorus calling for change,” he said. “The incoming government recognised that and we’ve set out not only to correct the harm of those 2009 changes, but stepping forward with new concessions to bolster support and engagement for employee share schemes.” The changes Companies and employees who are issued with options will generally be able to defer tax until they exercise the options (convert the options to shares), rather than having to pay tax when those options vest. Eligible startups will be able to issue options or shares to their employees at a small discount, and have that discount exempt (for shares) or further deferred (for options) from income tax. The maximum time for tax deferral will be extended from seven to 15 years. The maximum individual ownership limit for accessing employee share scheme tax concessions will be increased from 5% to 10%. Eligible startups need to have an annual turnover of less than $50 million. In the event a startup raises venture capital, that will not affect the eligibility threshold. If a startup is acquired before it has operated for three years, its original shareholders will still get their 15% tax deduction on the sale of the shares. Billson says the changes are on track to come into effect in the new financial year. “I’ve had encouraging early responses with opposition members and I’m optimistic that will all be implemented as per a tight and demanding timetable which is exactly what the startup industry were calling for,” he said. StartupSmart understands there is support from within the Labor party to overhaul the current rules governing employee share schemes. The legislation tabled in parliament today not only allows employees at eligible startups to receive tax concessions, but also ensures the regulatory burden faced by young tech companies is significantly reduced. Billson says there will be “good-to-go template tools and documents” from the ATO available to help businesses wanting to set up an employee share scheme. Reuben Bramanathan, senior lawyer at Adroit Lawyers, told StartupSmart there were some “key issues” with the draft bill that have carried over to its current form. “If an employee resigns from a company on good terms, and they keep their vested shares, they still have to pay income tax at that time,” he said. “This taxing point applies even if they are unable to sell the shares at that point, for example, due to lockup restrictions in the shareholders’ agreement.” Billson says this was identified as an issue during the consultation process. “This was an issue that came up and we consulted quite widely on that as we knew it was an issue of some interest,” he said. “We extended the tax refund provision to cover situations where an employee is forced to pay when those options lapse or cancel. That’s what we’ve sought to do to alleviate that concern.” Another part of the legislation that has been criticised is the exemption for startups turning over more than $50 million, as well as companies listed on the ASX. That means companies like Atlassian and Freelancer will not be able to access the scheme. However Billson defended this, saying issues around employee share schemes “most visibly” affect smaller players. “It’s unashamedly focused on startups and smaller enterprises,” he said. “We’ve got to work within a frugal budget climate, therefore we’ve had to target these measures where they can best make a difference.” Atlassian co-founder Mike Cannon-Brookes has criticised that position, telling SmartCompany last month it’s a bit like saying Facebook and Google don’t need to give employee share options “which I think they would disagree with”. The new employee share scheme rules are due to come into effect on July 1 should they pass both houses of parliament. Follow StartupSmart on Facebook, Twitter, and LinkedIn. Buy tickets to the 2015 StartupSmart Awards.
A revolution in entrepreneurship is underway. A student, armed with a MacBook, an internet connection and a great idea can create a company that reaches people around the globe, with just $5000 dollars or less. For entrepreneurial students at high school or university, your ambitions of bringing this idea to life will more often than not be met with indifference, even dismissiveness, from the usual career advice sources. In my opinion, the career advice you’ll receive – study what you like, graduate, apply for graduate job at a consulting, finance or other established company and head into a career path that probably won’t exist in five years’ time – is outdated and wrong. Entrepreneurship is a valid path for you as a student. So how can you navigate university to help your entrepreneurial career? Looking back In 2008, I accidentally sat down to lunch next to the CEO of a growing tech company, which landed me my first internship. Today his company, Atlassian, has changed how company teams collaborate, and is worth over $3.5 billion dollars. That same year, my lecturer at Sydney University founded Freelancer.com, which now provides jobs to over 14 million freelancers around the world and is worth over $350 million. And around the same time, my friends founded a startup, OrionVM, in their dorm room. OrionVM is now a leading global cloud infrastructure company, supporting governments and organisations around the globe. All of the ‘founders’ mentioned above were entrepreneurial students at university. I believe talented students from our universities should be taking the leap, creating their own jobs. The resources at hand are arguably, limitless (compared with 20 years ago) – entrepreneurial students should be encouraged to be trailblazers in their fields. I also believe entrepreneurship utilising technological innovation is the most important. And this is how I encourage all students to frame their thoughts. If you want more context of how tech innovation disrupts and progresses a nation, read the book Why Nations Fail, in which the authors observe that throughout history “technological change is only one of the engines of prosperity, but it’s perhaps the most critical one”. At the core of this revolution are mindboggling creativity, innovation and opportunities created by new technology. Whereas the previous revolution, the Industrial Revolution, saw a surge in invention, the Entrepreneur Revolution will see a surge in new businesses that bring these innovations into the real world. This guide is designed to give you a few tips on how to navigate your time at university, take advantage of this revolution and kick-start your entrepreneurial career. I also asked a few great entrepreneurs to provide me with their one piece of advice for student entrepreneurs, which is dotted throughout this article: “Put your heart and soul into everything that you do – every subject, every part time job, every project. At some point in life everyone faces a decision, to bet on themselves or to take an easier, safer road. Hopefully the bank of experiences that you build during university will enable you to bet on yourself to succeed.”—Melanie Perkins, founder and CEO at Canva.com and created a web tool that allows anyone to do simple graphic design for free. Go to university To get this question out of the way, I can already hear you asking, “But Bill Gates and Steve Jobs both dropped out of uni! If I’m some uber-entrepreneur, should I go to university?” You should go to university. At least give it a go if you have the opportunity to study. University gives you qualifications, a great knowledge base and the opportunity you build your networks and experiences. But which undergraduate degrees are useful to entrepreneurs? Personally, I think including engineering and/or science in your degree is critical. Technical subjects are about understanding, experimenting and building useful ‘things’. Software is quite literally eating the world and those that understand technology stand to benefit in a much greater way. A great way to do this is to start with code. I believe there is only one reason why you should not go to university: If it’s clearly obvious why you should not go. The opportunities presented to you at university are great. Marc Andreessen, the guy who created the world’s first web browser, recommends aspiring entrepreneurs develop skills rather than plan for a career. Similarly, university shouldn't teach you how to live your life; it should teach you how to learn. “The first rule of career planning: Do not plan your career. The second rule of career planning: Instead of planning your career, focus on developing skills and pursuing opportunities.”