“Australian startups and Australian entrepreneurs find the American market very, very accessible. We need to do a better job of commercialising technology here in Australia.” That was what Federal Minister for Communications Malcolm Turnbull said, at an event in February last year, when he was still in the shadow cabinet. While in opposition, Turnbull talked about better R&D incentives, criticising the Howard government for creating uncertainty by changing eligibility rules on this one; he blasted red tape that slowed down the speed of innovation; and was critical of the fact that the number of startups funded by public organisations had decreased over time. “As we continue to pursue the important goal of improved productivity, which is closely linked to a better utilisation of technology, we have to ensure that governments are doing everything they can to make it easier for people to innovate,” he said at that time. So when Turnbull took up his mantle in the Abbott government in September last year, there were high hopes of improved government support for startups. This, thought the startup community, was a man who ‘gets’ what we’re about. Despite the fact that his stance on NBN is a source of much contention (that is another seven columns in itself), most in the startup community still saw Turnbull as the answer to getting some much-needed government attention. And he continued to say all the right things when in power. In January this year when conducting a live Facebook Q&A session (while visiting Facebook as part of a tour visiting leading US startups), he praised the potential for crowdfunded equity and said more needed to be done to encourage innovative companies. “We need to do more to encourage innovative companies in Australia . . . an obvious area is rectifying the anomalous treatment of employee shares and options in Oz,” Turnbull wrote at the time. “There is a lot of potential for crowdfunding-type models for aggregating venture capital. We need to think laterally on this critical issue.” It was only in March this year when he responded to a conversation between Nitro chief executive Sam Chandler and BlueChilli CEO Sebastien Eckersley-Maslin discussing later stage funding options for Australian startups. Turnbull waded into the conversation and invited both of them to meet and chat about the issue with him. A meeting, by the way, that never happened. Turnbull also wrote an opinion piece of his own for The Sydney Morning Herald, telling Australian startups that the government can help them. When it comes to funding, wrote Turnbull, “The role for government here is to foster a framework in which investors are protected and yet start-ups can raise money without hiring teams of lawyers and financial advisers.” Again he mentioned that the government was investigating ways to simplify rules for crowdfunding. “And finally, the government has a role in making life easier for start-ups to do business in Australia and stay here, as opposed to moving offshore,” he wrote. “One of the key priorities for the government is changing employee share schemes so that employees are not taxed on receipt of shares and options. But hopes were shattered on Tuesday when the federal budget was released. Nothing that Turnbull had floated was mentioned, and the limited support that startups had was effectively abolished. The budget announced the creation of the Entrepreneurs’ Infrastructure Program with an allowance of $485 million over five years, at the expense of the Innovation Investment Fund, Commercialisation Australia and other smaller support programs, saving $845 million over five years. That means even less public money for startups (about half of what it was), something that Turnbull had us believe was an important issue for him. Details of the new program still remain unclear. The government also cut the R&D Tax Incentive Scheme, and lo and behold, it appears it will become a more complicated process, as BDO points out “in a practical sense, the change in rates results in a more complex calculation of the benefit of the R&D tax incentive”. That was the very thing that Turnbull was critical of the Howard government for. But that’s not even where it ends. What about his ideas of better employee share option schemes and changes to rules around crowdfunded investment? Two things Turnbull has consistently argued would make a difference to the Australian startup scene. It was only a few days before the budget was announced that the government delayed plans to introduce a new regime for the employee share scheme. The delay was meant to be until later this year, but there was no mention of it in the budget. Ways to liberalise the rules to allow greater involvement from investors to facilitate crowdfunded investment are still under review, but there is no deadline on when the report on that will be delivered. You’d be forgiven for thinking it's not going to happen.
Facebook for iOS is trialling suggesting contextual content to keep users browsing after they share. The test is being rolled out to a small section of iOS users. Those users will notice cards of content which relate to what they’ve just posted. By reacting to what users are thinking about then and there, Facebook could unlock new monetisation potential. Mozilla backs down on DRM Mozilla has reluctantly agreed to build a web standard called Encrypted Media Extensions for Firefox which will allow the use of copy-protected video from Netflix and the other sources. The company announced the move on its blog. “We very much want to see a different system,’’ the statement said. “Unfortunately, Mozilla alone cannot change the industry on DRM at this point.” iPhone 6 to get 1704 x 960 resolution display? After months of speculation about the size of Apple’s iPhone 6 screen, a report has surfaced claiming it may also feature a higher resolution. 9to5mac reports that sources indicate iPhone 6 will not only be larger, but Apple is also testing a 1704 x 960 resolution display. Overnight The Dow Jones Industrial Average is down 101.47 to 16,613.97. The Australian dollar is currently trading at US94 cents.
We asked some Australian startups what they thought of the budget and how it might affect them. Here’s what they had to say. Michael Fox, CEO, Shoes of Prey: It's a challenge for tech startups raising capital in Australia and the temptation to move to the US where it's significantly easier to raise funding is high, and a lot of startups move for this reason. The IIF and CA were both designed to help fill this funding gap in the Australian market, so with both of them gone we'll lose a lot more Australian tech startups to the US. The reduction in the refundable percentage of the R&D tax credit will further exacerbate this. Alan Jones, head of marketing, BlueChilli: Support for the tech startup industry is not about handouts to lazy businesses, it's about arresting the innovation brain drain. In five years we can build a $50m tech startup with a team of 10 and a few laptops and mobiles. But unlike a manufacturer or a miner, that IP is highly mobile and can be based anywhere the industry support is greatest. This budget is the right step forward if what we want to do is create more Atlassians – creating most of its value for the US economy and paying most of its tax in the UK. Bosco Tan, co-founder, Pocketbook: The impact for early stage and fast growing startups is staggering. The pulling back of government support makes our companies immediately less competitive to economies like Singapore. The temporary R&D cutback conditions and the scrapping of CA & IIF to start a new program means that there will be at least one year where funding sources will be even tighter. In our world, all startups look for is a supportive and stable environment for us to compete globally. This also means a tax system around employee share schemes that actually works for companies of our size. It should be in our government’s interest to help build economic value and jobs like how Facebook and Google have contributed to the US economy. Damien Andreasen, co-founder, LawPath: Technology in Australia is a developing industry with the potential to create over half a million jobs in the next 2 decades*. Reducing funds available to support innovation and early stage tech businesses shows a lack of foresight. Reducing the R&D incentive by 1.5% will hurt startups like LawPath, we depend on the rebate to plan product development, staffing levels and even a slight reduction can have a big impact. The upside of the 1.5% reduction in company tax won't offset the R&D loss, most startups are yet to hit breakeven. The loss of the CA and IIF grants are regrettable but shouldn't stop Australian entrepreneurs getting on with the job of bringing innovative new tech business to life. Shane Greenup, co-founder, Rbutr: The largest companies in Australia are all mining, banking and supermarket conglomerates, and BHP has an annual revenue of $72 billion, followed by Rio Tinto at $59.8 billion and Wesfarmers at $58 billion. Then you look at the tech giants in the USA: Microsoft’s revenue is $77.8 billion; Google is $59.8 billion; and Apple is $170 billion. There is really no reason why companies as large and successful as these couldn't be founded in Australia and grown here. Tech doesn't require resources like mining does, and isn't limited to the local Australian market like supermarkets tend to be. You would think that investing in the development of companies like these would be a huge priority for any government.
