Many Australian startups have pivoted into successful companies. But how do you know it’s the right time to change the direction of your company, or the product or service it provides? StartupSmart spoke to several entrepreneurs for their top tips. 1. Make sure you and your team have enough drive Ned Dwyer, founder of Elto, says it is important to take into account whether you as the founder – as well as your team – have enough energy to see the pivot through. “It’s the right time to pivot when you know that you’ve exhausted your current line of pursuing product-market fit with your current product or market, but you still have enough gas in the tank to keep going,” he says. “When I say ‘gas in the tank’ I mean that not only do you have some runway to keep going, but the team is still passionate about the problem you’re tackling and can be motivated to run at a completely new direction.” 2. Know when it might be best to just start over Dwyer also points out that sometimes, changing the focus of the startup or tweaking the product or service is just not enough. “There is nothing worse for the psyche of a founder than trying to pivot when you don’t have any gas in the tank,” he says. “That is the definition of rearranging the deckchairs on the Titanic. If it’s a completely new product, with a different market and solving a different problem, then it might not be a pivot – it might be time to start again.” 3. Test your product, then test it again Mick Liubinskas, web strategist and co-founder of Pollenizer, says entrepreneurship requires many contradictions. “One is that you must be both pigheadedly stubborn and stay true to your course and listen a lot and change course all the time,” he says. “The hard part of knowing when to pivot is that you never have perfect information. All you have is your MVP, your first guess on customers, your first attempt to sell it and a thousand other variables.” Liubinskas advises entrepreneurs to make a change proportionate to their failure and then retest. After a success, he recommends retesting three more times to make sure it wasn’t a fluke. 4. Set clear measures for success and failure For Catherine Eibner, founder of Project Tripod and adviser at Blue Chilli, the right time to pivot “should actually be very clear” – especially if entrepreneurs are using tools such as Lean Startup Machine’s Validation Board. “The key is having the measures of success and failure defined before completing any tests so you know what to adjust – the problem you are solving or the customer you are solving it for,” she says. Follow StartupSmart on Facebook, Twitter, and LinkedIn.
Startup figures got the chance to lobby Prime Minister Tony Abbott to encourage superannuation funds to invest in venture capital, as well as open up equity-based crowdfunding, when he visited The Hub co-working space in Melbourne on Wednesday. While at The Hub, Abbott officially announced reforms to employee share option schemes and met with startups HealthKit and School of Life. Hub Australia founder and chief executive officer Brad Krauskopf was granted an audience with Abbott and Minister for Small Business Brice Billson, along with representatives from the venture capital industry, Startup Grind, Silicon Beach, That Startup Show, AngelCube, and the Founders Institute. During the meeting, the group congratulated Abbott and Billson on the changes to employee share option schemes that have been implemented as part of the government’s Industry Innovation and Competiveness Agenda. They also lobbied the government for more support. “How do we make it so that it’s easier for super funds to invest in venture capital? How can we get (equity-based) crowdfunding going as well,” Krauskopf says of the group’s concerns. “All these things are known issues. So in that sense it wasn’t new stuff, but we got the opportunity to communicate it.” Krauskopf says changes to employee share option schemes are an important first step from the government to support startups. Pollenizer chief operating officer Clare Hallam explains how the system currently works, illustrating why the changes are so important. “For a startup that has raised some angel money and now has a valuation of $1 million, it’s a challenge to motivate a new employee with equity. If you issue the shares the employee has to pay for them, you can give a payment summary for the value of the shares, but the employee will have to pay the tax at the point of issue. Not very attractive to the employee to pay tax on something that may never reach its proposed value,” she says. Australian Private Equity and Venture Capital Association chief executive Yasser el-Ansary is thrilled such a problem will no longer exist when the proposed changes are implemented next year. However, he adds while it’s a step in the right direction, more work needs to be done if Australia is to catch up to other developed countries and compete globally in key growth innovation over the long term. “Part of that will be ensuring that innovative businesses have access to venture funding at all stages of growth and that Australia improves its ability to translate and commercialise basic research into real products and outcomes,” he says. “We will be continuing to advocate for more policy changes to encourage greater private sector investment into this critically important part of the economy.” The government’s commitment to invest $12 million in improving the focus of science, technology, engineering and mathematics (STEM) subjects in primary and secondary schools was also announced as part of the agenda. That $12 million includes $3.5 million that will go towards providing greater exposure to computer coding in schools. Australian Computer Society chief executive officer Alan Patterson says that’s “most welcome” but much more needs to be done. “We must recognise basic coding as a foundation skill and build it into the national curriculum,” he says. “This needs to start at a young age, so that our students are better prepared and equipped to compete globally, as other countries such as the UK have these programs in place. “A focus on technology for students in schools means we need better professional development for teachers in the technology space. “ICT is uniquely dynamic – and will remain that way for the foreseeable future. Many of today’s young people will work in jobs nobody has even heard of today. This requires a lifelong approach to skills and education in the technology area.” Follow StartupSmart on Facebook, Twitter, and LinkedIn.
