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‘Punched in the guts’ Moula digs in as OnDeck prepares to enter the Australian SME lending market

5:52AM | Tuesday, 5 May

When Moula co-founder Aris Allegos heard American competitor OnDeck had chosen Australia as one of the targets for its international expansion, he felt like he’d been punched in the stomach.   It’s the moment many startup founders dread: a large well-funded competitor launching in the same market. OnDeck is certainly that. The US online lending portal raised over $US1 billion in its initial public offering late last year.   “Your initial reaction is boom, someone’s just punched you in the guts, or called my baby ugly or what have you,” Allegos says.   “That’s the moment of despair. But you’ve got your team around you and you go, well (a) it’s a big enough market, and (b) it helps differentiate us and the path we’re going down.   “And you just get on with it. But boy it’s a roller coaster.”   Like OnDeck, Moula offers loans targeted to small businesses that are quickly approved and get cash in the hands of business owners within one business day.   Moula doesn’t have the international ambitions of its larger competitor. Allegos says the limited access to credit data in the Australian small business lending space makes it difficult to apply elsewhere, and believes it’s a problem OnDeck will need to wrestle with. He says in the United States and the United Kingdom there’s a lot of sharing of credit histories, which is not the case in Australia.   “Come to Australia and the majors keep the data inside their respective banks,” he says.   “Positive credit reporting with respect to small business in Australia is effectively non-existent. For us, we thought we need to build that platform in Australia, specifically for Australian businesses.   “We will focus entirely on the $12 billion of annual lending that goes into that sub $100,000 space (in Australia).”   Since launching in May last year, Moula has been growing steadily. In its first few weeks it was doing a loan a week, with the average loan size being about $10,000. Currently it’s doing $200,000 worth of loans a week and the average loan size has grown to $30,000.   OnDeck’s gross revenue for the quarter ended March 31 was $US56.5 million, up 98% from the previous period. Since being founded in 2007, it has loaned more than $2 billion to business across the US and Canada.   Up until last month Moula’s funding platform was only available to eBay stores, but now the startup has expanded to offer its service to bricks-and-mortar retailers. That’s because integration with over 50 banks in Australia gives Moula access to the financial information needed to complete the process it uses to assess borrowers.   “Small business lending is evolving and the integration of new data sources means that we continue to disrupt the traditional lending model,” Allegos says.   “In the past, SMEs have felt the pinch as lenders tighten their belts. Businesses now have the opportunity to access funding in real time, knocking down previous barriers to business growth.”   Do you know more on this story or have a tip of your own? Raising capital or launching a startup? Let us know. Follow StartupSmart on Facebook, Twitter, and LinkedIn.

Australian web design startup Elto acquired by GoDaddy

4:41AM | Tuesday, 14 April

Aussie web design marketplace Elto has been snapped up by domain registration company GoDaddy for an undisclosed amount.   GoDaddy – which has 12 million customers worldwide – raised $605 million earlier this month after listing on the New York Stock Exchange.   The acquisition comes as the company expands its customer offerings and aggressively targets small businesses and startups.   Elto was founded in 2012 as way for small businesses to make simple changes to their website for a set fee.   Originally called Tweaky, the startup later rebranded, moved to San Francisco and closed an investment deal with Blackbird Ventures.   More than 60% of Elto’s customers are based in the United States, along with all of the company’s major partners such as WordPress.   Chief executive of Elto, Ned Dwyer, told StartupSmart he and his co-founder PJ Murray decided to be acquired by GoDaddy because of their “huge customer base” of small business owners.   “It’s also about the team, the people who are running GoDaddy these days,” he says.   “In the last couple of years GoDaddy have been making big bets on top talent through acquisitions and hiring from companies like eBay, Intuit and Amazon – I get to work with some incredibly smart people every day.”   Dwyer says he and PJ will be joining the team at GoDaddy, and while he is excited to start working on building “the biggest marketplace we can” it is still bittersweet to sell something they have been working on for so long.   “We would have liked to stay as an independent company but we also couldn’t turn down this opportunity,” he says.   “It’s also nice to be able to focus 100% on building a great product experience with no distractions from things like balancing the books, managing payroll and the million other things you have to do as a founder that keep you from delivering value for customers.”   The deal has been in the works for some time, with Elto putting a halt on accepting new projects at the start of this year.     General manager of hosting at GoDaddy, Jeff King, said in a statement the company was excited to announce its latest acquisition.   “Ned and PJ have built something people truly want at Elto — and something that GoDaddy’s small- to medium-sized business customers need,” he said.   “We’re thrilled to welcome them into the GoDaddy family.”   Follow StartupSmart on Facebook, Twitter, and LinkedIn. Buy tickets to the 2015 StartupSmart Awards.

Airbnb, Uber opponents build barriers rather than compete, asking consumers to pay price

4:22AM | Wednesday, 1 April

“It’ll never work.”   “It’s not trustworthy.”   “It’s not fair.”   “It’s illegal.”   For the last 20 years, this sequence of responses has become quite common to those who watch the internet and the creative companies it’s spawned. Incumbent businesses confronted by these digital disrupters resist changes to the status quo for understandable reasons: they were winning at a game they had mastered. When the game changes, efforts to strengthen the previous barriers to entry are standard procedure.   Microsoft did it to Linux (an open-source operating system), the Bell companies fought voice service competition from cable-TV triple-plays and startups like Vonage, and record labels defeated Napster and then proceeded to sue their own customers once they realized peer-to-peer file sharing could not be shut down at a central locus.   More recently, Airbnb and Uber have inspired a new generation of incumbents to play these same cards. Both companies have grown at phenomenal rates over short lifetimes, both rely on not owning the core asset (sleeping rooms in the former case, cars in the latter), and both have attracted sky-high equity valuations.   Because of these traits, they have also attracted the attention of asset-owners who formerly profited from scarcity and thus are threatened by the lower prices brought by the asset-light coordination model of these two disrupters. This threat has prompted the asset-owners to erect barriers to entry wherever they can, often in the guise of more regulation.   Just this month, Airbnb faced a proposal in San Francisco that would place more restrictions on rentals, while Uber has inspired fierce opposition to a bill that would allow its entrance into the Nevada (read “deliberately scarce Las Vegas taxi”) market. More interestingly, New York hotel interests are fighting Airbnb’s efforts to pay lodging taxes, in part because doing so would seem to legitimize the new competitor.   In all cases, the incumbents are trying to use their links to legislators to increase regulation of their sector, biased toward status-quo definitions of same. But such efforts that purport to protect consumers lead to all sorts of unintended consequences. Previous efforts to stifle disruptive technologies have often been costly for the economy and in the end unsuccessful, no matter how logical and attractive they appeared to be at the time. Sharing beds and cars   Both Airbnb and Uber make commissions by matching sleepers or riders with beds or cars, aided by the internet’s tendency to lower coordination costs and smartphones' unique combination of geographic context, rich visuals and ubiquitous wireless networking. It’s a much more attractive model than owning infrastructure and having to pay health care for employees.   Across the world, many taxi and limousine commissions (TLCs) have ruled Uber illegal (even so, the service currently operates in 55 countries). Couch-surfing is more difficult to regulate: a 30-story hotel in Times Square is impossible to miss, while 20,000 available rooms in New York city (the figure dates from 2014) are mostly invisible from the street.   In both cases, however, the incumbents can only do so much by way of competition: cab fares are set by law and taxi medallions are scarce for obvious reasons. In New York, the price of those medallions dropped by 17% (about $200,000) between 2013 and 2015, so Uber is hurting incumbents where it counts. Hotels with high fixed expenses, meanwhile, can only compete with Airbnb in subtle ways: saying “we’re cleaner than Joe Blow’s guest room” might be seen as damaging the brand while validating the competition.   As a result, these incumbents can do little except drop prices or resort to regulatory protection. In part, this paucity of options reflects the highly fragmented nature of both markets. Trying to organize 50,000 licensed New York taxi drivers (who share 13,600 vehicles) to improve service, speed up pick-up times or otherwise compete with Uber on quality would be a logistical impossibility. Incentives aren’t aligned: the medallion owners don’t drive cars. Furthermore, taxi companies have been slow to invest in GPS and similar technology, guarded as they were by the regulated scarcity. Hailing and hoping   Compare this model to Uber, in which the car owner is the driver. The smartphone app is a far superior method of arranging a ride compared with hailing and hoping – or even calling a dispatcher then hoping. Much like Fedex, Uber’s supply chain visibility (knowledge of where the package or cab is) contributes to the overall value of the experience.   Conversely, waiting for a cab to get to the airport is made much more stressful by the lack of knowledge of where the ride is or how bad traffic is on a given route.   Airbnb uses a similar confidence builder, wrapping information around the transaction. Much like eBay (its business-model grandfather), Airbnb rates both buyers and sellers, making both opening one’s home and staying in a private residence less of a gamble.   For both Airbnb and Uber, the low barrier to entry and then the decentralized structure of the asset threatens the incumbents' moats: medallions in the taxi setting, real estate investment and heavy overhead (branding, IT systems and labor costs) in the case of a hotel. Complex regulation protects incumbents   It’s important to realize how complex business regulation has become. What started as an effort in consumer protection (think of Upton Sinclair, “The Jungle,” and the creation of what became the FDA) now serves to do multiple additional things: to employ regulators who have a vested interest in keeping their jobs to maintain barriers to new-market entry and thus innovation to reassure markets and investors of a stable competitive environment.   Thus what looks like “illegal” or “unfair” competition is in fact often a matter of innovation breaking an outdated, well-protected business model that has focused on profits rather than customer service or competitive differentiation.   Note that in every case we have mentioned, the consumer protection function of regulation did not drive efforts to outlaw the competitive threat: Linux, VoIP, and unbundled CDs all dropped prices in the market while arguably improving quality. Regulators, however, need things to regulate, as we have just seen when the Federal Communications Commission defined the internet in such a way as to make up for millions of Americans abandoning wireline phone service, its primary locus of influence and revenue. Thus the incumbents and the regulators face a common threat. Room for regulation, but…   At the same time, it’s worth noting that Airbnb’s and Uber’s independent contractors, with few exceptions, are looking littler and littler in light of the massive valuations and global aspirations of the two startups. In the latter case particularly, drivers have faced repeated and arbitrary changes in compensation models. Uber asserts that these changes should increase gross revenues, but the effect on operating expenses (and thus take-home pay) is less clear.   Given the power imbalance between very big money at headquarters and independent contractors at the edge of the network, there is scope for harm, for protection and for risk – and thus a potential place for regulation – but those affected lack the political weight to compete with the more powerful motivator of eroded profits among a small number of incumbents.   Labor unions and regulations protecting both workplace safety and the right of workers to organize were part of the answer to a similar imbalance in the 20th century. It’s as yet unclear what new arrangements could emerge now.   So when a TLC tries to block Uber cars from accessing airport terminals, or hotels ask a city to refuse Airbnb’s efforts to pay lodging taxes, it’s worth asking: whose interests are being protected? Most likely, the legal efforts directly relate to the incumbent businesses that have been insulated from competition rather than to the common good, public safety, or economic progress.   This article was originally published at The Conversation.