Having some form of anonymity online offers many people a kind of freedom. Whether it’s used for exposing corruption or just experimenting socially online it provides a way for the content (but not its author) to be seen. But this freedom can also easily be abused by those who use anonymity to troll, abuse or harass others, which is why Facebook has previously been opposed to “anonymity on the internet”. So in announcing that it will allow users to log in to apps anonymously, is Facebook is taking anonymity seriously? Real identities on Facebook CEO Mark Zuckerberg has been committed to Facebook as a site for users to have a single real identity since its beginning a decade ago as a platform to connect college students. Today, Facebook’s core business is still about connecting people with those they already know. But there have been concerns about what personal information is revealed when people use any third-party apps on Facebook. So this latest announcement aims to address any reluctance some users may have to sign in to third-party apps. Users will soon be able to log in to them without revealing any of their wealth of personal information. That does not mean they will be anonymous to Facebook – the social media site will still track user activity. It might seem like the beginning of a shift away from singular, fixed identities, but tweaking privacy settings hardly indicates that Facebook is embracing anonymity. It’s a long way from changing how third-party apps are approached to changing Facebook’s entire real-name culture. Facebook still insists that “users provide their real names and information”, which it describes as an ongoing “commitment” users make to the platform. Changing the Facebook experience? Having the option to log in to third-party apps anonymously does not necessarily mean Facebook users will actually use it. Effective use of Facebook’s privacy settings depends on user knowledge and motivation, and not all users opt in. A recent Pew Research Center report reveals that the most common strategy people use to be less visible online is to clear their cookies and browser history. Only 14% of those interviewed said they had used a service to browse the internet anonymously. So, for most Facebook users, their experience won’t change. Facebook login on other apps and websites Facebook offers users the ability to use their authenticated Facebook identity to log in to third-party web services and mobile apps. At its simplest and most appealing level, this alleviates the need for users to fill in all their details when signing up for a new app. Instead they can just click the “Log in with Facebook” button. For online corporations whose businesses depend on building detailed user profiles to attract advertisers, authentication is a real boon. It means they know exactly what apps people are using and when they log in to them. Automated data flows can often push information back into the authenticating service (such as the music someone is playing on Spotify turning up in their Facebook newsfeed). While having one account to log in to a range of apps and services is certainly handy, this convenience means it’s almost impossible to tell what information is being shared. Is Facebook just sharing your email address and full name, or is it providing your date of birth, most recent location, hometown, a full list of friends and so forth? Understandably, this again raises privacy concerns for many people. How anonymous login works To address these concerns, Facebook is testing anonymous login as well as a more granular approach to authentication. (It’s worth noting, neither of these changes have been made available to users yet.) Given the long history of privacy missteps by Facebook, the new login appears to be a step forward. Users will be told what information an app is requesting, and have the option of selectively deciding which of those items Facebook should actually provide. Facebook will also ask users whether they want to allow the app to post information to Facebook on their behalf. Significantly, this now places the onus on users to manage the way Facebook shares their information on their behalf. Video explaining the new Facebook login. In describing anonymous login, Facebook explains that: Sometimes people want to try out apps, but they’re not ready to share any information about themselves. It’s certainly useful to try out apps without having to fill in and establish a full profile, but very few apps can actually operate without some sort of persistent user identity. The implication is once a user has tested an app, to use its full functionality they’ll have to set up a profile, probably by allowing Facebook to share some of their data with the app or service. Taking on the competition The value of identity and anonymity are both central to the current social media war to gain user attention and loyalty. Facebook’s anonymous login might cynically be seen as an attempt to court users who have flocked to Snapchat, an app which has anonymity built into its design from the outset. Snapchat’s creators famously turned down a $US3 billion buyout bid from Facebook. Last week it also revealed part of its competitive plan, an updated version of Snapchat that offers seamless real-time video and text chat. Video introducing chat for Snapchat. By default, these conversations disappear as soon as they’ve happened, but users can select important items to hold on to. Whether competing with Snapchat, or any number of other social media services, Facebook will have to continue to consider the way identity and anonymity are valued by users. At the moment its flirting with anonymity is tokenistic at best. Tama Leaver is a senior lecturer in internet studies at Curtin University, Emily van der Nagel is a PhD candidate, Faculty of Health, Arts and Design and The Swinburne Institute for Social Research at Swinburne University of Technology. This piece originally appeared at The Conversation.
Amazon is giving English and American customers the chance to shop without leaving Twitter. The online shopping giant is rolling out a new feature called #AmazonCart, which allows users to connect their Amazon and Twitter accounts and add products to their Amazon shopping basket by simply replying to any tweet containing an Amazon link, with #AmazonCart Apple and Samsung damages recalculated A US federal jury has recalculated the damages awarded in the court case involving the two smartphone competitors. The jury raised the amount owed for some patent infringements and lowered it for others. The changes offset each other meaning the total damages awarded in the new verdict stay the same as the original. The court awarded Apple $US119.6 million for patent infringements and Samsung $US158,400. Google and Facebook top three in tech by 2020, Apple not? One of the world’s top tech investors, Fred Wilson of New York’s Union Square Ventures, believes Apple will cease to be important by 2020. Wilson, speaking at the TC Disrupt conference in New York, said Apple is too rooted to hardware and isn’t invested enough in the cloud, something he says will provide the company significant challenges moving forward. Overnight The Dow Jones Industrial Average is up 17.66 to 16.530.55 and the Australian Dollar is trading at US93 cents.
