Lessons from my first year in business

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Martin Hosking

 

Business: RedBubble

In a nutshell: Global online art community that sells everything from t-shirts to wall art.

Established: 2007

Revenue: $3.3 million

 

The first year in business is an unconstrained time as you are under less pressure than you subsequently are. It’s an undefined time where you don’t really know how the business will go and it’s about learning as much as possible.

 

In Australia, you really need momentum from the start. I often see companies profiled on StartupSmart and elsewhere that never have enough funding to endure.

 

In the tech space, there aren’t really any rolemodels here – if you take the US, you’ve got Tumblr that is raising $20 million or $30 million funding in chunks, that’s not possible here, so it’s challenging. There are so many variables you have to deal with.

 

We probably bit off more than we can chew in our first year, even though we were reasonably well funded, due to the complexity of the business.

 

It made us focus more on what we are doing, which has continued to be a challenge for us since the first year.

 

When you are building a website, you either build it extremely well and make it scalable, or not build it well but be quick. If you do it well, it will take time and be expensive, but you will have the foundations of a good business.

 

For example, do you want to spend $10,000 on legals straight away, or should you put the money towards something more immediately useful?

 

The challenge is to build the platform while investing in things that make you money.

 

There is no perfect answer – you need to make a judgement call. That said, Australian businesses often under-invest in their legals and pay the price. You’ve got to get that kind of structure in place early on.

 

You can’t just get out there to the marketplace straight away. You’ve got to think about GST or, if you employ people, superannuation plans.

 

These are all basic things you need to do, but you need to get them all done before you get out there. It can be frustrating.

 

We have very few people here who started with us. It’s quite normal to have a high turnover of staff from your first recruits. It’s hard to recruit people into a young start-up.

 

We may have been a bit more focused, but it’s a time of learning. I’d rather have learned those lessons than do anything too differently.

 

The first year is often about managing expectations – of you as well as investors. In our case, we were shipping out of Germany when the euro was very high, which meant it was costing us more than the sales we achieved. It was a mistake, yes, but you learn from it.

 

After a year, you should have the basics in place. You should have good corporate governance, a board with at least one independent person and you should be talking to customers.

 

You also need more than one good person in your company. There’s a reason why investors look for two founders or at least two good people in the business. It can be hard to get investment if it’s just you.

 

You need an idea of how you are going to make money. It’s not really viable to launch a business in Australia without a business model – maybe in the US, but not here.

 

I’m very sceptical of five-year forecasts, but you need some sort of business plan and an idea of the basic economics of your start-up and how it is defensible from competitors.

 

I don’t think starting up is necessarily fun. You should be excited about what you do, but it’s hard to have fun in a start-up!

 

You need a sense of purpose and passion, whether that’s to change the world for the better or become a billionaire.

 

You can have fun along the way, of course, but let’s not be delusional. It’s not like going to Luna Park. You can’t leave a high paying job and think that starting up will be a land of roses and cream.

 

You can read a full StartupSmart profile of RedBubble by clicking here.

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