There’s money to be made in the new media business

3:04AM | Wednesday, 18 March

Australia’s media industry can be described as one of the most concentrated in the world. As one of the world’s most successful democracies, it is hard to imagine three main owners (Fairfax Media, News Corp and APN News) hold 98% of the media industry. With players such as Private Media (the publishers of Crikey and StartupSmart) coming through, Australian readers are beginning to receive more options to choose from.   Smaller independent media outlets such as The House of Media find it difficult to compete and secure airtime in a 24-hour news cycle. In order to survive and stand out, they need to be creative, accessible and innovative.   New media outlets around the world have gained a strong market presence in the global media industry. Digital players such as BuzzFeed, Mashable and Quartz have succeeded in finding their place due to their technological knowhow and money from non-media investors. Not only have new media platforms been able to attract monetary investment, they have also attracted award-winning journalists and maintained a viable content production staff to compete with traditional media channels.   An example of this is First Look Media. Funded by eBay founder Pierre Omidyar, First Look Media operates without having to rely on traditional funding sources such as advertising. To differentiate itself from its competitors, First Look Media is seeking 501c3 non-profit status from the IRS in the US. First Look Media aims to promote editorial independence free from financial and political interference. With a billionaire as their publisher, First Look Media can continue to attract award-winning journalists to prepare content and pursue independent reporting.   Other new media companies around the world have been successful in attracting non-media investors. In the last six months, we have witnessed millions of dollars being invested by venture capitalists into online media businesses. However, the big question remains, what profit margins will they get in return?   Mashable, one of the world’s leading media companies for technology and the connected generation, raised $17 million in Series B funding. With funding from Time Warner Investments, the injection of funding will allow Mashable to hire more staff, develop its strategic growth areas such as video production and proprietary Velocity technology and grow its editorial talent. According to Mashable, 2014 brought in a 45% increase in revenue, 60% increase of social followers and 40% growth in monthly unique visitors to 42 million globally. Mashable’s success in attracting local audiences is attributed to its dedicated country sites in the UK and Australia and diversifying its advertising portfolio through integrated partnerships with blue chip clients.   Success stories such as Mashable have opened up opportunities for new media businesses to succeed and make money. Other notable deals over the past six months include:   Business Insider: Launched in 2009 in New York City, business and technology news website Business Insider recently pulled in $25 million in funding from venture investor Axel Springer, totalling their investment backing to almost $60 million to date. Vice Media: New age arts and culture magazine and website raised $250 million by selling a 10% stake to A&E Networks (a joint venture between Disney and Hearst Co.)   BuzzFeed: Popular entertainment site BuzzFeed closed in on a $50 million investment led by Andreessen Horowitz last year. The latest financing round pushes the company market value of BuzzFeed at $850 million.   Vox: Vox closed a funding round of $46 million from first time media investor General Atlantic.   A question we still ask ourselves is – are these new media companies worth the investment? I guess only time will tell.   New media companies don’t just produce and publish news and content, they are vertically-integrated technology platforms with their own publishing tool. This makes online publications such as BuzzFeed and Vox extremely attractive to advertisers who are searching for new ways to reach audiences. Another reason why new media companies are an attractive option for venture capitalists and investors is its ability to influence and shape debate and discussion. Investors want to influence decision-makers and keep corporate and government institutions accountable. For a number of investors, the ability to influence is worth the monetary and time investment.   Content consumption in Australia and around the world is constantly evolving and changing. To remain relevant, new media players need to develop innovative production, distribution and marketing techniques to push their content. New media websites such as Mamamia have managed to capture the interest of a core group within Australian society. Its targeted stories on politics, pop culture, entertainment, fashion and feminism have enabled it to morph from a lifestyle blog to an interactive news website with a loyal readership of 4 million readers per month.   Australia’s digital media scene requires innovation and a fresh change. With many global new media companies able to attract serious funding and investment, there is a real opportunity for new media organisations in Australia to make money and stand out. So what are we waiting for? Let’s get started!   Jieh-Yung Lo is the founder and managing director of The House of Media. Follow him on twitter at @jiehyunglo. Follow StartupSmart on Facebook, Twitter, and LinkedIn.