Perhaps inspired by the collective sigh of the internet when Facebook bought Oculus Rift, a team of enthusiastic Queenslanders are hoping to make virtual reality, well, a reality. The VR SmartView team won the first ever Startup Weekend on the Sunshine Coast last weekend with their idea – a head mountable display that enables users to clip their smartphones into position allowing it to act as the screen, with the intent of creating a mobile virtual reality device. Wilfrid Watson, who co-founded the startup along with fellow University of Sunshine Coast students Ben Lowe and Danum Harris-Lusk, Metaweb owner Stephen Maher and industrial designer Neil Waldbaum, says virtual reality has always been a passion of his. “VR is amazing to me, it’s really taken my interest, and with Oculus Rift, that sort of took virtual reality to the masses,’’ he says. “What VR is as a philosophy, when people first experience it they giggle with joy, it’s a new experience.” The VR SmartView team played with an Oculus Rift dev kit and say they noticed a few problems: the need for cables, low resolution and high cost. The idea to use a smartphone as a screen came from that indomitable source of inspiration, YouTube, while browsing do-it-yourself versions of virtual reality, in order to solve some of their grievances with the Oculus Rift. It was here he stumbled across a video of someone who had made a similar headset for their phone out of cardboard. “I did a lot of research about who has done what, I think the first guys to do this concept were the University of Southern California, and I’ve looked at the competition and only one guy is selling it at the moment in Germany and it’s a really clunky design,” Watson says. “Reddit forums have had a lot of mixed feedback, we’ve got a digital mock-up and we’re looking at ways in which to make it more user friendly.” Watson says he’s heard the scepticism when it comes to the viability of virtuality reality, but he really believes it’s time is now. “Smartphones are immensely powerful, they’re disruptive devices, and now we’ve got a ridiculous level of pixel density, and for virtual reality the more pixel density in the smartphone the better,’’ he says. “VR was around in the eighties, when it first came out everyone was like VR! VR! VR! “It has existed to now with solutions; they’re very, very complex and expensive set ups.” Watson says the product he and the VR SmartView team want to develop is possible now thanks to the upward trend in pixel density on smartphones, which might not have been the case five years ago. Having won the Startup Weekend Sunshine Coast, the VR SmartView team will now focus on producing a physical prototype.
So much for not mixing business and pleasure, newly launched dating app LinkedUp! is using business networking site LinkedIn to hook up dates. LinkedUp! is like a mixture of LinkedIn and dating site Tinder and pulls information from LinkedIn user profiles, like their industry, schools and job. The app allows users to chat after they have a mutual match. Like Tinder, LinkedUp! users can swipe right or swipe left to allow users to like and dislike profiles. LinkedUp! allows users to connect with anyone on the LinkedUp! platform and similar to other Facebook-based mobile dating apps is not based on your immediate network or connections. LinkedUp! chief executive Max Fischer is based in Los Angeles in the United States but spent some time studying at University of New South Wales in Australia. He told SmartCompany he got the idea for LinkedUp! after noticing people, including himself, using the business networking site to find dates. “LinkedUp! users get a very true sense of who someone is, where they are from, where they went to school and what they do, giving users a sense of comfort and trust,” he says. “These are also the first questions people ask in terms of gaining rapport in first date interactions!” Fischer says there is no indication on a user’s LinkedIn profile that they are on LinkedUp! and the app never posts anything to LinkedIn. “What's great about our application is that a user has to opt-in and download our app to be part of our platform, which helps keep LinkedIn professional,” he says. “So only people who want to be a part of our LinkedUp! app are using it.” The app is in no way affiliated with LinkedIn but uses the networking sites API key. Fischer declined to reveal how LinkedUp! is making money and how many users it has so far. “The current traction and metrics are very encouraging since the app went live,” he says. This article first appeared on SmartCompany.
Location check-in app Foursquare will introduce a new app called Swarm as part of its attempt to reinvent itself after hitting a growth plateau over the past couple of years. Foursquare became popular in the late 2000s but its growth has stagnated since then, with the likes of Facebook incorporating and popularising aspects of Foursquare’s location check-in features. In its official blog, Foursquare justifies the splitting of its Foursquare app into two separate apps – Foursquare and Swarm – by saying most people used the app to either “keep up and meet up with their friends” or “to discover great places”. “But, as it turns out, each time you open the app, you almost always do just one of those things,” the statement on the blog said. “We built Swarm because you’ve told us how often you still have to text your friends: ‘where are you?’ and ‘what you up to later?’ We wanted to build a quick way for you to know these two things for all of your friends.” Swarm will be available on iOS and Android in the coming weeks, and soon after on Windows Phone. The company goes on to say in the blog that changes are also imminent for the original Foursquare app as it attempts to carve out a niche for each of the standalone apps. It promises that a new, improved search and discovery capability for the Foursquare app will provide for a more nuanced user experience than what is currently available. “Local search today is like the digital version of browsing through the Yellow Pages (remember those?). We believe local search should be personalized to your tastes and informed by the people you trust. The opinions of actual experts should matter, not just strangers. “We’re right now putting the final touches on this new, discovery-focused version of Foursquare. It’ll be polished and ready for you later this [American] summer.”