—internet pioneer and leading tech investor Marc Andreessen (From his Guide to Career Planning.) Make an effort Hanging out with ambitious, like-minded people can have a powerful effect on your studies, the friends you make and your career. Why do you think executives pay so much to do a Harvard MBA? At the University of Sydney we have over 200 clubs and societies; everything from Quidditch Society to the 3D Printing Club. While unassuming on the surface, these groups can you help you forge life-long connections. My first experience with this was when I became the president of the Sydney University IT Society. Before I joined I was failing half my subjects, found it hard to relate to people in my class and was disillusioned by my course content, which wasn’t what I expected leaving high school. Joining one society led me to my first internship, forming strong friendships, helped increase my grades, introduced me to new subjects and ultimately stopped me from dropping out of university. Whether you join a society, group or event, you’ll need to make an effort to hang out with good people, and you’ll never have as much free time as you do while at university. Don’t climb the wrong hill Many students don’t believe me when I tell them they to try new things at university — the idea of just going to lectures and home again seems totally reasonable. To explain how you should approach university, I’ve borrowed an analogy from computer science, recently highlighted in a blog post by serial entrepreneur and investor, Chris Dixon. Imagine you are dropped at a random spot on a hilly terrain, where you can only see a few feet in each direction (it’s a foggy mountain range). The goal is to get to the highest hill; where you would like to be in 10 years. The simplest action would be to take a step in the first direction that takes you higher, maybe that’s the most obvious piece of career advice you’ll receive from people around you, thus this is the direction you start taking. But what if you were dropped at the lower hill? What if the hill you should be climbing is the one you can’t see through the fog, that’s around the corner from you? Exploring many different ‘parts of the terrain’ early in your career is essential in helping you discover what you’re passionate about, what gets you going and, for the entrepreneur, where you think you could make an impact. Once you discover this, get focused and start on that route. People discover their ‘hill’ at different stages of their life and you’ll see this all the time in what inspired successful entrepreneurs. “People early in their career should learn from computer science: meander in your walk (especially early on), randomly drop yourself into new parts of the terrain, and when you find the highest hill, don’t waste any more time on the current hill no matter how much better the next step up might appear.”—Chris Dixon. Building your ‘open network’ The question you should truthfully ask yourself in three to five years of graduating from university is: What do you want your network of friends to look like? For the freshers out there, you will gain confidence over time and end up meeting some really cool people at university. However, this won’t happen just because you go to university. You need to network. And preferably place yourself in an open network And to prove the point, let’s look at network science. Networking may conjure up images of 90s businesswomen and men looking dorky (thanks stock imagery!), but in this context it is purely about connecting with new people from different groups. And it can make a huge difference in your entrepreneurial career. Having a large open network is a strong indicator of entrepreneurial and career success versus a small, closed network. Writer and social entrepreneur Michael Simmons, in an article recently published in Forbes, summarises that open networks can determine career success: “The bottom line? According to multiple, peer-reviewed studies, simply being in an open network instead of a closed one is the best predictor of career success.” Simmons argues we often attribute the success of entrepreneurs to ‘personality quirks’, which helps them with their technical abilities, attention to detail and attracting world-class talent and holding them to high standards. He goes on to say, “We think we understand what caused his success. We don’t. We dismiss usable principles of success by labelling them as personality quirks.” “What’s often missed is the paradoxical interplay of two of his [Steve Jobs] seemingly opposite qualities: maniacal focus and insatiable curiosity. These weren’t just two random strengths. They may have been his most important as they helped lead to everything else.” People in open networks have a more accurate view of the world, serve as a connector between groups and have exposure to more breakthrough ideas. Summary A revolution in entrepreneurship is underway. Student entrepreneurs involved in technological innovation can reach a global audience with their new product or service Go to university if you have the opportunity and there’s no obvious reason why you should not go Include a technical degree in your studies or at least start with a software engineering subject Make an effort: Meet new people, go to events and join clubs and societies ‘Meander in your walk’ while at university and early in your career — try doing things you wouldn’t normally consider Create an open network. Learn to be comfortable meeting people and develop into a network expert, be authentic and genuine in your interactions with others James Alexander is program manager and co-founder of the Sydney Incubate accelerator program. This article originally appeared on Medium. Check back soon for part two. Follow StartupSmart on Facebook, Twitter, and LinkedIn.
Salesforce has announced a partnership with StartupAUS to help the not-for-profit champion the industry, according to Salesforce head of startup relations Ludovic Ulrich. The announcement coincides with the launch of the company’s Salesforce for Startups program in Australia. Ulrich says Australia has all the elements of a successful startup ecosystem in place and he hopes the partnership adds more weight to the lobbying efforts of StartupAUS. “We want to help line up all the great startup leaders in Australia to champion the industry,” he says. “Together we want to foster the ecosystem, by bringing our brand and our reputation on board. We want to be part of the dialogue, along with StartupAUS, when it comes to regulation. Ensuring it’s very startup and founder friendly. “(Australia’s startup ecosystem) is super active right now. The planets are aligned and the ingredients are here. I’m impressed with its energy level and maturity. I would use the adjective ‘vibrant’.” StartupAUS board member and entrepreneur-in-residence, Fusion Labs’ Peter Bradd, says StartupAUS is excited Salesforce is joining as a partner. “Salesforce and StartupAUS believe a home-grown tech sector is vital to Australia’s economic future,” he says. “But getting there will require a national imperative to create the right environment, with a supportive culture that empowers new entrepreneurs and provides future generations with the tech skills needed to succeed.” The Salesforce for Startups program helps tech entrepreneurs access Salesforce technology and resources to help build and scale their startups. It’s free to join and members get access to content and platform resources to help build an app. Registered startups have additional access to product special Salesforce product offers. Of course the benefit for Salesforce is it’s building a relationship with startups that might become customers as they start to mature. Startups will also be encouraged join the Pledge 1% program. In partnership with Atlassian and the Entrepreneurs Foundation of Colorado, the program encourages companies to pledge one per cent of their time, equity and product to charitable causes. Salesforce senior vice president and general manager Desk.com, Leyla Seka, adds that the company was keen to push both models in Australia because of the startup activity they were witnessing here. “Many companies are heading to the US from Australia and killing it. We’re using these brands and we’re loving these brands,” Seka says. “StartupAUS is coming to it and approaching a whole bunch of things that are going on Australia, like a heap of government restrictions and different things they’re addressing as a non-profit. We love startups and really wanted to find a way to help the Australian startup community.” Follow StartupSmart on Facebook, Twitter, and LinkedIn.