Increasing access to venture capital for startups should be the goal of changes to the Significant Investor Visa, according to OneVentures managing partner Dr Michelle Deaker. The government’s National Industry Investment and Competitiveness Agenda is set to be released on Tuesday, and as the Australian Financial Review reports, it’s expected to recommend changes to the visa, which is available to overseas high net worth individuals who invest a minimum of $5 million for at least four years. The visa conditions are expected to be altered to encourage investment in areas the government deems most important. Exactly what areas those might be, won’t be known until the report is released. Deaker says they should include the venture capital industry and startups. “I think it would be a great opportunity to channel capital into those funds generating economic investment in Australia,” she says. “Exactly what I’d be doing is to trying to channel capital into those areas where there are structural market deficiencies, and one of those areas is venture capital.” OneVentures released a white paper on Monday titled ‘Startup…and then what’ which pointed out Australia’s strong record of starting businesses and a high calibre of early stage venture capitalists. It also noted that according to the 2014 Global Innovation Index Australia ranks 17th of 143 countries, up two places from last year. However, the paper says Australia “is not yet putting the runs on the board as an innovative centre for VC and PE (private equity)”. Deaker says lack of capital, plus the fact Australia struggles to commercialise its innovation, is holding Australia’s startup ecosystem back. Another sore point for Australian startups over the past few years have been changes to employee share schemes by the Labor government in 2009, which meant employees were taxed when they receive share options from their company, rather than when they are sold or become full shares. The government is expected to reverse the 2009 changes so that share options will be taxed when they are converted to shares. The move’s been on the cards for some time, given the considerable pile of evidence of the benefits of such reform. “The implementation of the changes in such a thoughtless way was a disaster for the early stage community,” Deaker says. “We all spent a lot of money and time working out how to deal with it. When they came in they didn’t sit down and look at the impact it would have. This will go a long way to getting our startup economy really rejuvenated.” Legal product manager at LawPath, Dominic Woolrych, says it’s a big help to startups and their employees, but doesn’t necessarily mean it will be any cheaper or less complex for them to use the scheme. “These reforms cannot come quickly enough for Australian startups who are losing potential employees to overseas markets,” he says. “The reforms are expected to mirror the English ESOP program known as the Enterprise Management Incentive Program. The advantage of this program is that it does not require employees to pay tax on shares granted by an employer under a certain threshold. “Solving the tax issue for the employee is crucial. However, the reforms may not solve the complexities and high costs involved for bootstrapped Australian startups. “For Australian startups to be competitive globally, we need to be able to retain our talent and attract more of it from overseas. The reality is the reforms are a step in the right direction but likely won’t go far enough to stop Australia haemorrhaging talent to London and the US.” Pollenizer chief executive officer Phil Morle says the proposed changes are great news for Australia’s startup community. “The current system has in some cases prevented us recruiting the founder talent we need to build Australia’s next generation of businesses,” he says. Follow StartupSmart on Facebook, Twitter, and LinkedIn.
One of Australia’s first startup incubators Pollenizer is shifting its focus from helping individuals create startups, to assisting big corporates like Optus spin out their own startups. Pollenizer co-founder and chief executive officer Phil Morle says the most valuable asset is what it called its “startup science”, its knowledge of how to build and support startups. With more and more big corporates becoming interested in disrupting themselves, rather than waiting to be disrupted by others, Pollenizer is now focusing on offering them the know-how required to do just that. “Startups are still the heart of what we do,” Morle says. “We’re not putting suits on and going into Singtel and drawing things onto the whiteboard, we’re bringing the essence of what startups do to those sorts of companies. “Turning employees to entrepreneurs and helping companies that are exceptionally good at scaling things that are known, create and scale the unknown.” Pollenizer is helping Optus run a new innovation program which will see the company run a competition where 200 of its employees from around the world will compete to create their own startup. The best team will then spend three months with Pollenizer where they will attempt to create a successful business. Morle says it’s a “commercial agreement” with Singtel, and Pollenizer will have the opportunity to invest in the startup during the incubation process. The employees will retain ownership of the startup and Singtel will ultimately decide whether to invest. “We do look for and have the opportunity to invest in the businesses incubated out of the program, that’s very important to us because we are very entrepreneurially minded.” In addition to targeting big corporates, Pollenizer is also casting its eye to opportunities in south-east Asia. The company is currently active in Myanmar, the Philippines and Singapore. It has partnered with Kickstart Ventures in the Philippines, and has designed a program called ideabox in Myanmar in conjunction with international telecommunications company ooredoo. Morle says Myanmar is a good example of the size of the opportunity that’s becoming available in developing economies in the region. Thanks to increased access to the mobile internet, the nation is moving from less than 1% of its population having access to the web, to over 80% in the not-too-distant future. “We’re very excited about south-east Asia as a burgeoning economy and a burgeoning startup ecosystem,” Morle says. “We’re excited by the pace of change and the opportunity that’s there to make internet companies for populations of 10s of millions of people.” And it’s for this reason that Morle sees other Australian incubators and accelerators looking to the region as a potential source of growth. “There’s a vast market for us all to join,” he says. “We’re already (in Asia) as a nation of entrepreneurs, and that’s only going to get more robust over the next few years.” Follow StartupSmart on Facebook, Twitter, and LinkedIn.
Startups are hard. But life is better when you have sales. Here is why I encourage people to spend a ratio of 50:1 on sales versus capital. Startups are far too ‘popular’ right now and, unfortunately, reading too much TechCrunch will have you believing that you start, raise capital and exit. The goal is to build a business, not start a startup. Good business is the creation of value and the realisation of that is profit, which is when your revenues are more than your costs. Sounds dumb, but it’s easy to lose sight of that amongst the ‘thrill’ of entrepreneurship. You want to keep your costs down, but none of that matters without revenue. 1. Sales shows value Product market fit is the goal of all startups and nothing says that those two things fit together in a real, business-like way more than sales. A customer saw so much value in the product that they gave you hard earned money for it. 2. Sales pays for things Cash in the bank lets you pay for servers, two minute noodles, bandwidth. For team members, it’s a great day when your equity is worth more than cash, so you would rather pay for things than give away equity. 3. Sales pays for growth Having a scalable growth model means when you spend a dollar on sales and marketing, more than a dollar comes back. Without revenue, the only way to keep growing is diluting through capital raising or crossing your fingers for ‘going viral’. 4. Sales attracts investors Of all the numbers we think about, sales is the hardest for someone to reject. Visits, users, engagement and retention are all nice but nothing says ‘there is something here’ to an investor like sales. 5. Sales avoids investors On the flip side, having enough sales can mean that you don’t need an investor. Who wants to raise money if they can fund costs and growth with sales? So stop going to capital raising events and start going to sales events. Read sales books. Hire sales people. Be a salesperson. Mick Liubinskas is a co-founder of Pollenizer, director at WooBoard, entrepreneur in residence at muru-D and director at Oomph. This post originally appeared on the Pollenizer blog.