Four Australian startups have been announced as participants in Silicon Valley-based accelerator 500 Startups latest program intake. One of the four is ZootRock, a social media tool founded by former Melburnian Audrey Melnik, who’s been in the United States for the past two years. ZootRock helps people and businesses manage their social media content by posting curated tweets and Facebook posts on their behalf, helping boost engagement and followers. “It’s really exciting because it’s great validation,’’ Melnik said of the announcement. “You get a dedicated point of contact and that person is your go-to person. They check in every week or twice a week and help keep you on track and keep you focused.’’ Joining ZootRock in 500 Startups accelerator program’s ninth batch are Stitch.net: a clean Tinder for adults over 50, Sportshold: a free prediction game for sports, and one yet to be announced company. Melnik came up with the concept for ZootRock after hiring a social media consultant while working on her first startup, WotWentWrong.com. “I was working on my other startup, which I pivoted away from towards (ZootRock),’’ she says. “I knew I needed to have a strong presence on social media, but I didn’t have the time. “I hired a social media consultant and I was unhappy with the results.’’ Without a social media consultant, Melnik was faced with the problem of how to maintain her social media presence. “I basically built the utility to do that,’’ she says. That utility is ZootRock. “I had just put a bunch of utilities together, I took a few more months working on it and ending up getting more software built for it and I started working on ZootRock full-time in the middle of last year,’’ she says. “What was also great, it was a lot easier for me to monetise than my startup at the time. I was able to get people to pay for it on a subscription billing basis.” The company has recently hired an operations manager. Melnik says it has really helped her, as a solo founder, to have someone to bounce ideas off. Although, she adds, being in Silicon Valley there’s no shortage of help on hand. “There’s a lot of support in the valley. What’s different to Melbourne is my whole social circle is all in this world – entrepreneurs, investors, journalists – there’s so many people to lean on and ask advice from,’’ Melnik says. “What I noticed in Melbourne is often your business network is very separate from your social network, but here’s it’s entwined.’’ As part of 500 Startups’ latest batch, ZootRock will hold a demo day, and Melnik says over the next 12 months they will be looking to raise money to build their team and scale up.
School Places, a startup which aims to lower prices for private education in Australia, while helping schools fill places, is the product of a genuine “light bulb moment”, according to chief executive Natalie Mactier. The startup, which is backed by Seek founder Paul Bassat’s venture capital firm SquarePeg, launched this month and so far 11 Victorian schools have signed up. Mactier says School Places plans to launch in New South Wales by July and hopes to be a nationwide by the end of the next financial year. “In actual fact we’ve had a range of enquiries from schools outside of Victoria already,’’ she says. School Places’ 25-year-old founder, Jeremy Wein, who attended private school in Melbourne growing up, says the business idea came about thanks largely to his family’s long association with private education. “My family have been involved with private education for most of their lives, as a student, teacher and board member,’’ he says. “We would often be talking about private school issues at the dinner table. “The number one issue that kept coming up was fees, and that they were getting far too high and something needed to be done.” One night his parents were speaking about it and Wein just happened to be browsing a discount travel website, within earshot of their conversation, when a thought popped into his head. “If revenue optimization is as important for schools as it is hotels and airlines, and there are discount websites for hotels and airlines, then shouldn’t there logically be one for schools.’’ And with that, School Places was born. “This is the first of its kind locally, and globally we haven’t been able to find anything similar,’’ Mactier says. “I firmly believe that most research this day and age is done online, and mums are definitely online, whether it be on Facebook or social media keeping in touch with friends, or researching schools.’’ According to the Independent Schools Council of Australia, in 2012 Catholic and independent schools accounted for almost 35% of Australia’s student enrolments. The startup hopes to offer discounts of between 10% and 30% for places. Mactier says School Places has been met with a “little bit of trepidation” by some schools who prefer a more traditional approach, but those that are open to the startup’s idea appreciate what it is trying to achieve.
Facebook has released its first quarter results, announcing its net income has nearly tripled year-on-year to $US642 million ($A690m), up from $US219 million a year earlier. The social media giant’s quarterly revenues hit $US2.5 billion, up 72% from the same quarter last year, as its operating margin has grown from 26% to 43%. Advertising remains Facebook’s dominant source of income, growing 82% to $2.27 billion in revenues, with 59% of ad revenue now coming from mobile users. However, the company’s growth rate has also led to 32% increase in expenses to $US1.43 billion, with the increase attributed largely to the company’s increased headcount and infrastructure spending. Its non-payroll expenses grew 26% to $US1.13 billion, up from $US895 million during the first quarter of 2013. During the quarter, Facebook announced a takeover of WhatsApp that saw investors in the mobile messaging service gain $US12 billion in Facebook stock and $US4 billion in cash, with a further $US3 billion in restricted Facebook stock going to WhatsApp’s founders and employees that will vest over the next four years. Despite the social media mega-deal, Facebook reported cash and marketable securities of $12.63 billion at the end of the quarter. In terms of subscribers, the company now claims 1.28 billion monthly active users, up 15% from a year earlier, while mobile monthly active users grew by 34% to 1.01 billion. Of its total user base, 802 million users use the company’s services daily, with 609 million people using its mobile sites each day. Alongside the results, Facebook announced chief financial officer David Ebersman is standing aside, to be replaced by David Wehner, who is currently Facebook's vice president of corporate finance and business planning. Wehner had previously served as the chief financial officer of online game developer Zynga, before defecting to Facebook in November 2012. In an official statement, Facebook chief executive Mark Zuckerberg described the quarter as a “great start to 2014” for the company. “We've made some long term bets on the future while staying focused on executing and improving our core products and business. We're in great position to continue making progress towards our mission,” Zuckerberg said.
Apple has reported a 7% jump in net profit, along with a seven-for-one stock split and a share buyback during the March quarter. The iPhone maker beat analysts’ forecasts by reporting quarterly revenues of $US45.6 billion, up from $US43.6 billion year-on-year, while net income grew to $US10.22 billion from $US9.55 billion for the March quarter last year. The company also announced it sold 43.7 million iPhones, beating analysts’ predictions of 38.2 million units. Along with the strong results, the company announced a seven-for-one stock split in June, an increase in its share buyback scheme from $60 billion to $US90 billion, and an increase in its capital return program from $US100 billion to $US130 billion. Facebook’s quarterly net income nearly triples Facebook has released its first quarter results, announcing its net income has tripled year-on-year to $US642 million. The social media giant’s quarterly revenues hit $US2.5 billion, up 72% from the same quarter last year, with advertising revenue contributing $2.27 billion, with 59% of ad revenue coming from mobile users. Its total subscriber base grew to 1.28 billion monthly active users, up 15% from a year earlier, while mobile monthly active users grew by 34% to 1.01 billion. Hockey foreshadows pension cuts, tax cuts Treasurer Joe Hockey used a speech in Sydney to reveal the May budget will increase the number of means tested payments, introduce co-payments for medical benefits and slash government spending, while also providing tax cuts. Hockey defended providing tax cuts while slashing benefits to pensioners, saying bracket creep would “have a serious impact on Australia’s economic growth prospects” without tax cuts. The Treasurer also foreshadowed co-payments for GP visits, a means-test for Medicare and the Pharmaceutical Benefits Scheme, tighter eligibility rules for family tax benefits and the age pension, as well as a welfare crackdown. Overnight The Dow Jones Industrial Average is down to 16501.6. The Aussie dollar is down to US92.89 cents.