China changes from world's factory to innovator and Australia needs to keep pace

3:55AM | Tuesday, 17 March

Australia’s economic future can be bright.   The 2015 Intergenerational Report (IGR) says that in 2055 our pay packets will on average, be able to buy nearly 80% more goods and services than now.   But, as the IGR concedes, whether these happy days come true really depends on what happens to productivity between now and then. Government policy settings that foster a culture of innovation will be crucial.   And there’s the problem.   As it currently stands, the World Economic Forum (WEF) ranks the strength of Australia’s innovation environment in the bottom half of the OECD.   If we are benchmarking ourselves against the likes of Germany, then that may not seem so bad. But how about China, a country that made a name for itself as the factory of the world on the back of millions of workers paid next to nothing? China rises up the innovation rankings That’s the reality that Australia now faces: out of the 144 countries ranked by the WEF, the strength of China’s innovation environment now lies just seven places behind ours. And don’t forget: per-capita incomes in China are only around one-quarter of those in Australia.   To be sure, it’s not so much that Australia has gone backwards. It’s that China has caught up. The days of cheap labour in China ended more than a decade ago.   Nowadays when utilities and other costs are added to sharply rising wages, Boston Consulting Group says that manufacturing costs in China are only 4% less than in the US.   That’s put enormous pressure on Chinese companies to innovate and produce higher value-added goods and services rather than try to compete on the lowest price.   It’s hard to argue with the results. According to the World Trade Organization, China’s share of world manufactured goods trade leapt from 4.7% in 2000 to 17.5% in 2013.   Some quip that China hasn’t yet discovered its own Apple. That’s true. But it does have Lenovo and Huawei, the world’s largest manufacturers of PCs and telecommunications equipment, respectively. Then there’s smart phone maker, Xiaomi, a company we’ll be hearing a lot more about in the next few years. And what’s unfolding in the digital space is nothing short of revolutionary. The world’s fasting growing e-commerce market Last month the Harvard Business Review said that over the past five years the digital evolution in China has been more rapid than in any of the other 49 countries they studied.   China doesn’t need to find its own eBay or Amazon.   By 2012, China’s largest online retailer, Alibaba, already had sales exceeding that of the American giants combined.   Industry researcher, eMarketer, says that the value of retail e-commerce sales in China in 2014 was 40% higher than in the US. By 2018, it will be more than double. Runs on the board in e-commerce are now being leveraged in other areas.   Alibaba just set up its own bank. To decide who to lend to it will tap its own treasure trove of data: the payments histories of more than 300 million individual users and 37 million small businesses that trade of its online platforms.   In searching for the secrets of Chinese success, don’t look for hordes of state-owned enterprises pumped full of government subsidies. Alibaba and co are privately-owned and profit hungry.   But what the Chinese government has done well is to recognise the high cost challenge and respond with a narrative about how it can be overcome. Innovation as the buzzword We heard this loud and clear when Chinese Premier, Li Keqiang, delivered his work report at the National People’s Congress earlier this month. “Innovation-driven development” is now the national economic strategy.   When addressing the World Economic Forum at Davos in January, Premier Li spoke of innovation and entrepreneurship no less than 20 times. He said that in Chinese eyes they are a “gold mine”. It’s not just words. It was reforms by China’s banking regulator last year that cleared the way for Alibaba to act on its entrepreneurial instincts and branch into finance.   Yet far from the Chinese sense of urgency and mission, Australian governments have appeared content squandering the proceeds of the mining boom - a once in a generation opportunity to reposition the economy for sustainable, innovation-led growth. So what about Australia? Innovation policy in Australia is now focused on establishing five industry “Growth Centres”, which will be designed to encourage business-university collaboration. But these have only been allocated around $190 million, compared with almost $3 billion for the UK Catapult Centres, on which they are based.   Australia doesn’t need to unleash its own Apple or Alibaba, however enticing such a prospect might be. The reality is we account for only 2% of the world’s R&D, and even less of its markets.   But we do need more knowledge intensive “micro-multinationals” that engage in niche production and feed into global networks and value chains.   Already in 2012, before the IGR, the Australia in the Asian Century White Paper noted: “Using creativity and design-based thinking to solve complex problems is a distinctive Australian strength that can help to meet the emerging challenges of this century”.   Countries like Germany, Switzerland, and more recently the UK, have shown that being a high cost economy doesn’t mean that manufacturing needs to be abandoned. Nor does it mean that international competitiveness needs to be lost.   But when a country like China starts teaching the same lessons, it really is time to sit up and start paying attention.   This article was originally published on The Conversation. Read the original article.

Online shopping platform puts the negotiation into buying

3:51AM | Monday, 2 March

An Australian startup is making online shopping more collaborative by allowing consumers and retailers to negotiate prices.   BuyMeStuff caters to consumers interested in buying electronics, appliances, and hair and beauty care products. Launched in December last year, buyers can select the product they want and receive an immediate offer from a retailer or wait 24 hours for a chance to get a better one. Retailers can also set prices based on demand for the product. Multiple retailers selling the same product can bid against each other to secure the buyer’s interest. A ‘discount condition’ provides additional discounts during a particular time period or to certain regions if an item is generating a lot of demand in an area.   If a buyer declines an offer, they are asked the reason in order to inform the retailer. A feature called ‘Desire List’ allows the buyer to list the amount they want to pay for a product. If it matches with the price set by the retailer, they receive an offer. The website caters to all sorts of consumers, from students to tech-savvy people who like the latest gadgets to people looking for bargains.   Among its competitors is Sydney-based startup Alphatise, which launched in August last year.   Director and co-founder Mahendra Harish says there is an absence of dialogue between retailers and consumers in the market.   “In the real world, prices are fixed. Static pricing means that retailers are losing revenue from overseas competitors. The retailers we have are Australian-based,” he says.   “Additionally, the pay-per-click model means that retailers are paying for something that doesn’t always translate into sales. We only charge for a sale and are risk-free for retailers. We also let them know the revenue made and losses incurred in cases where they lose a buyer. During bids, we don’t reveal the winning price and every retailer likes that.   “Buyers see the shipping price included in the final price. On eBay, for instance, you have to use a lot of filters to buy a product and they charge 9% to 10% on it. We charge retailers a ballpark figure between 5% and 6% on a sale, which excludes shipping. We also do the marketing for the retailer, something which does not exist widely yet.”   Harish says he is targeting small and medium-sized businesses who sell consumer electronics because bigger electronics companies want to see growth in the market before getting on-board. The platform currently has seven retailers from Melbourne and Sydney, with a further five in the pipeline. They have received 1500 user requests so far.   The startup is self-funded and wants to reach the “next level of scalability”, according to Harish and is looking for venture capital investment. For the moment they are concentrating on the Australian market and hoping to bring multiple dealers in one space.   “We want to have scalability in every vertical – in services, in niche markets like automobile parts and buying cars,” he says.   “Once we reach a particular scale, we want to expand into Asia and India. It depends on the right funding and we want to understand the market and see if it is ready for our website.”   Follow StartupSmart on Facebook, Twitter, and LinkedIn.

A note to our future selves: What youthful entrepreneurs the Feiglins have learnt from launching Sailr

12:03AM | Wednesday, 17 December

It’s been more than a year since we took the leap and started working on Sailr. Working on a startup is an experience of binaries – it’s mostly highs and lows, with very little in between. With every success and failure come new learnings, challenges and experiences.   Here’s what we wish we knew.   Focus Sailr launched as a marketplace without a defined category, leaving it open and hoping that, like eBay and other marketplaces, people would be selling a gamut of products to interested would-be buyers. We were lucky to have some great press coverage that flooded the site with new users and products. However, we quickly discovered that we were not making connections between buyers and sellers as a result of the lack of marketplace focus.   We also thought our value to be a combination of a social network and marketplace. Building, maintaining and growing a social network is a massive project, and creating and growing a two-sided marketplace is also very challenging. Bringing the sellers and buyers together is vital: narrowing the category on the supply side and then attracting customers interested in that narrow category is likely the first step. From a tech perspective, trying to build a social network and marketplace meant double the code and more moving parts that could possibly break.   Start by doing one thing, and do it well.   Time and focus interaction   We believe that the more focused a business is, the less time required to make a project more successful. That is, time spent will likely be more productive and have a greater impact.   With Sailr, we were unfocused; hence our invested time was less effective — definitely not ideal with other full-time commitments. A focused business is more able to effectively draw conclusions and learn from “experiments”, tests or changes as a result of fewer variables and their possible interactions.   People Building a support network of people you can turn to for advice and feedback is really important. It’s especially useful if they have had similar business experiences before and can provide some level of guidance – we call these people the “experts”. User feedback is certainly the most valuable, though; these are the people you need to satisfy — not the experts.   Sharing your ideas with others is valuable. Hearing different perspectives encourages new thoughts and challenges your own ideas, possibly leading to a greater overall product.   It’s paramount to stay true to yourself and ideas. Feedback, especially from “experts”, is almost always conflicting as everyone has their own unique perspective to share. It’s ultimately up to you to decide what you wish to take on board. This is hard, and admittedly, something that is still a struggle for us.   Subscriptions and sales Subscription revenue (and sales) is good. While we didn’t have many subscribers, those that subscribed didn’t cancel. Receiving the email notification from Stripe every month was motivating, and, to some extent, proof that the business was working.   Having a business that makes money from the beginning is ideal — costs don’t wait. You may have office space to pay for, web hosting, marketing costs to cover as well as other expenses.   Not relying on external capital is safer.   Be full-time if you can   While we are at school and university full-time (Nathan is in his last year — yay!) we can’t work 9-5 on our business ideas. When taking on a really big project, such as Sailr, it would have been beneficial to dedicate more time to growing and building it. Although, working on your business as a side project while studying or in a job provides a safer environment to test ideas in the hope that they grow.   Landing page “validation” Don’t do it. With Sailr, we were convinced that our business was “validated” because we had 150 signups on our pre-launch website. When we launched the site only five of them signed up, and none of them paid. The best validation would be pre-selling the product to customers (even at a discounted rate). This shows real demand for the solution. Many products on Kickstarter work this way and The Grid is another great example.   Assumptions   We all have assumptions about what we think will happen. But what if they are wrong? With Sailr, we assumed that sellers would promote their own products using their existing social media outlets. This did not happen. The sellers expected Sailr to provide them with a network of buyers instantaneously. You can’t please everyone.   “Most startups fail” is indeed a truism. But we feel that within the startup community there is an over-emphasis on failing. There needs to be greater optimism and emphasis on success. Whether your business succeeds or fails, stay optimistic, focus on what you have learnt and look for the positives.   This post originally appeared on Medium. Nathan Feiglin and Naomi Feiglin are co-founders of Sailr.