Startup incubators Pollenizer and BlueChilli have, unbeknown to each other, both launched new online courses which they hope make their advice more accessible to time-poor and cash-strapped entrepreneurs. BlueChilli chief growth hacker Alan Jones says it’s no surprise that the two incubators are on the same page. “Like Pollenizer, BlueChilli has a supply problem,” he says. “Here at BlueChilli we see 200 to 250 ideas each month and on average say yes to two. We’re looking for a way to give people not yet ready for BlueChilli a chance to learn how to be a great startup founder. “It’s also to help people that are considering to be a startup founder, but aren’t quite ready to chuck in their full time job yet.” BlueChilli’s 99toLaunch program runs for 90 days and costs $199, but will eventually move to $299. For $US199 entrepreneurs can take part in Pollenizer’s 60 Day Startup program, which has been designed to help them go from “idea to action as quickly as possible”. Both set out a schedule for participants to follow and help guide entrepreneurs through the early stages of creating a startup. “Pollenizer and BlueChilli have been around for about the same amount of time, and each have been developing a knowledge base, a curriculum, and both are at the point of maturity, where we can take a chunk of this stuff and make it available,” Jones says. Pollenizer chief executive officer Phil Morle says the 60 Day Startup program is a way to make the incubator’s startup advice available to many more people. “The genesis of it comes from the last three years of Pollenizer where we’ve needed to develop waves of startups and rapidly get all of our teams and entrepreneurs up to the same level,” he says. “About three years ago we developed a training program internally and a year after that made it available for other people, all over the world for the last couple of years. [We did this] both ourselves and as part of the muru-D program. “The challenge has always been, as a business model how do we make this available to as many people as possible, make sure they’re not redeveloping the wheel, and how do we not charge them money they don’t have. “And yet we need to make a profit from it, so we moved it into this online format.” The 60 day program includes 12 modules, which each focus on a specific aspect of founding a startup, including developing a strong idea, designing a minimum viable product, and finding a co-founder. The program can be taken anytime, and entrepreneurs can complete it at their own pace. “The biggest questions for entrepreneurs starting out are: What’s normal? What should I be doing? Some days it feels too hard so you don’t want to do anything, you feel like you’re never going to get anywhere,” Morle says. “This program tells you what to do, based on our experience. “Entrepreneurs can have a self-motivated program, but something happens every single day to take them out of procrastination and help them create a business that has been proven, been launched, has customers and evidence, and that they can starting talking to people about.”
If you are just starting out in business you may not be familiar with Research & Development Tax Incentives (R&D) available from the Australian government. They offer help to businesses by offsetting some of the costs of performing R&D. Many startups are not aware of what constitutes as research and development, therefore potentially missing out on a substantial cash injection for their business. Is my startup eligible to submit an R&D grant application? R&D projects usually comprise of a set of activities with start and finish dates, undertaken to generate a specific piece of new knowledge. Under the R&D Tax Incentive Scheme, eligibility is determined on an activity basis rather than on a project basis. Eligible activities fall into two classes, core R&D activities and supporting R&D activities, both of which can be claimed. The R&D program has four steps: 1. Conduct eligible R&D activities You will need to write an R&D project plan to support your application. If you haven’t done this before there are various service providers that can help you put this together and ensure that you provide the correct information. Getting the base project plan together is tough for the first year’s claim but once you have this it will form a template for your business to use for subsequent applications. 2. Register with AusIndustry Companies with an income year of 1 July 2012 to 30 June 2013 who wish to apply for the R&D Tax Incentive for the 2012-13 income would need to have lodged their registration application with AusIndustry by Wednesday 30 April 2014. 3. Ensure your books are in order Use a bookkeeper who has experience in accounting for R&D tax incentives. Your bookkeeper should understand how to structure your company expenses efficiently to help maximise your eligible expenses. Make payments for all eligible expenses in the year of the claim – i.e. before June 30. Don’t get caught out with employee super expenses. Although this isn’t due for payment until July 28, you will need to make the payment before June 30 in order to include these expenses in your claim amount. Get your filing in order. Expense receipts, travel diaries and any other relevant documentation that may be required in the event of an audit to substantiate your claim will need to be kept safely. 4. Lodge your company tax return with the ATO Talk to an accountant as soon as you make the decision to apply for R&D tax incentives. Seek advice from your accountant to ensure your business is prepared to lodge its return and understand how the timing of the application submission will impact forecasting your cash flow. You can read more by downloading the information pack from the AusIndustry website. Additionally, you may use the online eligibility tool to assess if your startup qualifies. NOTE: As part of the 2014-15 federal budget, the government reduced the rate of benefit to all companies under the R&D Tax Incentive, effective from 1 July 2014. The rates of the refundable and non-refundable offsets will be reduced by 1.5 percentage points to 43.5% and 38.5% respectively. The change will apply for a company’s income years commencing on or after 1 July 2014. Clare Hallam is the COO of Pollenizer. She has worked alongside the founders from the very early days of Pollenizer and is now responsible for ensuring that the machine is well oiled and finely tuned to allow the business operations to scale and expand across the globe.
Even a brilliantly creative idea is not enough on its own to build a booming startup. The first major challenge many founder fails at is validating their idea. Startup mentor and Pollenizer cofounder Phil Morle shared his tips on how to actually check if there is market demand for your product with us last week. “Validating assumptions is important in a startup because it is ALL conjecture at the moment of inception. Nothing is proven. Startups are statistically likely to fail and the reason they fail is because one/all of the 100 initial assumptions are wrong. A validated business model is one that has moved assumptions in the model from hypothesis to fact,” Morle wrote. Below, Ed Onggo from one-year-old music ticket booking app GiggedIn shares his journey to discover if his idea was as great as he thought it was.