Opening a venture capital branch seems to be the new “thing” in the corporate world. While Telstra and Westpac are the new big national players, Google is clearly ahead of the curve, with two distinct venture capital firms: the newly launched Google Capital and the five-year-old Google Ventures. But why are so many companies, across a range of sectors, now running to open their own venture capital funds? And why does a company like Google, which has already delivered tremendous innovations in the past, now need to innovate “on the outside” with not one, but two, venture capital branches? How it works Venture capital has evolved as a tool to provide financing to firms in situations of extreme asymmetric information: young companies with no history, no assets and no track record, the proverbial “two kids in a garage”. In this situation bank debt is not viable because the bank has no way to control how the money is spent and no collateral to fall back on. Direct access to the stock market is also out of the question because investors would not be able to judge quality and risk of the project. The venture capitalist, on the other side, has industry specific know-how and can structure the financing in a way that allows them some control over the firm: in exchange for a capital injection the venture capitalist receives a portion of the equity and, usually, a seat on the board. Moreover, as a common practice, the investment is usually staggered into multiple tranches, with subsequent infusions conditional on the achievement of predetermined “milestones”, such as the completion of a prototype. Incentives for innovators While venture capital is a powerful tool, there is another way for companies like Google to innovate: internal development. If the “two kids in the garage” were to work as Google employees, the company would be able to allocate capital with the best possible knowledge of the project. So why use venture capital and not just develop internally? While this question hasn’t yet been directly addressed by academic research, pulling together different strands of literature can provide some useful insight. A first problem is the incentive structure for the “innovator”. Disruptive innovation is highly reliant on the talent and ideas of a small number of individuals. In a startup, innovators can reap the entire value of their idea when they sell their shares. For instance, the founders of WhatsApp, Brian Acton and Jan Koum, are now worth a combined US$9.8 billion after it was acquired by Facebook. When the innovation is promoted within a larger company the key actors will, at best, receive stock options with a value based on the performance of the entire company, only marginally reflecting the potential value of the innovation. Consider Paul Buchheit, the Google employee who developed the first Gmail prototype. While the details of his compensation are unknown, it is unlikely that it contained the full value of the world’s largest email service. Buchheit later left Google to join a startup incubator. This situation can get even more extreme: the CIA finances the development of strategic technologies via its own venture capital fund – In-Q-Tel. The entrepreneurs the fund financed would know that beyond the government getting the “first bite” of their products, they’d be able to benefit from the commercial applications. This would be impossible for public employees developing the same ideas in a basement at Langley. Taking a punt Another important factor: investing in disruptive innovation means accepting a high failure rate. While precise estimates are impossible, high levels of risk for venture capital investments have long been documented. Large public companies may be unwilling to accept this risk, not because of financial constraints, but because of pressure to maintain quarterly profitability. A recent survey has shown the majority of CFOs are willing to abandon valuable projects in order to meet quarterly profit expectations. Google was forced to close its in-house development playground Google Labs after it was criticised for a lack of focus. Other research has shown that firms whose financial statements are analysed by a large number of financial analysts tend to produce less innovation: they generate fewer patents and patents with lower impact. The authors of that study concluded that “analysts exert too much pressure on managers to meet short-term goals, impeding firms' investment in long-term innovative projects". Startups and venture capitalists do not suffer the same pressure: they are intrinsically less transparent and thus “protected” from the scrutiny of financial analysts and activist investors. They are free to experiment, free to take big risks, free to fail miserably, and eventually free to come up with an idea that will shake the market. Marco Navone is senior lecturer in the Finance Discipline Group of UTS Business School - University of Technology, Sydney and research fellow at CAREFIN, the Center for Applied Research in Finance at Bocconi University (Milan, Italy). This article was originally published at The Conversation. Read the original article
Facebook’s latest changes to its layout creates more problems for small business using social media, as the real estate available on its site for eyeballs gets smaller. The social media giant has been catching criticism recently for changes to its algorithm that make it harder for businesses to be seen online. In the hospitality industry, discontent was articulated by the Eat 24 website, which closed down its Facebook Page after finding the problems too hard. With the changes to the online advertising feed, it makes it even harder for small business to be seen on the platform as reduced space means higher prices for the space that remains available. It’s hard to see small businesses getting much traction with the changes when they’re up against big brands with large budgets. On the other hand for the big brands, the importance of proper targeting becomes even greater. A challenge for small business The big problem now for small business is where do you advertise where the customers are? A decade or so ago, this was a no-brainer – the local service or retail business advertised in the local newspaper or Yellow Pages. Customers went there and, despite their chronic inefficiencies, they worked. Now with Facebook’s changes, it’s harder for customers to follow small business and this is a particular problem for hospitality where updates are hard. The failure of Google Google should have owned this market with Google Places, however the service has been neglected as the company folded the business listing service into the Plus social media platform. Today, it’s hard to see where small business is going to achieve organic reach – unpaid appearances in social media and search – or paid reach as the competition with deep pocketed big brands is fierce. Services like Yelp! were for a while a possible alternative, but increasingly they are stitching up deals with companies like Yahoo! and Australia’s Sensis, which marginalises small business. So the online world is getting harder for small business to get their message out onto online channels. For the moment that’s a problem although it’s an interesting opportunity for an entrepreneur – possibly even a media company – to exploit. This article first appeared on SmartCompany.