Bid-based shopping platform promises fear-free haggling

12:46AM | Tuesday, 16 December

Sydney-based startup Bidz Direct has developed a new shopping platform that’s attempting to give consumers more control over pricing.   Co-founder Phil Tran told StartupSmart Bidz Direct lets buyers select an item, name the price and get an immediate list of agreeable sellers. He says the instant match means buyers can score discounts without having to search through Google for cheaper prices or endure waiting for an auction to end   “You can walk in to a Harvey Norman and see the camera you want for $200. You take a photo of it and upload it to the site for $180 and it will show you sellers that match,” he says.   Tran says the concept is based on special bid pricing for large enterprises where clients negotiate better deals on multi-million dollar accounts. After an extensive career in this field at IBM, he decided to apply it to consumers in the retail market.   Tran hopes Bidz Direct will help people save on products in a global market while making the shopping experience more efficient and enjoyable.   “If you think about the way we shop physically, now, you don’t want to haggle but you don’t want to pay the retail price so you end up walking away because you fear rejection. We’re removing that emotional fear of haggling with shopkeepers,” he says.   Tran says retailers would benefit from fee structures lower than eBay and enhanced productivity through features like auto-approval delegation where a price range is set for an item and sold automatically to any interested buyer.   Bidz Direct is set to go live in February 2015 and has raised $150,000 from private investors so far. Tran says meetings with AngelCube and investors in Silicon Valley are planned for early next year before they expand to the Asia Pacific region.   Follow StartupSmart on Facebook, Twitter, and LinkedIn.

Melbourne startup aims to make buying a car easier than ever before

12:21AM | Monday, 15 December

A Victorian startup is looking to shake up the online car buying space and has already secured $2 million in seed funding.   Cardeals2u has only been trading for four weeks, but has already quoted close to $20 million worth of vehicles.   Unlike other online car sales sites, Cardeals2u allows users to receive offers directly from car dealers instead of spending time trawling through classifieds.   Co-founder Kevin Durston told StartupSmart he has always been “a car guy” and felt like the current way of looking for car deals online was “a little frustrating”.   “If the buyer knows what they want why do they have to look at photos online?” he says.   “The online car market has been built around online classifieds. We’ve moved from the old trading post days and essentially put photographs to those advertisements and put them in an online environment. We thought there’s an opportunity to take it to the next level.”   The startup recently received $2 million in funding, led by Jason Wyatt from The Exchange Group and Aidan Clarke, founder of the 2XU performance sports clothing company. Durston says the funds will be used primarily to scale the business into a platform that can compete with some of the more established car sales websites.   “The plan for those funds is to scale obviously in Australia and potentially offshore to reach bigger markets,” he says.   “This model doesn’t seem to be well represented in overseas markets, so we believe there is a strong opportunity offshore.”   Durston says while most consumers still prefer to purchase their car from a physical dealership due to the high cost of a vehicle, around 90% of people do their research online first. He says the trick is to mould these two processes together and that it will only be a matter of time before more consumers who know what they want buy a car online in the same way that they might purchase a vehicle over the phone.   “It’s just about consumer uptake and getting in-line with what’s happening globally,” he says.   “You can already buy a car on eBay. There are plenty of opportunities for entrepreneurs out there in the tech space to look at how something is done and bend their minds to look at how it can be done better.”   Follow StartupSmart on Facebook, Twitter, and LinkedIn.

Australian innovation: Three stereotypes we need to turn upside down

10:27PM | Tuesday, 7 October

Stimulating startups, innovation and STEM (science, technology, engineering and mathematics) is critical for Australia’s economy. But we need to challenge some of our beliefs about who can and can't do these things if we want to lay the groundwork for substantive change.   I'm confident there is a growing sense of urgency around the critical link between startups, STEM and technology and Australia’s future prosperity, with tangible initiatives, focus and metrics in how these are stimulated appearing in many corporate, education and community initiatives.   If Australia is truly going to increase innovation and leverage digital tech on a global scale, then we must make some key changes. "Start ups" and "STEM" are stereotypically synonymous with a younger generation. These stereotypes are unnecessarily narrow. At some stage our ideas of who can and can’t innovate with technology (which currently exclude corporate, small business and those outside their 20s or 30s) will become self-fulfilling and self-defeating.   We need to invest in building a nation that leads in STEM and critical thinking. Australia invested just $4.5 per capita in venture capital for startups last year, compared with $120 in Israel, $85 in the US, $20 in South Korea and $15 in the UK.   We must also take steps to stimulate innovation beyond the stereotype of the young, tech-enabled crowd.   Here are three stereotypes we’d do well to reverse.   Stereotype #1 – Young entrepreneurs belong only in startups   Young entrepreneurial types start from the beginning with building a customer base or idea, and without the constraints of towing caravans of what they should adhere to. We know that a lack of business skills, networks and scale are the main reasons startups often fail, and venture funds look for these very things – previous attempts in the form of second-time-around founders, or those with prior business exposure.   What if we took entrepreneurs starting out and gave them a position in large corporates? Switch the assumption that young entrepreneurs only belong in startups and create an employment construct where, say for two years, they have a direct reporting line into leadership to work on new services or products.   It’s possible to find the right balance of new thinking, to create options from alternate perspectives, and in delivery, to combine the skills and diversity of that approach with leveraging the commercial, scale, marketing and regulatory expertise of a large corporate.   Stereotype #2 – People who work in corporates can’t innovate and don’t have a startup persona   It’s evident that after a few years’ experience and building expertise, there are corporate or medium-sized business employees who have a good balance of business experience and feel an urgency to fill a gap in the market. If they don’t, it’s often because they have financial commitments or dependents and fear if they leave the paid workforce, they’ll be locked out.   According to a Kauffman Org report, the average age of successful founders is 40, with twice as many successful entrepreneurs over 50 as there are under 25 years of age. Experienced entrepreneurs will probably have had experience in people management, scale and financial management to assist the odds in expanding.   We'd do well to reverse the cliché that those of middle age are too late to the game. Such people are experienced in business, scale and leadership and have strong relationship networks to leverage, as well as second nature digital literacy.   The suggestion is to offer more middle management the opportunity to take a leave of absence to focus on a new startup idea. Benefits to the sponsor organisation are many. An employee who has been with you for eight years would be revived and focused when they returned after 12 months establishing their own business idea. The sponsor organisation may offer a program, part salary, grant or leave without pay for the employee to have that opportunity.   It could then take first right to buy, bring the idea into the organisation under terms, partner or procure. It could be the organisation's data or API is leveraged. We know corporates aren’t short of ideas or highly intelligent people, and we know Australia needs more successful startups.   As a quick litmus test, in the PwC innovation team 80% have had their own successful startups or been working in the startup scene, with each returning to corporate life passionate about re-inventing Australia’s corporates and governments.   Stereotype #3 – More experienced people are neither innovative nor technology literate, and the business of solving problems is best left to younger generations   There’s nearly everything wrong with this perception. Reversing it, and providing the missing link, could have a profound network effect. By the time many in this older generation retire they will have been using smartphones, downloading apps – with higher mobile adoption rates than most countries in the world – and using Google, Amazon, eBay, for example, for 15-20 years.   The size of the generation ranging 50-60+ years is increasing as a percentage of population. This generation consists of people who are mostly still fit and active, will live 20 more years after retiring, have good business networks and employment experience, have paid off their assets and have access to their super funds.   As Bernard Salt pointed out in The Australian recently, the way we think about 55+ year olds is now different in an age when we live to beyond 85. Most aren't retiring, but adopting "portfolio lifestyles".   How great would it be to see this generation of entrepreneurs celebrating a new phase of their lives, and instead of being positioned as a social services consumer, becoming the innovator or mentor or partner with young Australians in business: An architect in her 60s combining with a manufacturing tech-savvy person in a 3D printing venture; or a semi-retired doctor using augmented reality for remote patient diagnosis.   Reversing these three myths and providing the missing support will stimulate innovation across the nation, leverage established human capital and accelerate Australia to fire on all innovation cylinders. Reversing each stereotype embodies diversity of thought. It would help accelerate a nation of innovators and create momentum in the economy for technology-literate people and jobs.   Kate Eriksson is the head of innovation at PwC Australia’s Digital Change services. A stalwart of the digital industry, Kate’s experience and network spans across some of the most iconic digital businesses in the world such as Google, Facebook, Skype and Twitter.