The author of the book Running Lean and successful startup founder Ash Maurya says “the true product of an entrepreneur is not the solution, but a working business model. The real job of an entrepreneur is to systematically de-risk that business model over time.” Validating assumptions is important in a startup because it is ALL conjecture at the moment of inception. Nothing is proven. Startups are statistically LIKELY to fail and the reason they fail is because one/all of the 100 initial assumptions are wrong. A validated business model is one that has moved assumptions in the model from hypothesis to fact. Validation in a startup is proof that a business model has been de-risked appropriately for the stage it is at. Some commonly articulated stages are emerging from startup practice. The initial stages are: ● Problem/Solution Fit: prove that others agree there is a problem to solve and that your idea can solve it. ● Product/Market Fit: prove that there is a working business model. Customers discover the business, use it and come back. All this makes money. As a startup moves through the stages, more risk is taken. People leave jobs, stake their reputation and invest capital in increasingly large chunks. I like to look at validation against this. Against the pain that happens if we are wrong about validation. Ask yourself, what do you want to know is true (not just a hypothesis) before you take on this next level of pain? Problem/solution fit Before problem/solution fit, the goal of an entrepreneur is to prove that there is a real problem to be solved with a low cost of failure. This means that it is ideally possible to achieve it without investing too much capital, without quitting a job, without taking any investor money. This is completely possible. Here is an idea for what you might do in a single day, for example. Some principles: ● Every validation should have a strong signal from BOTH the feeling in your gut AND actual numbers. Numbers can become a crutch used to support crappy ideas on their own. And your gut? Malcom Gladwell is right that it can tell us a great deal in a blink, but it is also the greatest liar when you want something so badly to be true. ● You should define what you want to see in the numbers BEFORE you start trying to get them. This is to stop you changing the rules along the way. In problem/solution fit, it is quite possible to run this phase (without creating a custom web application). I like to see a small number of people do something that proves they value what I want to build as a business. Problem/solution fit quick benchmark Every business is different. So apply these suggestions to what your gut tells you. Customers 50 Activated customers 70% Visits / customer / month 3+ Payment More than $1 (it’s the hardest $) Here, you have a decent number of customers trying your prototype. 70% of them are ‘activated’ which means they have performed the steps you need them to perform to truly engage with the solution rather than bounce. Users are coming back three times per month or more and someone somewhere has given you some money because they value what you are building. If you hit these numbers, and your gut told you that the people behind the numbers were valuing it, would you quit your job or invest $50K? Imagine the ’pain’ and then decide if it is validated enough. This validation can be done in under three months and you would be a bit worried if you could not do it in that time. Product/Market Fit This is harder. Product/market fit can take six months to a couple of years and is challenging because there are so many parts to a working business model. One of them can be a point of failure and send ripples through the rest of the model that can send a team back to the whiteboard. The main metric to track in product/market fit is ‘traction’. Traction shows that the business is going somewhere. Customers value it. Customers keep coming back. Customers tell their friends. Andrew Chen gave a helpful talk last year that started to define some benchmarks for what product/market fit looks like (slides 7-8) in the numbers. Usefully, he suggests different benchmarks for SaaS and consumer products as the business models can be quite different. I would be surprised if many startups outside of Silicon Valley get that kind of traction in this phase. My suggested benchmarks are below. Product/Market Fit Quick Benchmark Consumer SaaS Customers Clear path to 50,000 Clear path to 10,000 Activated customers 50% 50% Visits / customer / month 4+ 20+ Payment Break even or trials to show business model at scale is profitable. Clear path to $100K MRR. 3x CAC to LTV. 5% conversion from free to paid. Consumer products need to be growing with reproducible, organic growth. If you can hit Andrew Chen’s 100K users then go for it, but I would personally be happy with 50K as long as traction is there and there is proof that an investment in growth will have predictable results. SaaS products will likely have fewer customers paying more money after a longer sales cycle. The payment benchmarks are becoming fairly standard. $100K MRR (monthly recurring revenue) through 5% of the customers converting to paid accounts. SaaS startups should aim to show that the lifetime value (LTV) of a customer is more than 3x what it costs to acquire the average paid customer. If you hit these numbers, do you think investors would give you $2-5m? Remember, imagine some pain and gut check that the risk/reward potential is balanced. Phil Morle is the CEO at Pollenizer, a venture builder working across Australia and Asia building new startups. Follow their weekly insights for pro-entrepeneurs here.
There have been several attempts at creating a snapshot of the Australian startup scene, but when startups launch and fail on almost daily basis it’s a hard thing to capture in a useful format. There’s also no up-to-date info on what the industry means to the overall economy. The most detailed report on the industry, the Startup Economy Report, was completed in April 2013 when Google Australia stated that “The Australian tech startup sector has the potential to contribute $109 billion or 4% of GDP to the Australian economy and 540,000 jobs by 2033”. In order to help facilitate growth and understand how the industry impacts the economy it’s important to have accurate information. Enter the Startup Wiki, a new initiative launched by Philippines-based entrepreneur Bowei Gai to try and build a comprehensive global guide to the startup world, with emphasis on regional stats and data. Originally, Gai set out to create a number of regional reports on his own, but found the task arduous along with the fact they became quickly outdated. To give an example of how the wiki can be populated, the Philippines entry has been created with up-to-date info. Australia’s entry remains sparse on information and it will be up to someone in the community to embrace the idea and start populating and editing it as things change. There’s some disagreement among Australia’s startup leaders as to whether the Wiki could amount to any value for the local community. Pollenizer CEO Phil Morle says surfacing what is normal for investors and entrepreneurs is an important part of helping us plan and grow. “There are lots of initiatives like this and they are quite an investment of effort,” Morle says. “The Wiki format will help share that load, but who’s going to start in Australia?” Adventure Capital managing partner Stuart Richardson says an independent, crowd-sourced, and verified record of fact, such as that Bowei is attempting to create and sustain, will be valuable to the rapidly growing Australian entrepreneurial ecosystem. But Startup Victoria cofounder and director Scott Handsaker is slightly sceptical of how useful the wiki could be. “The underlying motivation behind this is laudable, but it remains to be seen whether a single global repository like this will be useful,” Handsaker says. “The problem with anything like this is that unless it is institutionalised at multiple levels, effort will fade away and people will move onto other things. I would want to see evidence that the founders of the wiki were in it for the long term.” Handsaker believes when it comes to anything to do with a startup ecosystem, the answer is always local. “The best resource for this kind of information is going to be generated and held locally, and it is not clear that attempting to put it into a global repository as well will have any extra benefit,” he says. “Ecosystems are grown by local people, doing local things, for local returns.”