Communications powerhouse Guy Kawasaki is joining the team at fledgling design software startup Canva, under the “chief evangelist” title he made famous at Apple, thanks to a tweet. Kawasaki had tweeted a design created on design software several month ago. A fellow Canva user asked him if he had used the platform. Cofounder Cliff Obrecht then followed up on Twitter, and the relationship grew from there. Kawasaki will stay in the US but work closely and in a full-time capacity with the Sydney-based Canva team. He told StartupSmart he loved the Canva product and the impact it could have. “I love what Canva does. I’m into democratizing stuff such as Apple and computers, Google and information, and now Canva and design.” The media landscape has changed significantly from Kawasaki’s Apple days with the rise of platforms such as Twitter and Facebook. Kawasaki has over 8 million social media followers. “Some people may have a bigger following but don’t know how to use it. But no one has a bigger following, knows how to use it, and is willing to use it,” he says. He adds the growth of the startup so far doesn’t appear to be hampered by Canva being based in Australia. Canva launched late last year and has 330,000 registered users. Over one million designs have been created on the platform already. Canva’s communications team wouldn’t confirm how many of the 330,000 users are Cofounder and chief executive Melanie Perkins told StartupSmart Kawasaki joining the team would make it easier for Canva to take off in the US market, which is already one of their biggest. “Cliff and I spend a lot of time travelling to and from the US, so having feet on the floor over there will help speed us up,” she says. “We couldn’t have planned on this, but our whole company was set up to solve a problem, and every single little bit along the path we haven’t been able to plan any of it.” Kawasaki will be involved in the marketing and promotion of Canva, speaking at events and driving a planned evangelist program with influencers.
Microsoft has today released a report calling for an urgent review of how the Australian innovation ecosystem works, in order to make the most of the burgeoning tech innovation movement. Joined-Up Innovation outlines seven steps Australia can take to boost the fragmented innovation workforce. The recommendations included breaking down silos within the innovation community, fixing slow-moving processes, improving knowledge sharing, proactive upskilling programs and encouraging mobility. The third recommendation of the seven was to “look beyond startups” when it comes to innovation, as a vibrant and productive innovation system needed to transcend just young businesses. This is despite the fact the report defined innovation as new businesses built around breakthrough ideas. The fourth recommendation, transforming our culture, is one the Australian startup ecosystem has been campaigning about for years. The report includes a number of cultural obstacles that are already preventing our innovation ecosystem from operating as smoothly as it could. “These include low acceptance of business failures, which can make potential; innovators reluctant to launch ventures for fear of harming their reputations,” the report finds. This fear of failure seems to emerge early, with president of the Australian Academy of Technological Sciences and Engineering Alan Finkel claiming the flow from university into startups is a pressure point. “We’ve cut it off at the knees by having this tendency to think it’s a failure if you leave university and go into industry – and it’s a double failure if you go from university to a startup and the startup isn’t a successful one.” The report also cited either the ‘tall poppy syndrome’ or ‘fear of being placed on BRW’s Rich List’ may be having a net result of few equivalents of Facebook’s Mark Zuckerberg or Microsoft’s Bill Gates. The report was created from roundtable discussions of over 15 innovation experts including Microsoft Australia’s managing director Pip Marlow, Commercialisation Australia’s Doron Ben-Meir, Australian Information Industry Association’s Suzanne Campbell, ATP Innovations’ Hamish Hawthorn and consultant Sandy Plunkett. In a statement, Marlow says Australia had amazing strengths but untapped potential. “But if we want to maintain – and preferably improve – our competitive position, we need to reinvent our innovation ecosystem for the information age rather than sticking with models developed in the industrial age,” Marlow says. The report also included new findings from PricewaterhouseCoopers that demonstrate how equipping Australia’s significant small to medium sized business community with greater tech skills could increase GDP by nearly $6 billion (0.4%). Image: Microsoft chief executive Satya Nadella.
Google has announced the takeover of drone aircraft manufacturer Titan Aerospace, outmanoeuvring Facebook in the process. As SmartCompany reported in early March, Facebook was believed to be interested in launching a $60 million bid for the drone aircraft maker. At the time, it was believed the social media giant was primarily interested in Titan’s technology in a bid to launch affordable, low-cost internet services in emerging markets. Titan’s drones – dubbed “atmospheric satellite platforms” by the company – fly at an altitude of nearly 20 kilometres and are equipped with solar panels, allowing them to continuously remain in flight for up to five years without needing to land. While most of the content on its website has been removed since the announcement, the New Mexico-based drone aircraft manufacturer originally described its primary market as being for high-resolution imaging. “Titan Aerospace provides persistent solar atmospheric satellite platforms to global customers for easy access to real-time high-resolution images of the earth, voice and data services, and other atmospheric-based sensor systems,” the company stated on its website as of March this year. A Google spokesperson emailed SmartCompany and said providing internet access was one of the key benefits of purchasing Titan. “Titan Aerospace and Google share a profound optimism about the potential for technology to improve the world. It’s still early days, but atmospheric satellites could help bring internet access to millions of people, and help solve other problems, including disaster relief and environmental damage like deforestation.” In June of last year, Google announced Project Loon, a project using hot air balloons to deliver broadband services to remote areas. Meanwhile, interest in drone aircraft has intensified after online retail giant Amazon announced plans to deliver customer orders using unmanned aircraft in December of last year. This story first appeared on SmartCompany.