Young entrepreneurs are worried the deregulation of university fees will burden them with more debt before starting their own business. However, they are also of the view that a university degree is not necessary in order to start a tech company. Last week Atlassian co-founder Scott Farquhar came out swinging against the government’s proposed changes to higher education, telling BRW it was unlikely he would have started his business if he had accrued $100,000 in debt. Everyone from vice-chancellors to student unions and education experts have weighed in on the debate, but what do the next generation of entrepreneurs – the people who will be directly affected by the government’s proposed reforms – think about deregulation? Victor Zhang is the 17-year-old co-founder of Generation Entrepreneur and is studying for his HSC in NSW. He told StartupSmart he thinks the disadvantages of university fee deregulation “outweigh advantages in the long term”. “It will make the playing ground for entrepreneurs slightly more difficult, where upon graduation they will have larger debts upon their shoulders,” he says. “This could likely discourage entrepreneurs from taking risks and reduce the potential of Australia’s talent.” Zhang says while he thinks deregulation has some benefits, such as an increase in competition between universities, higher fees could mean people his age decide to study overseas which would result in a “drain of talent”. Meanwhile Jesse Park, a year 12 student and co-founder of Bypass – an app aimed at showing users if there is someone they know at a social gathering – says he will be deterred from going to university if a degree costs too much. “It’s an extremely narrow-minded and shallow decision,” he says. However, not everyone thinks university fee deregulation will stop young people from gaining tertiary qualifications or prevent them from taking risks after graduating. Hayley Guagliardo, 14, is in year 10 and has completed an internship at BlueChilli in Sydney. She is working on an online job platform for young teenagers and is thinking about studying law or engineering at uni. “If I want to go to uni, I’d definitely go to uni regardless of the price,” she says. “The risks I would take would probably not put me in much of a worse position [in regards to higher HECS debt]. I would still take risks.” David Chen, 16, is working on a startup called Notestarter – a free online resource to help high school students with their assignments and exams. He thinks deregulation would improve the competitiveness of Australian universities with overseas institutions and allow for better facilities. “I actually think this would motivate more of us to found startups,” he says. “This would be simply due to the fact that by taking larger risks, there could be larger rewards we could reap later.” Nathan Feiglin, the 16-year-old co-founder of online marketplace startup Salir, told StartupSmart he hasn’t decided yet whether he will study at university. “University is not a necessity,” he says. “Many skills required to get a startup off the ground can be learnt by actually doing something rather than sitting in a lecture theatre theorising about how to do it. Other skills, such as coding websites and mobile apps, can be learnt from a countless number of non-university sources both on and offline.” And while Feiglin says he would rather have less debt on his shoulders than more should he study at university, he does not think higher course fees will dissuade him “more than other factors”. “Due to the nature of HECS, I don’t think I’d be less likely to take risks.” Education Minister Christopher Pyne introduced another university reform bill into the House of Representatives last week, before Parliament dissolved for the summer break. It will likely pass the lower house and be debated in the Senate early next year. Follow StartupSmart on Facebook, Twitter, and LinkedIn.
Local services marketplace Oneflare has teamed up with the University of New South Wales in order to give students a taste of what it is like to work in a fast-growing Australian tech startup. The partnership will see Oneflare become the newest sponsor of the UNSW co-op scholarship program, which aims to kickstart the careers of budding entrepreneurs. The sponsorship will see three UNSW co-op scholars be given the opportunity to work at Oneflare for six months each, along with other companies such as Coca-Cola Amatil, Macquarie Group and Atlassian. Oneflare chief executive Marcus Lim told StartupSmart both he and chief operating officer Ken Tabuki had completed the co-op scholarship program themselves. However, when they were scholars, the work experience was limited to big corporates and did not include tech startups. “What you realise once you enter these organisations is that the work experience is very, very different,” Lim says. “We seek to provide a very different experience to a rather dogmatic work culture.” Lim says sponsoring the scholarship is part of Oneflare’s long-term strategy and he hopes to attract some of the brightest minds to come work for the company. “We realised finding good talent is really difficult and it takes a long time to go through a lot of candidates to find the right person,” he says. “And when you do actually want to hire someone you have to wait longer rather than sooner to hire that candidate. If we started this process now or earlier, and started attracting the right talent to the company, this would be a lot easier for us in terms of scouting out talent.” Lim says while he encourages other startups to consider internship placements as a way to invest in “human capital”, he also points out that every startup is different. “Not everyone can afford to commit $17,000 to a university over four years or provide an internship structure,” he says. The news of the UNSW partnership follows Oneflare securing an additional $1 million in funding for an international expansion in October. Follow StartupSmart on Facebook, Twitter, and LinkedIn.