Australia’s first startup incubator, Pollenizer, will be moving its Australian operations to Hub Sydney, forging a relationship with one of Australia’s largest communities of entrepreneurs. The move means Pollenizer will have group regional (both domestically and Asia-Pacific) access to embedded communities. Pollenizer CEO Phil Morle said the move was a strategic one to fit in better with their higher purpose of “growing a guild of entrepreneurs across borders”. He says this fits well with Hub Sydney, which has a goal of growing a wondering brand of entrepreneurs. “It’s not a case of just moving our desks in,” Morle says. “We have our own dedicated office and within that we can elastically adapt as we grow new companies.” The new companies will also be established in the hub. The move aligns with the changes in Pollenizer over the last six years. Two years ago, the Sydney Hive was very much its core base and had 36 employees. The company is now distributed across Adelaide, Perth, Brisbane, Melbourne as well as Asia. “These days we are based as much in the region as we were in Sydney,” Morle says. Pollenizer will embed its program into the community of 1000 like-minded entrepreneurs with the common goal of supporting entrepreneurship. This partnership opens opportunities for mentorship and alliance within Hub Australia. Pollenizer makes the move in May. Disclaimer: I am a former employee of Pollenizer
This is an action plan to get a new business started. As long as it stays is in your mind and not in the world, your business will stay a dream. You will never know if it could have been real. So let’s begin. Starting a new business is huge and the fear of this can be a common block to getting started. I hope that this post provides some practical steps you can perform and smash through. Breaking it down into stages makes this process less painful. Your only commitment is to get through this stage. As time goes by, the stages get more complex and take longer to complete, but this first stage can be done fast. We’ll give ourselves one day for this stage. Our goal is validate the core idea. We want to check that you are not the only person that that loves this opportunity. Will other people love it too and pay you for it? While a business is just an idea in your head it is in the riskiest state it will ever be in. Nothing is proven and every detail could be a reason it will fail. In this single day, we will remove some of those risks. Every small proof of value will help you (and others) take bigger and bigger steps towards making the business real. Things not to do when you have an idea Keep it a secret. Write a patent application Trademark your logo Do a three-year financial projection Do market sizing These are all a waste of time until you have tried your idea against a real customer. You don’t need external capital yet, you don’t need a cofounder. You don’t even need to quit your job. But you must start. Today. Pick a day Put a day in your calendar and call it “start business”. Make sure you have no distractions and no excuses. When the day comes, commit to getting everything in this post done. Tell you friends that you are going to do it and that you may be calling on them for feedback. It’s like giving up smoking: A bit of peer pressure will go a long way. When the day begins, here’s what you’re going to do: Understand: Create a one page business plan using a lean canvas Experiment: Ship something and put it in front of at least one customer Dream: Know where you are heading with a news story from the future These tasks set the tone for how you will continue. Startups become successful by learning faster than their competition. We are learning how to make something that customers will value. We do this by: Building something Measuring what people do with it Learning from what we see Repeat We are going to do all of these things in just one day. Ready? Let the day begin. Understand: Create a one page business plan using a lean canvas We use a lean canvas to describe our business plan. Everything is on a single page. Use our online version here or print off this one and scribble. Quickly complete a first draft. Complete every cell. A business that can’t complete every cell has a weakness. Don’t over think. Execute! Problem: what is the problem your business will solve? e.g. tourism can be generic and boring Customer: who has this problem the most? e.g. students in a gap year Unique Value Proposition: how will you describe the business so that it stands out to customers? e.g. unique travel plans just for you so that you can see the world through new eyes and support a developing market Solution: clear explanation of product functionality e.g. personality survey > local commissioned to build itinerary > mobile application with daily suggestions custom for you Channels: where will you reach the customers? e.g. Facebook campaigns targeting people at university with viral travel personality quiz Revenue: what do you want to charge each sale? e.g. $50 per itinerary Costs: What will each sale cost you? e.g. $30 to local itinerary builder Metrics: what will you measure to show a sustainable business emerging? e.g. Conversion % from quiz to sale Unfair Advantage: what can you manufacture today that will give you an unfair advantage against competition? e.g. partnership with freelancer.com to reach the local itinerary builders at scale. Review. Does it make sense? Does the relationship between what you have written in each cell make sense? Now go and share the business plan with somebody. Anybody you like. Walk them through your lean canvas in order. Ask them if they understand it and if it feels valuable. Note, this is a fairly weak validation, but saying it out loud helps make sense of it in your own mind. This is your first version of the product. You have your hypothesis. Feel free to make a few lean canvases until you find something your are happy with but don’t over think it. There is practically nothing that you know (i.e. you need to prove for it to be known) about this business so you just need this good enough to go to the next task. Now, we start validating. Experiment: Ship something and put it in front of at least one customer The temptation is to delay this stage but it is vital that you don’t. Most people do. Don’t be one of them. Take the plunge. Build something that customers can interact with to start validating your assumptions. Right now we are just going to validate the unique value proposition off your lean canvas. Here’s my design. The experiment begins with the simple hypothesis that the value proposition is something that customers would agree is valuable. I am going to build an experience online as quickly as I can that will get a potential customer to engage with the value prop. Note that I am not asking them an opinion in a survey. I am trying to motivate them to do something. I am going to use the 'Wizard of Oz' technique and off-the-shelf tools to build something that we can watch customers use and learn from. Remember. Build > Measure > Learn. In The Wizard of Oz, we discover that the great and powerful Oz is, in fact, an old man behind a curtain controlling a puppet. A ‘humbug’, as Dorothy would say. But this did not stop the citizens of Oz thinking he was a wizard with magical powers. The illusion was enough. Inspired by this, I am going to make a puppet version of your product idea. Most business ideas can be tested in this way, they just need lots of manual work behind the scenes to give the illusion of the amazing product you are imagining. The full business could never work this way