Emotions fuel Alibaba’s historic IPO

9:13AM | Monday, 22 September

The story of Chinese e-commerce company Alibaba has become almost as magical as the original Arabian story that gave it its name.   It has become compelling because of the dazzling success of its public listing on the New York Stock Exchange last Friday. Alibaba’s shares opened at $92.70, already some 27% above their listing price of $68 and ended up raising US $21.8 billion for the company, making it the world’s largest technology IPO. Alibaba is now valued at $231 billion, making it bigger than Facebook ($200 billion), Amazon ($150 billion) and eBay ($65 billion).   The curious aspect of this phenomenal success is that immediately prior to the IPO, the general US public were largely unaware of the company, what it actually did, and why it would be worth that much money. A poll held on the 18th September in the US showed that only 12% of those surveyed had ever heard of the company or the IPO. In the case of Alibaba’s IPO, what was important was not its visibility with the US general public, but with the institutional investors involved in the initial allocation of shares.   The emotional drivers of the stock market   It is easy to assume that when it comes to buying and selling shares that the large investment banks, fund managers and brokers are all acting on the basis of objective calculations and financial models. Behind the rhetoric however, are decisions based on emotions. Not only is there good evidence that emotions drive a great deal of the day-to-day trading, even in the professional and seasoned trader, but that key events such as IPOs are driven in much the same way. This is perhaps stating the obvious. The price of shares will ultimately be decided by what buyers in the market are willing to pay for them and so if there is a collective view that a company is worth a particular valuation, then it doesn’t really matter what the company fundamentals are actually saying. In the case of Alibaba, sentiment is being driven by a rich and gripping story that could well have come from the “Arabian Nights”.   Jack the hero   The hero of the piece is of course Alibaba’s founder Jack Ma who started his working career reputedly as a street seller and english teacher and last week became a multi-billionaire worth $18.5 billion. Ma is a true maverick who professes no technical knowledge and is prone to spontaneous decisions about how his money is spent. He bought half of the Chinese Guangzhou Evergrande Football Club after discussing the deal over drinks. But he has built a company that is growing faster than Amazon and is making a consistent profit, which Amazon has been unable to do.   Setting the scene   The backdrop to the story is China, where e-commerce is set to overtake the US this year, heading towards being double its value by 2016. Even before that happens, China’s online commerce is already breaking records. Single’s Day, a special online shopping day held each 11th November, saw Alibaba process $5.75 billion in sales last year. This was 2.5 times more than the total sales on Cyber Monday in the US, a special day of sales held by companies like Amazon and eBay.   Trials and ordeals in the hero’s journey   Of course, no story of the hero’s journey would be complete without the tests and ordeals. Academics have already warned that the corporate structure of Alibaba, with a few people wielding enormous power, represents an enormous governance risk. The corporate structure is partly a reflection of how the company has had to structure to get around regulations in China, but also in part to deals that Ma did with early investor companies like Yahoo and Softbank. Yahoo was forced to sell 121.7 million shares at the offering price of $68, potentially losing nearly $3 billion if they had been able to sell them on the open market later that day.   Other challenges range from normal concerns of competition through to ongoing issues with the quality of traders and fake products on Alibaba’s sites.   The Alibaba story was captivating enough to make investors clammer after their shares on the opening day. Of course, investors could also have simply been displaying the irrational exuberance that accompanies an Internet stock bubble. In any event, it is still a story that has a long way to play out and it is guaranteed to be a page turner.   David Glance does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations. This article was originally published on The Conversation.   Read the original article.

Airbnb appoints country manager for Australia and New Zealand

8:01PM | Monday, 25 August

Airbnb has announced the appointment of Sam McDonagh as country manager for Australia and New Zealand, in a move to boost local awareness of the accommodation company.   A native from Perth, McDonagh has over 20 years’ experience in senior management roles at companies including eBay and iiNet. He also co-founded Quickflix in 2003.   McDonagh will also be a tasked with ensuring Airbnb is providing Australian customers with unique travel experiences within Australia and around the world.   “Australia and New Zealand are incredibly important markets for Airbnb both in terms of domestic and international travel,” says Varsha Rao, head of global operations at Airbnb.   "Sam has a deep passion for travel and a great track record growing companies that are focused on strong customer communities, which will make him a great asset to Airbnb.”   According to Airbnb, it is experiencing rapid growth in the region with the number of Australian listings on the platform more than doubling in the last year alone.   Inbound travellers to Australia and New Zealand are also increasingly using the service to secure unique accommodation experiences, with the number of guests booking through Airbnb more than tripling year on year.   McDonagh will be based in Sydney and will be focused on supporting the local team in strategic initiatives and partnerships to further develop and grow Airbnb in the market.   Follow StartupSmart on Facebook, Twitter, and LinkedIn.

Australia front runner in e-commerce race: report

11:00AM | Wednesday, 30 November

Australia has the third highest business-to-consumer e-commerce sales rates in the Asia-Pacific region, according to a report by German-based business intelligence organisation yStats.com.   The Asia-Pacific B2C e-Commerce Market report paints a very different picture from a recent report from the University of Sydney, which claimed Aussie retailers are behind the eight ball when it comes to engaging customers online and at risk of losing out to overseas competitors.   The yStats report shows between 2013 and 2018, the Asia-Pacific e-commerce sector is forecast to grow by more than 20% a year, with Australia cited as a front runner in the region.   Australia had the third highest B2C e-commerce sales rates for the region, coming in behind China in first place and Japan in the number two spot.   Internet penetration in Australia was also one of the highest in the region at 80%, with over three quarters of internet users making purchases online.   The report found the travel sector accounted for around a quarter of total B2C e-commerce sales in Australia, while two of the most purchased physical product categories were electronics and fashion products, each accounting for more than 10% of the total sales.   Adam Schwab, founder of one of Australia’s biggest e-commerce players Aussie Commerce, told SmartCompany while he believes Australia will struggle to ever overtake markets such as the US, it was certainly punching above its weight.   “While our e-commerce companies are certainly not the biggest, we have some of the best players globally,” says Schwab.   The report shows the leading players in the Australian market are foreign names, such as Amazon and eBay, which are among the most visited websites in the country.   However, it said local merchants are rapidly emerging with the number of local online stores tripling in recent years.   Schwab says one of the biggest advantages the Australian e-commerce sector has over other markets is the country’s readiness to adapt to technological changes.   He says for pure e-commerce players in Australia, there is a further advantage of competing against the entrenched nature of the established retail players in the country.   “E-commerce is taking on established players who have had it easy for a long time,” he says.   While Schwab believes the established retail players are getting better at adapting to online demand, he says they had previously operated in a protected environment that allowed them to charge more than international competitors.   Schwab says e-commerce cuts out the middle man and issues such as the high cost of wages for bricks-and-mortar retail staff, making Australia more competitive on a global level.   Follow StartupSmart on Facebook, Twitter, and LinkedIn.   This article originally appeared on SmartCompany.