Online retailer Shoes of Prey secured $US5.5 million ($6.5 million) in venture capital this morning to fund its bricks-and-mortar expansion. The retailer, which enables customers to design their own shoes, started off as a pure play online offering. But Shoes of Prey’s founders, Jodie Fox, Michael Fox and Mike Knapp, have realised the value of having a physical store presence after the success of Shoes of Prey’s David Jones concession stores. The funding round was led by US-based Khosla Ventures after the Shoes of Prey team got in touch with Ben Ling, the investment partner at Khosla, through a former Google colleague. Michael Fox told SmartCompany the deal came together fairly quickly after first reaching out to Ling in July this year. “That seems to be how venture capital in the US works, warm introductions always seem to help,” Fox says. New investors alongside Khosla Ventures include Bonobos co-founder Andy Dunn, and ThirdLove co-founders David Spector and Heidi Zak. Existing investors also took part, including Blackbird Ventures, Atlassian co-founder Mike Cannon-Brookes and Bill Tai from Southern Cross Ventures Partners. The deal leaves the co-founders with “just under” 50% in equity while Shoes Of Prey’s employees retain 15% equity in total. In order to “get the deal done” Shoes of Prey’s co-founders had to agree for one founder, at this stage Jodie Fox, to step down from the board. “US venture firms generally have much smaller boards so we reduced the board to three, so only two of Mike, Jodie and me could be on the board,” Fox says. “We might set up a rotating structure”. Fox says “it’s not ideal” but the business should be able to work around the limitation. Shoes of Prey will use the funding to open more bricks and mortar stores, including in the United States, hire some more key staff and increase its manufacturing facilities. “We have signed a deal with Nordstrom to open six stores in the US. The first one opened two weeks ago in Seattle and we are opening a store in Westfield Bondi Junction and funding will help with all those stores rolling out,” he says. Shoes of Prey will roll out another seven stores over the next few months. “We still sell most of our shoes online but we have realised that there is life left in physical retail,” Fox says. “It offers a great opportunity for customers to come in and interact with the brand.” Expanding Shoes of Prey’s manufacturing in China will also reap rewards for the business. “We have maxed out the size of the space of our factory in China, so we have leased a new three storey 4000 square metre factory and that will give us a lot of room to expand,” Fox says. “The key thing is that it will bring our delivery time down to deliver shoes within two weeks of the consumer ordering”. Shoes of Prey previously raised $3 million in Australia in 2012 with further fundraising in 2013. This article originally appeared on SmartCompany.
Rich Lister and co-founder of tech giant Atlassian, Scott Farquhar, has invested $750,000 of his own cash in Townsville-based app developer SafetyCulture. Speaking to SmartCompany this morning, SafetyCulture founder and chief executive Luke Anear said Farquhar led a $2.1 million investment round in his company, with the venture capital fund he backs, Blackbird Ventures, also contributing $750,000. The remaining $500,000 was raised from existing shareholders. The raise follows a $3 million fundraising round in November last year, which included $1.79 million from Commercialisation Australia and $1 million from Blackbird Ventures. “Scott has been involved with SafetyCulture for around 12 months as an adviser with Blackbird and he got to the point where we he wanted to invest himself,” says Anear. “We didn’t need to raise more than $2 million but we needed to give our other shareholders the right to participate in the raise.” Farquhar is taking an active interest in SafetyCulture, spending last weekend working with the team at their offices in Townsville. “Normally I would meet up with Scott in Sydney and with the launch of our Sydney office on December 1, it means we will be even closer to him,” Anear says. And there is a chance Farquhar could become a more permanent fixture at SafetyCulture, with Anear open to the possibility of the entrepreneur taking a seat at the company’s board table. “It’s quite possible, it just depends on what we need at each stage of our growth,” he says. SafetyCulture is the developer of a number of workplace safety and management apps including iAuditor, which allows workers and employers to complete mobile safety audits. To date, more than 10 million audits have been completed by users. The company now employs 45 people, including former Atlassian senior engineer Anton Mazkovoi, and Anear says the team is close to “turning on our revenue model”. Anear says the latest round of funding will give the company “a little more time” to work on rolling out its revenue model, as well as support the release of its next accident management app and expansion of its cloud-based services. “Anton Mazkovoi has recently joined us, and as the fourth employee at Atlassian, he has seen the whole movie before,” Anear says. “Having someone like that helps us to focus on the areas that matter the most. Having a great engineer attracts other great engineers.” Anear says the support of entrepreneurs like Farquhar can put a new business “on the right track”. “Certainly when you start getting traction, a lot of people want to give you advice and it can be overwhelming,” he says. “But the advice you get from someone who has built a $1 billion company is different to the advice you get from other people … what Scott says resonates on a fundamental level.” This article was originally published at SmartCompany.
Australian startups face a number of challenges when attempting to use employer sponsored visas. These issues were recently highlighted by Scott Farquhar, Atlassian CEO and co-founder, who argued for a simplification of Australia’s ‘byzantine’ employer sponsored visa laws. Since then the federal government has announced the National Industry Innovation and Competitiveness Agenda, which includes several reforms to employer sponsored visas which will affect startups. While reforms will go some way to reducing the burden on startups, it is unlikely that the overall process will become substantially simpler or cheaper in the short term. Employer sponsored visas are a challenging area for policy development, particularly during periods of increasing unemployment. Startups would be best advised to do their research early when considering sponsoring employees through the 457 visa program and look at the limited alternatives that may be available. Impending changes: Industry Innovation and Competitiveness Agenda As part of the Innovation and Competiveness Agenda, the government has announced it will implement measures to reduce the burden imposed on startup businesses. These reforms include lengthening the period that Business Sponsorships are valid from 12 to 18 months, reducing sponsorship requirements for employers, and retaining the Temporary Skilled Migration Income Threshold at $53,900 for two years. The announcements failed to confirm whether reforms would also occur in related areas such as increasing the duration of 457 visas sponsored by startups from the current maximum of 12 months. Factors to consider: Business sponsorships and 457 From an immigration perspective, a ‘startup’ is any business that has been operating for less than 12 months. Businesses with less than one year of trading history are likely to be considered as a startup. Costs Under the reform agenda, startups will see the period of sponsorship increase to 18 months; however, this does little to reduce costs. The business must pay for the initial sponsorship and renewal 18 months later. The business must also pay for most costs associated with the 457 visa – the visa application charge being the exception. It is unclear whether 457 visas sponsored by employers will be increased from 12 to 18 months. Subsequent sponsorship periods and visas are valid for up to three and four years respectively. However, the cost implications are significant in addition to the salaries and other related costs such as paying return travel costs. Salaries The 457 visa program requires employers to pay sponsored visa holders at ‘market rates’. Market rates are based on what an Australian would be paid in the same role. As such, startups are not in a position to pay a founder or early entrant at a minimal rate to push for growth. Any 457 hire must be engaged through a contract of employment and base remuneration must be guaranteed. These factors will need to be taken into consideration when deciding if the 457 is an appropriate option for the business. Training Startup businesses will need to present an ‘auditable training plan’ as part of the Business Sponsorship process. The plan must show how the business trains Australian employees (or directors if there are no employees) over the first 12 months. Expenditure on training must equate to at least 1% of payroll, or where there are no employees, 1% of directors drawings. When renewing the application the business will need to demonstrate that these training benchmarks have been met. The business will need to meet this training benchmark for each year a 457 visa holder remains in the business. Documentation The current sponsorship obligations require employers to be on top of their paperwork. It is critical that businesses retain documents relating to training, payroll, job descriptions, and employee records as required by the Sponsorship Obligations. Any startup considering employer sponsored visa options must be prepared to ensure the relevant documentation is in place at all times and the business is able to show the Department of Immigration that it is meeting these requirements. What are the alternatives? If the 457 visa is not an option then startups may consider whether the Working Holiday visa or Work and Holiday visa are better temporary solutions. The visa is not a substitute for the 457, however, where startups are willing to engage an employee for an initial six months these visas may be useful. Both visas are only available for citizens of limited countries and for people under 31 who have not held the visa previously. This initial six-month period may give the business sufficient time to improve its financial position to meets 457 visa requirements. Due to the limitations on startups it is not possible to sponsor staff directly for Permanent Residency at the early stages of the business. Further, businesses should be aware that sponsoring staff who are overseas directly may take 6 to 12 months. Business should also be aware that if overseas staff visit Australia to engage in work then they should verify whether the appropriate visa is a Business Visitor visa or a 400 Short Stay Work visa. In circumstances where work will be conducted the 400 Short Stay Work visa would be required. Concluding thoughts Despite the proposed reforms for startups the visa process will remain complex. The changes will do little to reduce the financial and administrative burden for startups. At this time there is no suggestion of a new visa being considered for startups. Startups should consider whether the business has the resources to meet the financial and administrative costs. If it is essential for international talent to join the local business, but the 457 is too burdensome, then the Working Holiday visa may fill the gap in some circumstances. Despite the proposed Innovation Agenda there is no easy answer to immigration issues for startups. Jackson Taylor is a registered migration agent and principal of Eventus Corporate Immigration.