because it wouldn’t scale. But why build all that stuff if no one wants it? For this startup, I am going to use three tools so I don’t need to do any coding. Strikingly for content and main website. Strikingly makes it very simple to make a gorgeous website in minutes that works on mobile and big screen. All I need to do is figure out what I want to say and what the call to action is. I describe the value proposition and ask the user to take the free travel personality quiz. Typeform for my forms. The link in the page goes to a form I made on Typeform. This site allows me to create lovely web forms that feel like a full-on web application. I use it to create my travel personality quiz. When forms are submitted, Typeform sends an email thanking the user for taking the quiz and inform them that they will get a suggestion of something to try in the next 24 hours. This I will do manually. The manual email that comes then upsells them to a full package for $50. Facebook for my marketing. I then start the ball rolling by posting onto Facebook that I have just taken a travel personality quiz with a photo of something unique and extra-ordinary of something I am going to try. This links through to the Strikingly site so that others can validate the idea. I can modify my experiment easily and use the analytics baked into Typeform and Strikingly to see how people are converting through the experience. Not every business is the same and yours may not be able to use these tools as simply as I did. There are a bunch of other tools you can use for your startup. Here’s some we collected. Mix and match what you need to create the illusion that you want. Build. Measure. Learn. I have built my experiment and now I leave it in the field to measure what potential customers do. It is possible to get sales on the same day you build something like this. Push yourself to do it. It’s quite a thrill and gets you focussed on building a BUSINESS on the first day. If you don’t believe your idea can be validated this way, leave me a comment and I will try to help. The experiment above is inspired by a real business in the Pollenizer incubator right now called GlobeHop. Go and check out what they are doing and help them to validate their business. Dream: Know where you are heading with a news story from the future While your experiment is out there, let’s make sure it is worth all the pain and hard work through clarity on the dream. When this business is really kicking, what will it look like? I like to create a story by imagining a news story that the world will read in the New York Times in 3 years from now. I like to do this because it strikes the balance between running experiments that keep it real and keep the business moving forward in small steps while also heading towards a vision that can create a big impact. We’r enot trying to make a small family business here. We’re trying to build something huge. If you have a great idea but you are blocked, I hope you will give this a try. Phil is the CEO of Pollenizer. He works with startups and corporates all over the world to bring Pollenizer's startup science to their practice. He has co-founded a great many companies. In former lives, Phil has been the CTO of Kazaa and a theatre director. This article first appeared on Pollenizer.
The election is over. The Coalition has won. Now what does it mean for Australia’s start-up sector? Unfortunately, it’s not entirely obvious. It’s something that’s been picked up on by members of the start-up community who are wondering what attention their industry will attract now that Australia has a new government. Dean McEvoy, who launched Australian group buying website Spreets.com.au, published on his blog an open letter to Coalition broadband spokesman Malcolm Turnbull last week highlighting the opportunity around start-ups that “at the moment nobody appears to own”. “There is an opportunity with the right incentives to inspire a generation of technology entrepreneurs,” he wrote. His letter was supported by other leaders in the start-up community, with Pollenizer co-founder Mick Liubinskas commenting that “supporting start-ups shows real leadership”. Blue Chilli co-founder Sebastien Eckersley-Maslin added: “Thanks for the open letter Dean and I agree that we have a golden opportunity to support the emerging economy and again draw attention to the report by PwC on the impact this industry can have on the Australian economy if the sufficient support is done correctly now.” At the Coalition’s e-government and digital economy policy last week, the policy document recognised that “policies encouraging innovation, funding research and providing incentives for entrepreneurs are very important over the medium term in developing a more sophisticated economic base”. In April this year, a report by PricewaterhouseCoopers, commissioned by Google, said Australia’s tech start-up sector had the potential to contribute $109 billion, or 4% of gross domestic product, to the Australian economy and 540,000 jobs by 2033 “with a concerted effort from entrepreneurs, educators, the government and corporate Australia”. The Coalition’s policy said that while a vibrant start-up community would be very encouraging, “there are limits to the capacity of governments to will this into existence, and, even if they could, it would not be material to the broader economy for years”. When StartupSmart asked Coalition communications spokesman Malcolm Turnbull’s spokesman for its policies relating to start-ups, we were referred to speeches Turnbull had made earlier in the year. Turnbull told the Kickstarter conference in February: “What we really have to do is to make sure we create an environment and some judicious support whether it is by way of R&D (research and development) concessions or supporting venture capitalists; we’ve got to make sure that what we are doing is really supporting you and your counterparts around Australia because you are the future of the industry.” He also said the Coalition was committed to making it easier for businesses to get on without excessive regulation and has pledged to cut the cost of red tape by at least $1 billion for each year it is in office. McEvoy suggested fixing tax laws that don’t incentivise people to take risks and be entrepreneurs and inhibit experienced people from helping start-ups. “The second and most important thing is to take ownership of this opportunity. Let it be known that you are aware of this opportunity and will sit down and help work out policies that make it thrive, not let this massive opportunity slip through the cracks,” McEvoy wrote. The start-up sector’s wishlist for the election included action on employee share scheme arrangements by making them simpler and their tax treatment more start-up friendly, more early stage funding available for start-ups, and a focus on educating more computer engineers. A review is underway into employee share schemes, with incoming Treasurer Joe Hockey saying in July that the Coalition would consider making changes. StartupSmart also asked a spokesman for Coalition industry and innovation spokeswoman Sophie Mirabella for a list of policies relating to the start-up sector, but didn’t receive a response. The Coalition has also pledged to protect medical research funding and provide “long-term” policy stability and that there needs to be better links between government, business and research institutions. With the election now over, and the business of governing now in the Coalition’s hands, the start-up community will be watching closely to see what changes, if any, come to help their sector.