Australia’s listed technology sector is about to boom

8:02AM | Wednesday, 13 August

In my last article I responded to an interview in Vox with Marc Andreessen. Andreessen lamented that, in spite of a historic gold rush in technology companies, the IPO is dying in the United States due to zealous over regulation in the form of Sarbanes–Oxley, for example.   As a result, the general public is missing out on the incredible gains that were experienced in the listed US technology companies of yesteryear.   Yes, the regulators have gone too far and it is creating serious friction in the IPO pipeline. However I argued that perhaps the real reason that technology companies appear to Marc to be listing later and later is because, not surprisingly, the top venture capitalists are keeping these returns all for themselves.   It's been a relatively recent phenomenon that US technology companies have been waiting longer and longer to go public. In the US, technology IPOs of yesteryear companies went public much earlier, with market capitalisations in the hundreds of millions of dollars instead of the tens of billions.   As a result, the general public had the ability to share in the spectacular returns that technology companies can generate over time as software eats the world and industry after industry is being wholesale remapped and reshaped, with revenue growth at a speed unprecedented in history.   Even though eBay's share price went up a spectacular 163% on opening day, if you bought shares on market after this rise and held on until today you'd have made over 3500%. If you bought Amazon the day after it listed, you'd be up over 27,000%. If you'd bought Microsoft at IPO in 1986, you'd be up 66,500% today and 3000% in the first eight years alone.   Unfortunately for investors in the US, the general public is missing out. You only have to look at Facebook listing at $104 billion and Twitter listing at $24 billion to get a feeling for just how late these companies are going to market.   So who is making all the money as the stocks go from the tens of millions of dollars in market capitalisation to the tens of billions? The answer, not surprisingly, are the venture capitalists. You can't blame them for doing so, because of course their business model is to make as much money as possible for their limited partners.   There is another stock market, however, outside the US that is not subject to Sarbanes–Oxley and where technology listings are about to boom. This market is already quite a large market for equity capital issuances. In fact, as much money was raised there in the last five years as NASDAQ. The only problem from a technology company perspective is that most of the money raised there has been for resources companies.   I am, of course, talking about the Australian Securities Exchange.   Now let me tell you how this has all come about, and why now.   There is a disaster in venture capital in Australia with only around $30 million per annum for the whole of seed stage investments, $40 million in early stage and $20m in late stage. AVCAL reports there were 16 "investments" done with this grand sum of $20 million in late stage venture capital in 2013.   I am quite perplexed about how they defined "late stage" here, because the very definition of a late stage round size is usually greater than $20 million in one single investment, let alone 16. The only conclusion I can make is that these investments were triaged into bleeding zombie companies – hardly a sign of a successful late stage industry. Either that, or AVCAL has now taken up reporting of late stage investments to include lemonade stands.   Atlassian, one of Australia's most successful technology companies, just raised $US150 million in a late stage round. The entire Australian venture capital industry simply isn't big enough to fund that single round.   In addition to the lack of venture financing, a major terraforming of the economy is needed. Although we have $1.5 trillion dollars in the fourth largest pool of retirement funds (superannuation) in the world, these funds don't invest very much in Australian venture capital because none of the VCs to date have demonstrated that they can generate a return.   It's hard to claim that venture capital is even an asset class in this country, as it's missed every single major technology success story this country has produced all the way back from Radiata: Atlassian, Kogan, Big Commerce, RetailMeNot, Campaign Monitor, OzForex. The list goes on and on. For the life of me, I can't think of one they actually invested in.   The funds being invested into Australian VC come roughly equally from corporates, government and high net worth individuals. Corporate investment in VC in Australia is in decline, and with the government recently turning its tap off with the cancellation of the IIF program, I don't see a path to resurrecting a domestic venture capital industry any time within the next decade or two without a serious change in philosophy, which is not going to come from either of the two major political parties.   The incumbent Liberal party is currently implementing a program of austerity, and the previous Labor government was, at best, only interested in trying to win union votes from bailing out the inefficient and dying local manufacturing sectors. The biggest impact Labor had on the sector during their tenure was to change the laws on the taxation of option schemes, which wiped out the primary incentivisation mechanism for the technology industry (and, ironically, the primary means by which wealth is redistributed from owners to workers).   While I personally was not sorry to see the IIF go, I was hopeful that the axing of the program would be replaced with something more effective for financing technology companies down under. A better way would be through taxation reform for investors in qualifying risky technology ventures –front-end relief in the form of tax credits or a reduced rate of tax and back-end relief in the form of capital gains tax reductions or exemptions like the UK's Enterprise and Seed Enterprise Investment Schemes.   At the end of the day, the Australian government only provided $25 million a year into the IIF program, which is paltry when you consider Singapore, with a population of 5.4 million, has committed $SG16 billion ($US12.8 billion) into scientific research and development over a four year period from 2011 to 2015.   So how are Australian companies getting financed? Whilst the big US VC brands like Accel, Sequoia, Spectrum and Insight are actively prospecting down here, they are mostly just looking for cheap deals by value investing in late stage companies outside the hot money Silicon Valley market.   The investments that they have made to date, and which have been trumpeted in the media, have for the most part been majority buyouts or exits (Campaign Monitor, 99designs, RetailMeNot, etc).   A notable exception to this has been Accel's investment in Atlassian.   However, the lack of funding has not deterred Australia's entrepreneurs from building world class technology companies. Instead, they have focused on raising funds from the best source possible: selling something valuable to their customers.   This story continues on page 2. Please click below.  Almost all of Australia's best technology companies have bootstrapped all the way through. Those that did take outside funding, for the most part, didn't take it until they reached quite a late stage. As a result, we have some very well run technology companies, and some world class companies in the making.   Although I am pretty active in the startup community, every second week I am shocked to discover yet another Australian technology company that I have never heard of generating $10 million, $20 million, $50 million or more in revenue per annum. Until recently, I had never heard of companies like RedBubble, Nitro, and Pepperstone. The latter of which has, in just three years, become the 11th biggest forex broker in the world, turning over $70 billion a month through their online platform).   Because the Australian technology industry is mostly bootstrapped, it took longer to get here, but coming down the pipeline are an incredible number of great technology companies.   So if the Australian VC industry is dead, then how are these great companies going to raise funds when they need them? Well, I believe the answer is staring them right in the face. It's called the Australian Securities Exchange (ASX).   After all, what better way to fund a company than by crowdsourcing it? This is what the resources industry already does today, via the ASX. If you have an early stage speculative mining company, you don't go begging down Coal Hill Road pitching to mining VCs and spending six months negotiating a telephone directory thick preferred stock structure. No, you write a prospectus detailing what you're going to do with the money and list it on the ASX.   Likewise if you're BHP or Rio Tinto, you can go to the ASX and the market is deep enough to raise billions. Crowd sourcing equity from the public has been done successfully for decades in resources. The ASX is in the top five globally for the total amount of money raised for equity issuances from 2009-13. There is no Sarbanes–Oxley in Australia, and listing costs are quite low. (In Freelancer's IPO, the underwriting fees were $450,000, legal fees were around $100,000, and investigating accountants cost about $50,000.)   Why go to a venture capital middleman unless they are a rockstar with solid operating experience that can add demonstrable value in some way?   I believe that Malcolm Turnbull will bring in legislation to allow the general public to crowdfund early stage ventures without a registered offering document, as is starting to happen elsewhere around the world. This will generate further interest and appetite in investing in technology companies from the general public which already actively takes a punt on speculative, early-stage mining companies (not to mention the Melbourne Cup).   At the moment, to invest in companies without a registered offering document you need to be a "sophisticated investor", which is curiously defined as a person having income of $250,000 per annum in each of the last two years, or net assets of $2.5 million.   I don't know why being rich makes you automatically sophisticated, and being poor means you’re incompetent with your money, but I'm sure that something sensible will happen here. If, by miracle, we see some taxation relief for technology investments, then this will be accelerated.   But I'm not holding my breath, even though the Australian government used to provide some form of taxation relief for investors in the mining industry.   When we were considering listing Freelancer on the ASX, many people gave us the usual regurgitated responses as to why it wouldn't work; investors here don't understand technology and that we would trade at a discount compared to US markets.   Professor George Foster from Stanford Graduate School of Business showed some time ago that country specific factors were a lot less important than company-specific financial statement-based information in explaining valuation multiples in an international setting.   Markets are increasingly globalised. It's almost as easy for a US investor to buy Australian shares as US ones. Money flows to where it gets the greatest return for a given risk profile; basically if arbitrage exists, someone will take it. Our stock going to $2.50 from a 50 cent issue price in the biggest opening in the last 14 years and third biggest opening ever on the ASX for an issuance larger than seed size is testament to the amount of pent up interest amongst the general public to invest in technology.   We took a calculated risk – nobody wants to be the first to try something new. But so far it has paid off.   It’s great to see the sector now heating up with recent listings from companies like Ozforex, iSelect, iBuy and MigMe (up 95% yesterday on their IPO, and like I did, broke the bell), and with WiseTech Global, Vista Group, 1-page, Covata, BPS Technology, Grays Australia imminently coming down the pipeline.   I suspect Ruslan Kogan will also be considering his options given the tremendous effort he has done bootstrapping Kogan to date. What surprised me is that the process was significantly easier, quicker and resulted in a more equitable and transparent capital structure than what I have experienced in any of the dozen venture capital financings I have been involved with in the past.   Projecting forward, I think that the ASX will be the primary way in which technology companies raise equity in this country in the future. The ASX realises this as well, and is moving to position itself as a regional hub for the Asian technology sector.   If it is successful—and I think there is a good chance it will be—it will cover a massive market. There are significantly more people in Asia (with dramatically rising incomes), significantly more micro, small, and medium enterprises (MSMEs). It’s a much bigger market for many industries, and there are a lot more mobile phones than the US, to draw comparison to just a few metrics.   The ASX is in a fantastic position to capture this opportunity. In the second half of 2013 a total of 14 technology companies listed on the ASX. Since January 2014 there has been 55. In the entirety of 2013, a total of 59 companies were financed by Australian venture capital.   This is the future for financing technology companies in Australia.   Matt Barrie is chief executive at Freelancer.com