Atlassian’s Scott Farquhar warns you’re “either becoming a software company, or being disrupted by one”10:51AM | Tuesday, 14 October
Every company is a software company, or is becoming one, according to Atlassian co-founder Scott Farquhar. Giving the 2014 JJC Bradfield Lecture in Sydney on Monday night, Farquhar compared software to the invention of electricity in terms of the impact it is having on society. “It’s software that powers computers, powers robots; software is the ultimate lever for human performance,” he says. “As such, like electricity, it can augment us, enable us, even replace us in many areas. Archimedes said, ‘Give me a lever long enough… and I’ll move the world.’ Software gives humanity that lever. “Companies now only fit into two buckets: either becoming a software company, or being disrupted by one.” Software has liberated Australia from the tyranny of distance, which Farquhar suggests provides both an opportunity and a threat for Australia. “We ‘made it’ from suburban Sydney. That’s the good news. The bad news is that any other ‘Mike and Scott’ from any suburb in Seattle or Shanghai, Lucknow or London or Hanoi or Helsinki can make it too,” he says. Given this, Farquhar says it’s important for the government to implement policy that helps foster innovation in the sector. Like employee share option reform (which the government announced today) and encouraging superannuation funds to invest more into local venture capital in order to bridge a gap in the Australian venture capital market. “Although the activity level of angel investors and VCs has ramped up – there is still a significant gap in the market in Australia,” Farquhar says. “Particularly once you move beyond an early stage, it is too difficult for a company to raise finance locally.” He also praised government tax incentives like the R&D Tax Incentive Program and the Export Market Development Grants Scheme. The parliamentary secretary to the Minister for Communications, Paul Fletcher MP, says he had a number of takeaways from Farquhar’s lecture, including the need for the nation to produce workers with the right skills. “He had some very important points about employee share ownership schemes and venture capital, but the point I want to focus on is the need for the right skills in the workforce,” he says. “Clearly when it comes to having enough skilled people to support a software industry, two critical policy levers sit squarely with government: education and immigration. “Clearly this is a timely point to be raising when the Review of the Australian Curriculum was released (Sunday) and Education Minister Christopher Pyne has stated there will now be discussions with states and territories and other key stakeholders about how to strengthen and regime the curriculum.” That review was criticised by those in the IT industry for not doing enough to promote ICT skills. As for immigration, Fletcher says the Abbott government is setting policy “with an eye towards meeting the skills needs of the economy”. “In my view, Scott has had some serious and important things to say,” Fletcher says. “It is critical to sensible policy development in this area that government is in no doubt what the sector is saying.” Follow StartupSmart on Facebook, Twitter, and LinkedIn.
Late 2013. San Francisco. As a fast growing software company with a client list that reads like a who’s who of Silicon Valley, we began talks with some of the best VCs about the possibility of doing a series A. Having their portfolio as your client base certainly makes getting a meeting easier… Meeting with various partners and firms, our eyes were opened to just how staggering the growth rates that their most successful companies achieved. What also became apparent is that most VCs have a playbook — what to do when you need to scale something, and you need to scale it fast. VCs’ approach to culture varies a lot. Some are very engaged in it, others less so. As one person said to me: “I’ve never been to a partners meeting talking about the culture of the company that they are considering investing in.” The further down the path we went, the more we realised that some aspects of those playbooks felt intuitively wrong for us as a company – specifically around sales and how you build a sales team to grow revenues quickly. It made us think — what type of company do we want to build? Are we just afraid of the hyper growth that Silicon Valley is famous for? I talked about this at length with my co-founders — both internally and in discussion with companies that had variously raised, hadn’t raised, had grown and had shrunk. It wasn’t until a few months later that we came to an “aha” realisation. At Culture Amp we believe the world should be a better place to work — something we seek to achieve by building the world’s leading survey platform for People & Culture. When our customers buy our product they are meeting a need, and looking to utilise our expertise via our software, but they are also aspiring to be a better company — specifically a better culture. I like to say “a brand is a promise to a customer, and culture is how you deliver on that promise”. For us, culture is our brand promise — if we, as a company, don’t put culture first how can we deliver on the very brand that we are founded on? As soon as we realised that, everything made sense. Normally when you raise money you need to be able to prove you can scale your business model far enough and fast enough to engage some of the brightest people in the room. We’ve set ourselves a higher target — we not only need to prove we can scale our business model (to them), we need to prove we can scale our culture (to us). If we can’t do that then we can’t raise money — simple. Just like the giants on whose shoulders we seek to stand (Australia’s earth shaking software companies like Atlassian, Campaign Monitor, 99Designs, Envato etc) we set out to change the world. And we are doing this by building a culture first company. As we head towards the end of 2014, I couldn’t be happier with the decision we made. We have tripled customers and revenue and are now growing at 10% month on month — all without taking any funding. Most importantly we have built an amazing team both in Melbourne and San Francisco. Am I against raising money? No. The VC model consistently helps to build companies much faster, and much bigger, than could possibly happen without them. The question though has to be more than just how big? and how fast? It has to be how well? Will we raise in 2015? Maybe. But if we do, it will be to scale our culture — which is our business model. Didier Elzinga is CEO/Co-Founder at Culture Amp. This post originally appeared on Medium. Follow StartupSmart on Facebook, Twitter, and LinkedIn.