Finding a co-founder is one of those things that can happen in an instant or it can take months of fruitless searching. While a lot of it depends on an entrepreneur’s networks and specific requirements, it seems there is also an element of luck involved, and not everyone is fortunate enough to find their co-founder in a chance meeting. Indeed, some entrepreneurs go to great lengths to find the perfect co-founder. Melbourne-based entrepreneur Marc Harrison offered a $2,000 bounty during his hunt for tech co-founders, while Sydneysider Ryan Wardell set up Cofounder Speed Date following his own struggle to find a sidekick. Even start-up powerhouses like Pollenizer have been known to put the feelers out for co-founders. Earlier this week, Pollenizer said it was seeking co-founders for four of its start-ups. And these start-ups aren’t duds either. One would involve a partnership with a Skype co-founder while the other would involve working with the former chief executive of CareerOne. It’s also worth noting an increasing number of accelerators have specific requirements regarding co-founders. In January, StartupSmart spoke to Australian start-up 7write.com about its struggle to find a third co-founder after being selected as a finalist for Startupbootcamp Amsterdam. On its website, Startupbootcamp Amsterdam says it prefers teams with three or more founders. “You can apply with two founders but to really accelerate your start-up we prefer a strong team of three people,” it says. Closer to home, Melbourne-based start-up accelerator AngelCube recently announced it won’t be taking on sole founders in future rounds. “I think we’ve learnt some lessons from the last round,” AngelCube co-founder Adrian Stone told StartupSmart in April. “We had too many sole founders and quickly realised being a sole founder is too much of a big task… [in a three-month program]. “[We realised] our program is not going to happen for a sole founder. We’re looking much more at teams. “I think what we’ve learnt is one founder is too few and four is too many. The jury’s out on whether two or three is right.” This means more start-ups are scrambling to find good talent, and find it fast. One entrepreneur facing this predicament is Tablo Publishing founder Ash Davies, who was named Best Young Entrepreneur at the 2013 StartupSmart Awards in March. Tablo Publishing helps authors publish their work from anywhere in the world and reach a global network of iBookstores. Davies, who has been accepted into the AngelCube program, told StartupSmart he is looking for a tech co-founder. “I am now four weeks into [the program] and working very hard and am at the point now where I could go a lot further if I had someone alongside me,” Davies says. “I’m looking for someone with great technical skills who can build applications but also someone with a strong sense of vision. “The biggest thing I’m looking for is someone who is able to learn fast.” Davies admits it is a tough process. “It’s like dating. You’ve got to match the personality as much as the skills,” he says. So how does one find a co-founder? StartupSmart spoke to Pollenizer co-founder Mick Liubinskas to determine what’s involved. Show your face Liubinskas says Australian start-ups don’t have the luxury of waiting for the right person to present themselves, so if you need a co-founder you have to make it happen. “Being in Australia we don’t have what the Valley or Israel have, where you can find lots and lots of co-founders waiting to take the risk,” he says. “The challenge is talented people who won’t take the risk or people who will take the risk but aren’t talented. “You want to find someone who’s so good they could possibly do it by themselves. The thing I encourage people to do is go to as many events as possible.” Conduct a trial “Say to people, ‘Hey, when we have a cup of coffee let’s sketch out one idea’,” Liubinskas says. “Try to work together as quickly as you can but don’t make [the project] so small that people can give it up easily. Be very aware that’s not going to give you [what you need].” Make them an offer “You have to have a clear idea and pitch it very strongly. Be specific about what you do and drive it as much as you can. You also need to put out an attractive offer,” Liubinskas says. “If you’re a non-technical person who’s really trying to get started, you may have to give them more equity. “You also need to make sure any equity is vested and that should apply to you as well. At Pollenizer, everyone’s equity for effort is earned over time.” Do as much as you can beforehand Finding any kind of co-founder is difficult, says Liubinskas, but finding a tech co-founder is particularly tricky because they are in such high demand and therefore receive lots of offers. In this situation, Liubinskas says entrepreneurs should attempt to do as much of the work as they can on their own. “Good entrepreneurs will always find a way and that’s part of the fun,” he says. “There are a lot of platforms where you can do manual testing without building a product. Once you actually start building, everything can actually slow down. “The more progress you can make in building a product, the more attractive it’s going to be for a co-founder and the easier it is for them to know what they need to build.” Take your time While it can be tempting to hire the first person who looks your way, Liubinskas says entrepreneurs must ensure the co-founder they choose is the right one for their start-up. “It’s tough with so much competition around… Do it slowly and carefully rather than doing it recklessly – that’s the main thing,” he says.
Pollenizer is looking for co-founders for four of its start-ups, one of which would involve a partnership with a Skype co-founder while another would involve working with the former chief executive of CareerOne. According to Pollenizer co-founder Phil Morle, all four businesses need “gutsy entrepreneurs with the audacity to believe that they can pull off a global business with limited resources”. The businesses are as follows: Fitbit for your house – collaborating with your social network to use energy more effectively. This is a partnership with one of the Skype co-founders. “This is a brand new idea so they’re looking for co-founders from scratch,” Pollenizer co-founder Mick Liubinskas told StartupSmart. Social Powered Retail – using social networks to increase sales. This would involve working across south-east Asia as well as Australia. “Social Powered Retail is Gyft… The co-founders took it as far as they could and we’re now looking for a new set of co-founders to go where the business needs to go,” Liubinskas says. 99designs for recruitment – crowdsourcing new hires. This would involve working with the former chief executive of CareerOne. “The recruitment business is looking for more co-founders; more engineering talent,” Liubinskas says. SasS for coaches – customer relationship management, session management and other tools for business coaches, consultants and mentors. “SaaS for coaches is Coachy, which has a lot of great potential customers… We need an entrepreneurial engineer who is longing for some B2B experience,” Liubinskas says. At this stage, Pollenizer has declined to reveal the names of the Skype co-founder and former CareerOne chief executive. But according to Morle, co-founders are paid a “modest salary with great equity”. “We will train you in lean start-up skills – if you don’t already have them – and mainline you into an amazing network of entrepreneurs and investors,” he says. Liubinskas, however, is quick to point out the Pollenizer environment is not for everyone. “A lot of people who come from the corporate world, where they ran a really large company, will say that it’s the same as running a small company, which it definitely isn’t,” he says. “Some people can make that transition but a lot of people can’t. The other thing is completely green people. “[You must also have] a willingness to share… Really the key to that for me is people in the same location. “I vowed I would never, ever do another start-up where the whole team is not in the same room. Some people can do it but it makes life harder.” Liubinskas says anyone who joins the Pollenizer family must be open to change. “Start-ups change every day. Even the businesses we’ve learned a lot about, they’ll continue to change. Not a single successful Pollenizer start-up is the same idea it started with,” he says. “You also need to not be precious. You need to be thick-skinned to deal with a whole bunch of failure along the way.”