Online freelance market is like “eBay in 1997”, says Matt Barrie

8:21AM | Monday, 11 August

Freelancer is dropping its minimum jobs price from $US30 ($A32.30) to $US10 ($A10.70) to make its platform more accessible to users in both developing and developed countries.   The company announced its financial result for the first half of the 2013-14 financial year today, with record revenue of $11.9 million, a 41% increase on the same period last year.   The company posted a net operating loss after tax of $600,000, which Barrie says was the result of accelerated re-investment in future growth and expanding its international footprint.   Freelancer currently has almost 12 million verified users. Freelancer CEO and chairman Matt Barrie says last year it added three million users, three out of four of which were from the developing world.   He says dropping the minimum job price to $US10 will make Freelancer more accessible to the roughly five billion people that are earning less than $10 a day.   “A huge amount of people can now work in tech, in areas where it would normally be unavailable to them,” Barrie says.   “It’s basically enabling people to rise up out of a low standard of living, and in some circumstances poverty. It’s allowing them to create businesses and put money back into their local economy.   “We continue to have the same strategy, to have the widest selection of freelancers at the lowest prices.”   The company added 1.8 million new registered users, up 54% on the corresponding period last year, while there was also growth in projects and contests posted, which were up 30% on last year.   “The space feels like it’s eBay in 1997,” Barrie says.   “We have continued to focus on re-investment in key areas of the business, such as product development, to drive future growth in the company’s broader marketplace offering and executing on strategic acquisitions where appropriate.   “The half-year results are extremely pleasing, with all key metrics in the online marketplace growing strongly and all categories of work within the marketplace performing well.   “The record revenue result is a measure of this performance as a whole.”   Barrie says for the rest of the year the company will continue to focus on improving scalability, strengthening the team, expanding its marketplace, product development particularly mobile, and expanding across regional and multilingual markets and job categories.   “The company expects growth to continue for the foreseeable future,” he says.

Free to a good home: The startup turning trash into treasure

8:00PM | Sunday, 10 August

There has long been a breed of urban scavenger that has taken great delight in searching through the collection of old furniture, broken appliances and other odds and ends that gather by the kerbside on indestructible rubbish day.   It seems there is no shortage of people trying to find a treasure amidst someone else’s trash by giving preloved goods a second lease on life.   Now a startup called Ziilch is updating the concept by taking the old goods ‘on the nature strip’ online.   Ziilch founder and managing director Michelle Power told StartupSmart describes Ziilch as being an online marketplace, like eBay, except with one key difference – everything’s available for free.   “It’s been operating for three years now. I originally had the idea in 2008 or 2009, when renovating my home,” Power says.   “I had a lot of items being thrown out because they weren’t suitable for donation.”   While Ziilch is a national website, Power says its user base at this stage is the strongest in its home city of Melbourne.   “We have a very active community across Melbourne of just under 50,000 members, who have posted just under 17,000 items in total,” she says.   Aside from both being free to browse and offering free goods, it is also free to place classifieds on the site. The only catch is that users need to organise their own collection.   Power’s fellow director, Don Milne, explains the business generates revenue through other forms of advertising.   “Our revenue stream at the moment mirrors Gumtree. We use traditional Google ads, as well as some charges for premium listings,” Milne says.   With growing concerns about the amount of waste generated by consumer culture, Milne predicts the demand for the service is set to grow.   “We see Ziilch as becoming a household name over the coming years,” he says.    Image credit: Flickr/nahemoth

Alphatise gets ready to take on e-commerce giants by “putting the consumer in the driver’s seat”

8:00PM | Monday, 4 August

After two years development and having already raised $3 million in funding, Sydney-based e-commerce startup Alphatise has launched.   Alphatise’s smartphone and web-based app allows consumers to request a product they want, indicate how much they’re willing to pay for it, and then gives sellers the opportunity to match that deal.   If 10 people want to buy a TV for $800, sellers can offer all 10 that deal, or give it to the first five.   Sellers are charged a 4% fee of the product price to access Alphatise consumers.   The startup was founded by friends Paul Pearson, Richard Frey and Ben Nowlan, who says it has the potential to be a powerful platform.   “What you’re getting is an e-commerce platform that allows you to buy what you want and have a say in what you pay,” Nowlan says.   “Putting the consumer in the driver’s seat becomes an exciting prospect.   “From a seller perspective, we’ve become fairly disruptive from that side as well. They can actually see customer demand, and we move away a lot of the noise from the market.”   The startup counts eBay and Amazon among its competitors, which Nowlan says are basically all companies operating in the online retail space.   One more direct competitor is Greentoe, a US startup out of Y Combinator which launched recently and offers a similar service.   Greentoe shows its users an average price for the product they’re after from a bunch of vetted online retailers, and allows them to say what they’re willing to pay, and sellers can accept that price.     Alphatise’s launch marks the first time customers get a chance to use the product, Nowlan says. Because the platform needs to be large it wasn’t possible to offer it as an MVP, although he says in many ways that’s how the platform will be treated in the weeks and months after launch.   That’s not to say the Alphatise team didn’t have an MVP, theirs was just the absolute minimum.   Alphatise’s MVP was essentially a bit of paper, Nowlan says.   They polled various people by showing them a grid of products and getting them to tick the ones that they wanted and write down the price they would pay to buy it right then and there.   “We found consumers would often put down they would buy the product now if it was within a 0-15% price variable,” Nowlan says.   Armed with this research the team were able to approach investors and secure investment.   Since beginning in 2012 the company has raised $3 million in funding and plans to open a Series A round in the coming months.   For the platform to really thrive it needs a large user base and Nowlan says that is the biggest challenge for the startup moving forward.   With that in mind, the startup is aiming for 100,000 Australian users by December.   “We fully acknowledge that’s our biggest challenge, getting the demand and getting the businesses to meet that demand.   “(Then) you’ll be able to create a wish for something and set the price, and have that demand met in minutes. Once we do that it becomes a different game.   “We have ambitious goals, but that’s exactly what Australian startups need to do to be successful.”