A number of Australian startups raising between $6 million and $35 million worth of funding in recent months is a result of the globalisation of venture capital and Australia’s increasing reputation as a startup creator, according to Australian investors. Last month Ingogo raised $9.1 million and Invoice2Go $35 million, in August ScriptRock raised $8.7 million, following LIFX’s $12 million raise in June and Hipages $6 million raise in May. The deals included investors from both locally and abroad. Blue Sky Venture Capital investment director Dr Elaine Stead and Tank Stream Ventures managing director Rui Rodrigues say raising capital in Australia is becoming easier than it was in the past. “The deals are a reflection of increasing globalisation, and it’s a great thing,” Stead says. “What I think we’re starting to see is in the old days funds invested locally and only locally, now venture funds from the United States are investing in not just the US, but other territories, where there’s great innovation and entrepreneurs. “What they bring is not just extra capital … it brings expertise in the key markets that a number of those companies are trying to access.” Stead says the factors of globalisation and the success of companies such as Atlassian and Freelancer – which have increased Australia’s reputation for creating globally scalable businesses – are leading to more venture capital firms casting their eyes to Australia. Tank Stream Ventures managing director Rui Rodrigues agrees and says the funding environment in Australia has improved considerably over the last few years. “Probably two or three years ago, it was relatively difficult to raise those $3 to $5 million rounds, and now that’s become a lot easier,” he says. “There’s been a shift towards the higher rounds too, while they are still much more difficult to raise than in the US, we can’t pretend there is as much capital in Australia as the US, but we’re seeing a slight shift in that we’re seeing bigger and bigger deals in Australia. “There’s definitely globalisation occurring in terms of the VC industry. Funds now have deal scouts all over the world looking for interesting deals, and one of the reasons is they are placed under huge pressure to allocate the capital they have available. We’re talking to multibillion-dollar funds. There’s only a limited amount of opportunity in big markets like the US to actually deploy that capital. “So Australia is a terrific option. There’s a very strong tech adoption rate, strong smartphone penetration, there’s a strong pool of talent – all of the parameters for the ecosystem to work. So although a lot of things can be improved in terms of funding, government support and education, in the very basic sense, we are fortunate to have some of the key factors in place that are required to create strong and global businesses.” Follow StartupSmart on Facebook, Twitter, and LinkedIn.
If the Australian startup ecosystem was to have a family reunion, SydStart might be it. Over 1000 startup founders, budding entrepreneurs and investors gathered at the Hilton in Sydney yesterday for SydStart 2014. Among them were Australia’s best and brightest entrepreneurs, Atlassian co-founder Mike Cannon-Brookes, Freelancer chief executive officer and chairman Matt Barrie, Startmate founder and investor Niki Scevak, Canva co-founder Melanie Perkins and many more. It was Mike Cannon-Brookes, perhaps the most uncomfortable with his position as one of the key figures the Australian industry looks to for advice and guidance, who drew the most interest. He spoke of feeling like a fraud when meeting other prominent startup founders from around the world and being pleasantly surprised by the fact that they felt the same way. And he had a lesson for founders: entrepreneurs are all the same. “You move up this weird totem pole of entrepreneurs, where you get to meet more and more interesting people and you to these weird points where you’re so excited to meet them, and you think to yourself ‘Wow, I’ve read about this person 40 times, just to get a half hour coffee is amazing’,” he says. “And then they turn up and they feel the same way and it’s like ‘wow, this is weird’. “You realise all these other super successful entrepreneurs are in exactly the same boat and that never goes away. They’re all doing it for the first time, they’re all making it up as it goes on, they’re basically making smart judgment calls and getting 80% of the decisions right. Ploughing ahead and continuing to be bold. They don’t get timid as the stakes get higher.” That point – all entrepreneurs are the same, all are learning on the job, all are “making it up as it goes on”, permeated the entire conference. Throughout the day, it was impossible to miss the many conversations going on between founders after advice and investors, or the successful entrepreneurs taking time to give it to them, regardless of who they were. It was a point Niki Scevak later picked up on. “If you look around the investment landscape you have all these people that believe in cliches that aren’t true,” he says. “They want to invest in proven founders, with a great management team, in this really, really big market, as if any of those are knowable at the time you get to invest. “All of these great success stories that Australia has been home to, they were started by, no offence, people with very little experience who had just finished university, no business experience, they looked like complete jokes and not only that they were entering into markets that were incredibly crowded. “You’re actually looking for first time founders that look like a joke, it sounds a bit silly, but founders know that. Founders know it’s a complete mess at the start. It’s not actually about that, it’s a couple of levels deeper and what unique insight do you have.” As Fishburners general manager Murray Hurps pointed out as the conference closed, when he began his startup 16 years ago, there was nobody to help out with that mess. That’s since changed thanks to the many co-working spaces and community leaders like SydStart conference coordinator Pete Cooper, as some of the many founders in attendance pointed out. SimpleNutrution.me founder Nathan Murphy spoke of the value of SydStart to people like himself. “SydStart is like a big family reunion every year where you get to see old faces, share war stories and hopes for the years ahead,” he says. “You gather around the elders and listen attentively to their advice for finding success.” For Play2Lead founder Theresa Lim, SydStart was not just about advice but also a place to recruit her team. “I was only expecting to potentially (meet) developers who I might add to my team or investors who might be interested,” she says. “No only did I achieve that goal, but I made several customer leads from enterprise as well. “I’ve had so many doors open to key customers through this (Fishburners and SydStart) community. Everyone is driven and helpful – the event itself inspires me to just keep going! Pete Cooper and Murray Hurps are tirelessly dedicated to making our startup community thrive.”
