The Pollenizer effect
In the four-and-a-half years since Pollenizer came onto the scene as a new tech start-up incubator, Australia’s tech sector has morphed beyond almost all recognition.
The industry has mushroomed at a rapid rate, with tech start-ups now spoilt for choice when it comes to dedicated seed funds, accelerators and co-working spaces.
However, Pollenizer has remained a focal point in Australia’s start-up ecosystem. In March, it was named Best Start-up Investor at the 2012 StartupSmart Awards – and for good reason.
Last year alone, Pollenizer tested 16 ideas, started eight new businesses, raised $7 million for portfolio companies, raised $1.1 million for incubation, and sold group buying website Spreets for a cool $40 million.
So what is it about Pollenizer that keeps the tech sector buzzing? StartupSmart spoke to co-founder Mick Liubinskas about the inner workings of the Sydney-based incubator.
Below, Liubinskas reveals the five secrets to how Pollenizer assesses and works with start-ups:
1. The priorities
One of the biggest things we add to a business is to bust procrastination, and over-analysis and over-planning, by just action.
I think that has a big effect on people. We have people who have been thinking about ideas for months, years even, and we start sometimes within an hour. Definitely within 24 hours.
Another part of the language we use is “top right, bottom left”.
A good business should have a big and exciting “top right”, which is a big market or solving a big problem, but you need a “bottom left”.
If the opportunity is so big you can’t find a way to start, that’s no good. You need a place to start and you need somewhere to go.
“Bottom left” is really important. Because we know you’re going to learn a hundred things running this business, we just want to do them fast and cheap.
2. The people
If you have one big idea and you think it’s going to be implemented once to perfection, you’re not going to work well within Pollenizer.
Both the idea and the co-founder we work with need to be tailored to our process. Both are critical.
We bring a big team to every business – a trained start-up engineer and a trained lean product manager are added to the enterprise as a full-time team. That’s what we call the pod. They’re the core of every start-up business.
Surrounding that, we have a trained start-up designer and start-up operations people. There’s also a network of 250 mentors and investors.
Every business also gets a board member who is one of the senior members of the Pollenizer family.
However, it still really relies on a very commercial, hands-on entrepreneur getting it done.
That leads to another principle of the Pollenizer effect – the very important balance between freedom and pressure.
Entrepreneurs have the freedom to test the idea in any way they want, but after three months are expected to come back with a result.
Plus each week you have to sit down and fess up to what you’ve done and what progress you’ve made.
It’s fine to say, “I failed 10 times this week” but it’s not acceptable to say “We’re still working on some things”.
It scares a lot of people. That’s a really important test for us. In the past, we’ve sometimes convinced people we’re the right way but if they don’t get it and can live with it, at some point they will get very uncomfortable.
The funny thing is experienced entrepreneurs really respect it because they’ve learnt the lessons. First-time entrepreneurs question it and say, “I’ve thought through this. I’m pretty sure it’s going to be right”.
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3. The timeframe
One of the most effective parts of Pollenizer is time… For a lot of entrepreneurs, it’s more about being time-effective than being cost-effective.
If you’re a true start-up business and you do it a lean way, and you fail after three months, at least you’ve only spent three months on it. What does hurt is spending your whole life savings over three years and failing.
The way we start the process is we want to work together on the business for nine months.
We [expect entrepreneurs to] raise external capital, and hit very aggressive checkpoints at three months and six months. At three months, we have either disproved the business or have shown it to be significantly harder than we thought or significantly less worthwhile than we thought, and the same at six months.
4. The funding
At the end of the six-month mark, if we keep going, we encourage entrepreneurs to start the process of raising capital. They have three months to raise the capital.
If we haven’t raised it [in that timeframe], survival of the fittest has to occur here. We’re not a charity. You need to do whatever you can to get the business to succeed.
We would like to raise enough money to get to the next significant point… We would like to raise enough for maybe a 12-month run.
We like to look at anywhere from $500,000 to a million dollars at that point. It can certainly vary depending on the co-founder – how much money they put in, etc.
We are both true partners and co-founders in this business, and it starts 50-50. We know our equity will probably dilute [in the future]… but that’s the way we like to see it start.
5. The end result
We’ve been pitched more than 2500 ideas over the last four and a half years. Out of those 2500, we’ve looked deeply… into 200 of them and started 35 companies.
There are still 15 companies that are alive and in varying degrees of momentum… We’ve had one exit, one that’s gone profitable and one giving dividends.
We have a rough survival rate of about 55%. When you’re talking about ideas from day one, we think that’s really good.
Australians aren’t great at embracing failure as something really positive… We’ve got a fear of ambition because life’s pretty good.
Some of those things are changing. We’re making progress in a lot of those areas. We need more wins so people see it as an opportunity.
Spreets is a great example – it looked like an overnight success but it was [co-founder] Dean [McEvoy’s] second business.
Looking at what we’re doing now, we’ve opened up in Singapore. One thing to think about is from a market perspective, there’s a lot of things I love about Australia but there’s a lot of things that are challenging as well.
I think Australia is getting so much better… but it’s still early days.