Hackers show the dangers of USB thumb drives, but this may be nothing new

8:32PM | Monday, 4 August

As confirmation of just how vulnerable we all are to computer malware, two researchers presenting at this week’s Black Hat hacking conference in Las Vegas will demonstrate that we can no longer trust the ubiquitous USB thumb drive.   Karsten Nohl and Jakob Lell from security consultancy SR Labs will demonstrate how they have put undetectable malware onto a USB drive which, when plugged into a computer, can do a variety of bad things. In one case, they will show how the thumb drive can act as if it were a keyboard, and issue commands to download and install malicious files onto the computer. In another example, they will show how the USB drive can be converted into a network drive and hijack internet traffic from the computer.   The idea of malware infected USB thumb drives is not new. In fact, one study has shown that around 26% of Windows infections are as a result of infected USB drives. The difference here however is that the malware is not carried on the drive where it is detectable by anti-virus software.   Software that drives USB drives   Most computer users won’t be aware that USB drives are tiny computers in their own right. There is software (called firmware) that controls the USB drive and is responsible for transmitting and receiving data from the computer when asked. Nohl and Lell have shown that it is possible to replace this firmware with code that can do a range of things like pretending to be a USB keyboard or network card. The difficulty with detecting problematic firmware is that a computer has no way of directly scanning the firmware without the firmware knowing.   Is it really that new a threat?   It is possible that this type of exploit is not actually that new and certainly security agencies like the NSA have been aware of the possibilities for some time. In the Snowden documents, a product called Cottonmouth involved a modified USB cable that could infect computers and act as a wireless bridge to further surveillance systems. There are versions of Cottonmouth that don’t need modified hardware.   On a more prosaic level, other scammers have exploited an element of this before with so-called “Fake Flash Drives”. These are USB drives that have been modified so that they appear to the computer as bigger drives than they actually are. Something appearing to be a 16GB flash drive is actually an 8GB drive and the computer will happily try and store files on space on the device that doesn’t exist. These scammers are rife on Ebay even today.   What does this mean for using USB drives?   What this all means is that there really is no way of knowing whether to trust a USB drive not having been infected. USB drive manufacturers could implement measures to try and protect against this type of tampering. The code could be cryptographically signed, effectively adding a manufacturer’s signature that computers could check before trusting a device. Given the importance of preserving what is an enormous market, approximately $2.5 billion worth of USB drives are sold globally each year, it would be in manufacturers’ interests to provide more security around these devices.   In the meantime, it is worth being careful with USB drives. It is always the case that you should never use drives that you have found or even been handed out for free at conferences or other events. If you decide to share a USB drive with colleagues or friends, then it may actually be worth letting them keep the drive. Of course, they would need to trust you in turn, but given that you at least know of the problem now, you will be that little bit better prepared.   David Glance does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.   This article was originally published on The Conversation. Read the original article.

Winning BattleHack not as easy as (Raspberry) Pi

7:48AM | Tuesday, 29 July

A late night hunt for a replacement Raspberry Pi and a sleepless night led to victory for a team of developers known as Gearbox in PayPal and Braintree’s Sydney BattleHack.   The team won the 24-hour hackathon with an Internet of Things solution that allows users to open a secure box, which would be placed in public parks and enable access to sports equipment that could be paid for using PayPal.   The team cooked the Raspberry Pi they were using during the hack, which sparked a frantic online search for a replacement.   A shout out on social media found an eBay seller willing to meet them late on Saturday night and the project was saved.   #GearBox just blew a @Raspberry_Pi at the @PayPalDev #battlehack in Sydney. Can anyone locally sell us one?— Tom Frauenfelder (@tomfrauenfelder) July 26, 2014   The senior global director of the PayPal and Braintree Developer Network, John Lunn, who was also one of the competition judges, chuckles when recalling the team’s frantic search, but says it’s all part and parcel of a hackathon.   “We had some dramas, but we had a fun time,” he says with a laugh.   BattleHack Sydney is one of 14 BattleHacks around the globe and the Gearbox team will now be flown to San Francisco to compete in the BattleHack World Finals in November with a $US100,000 prize up for grabs.   It’s the second year BattleHack has been running, but the first time it’s visited Australia, and Lunn says the Gearbox team should have a good chance in the world finals.   “We didn’t know what to expect, but were happy to get the a variety of different people, from young university students to more senior people from university, people that worked corporate jobs at large companies in Sydney and people who were working on their own startups,” he says.   “The quality was fine. We had a nice mixture of hardware and software and a good completion rate, the hacks we saw were finished.”   Midnight is here and so are many of the hackers #BattleHack #Sydney 13hrs to go. pic.twitter.com/KotmO7r0qi— Jason Cartwright (@techAU) July 26, 2014   BattleHack teams were tasked with coming up with a solution to a local problem that would make their city a better place to live, using a mobile application that incorporates PayPal or Braintree.   Lunn says there was a great mix of ideas, including a number of which aimed to help the homeless, one of which looked at how homeless people could take donations once the world moves away from physical money, while others dealt with street art and crowdfunding.   “I am so pleased we could bring BattleHack to Australia this year to give Aussie developers a chance to show off their skills,” he says.   “The creativity and quality of code we saw proved that Australia has world-class developer talent.”   Follow StartupSmart on Facebook, Twitter, and LinkedIn

Your Fork pivots to an online grocery store with a difference

7:49PM | Tuesday, 15 July

An Australian startup has pivoted away from the delivery of pre-made meals and instead decided to tackle on-demand groceries.   Your Fork began as a network for delivering home cooked meals, launching late last year after a successful testing phase in Sydney. Then in April the business started selling desserts and sweets in order to avoid scalability issues – one of them having to rush to deliver food while it was still warm.   Co-founder Roshan Mahanama told StartupSmart there were a few reasons for changing the direction of the business a second time.   “The reason we pivoted so often and so fast in the past nine months is you kind of know when you’re getting traction and when you’re not,” he says. “The first one was almost like an eBay or Etsy. The insight we got was the prices were all over the shop and someone needed to add trust to the marketplace. Trying to find good quality home chefs was really hard.”   The business has now grown into a service where users can shop for ingredients for a specific meal in just a few clicks and have them delivered in one hour. One of several on-demand delivery startups to pop up in recent years, Your Fork was selected as an Australian startup to watch in 2014.   Mahanama says he feels like the latest reincarnation of Your Fork is here to stay because he can’t imagine life without it.   “It’s reinvented the way I think about home cooking,” he says. “It’s all the convenience of takeaway with all the nutritional benefits of a home cooked meal.”   Your Fork has uploaded more than 50 recipes that customers can choose from, including curries, stir-fries and pasta. However users are able to share their own meals and Mahanama hopes this will build a strong peer-to-peer network.   One of differences between the business and other delivery-based startups is Your Fork has to go and get the items for the customer before bringing it to them – rather than delivering straight from a warehouse. Mahanama says this has resulted in him learning “a lot” of valuable lessons.   “You’ve got to be really accurate to what you say,” he says. “You can’t say you’re going to be there in an hour and be there in an hour and a half.”   When it comes to pivoting, Mahanama says it is all about fostering the right environment to be able to do so quickly and effectively.   “Look at the data,” he says. “You’ll know when you don’t have traction. Be really, really critical – sometimes it’s a marketing problem, sometimes it’s a structural problem.”   Mahanama also says a great way to test whether or not you need to pivot is to take your product away from customers for a short while. If no one responds – or “cries” as Mahanama puts it – then it is probably worth shifting to a different idea or business model.

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