Australian startup conference SydStart is considering a name change, in order to reflect its growing prominence as a national startup event. Founder and event coordinator Pete Cooper says the event’s reach encompasses far more than just the Sydney area, with international and interstate representation growing each year. SydStart 2014 will be held at the Hilton in Sydney on Tuesday September 2 and features 120 exhibitors, and over 50 speakers and panellists, including the likes of Freelancer CEO and chairman Matt Barrie, and Atlassian co-founder Mike Cannon-Brookes. “It’s easy to get the headline numbers growth, but the hard part is to get the sheer range,” he says. “We’ve got everything from IoT (Internet of Things) in the home, to bespoke fashion and high volume, high capacity cloud services. “We’ve got a huge percentage of women entrepreneurs this year, which has been part of a steady trend. My teenage daughter has been a big motivator for me to get away from the neck beards, they’ll be there and they are still some of the nicest and smartest guys, but the sheer range is great.” 220 startups applied for SydStart’s pitch event. These were narrowed down to 30 finalists. The Top 10 will pitch on the main stage at SydStart in front of a host of potential investors, while the next 20 finalists will get the chance to pitch on the expo stage to help them build awareness. The Top 10 finalists include: BLRT - Communication Go Far - Driving optimisation You Chews - Catering marketplace Thinkable - Research marketplace Coalfacer - Research marketplace UrbanOutsource - Home services marketplace Stockspot - Financial advice Rbutr - Crowdsourced rebuttal Next For Sale - Property pre-marketplace Touch Payments - Mobile payments Cooper says he was unsurprised the Top 10 was dominated by marketplace startups. “I’ve seen this trend coming for years,” he says. “I think it’s a combination of the Australian education system, we’re not narrowly educated so marketplaces are a natural thing. So Australia is well placed because of the diversity in our education, our history of good commerce and the force of law. “Australia is a natural place to build great marketplaces, look at Design Crowd, 99 Designs and Freelancer.” Over 1000 people are expected to attend this year’s event, which Cooper describes as “the hobby that ate my life”. “It was supposed to be a part time thing I do a few weeks a year, but it’s become enormous,” he says with a laugh. Follow StartupSmart on Facebook, Twitter, and LinkedIn.
In my last article I responded to an interview in Vox with Marc Andreessen. Andreessen lamented that, in spite of a historic gold rush in technology companies, the IPO is dying in the United States due to zealous over regulation in the form of Sarbanes–Oxley, for example. As a result, the general public is missing out on the incredible gains that were experienced in the listed US technology companies of yesteryear. Yes, the regulators have gone too far and it is creating serious friction in the IPO pipeline. However I argued that perhaps the real reason that technology companies appear to Marc to be listing later and later is because, not surprisingly, the top venture capitalists are keeping these returns all for themselves. It's been a relatively recent phenomenon that US technology companies have been waiting longer and longer to go public. In the US, technology IPOs of yesteryear companies went public much earlier, with market capitalisations in the hundreds of millions of dollars instead of the tens of billions. As a result, the general public had the ability to share in the spectacular returns that technology companies can generate over time as software eats the world and industry after industry is being wholesale remapped and reshaped, with revenue growth at a speed unprecedented in history. Even though eBay's share price went up a spectacular 163% on opening day, if you bought shares on market after this rise and held on until today you'd have made over 3500%. If you bought Amazon the day after it listed, you'd be up over 27,000%. If you'd bought Microsoft at IPO in 1986, you'd be up 66,500% today and 3000% in the first eight years alone. Unfortunately for investors in the US, the general public is missing out. You only have to look at Facebook listing at $104 billion and Twitter listing at $24 billion to get a feeling for just how late these companies are going to market. So who is making all the money as the stocks go from the tens of millions of dollars in market capitalisation to the tens of billions? The answer, not surprisingly, are the venture capitalists. You can't blame them for doing so, because of course their business model is to make as much money as possible for their limited partners. There is another stock market, however, outside the US that is not subject to Sarbanes–Oxley and where technology listings are about to boom. This market is already quite a large market for equity capital issuances. In fact, as much money was raised there in the last five years as NASDAQ. The only problem from a technology company perspective is that most of the money raised there has been for resources companies. I am, of course, talking about the Australian Securities Exchange. Now let me tell you how this has all come about, and why now. There is a disaster in venture capital in Australia with only around $30 million per annum for the whole of seed stage investments, $40 million in early stage and $20m in late stage. AVCAL reports there were 16 "investments" done with this grand sum of $20 million in late stage venture capital in 2013. I am quite perplexed about how they defined "late stage" here, because the very definition of a late stage round size is usually greater than $20 million in one single investment, let alone 16. The only conclusion I can make is that these investments were triaged into bleeding zombie companies – hardly a sign of a successful late stage industry. Either that, or AVCAL has now taken up reporting of late stage investments to include lemonade stands. Atlassian, one of Australia's most successful technology companies, just raised $US150 million in a late stage round. The entire Australian venture capital industry simply isn't big enough to fund that single round. In addition to the lack of venture financing, a major terraforming of the economy is needed. Although we have $1.5 trillion dollars in the fourth largest pool of retirement funds (superannuation) in the world, these funds don't invest very much in Australian venture capital because none of the VCs to date have demonstrated that they can generate a return. It's hard to claim that venture capital is even an asset class in this country, as it's missed every single major technology success story this country has produced all the way back from Radiata: Atlassian, Kogan, Big Commerce, RetailMeNot, Campaign Monitor, OzForex. The list goes on and on. For the life of me, I can't think of one they actually invested in. The funds being invested into Australian VC come roughly equally from corporates, government and high net worth individuals. Corporate investment in VC in Australia is in decline, and with the government recently turning its tap off with the cancellation of the IIF program, I don't see a path to resurrecting a domestic venture capital industry any time within the next decade or two without a serious change in philosophy, which is not going to come from either of the two major political parties. The incumbent Liberal party is currently implementing a program of austerity, and the previous Labor government was, at best, only interested in trying to win union votes from bailing out the inefficient and dying local manufacturing sectors. The biggest impact Labor had on the sector during their tenure was to change the laws on the taxation of option schemes, which wiped out the primary incentivisation mechanism for the technology industry (and, ironically, the primary means by which wealth is