In recent weeks, many commentators have pointed out the similarities between the current Silicon Valley scene and the tech boom of the late ‘90s. Meanwhile, recent falls in tech related stocks have led some to fear that another dot-com crash could be around the corner. A first-hand witness of the tech boom of the late ‘90s was author and web pioneer Bill Lessard. In 1999, Lessard and his co-author, Steve Baldwin, wrote a book about the experience of being an ordinary IT worker at a startup during the tech boom, titled Net Slaves: True Tales of Working the Web. It was followed-up by a book chronicling the experience of those same IT staff after the bubble, titled Net Slaves 2.0: Tales of Surviving the Great Tech Gold Rush. The books led to the creation of a pioneering and now defunct online community called Netslaves.com, which bought together many people connected with the tech startup scene. StartupSmart spoke to Lessard about how the current US tech startup scene compares to the ‘90s tech boom. Working the web in the ‘90s According to Lessard, working in a tech company in the US during the late ‘90s was often the opposite of the hype portrayed by many in the media. “For every [Netscape founder and venture capitalist] Marc Andreesen getting rich quick, there were thousands of people getting old fast. The situation was ridiculous. It was akin to saying that everyone who moves to Hollywood becomes Brad Pitt or Angelina Jolie,” Lessard says. “And it wasn't just your mom who was falling for such nonsense, either. Otherwise perfectly reasonable people I'd meet at parties would gush when I told them what I was doing for a living. “After a while, I wanted to punch such people on sight. Working the Web 1.0 was 14-hour days, not cleaning your apartment for six months, having three different jobs in the course of a year.” Many people cite the infamous takeover of media giant Time Warner by tech company AOL as representing the pinnacle of the hype surrounding the early web. Lessard says it was the experience of a round of layoffs at Swiss bank UBS that led him to write the Netslaves books. “I was getting downsized from my seventh job in seven years when I looked up a friend of mine from Time Warner. I was 32 at the time. I was way past my Web 1.0 due-by date. “I wanted to do something different. It was Steve's idea to write about this industry. I added the Studs Terkel aspect of profiling the real people who power tech.” The books led to the creation of Netslaves.com, an online community filled with the tales of disgruntled employees from tech start-ups. However, it wasn’t just IT workers who visited. “It was a sterling example of online community in the pre-Facebook era. There were disgruntled techies, sure. But there were also members of the investor and executive classes. “There were also garden-variety freaks, fruitcakes and lunatics. It's fun to remember the site now, but back then, it was a mess. What started out as an outlet for tech industry workers devolved into a mosh-pit of post-9/11 political extremes.” Lessard explains how, in some ways, the Netslaves website was a forerunner to modern tech startup sites such as TechCrunch, StartupSmart and Valleywag. “We took the bitchiness of Suck.com and brought it to tech. TechCrunch and StartupSmart are definite influences in their willingness to question the sacred cows of the industry. “But Sam Biddle at Valleywag, who criticizes West Coast tech cultist insanity from his Brooklyn perch, seems the closest to what we were doing as New York guys (and gals) with a digital axe to grind.” A particularly notable contributor to the Netslaves website was freelance journalist and pioneering US political blogger Steve Gillard. Gillard, who passed away in 2007, was cited by progressive blogger and Daily Kos founder Markos Moulitsas as a being a key influence on his work. “Steve was a gentleman. He was an educated, honest person in a world where educated, honest people are in too-short supply. Steve appeared out of nowhere. First he was on the mailing list that was the precursor to the bulletin board, then he was sending us reams to stuff to publish, then he was posting even more material directly when we got ourselves a proper CMS. “Steve brought history and a strong sense of social justice to what we were doing. He had no tolerance for the whole rich-kids-messing-around ethos of the industry because he was a moral person and a black dude from Harlem who had witnessed the consequences of such foolishness. “I was so glad to see him taking off as a political blogger. My only regret is that he didn't live longer to enjoy it.” The problems with Web 1.0 Lessard recalls a common complaint from many on the site was that tech startups were often started by young people straight out of college, and the founders lacked basic management skills or training. “It's okay to get some pizza and code all night when you're in college, but if you've got millions in venture and employees with bills to pay and some even with families and mortgages, it's not a good look, particularly if the company is going to be out of business in six months. And your best option seems to be to get another job just like the one previous.” Reclining upmarket office chairs by Aeron came to be a symbol of the tech startups that failed during the ‘90s tech crunch. “In an industry that had rejected suits and ties and other traditional symbols of corporate power, the Aeron was the seat of power in the Web 1.0 ‘game of thrones’. “The closest contemporary equivalent is Mark Zuckerberg's hoodie, where the ultimate expression of authority resides in the rejection of authority. It's all very American. And it's all very rock-n-roll.” Story continues on page 2. Please click below. Key differences to the ‘90s tech crunch Lessard points out there are several crucial differences between now and the tech wreck on the late ‘90s. The most important is the frequency with which companies file for an IPO. “Back in the Web 1.0 Boom, you had dozens of companies going public every week. Every company seemed dumber than the last, but that didn't stop them from going to market and jumping to 90 bucks a share on their first day of trading. “These days, there are offerings, but there are fewer and the companies have stronger fundamentals. Also, another difference is that acquisition is an accepted exit strategy. In the '90s, it was IPO or bust. “If nothing else, it seems like companies are more careful today because they have to be. There's money out there, but not a plethora of dumb money willing to throw cash at anything with a "dotcom" in its name.” Life after startups Since the tech boom of the late ‘90s, Lessard has returned to the public relations industry, with his company counting startups amongst its clients. “I did PR before I got into tech, right after I got out of grad school... I run my own shop, so I get to pick and choose the projects I work on. “I have a great job because I get to advocate for things I believe in. I don't represent crooks and hucksters. I represent people who are trying to make a difference in their own little way. I have worked with videogame charities who distribute used games to kids in hospitals and cancer wards. “I have gotten a street named after a favourite jazz artist. I have partnered with major sports franchises and food startups to get fresh food to people in underserved communities. I choose people as much as they choose me. It's not going to make me rich, but that's okay. My wealth is the satisfaction of being able to live the way I was intended to live.” Four tips for startup founders According to Lessard, there are four key lessons from the tech wreck that startup entrepreneurs should apply to their businesses: 1) Create a company that will make the world a better place. There are already enough apps for simulating fart noises. 2) Failure will teach you the lessons that you need to know the most. 3) Take better care of yourself. Cut out all the pizzas and the all-night coding marathons. That bro stuff is nonsense, and it will kill you. 4) Figure out what kind of person you are: Are you an overdog who needs to run stuff? Are you an underdog who just wants a check and weekends off? Are you a lone wolf who neither wants to run things nor be told what to do? These are important questions. The world is the way it is because it is full of people who are trying to fit themselves into slots they don't belong in.