Melbourne-based start-up accelerator AngelCube has made several small changes to its program, including distancing itself from start-ups with sole founders, after opening applications for 2013. AngelCube, named Best Start-up Investor at the 2013 StartupSmart Awards, offers seed capital, mentorship, connections and opportunities to web start-ups. Applications for the 2013 program will close next week on April 12. Once applications have closed, 20 finalists will be chosen to pitch to a selection panel of high-profile tech players. From those 20, AngelCube will select eight start-ups to participate. The program is completed over a three-month period, after which the start-ups head to the United States to pitch to a roomful of investors. There are a number of noteworthy start-ups in the AngelCube fold, including Kickfolio, which raised $100,000 from US investors before being accepted into US-based accelerator 500 Startups. Kickfolio is now closing a Series A funding round. Other AngelCube success stories include LIFX, Broccol-e-games and shopping recommendation engine Giveable, which has raised $150,000. According to AngelCube co-founder Adrian Stone, about half of AngelCube’s graduate companies go on to raise follow-on funding from Australian and overseas investors within six months of completing the program. Successful applicants for this year’s program will receive $20,000 in seed funding, six months of free desk space and access to a group of more than 50 mentors. Mentors include RetailMeNot founders Guy King and Bevan Clark, Pollenizer co-founder Mick Luibinskas and Nic Hodges of MediaComm. Stone told StartupSmart AngelCube will be doing a few things differently this year. “I think we’ve learnt some lessons from the last round,” Stone says. “We had too many sole founders and quickly realised being a sole founder is too much of a big task… [in a three-month program],” he says. “[We realised] our program is not going to happen for a sole founder. We’re looking much more at teams. “I think what we’ve learnt is one founder is too few and four is too many. The jury’s out on whether two or three is right.” Stone also admits the net needs to be cast a little wider this year. “A lot of the ideas were probably too small [last year]. They focused on a niche market in Australia only. If you have a niche market and your market is Australia, that’s not what we’d call a scalable start-up,” he says. “So we’re looking for big ideas.” Stone is quick to point out the program won’t be easy. “Anyone would love somebody to hold their hand. We’ve realised that is probably counterproductive,” he says. “It’s not our job to build these companies. It’s their job to prove they’re entrepreneurs, and we produce a great environment to help them bloom and succeed. “There’ll be fewer sessions in the weeks. [Last year,] we had too many people in and out, talking to our start-ups and distracting them from the game of building their business. “The second thing is, our start-ups started pitching their ideas too early. “This year, we want them to focus on ensuring they have product-market fit by talking to customers and then start pitching to investors.”
Key players in the Australian tech start-up scene have lashed out at Prime Minister Julia Gillard’s suggestion the 457 visa program is being abused by the IT industry.
Pollenizer co-founder Phil Morle has revealed the reasons why iConnect Catering was named the winner of the latest Startup Weekend Perth, highlighting the growth of the Perth start-up scene.
Silicon Valley start-up expert Tyler Crowley has shared his thoughts on how local start-ups can improve their pitches and gain more media attention, as part of a whirlwind Australian visit. Crowley has been helping start-ups improve their pitches since the first TechCrunch40 events and is involved with the LAUNCH Conference, where he works one-on-one with start-ups. He is also a co-host of This Week in Startups where he shares insights on the art of pitching. Crowley is in Australia to host several clinics for up-and-coming Australian start-ups, and work with key players to help them improve Australia’s start-up ecosystem. His visit to Australia is the result of a partnership between Pollenizer, From Little Things, The New Agency, Event Directors and Mi9. In an interview with StartupSmart, Crowley shared his thoughts on the following topics. Improving Australia’s start-up community “There’s a list of ingredients [to create a successful start-up community],” Crowley says. “Some of the key ones that do exist here are lots of small tech meet-ups are already happening. That is always sort of the first phase of the organic process. “Another key ingredient that Sydney has, that other cities would love to have or would kill to have, is an official home for the community… Fishburners is exactly that. “One thing Sydney doesn’t have is an official monthly meet-up of all the smaller meet-ups. “Having a key brand that represents the entire community, such as Silicon Beach, [is important] but there are no rules that go along with it. “If you have an event with 200 people and everyone’s ‘checking in’, that gets out and spreads globally… and gets the attention of other communities of what’s going on here.” Selling yourself “[Pitching] is not an integral skill that most CEOs have. Sometimes they’re too close to their own product and don’t know how to communicate it,” Crowley says. “The first step is to get them to empathise with the audience and see how the audience feels. “We don’t show children PowerPoints – we tell them stories. It’s much easier to retain information when it’s in a story format rather than a PowerPoint format. “The default is to be slightly critical and analytical [in your pitch]… Get the audience in a really emotional state… rather than a critical and analytical state.” “The same strategy [applies when selling to customers]… Try not to be so analytical. Be more emotional and empathise with the person.” Gaining media attention “Media folks, when you email them, are very critical. They’re rather dismissive and looking for a reason to say no,” Crowley says. “One way to get around that is to [keep your email] brief and link to some sort of movie… For whatever reason, journalists tend to be quite visual people and storytelling people. “They will click on the link and watch the movie.” “I think a problem a lot of start-ups have is they communicate with journalists in a totally different language. “When you convert your pitch into a mental movie or story, it shows you’re really doing it yourself and it makes journalists’ job much, much easier.”
It’s fair to say 2012 was a mammoth year, not only for the various incubators and co-working spaces, but for the Australian start-up scene in general.