redistributed from owners to workers). While I personally was not sorry to see the IIF go, I was hopeful that the axing of the program would be replaced with something more effective for financing technology companies down under. A better way would be through taxation reform for investors in qualifying risky technology ventures –front-end relief in the form of tax credits or a reduced rate of tax and back-end relief in the form of capital gains tax reductions or exemptions like the UK's Enterprise and Seed Enterprise Investment Schemes. At the end of the day, the Australian government only provided $25 million a year into the IIF program, which is paltry when you consider Singapore, with a population of 5.4 million, has committed $SG16 billion ($US12.8 billion) into scientific research and development over a four year period from 2011 to 2015. So how are Australian companies getting financed? Whilst the big US VC brands like Accel, Sequoia, Spectrum and Insight are actively prospecting down here, they are mostly just looking for cheap deals by value investing in late stage companies outside the hot money Silicon Valley market. The investments that they have made to date, and which have been trumpeted in the media, have for the most part been majority buyouts or exits (Campaign Monitor, 99designs, RetailMeNot, etc). A notable exception to this has been Accel's investment in Atlassian. However, the lack of funding has not deterred Australia's entrepreneurs from building world class technology companies. Instead, they have focused on raising funds from the best source possible: selling something valuable to their customers. This story continues on page 2. Please click below. Almost all of Australia's best technology companies have bootstrapped all the way through. Those that did take outside funding, for the most part, didn't take it until they reached quite a late stage. As a result, we have some very well run technology companies, and some world class companies in the making. Although I am pretty active in the startup community, every second week I am shocked to discover yet another Australian technology company that I have never heard of generating $10 million, $20 million, $50 million or more in revenue per annum. Until recently, I had never heard of companies like RedBubble, Nitro, and Pepperstone. The latter of which has, in just three years, become the 11th biggest forex broker in the world, turning over $70 billion a month through their online platform). Because the Australian technology industry is mostly bootstrapped, it took longer to get here, but coming down the pipeline are an incredible number of great technology companies. So if the Australian VC industry is dead, then how are these great companies going to raise funds when they need them? Well, I believe the answer is staring them right in the face. It's called the Australian Securities Exchange (ASX). After all, what better way to fund a company than by crowdsourcing it? This is what the resources industry already does today, via the ASX. If you have an early stage speculative mining company, you don't go begging down Coal Hill Road pitching to mining VCs and spending six months negotiating a telephone directory thick preferred stock structure. No, you write a prospectus detailing what you're going to do with the money and list it on the ASX. Likewise if you're BHP or Rio Tinto, you can go to the ASX and the market is deep enough to raise billions. Crowd sourcing equity from the public has been done successfully for decades in resources. The ASX is in the top five globally for the total amount of money raised for equity issuances from 2009-13. There is no Sarbanes–Oxley in Australia, and listing costs are quite low. (In Freelancer's IPO, the underwriting fees were $450,000, legal fees were around $100,000, and investigating accountants cost about $50,000.) Why go to a venture capital middleman unless they are a rockstar with solid operating experience that can add demonstrable value in some way? I believe that Malcolm Turnbull will bring in legislation to allow the general public to crowdfund early stage ventures without a registered offering document, as is starting to happen elsewhere around the world. This will generate further interest and appetite in investing in technology companies from the general public which already actively takes a punt on speculative, early-stage mining companies (not to mention the Melbourne Cup). At the moment, to invest in companies without a registered offering document you need to be a "sophisticated investor", which is curiously defined as a person having income of $250,000 per annum in each of the last two years, or net assets of $2.5 million. I don't know why being rich makes you automatically sophisticated, and being poor means you’re incompetent with your money, but I'm sure that something sensible will happen here. If, by miracle, we see some taxation relief for technology investments, then this will be accelerated. But I'm not holding my breath, even though the Australian government used to provide some form of taxation relief for investors in the mining industry. When we were considering listing Freelancer on the ASX, many people gave us the usual regurgitated responses as to why it wouldn't work; investors here don't understand technology and that we would trade at a discount compared to US markets. Professor George Foster from Stanford Graduate School of Business showed some time ago that country specific factors were a lot less important than company-specific financial statement-based information in explaining valuation multiples in an international setting. Markets are increasingly globalised. It's almost as easy for a US investor to buy Australian shares as US ones. Money flows to where it gets the greatest return for a given risk profile; basically if arbitrage exists, someone will take it. Our stock going to $2.50 from a 50 cent issue price in the biggest opening in the last 14 years and third biggest opening ever on the ASX for an issuance larger than seed size is testament to the amount of pent up interest amongst the general public to invest in technology. We took a calculated risk – nobody wants to be the first to try something new. But so far it has paid off. It’s great to see the sector now heating up with recent listings from companies like Ozforex, iSelect, iBuy and MigMe (up 95% yesterday on their IPO, and like I did, broke the bell), and with WiseTech Global, Vista Group, 1-page, Covata, BPS Technology, Grays Australia imminently coming down the pipeline. I suspect Ruslan Kogan will also be considering his options given the tremendous effort he has done bootstrapping Kogan to date. What surprised me is that the process was significantly easier, quicker and resulted in a more equitable and transparent capital structure than what I have experienced in any of the dozen venture capital financings I have been involved with in the past. Projecting forward, I think that the ASX will be the primary way in which technology companies raise equity in this country in the future. The ASX realises this as well, and is moving to position itself as a regional hub for the Asian technology sector. If it is successful—and I think there is a good chance it will be—it will cover a massive market. There are significantly more people in Asia (with dramatically rising incomes), significantly more micro, small, and medium enterprises (MSMEs). It’s a much bigger market for many industries, and there are a lot more mobile phones than the US, to draw comparison to just a few metrics. The ASX is in a fantastic position to capture this opportunity. In the second half of 2013 a total of 14 technology companies listed on the ASX. Since January 2014 there has been 55. In the entirety of 2013, a total of 59 companies were financed by Australian venture capital. This is the future for financing technology companies in Australia. Matt Barrie is chief executive at Freelancer.com