There’s a golden saying that networking is about getting someone else’s business card, not giving away your own. When you meet someone you want to connect with; someone who inspires you, a potential business partner, a future employee; your mission is to intrigue them enough that they want to connect again with you. Taking this advice on board, we recently packed our bags and headed to San Diego for Social Media Marketing World, the world’s biggest conference for social media marketers. With a bag of t-shirts, stickers, and a few business cards, we were off to meet and learn from some of the top social media experts from around the world. Without a sponsor booth or speaking session, our goal was to meet as many people as we could. Unsurprisingly, social media is just like networking. You want to provide enough unique value that you stand out from the rest of the pack. The first time someone visits your page, you want them to give you permission to keep them updated – have them ask for your business card. But what else can you do to spice up your social media presence? Here are some of the top things we took home from this year’s Social Media Marketing World conference. Visual social media is growing fast There’s no question about it, visual social media is on the rise. According to new research announced by Social Media Examiner’s Mike Stelzner, 70% of marketers plan on using more visual content in 2014. It’s really no wonder. The brain can process visuals faster than text. Visuals have the power to inspire an emotional reaction. They’re easier to understand and they’re shareable. The biggest social networks – from Facebook to Pinterest, Google+ to Instagram – are all centred on visual content. Even Twitter has joined the visual game by allowing people to add embedded content to their tweets. In fact, Buffer found that tweets with images received 150% more retweets than those without. There’s more you can do to maximise the engagement of your social posts. When considering your visual content calendar, aim to build consistency with your content. You can do this by using the same colours, fonts, brand photo filters and templates for different posts. Each time your content appears on a follower’s News Feed, it will stand out to your followers because it reflects a consistent brand. If you see a similar looking post from the same brand each day, it’s more likely to make an impact. Slideshare expert and speaker Todd Wheatland suggested considering visual content as part of your brand’s marketing funnel. For example, if you’re releasing a big research report, break it down into bite-sized content that you can share across different social networks. Leverage your existing content by being strategic about the way you share on social media. Entice people to give you their email address by promising the full or extended version if they provide their email. You can also Facebook and tweet individual graphics with links to your Slideshare presentation or blog. Good content must be shareable and snackable That brings us to an important question: does good content exist if no one can find it? Well, it’s certainly not living up to its potential. Many of the speakers at Social Media Marketing World revealed that spreading their content was one of the most important things they do as a content creator. Good content needs to be put out into the world. A good tip from Australian blogger Donna Moritz was to make your content shareable and snackable. If you’ve produced a blog post with social media tips, then take individual tips and share them as image posts on social media. You can share these bite-sized tips at different times over the course of a week, of course linking back to your original blog post. So you’re wondering: how often can you tweet a tweet? There’s actually some interesting research that suggests repeating your tweet. As the New York Times found, sharing the content several times over a day or week generates more clicks and helps keeps your content in the feed so people don’t miss it. Another thing to consider is making sure you’ve included shareable content in all your blog posts. Did you know that more than 80% of content on Pinterest is re-pinned? That means people are looking for content they can re-share on their own Pinterest page. Pinterest is also one of the top traffic drivers on the Web. In your next blog post, try including a few of the taller Pinterest-style graphics in your posts that people can easily share. The customer is the hero of your story Don’t forget that social media is, well, social. The best online relationships are just like any offline relationship. It’s important to invest time and energy building relationships with people in your industry. If there’s a topic you’re interested in, whether it’s social media or fashion, there’ll be a community online that you can tap into. Figure out how you can contribute. Razor Social’s Ian Cleary advocated spending time building a network of influencers. Over time this network of people in your industry will be useful as a second opinion for new ideas, and can also help you get content out to the world. Focus on building relationships with people in that community. You never know what potential there may be for you to work together. You truly do need to “go offline to build online.” We set up a simple Google Spreadsheet to use during Social Media Marketing World to keep track of people that we met. Every time we were given a new business card, we added that person’s details to the spreadsheet and make a note about anything we talked about as well as ways in which we could help them out or work together. This made it a lot easier to follow up after the event. Tools like Grouphigh, Littlebird and Mention can be helpful to find people talking about particular topics online. Tapping into conversation in your industry is a great way to build relationships with the right people. Put simply, it all comes back to having a coordinated plan for any marketing activities you undertake, whether they’re online or offline. Seek out influencers, produce great content, and invest time in getting the word out there. It’s important that you look at your startup’s objectives when planning your social media strategy. Good content takes time. Are you trying to attract new users or build a community for your existing customers? What topics does your brand need to be talking about online? Knowing the answers to these questions will help get started on the right track. How are you incorporating these trends into your startup’s social media strategy? Share your suggestions below. Zach Kitschke is head of communications at Canva.com.
Technology is developing exponentially, and at the click of a button we can access an infinite amount of information. With this privilege, comes the potential cost of information overload, increased distractibility and low-grade background anxiety as we try to keep on top of things. With invisible umbilical cords connecting us to our devices, staying focused is an increasing challenge. Our attention buzzes around with the restlessness of a mosquito fluttering between, emails, Facebook, Twitter, and text messages. Many of us are suffering from what Dr Ed Hallowell, specialist psychiatrist in ADHD, coined as Attention Deficit Trait. If we wish to remain healthy, happy and clear-minded we need to upgrade our "inner technology" to meet the demands of our increasingly complex world. We are standing on the precipice of a potential paradigm shift with an exciting dialogue unfolding at the intersection of science, technology and the world of wisdom. From the outside, meditation can look like a whole lot of nothing, but you only need to try it for a few minutes to realise just how challenging it can be to develop our attention and sharpen our focus. In the start-up community in particular there are never enough hours in the day and so bringing any extra habit into your life needs to be worthwhile. Meditation is not about becoming passive or giving up on your goals or future plans. In fact, it's a perfect companion to developing your capacity to think more clearly, be more effective and find wiser solutions to challenging problems. Leading companies in the world, including Google are offering mindfulness training to their employees, recognising the benefits of meditation in supporting more clarity, innovation and productivity. Science is supporting the fact that just two weeks of regular mindfulness meditation can have significant benefits. When regularly practiced, meditation has been shown to increase our immune function, grow our prefrontal cortex (required for strategic thinking and problem solving), and increase an enzyme called Telomerase, which functions to protect our chromosomes from age-related damage. To really benefit from meditation, the problem is you actually have to do it. Meditation commonly falls by the wayside for even the most enthusiastic amongst us. Just like physical exercise, bringing a habit of regular meditation into your life can be quite a challenge. So often it seems like there's not enough time or we just "don't feel like doing it”. The thing is there is research to suggest that even 10 minutes of meditation, five days a week can improve our attention and focus. Sometimes we need support to follow through on our intentions. Having the support of others or doing something that helps us feel we're making a meaningful difference in the world, and can boost our motivation. This logic has fuelled the creation of Mindful in May, a one-month meditation campaign starting on May 1, and delivered online. It will teach you how to meditate and at the same time help bring clean water to those in developing countries. To date the Mindful in May global community has raised enough money to build water projects in Ethiopia and Rwanda helping transform the lives of thousands of people. You’ll get a one month meditation program including 10-minute guided meditations on a weekly basis, access to exclusive video interviews with global experts in the field of meditation and mind wellbeing. The challenge starts on May 1 so register before then, donate and invite your friends or colleagues to create a meditation fundraising team to help bring clean water to those in need. Together, let's see how far we can spread this Mindful Ripple. Elise Bialylew is a doctor, coach and wellness innovator with a background in psychiatry. She is the founder of Mindful in May.