Didier Elzinga

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Employee share scheme reform necessary, but current amendments not perfect

3:04AM | Tuesday, 10 March

The federal government’s proposed changes to employee share schemes is a step in the right direction but the reforms are far from perfect, according to two Australian entrepreneurs.   The reforms – which were announced in October last year – will see the changes made by the Labor government in 2009 rolled back to encourage employee share ownership and innovation.   So far Treasury has released an exposure draft of the legislation, which aims to introduce further tax concessions for startup employees and streamline the employee share scheme process for businesses.   However, Didier Elzinga, co-founder and chief executive of Culture Amp, told StartupSmart there were “a few technical problems” with the proposed legislation as it stands.   “We’re certainly keen to run our company the way you would run a company in the US and equity is a big part of that,” he says.   “Honestly the share option reforms are somewhat flawed. So we’ve gone through with our own lawyers and actually you can’t use them as a startup. There are a few technical problems with the way they’ve been drafted that make them essentially useless.”   Elzinga says while the intention behind the current employee share scheme reforms is fantastic they are also “not quite there yet”.   “My understanding is that for example they’ve targeted it at startups but one of the things they’ve said is you can’t be forced to sell your shares within X years,” he says.   “Whenever you raise money you get a drag along provision which essentially can force somebody to sell shares if we were to be bought by a large company or whatever. So we instantly fall out. So little things, points of technical law but still affect as a startup whether we can use those provisions.”   Niki Scevak, founder of the Startmate accelerator program, told StartupSmart a major problem with the proposed changes is they “haven’t been locked in just yet”.   “It’s really befuddling to me that one simple concept – which is you pay tax when you sell the shares – is such a hard concept for the government to get their head around,” he says.   “Nothing financial in the early stages shows a company is worth X dollars, so who knows what the real valuation of the company is. Why not just tax the person when they make the money? If you do that, a lot more people would give away equity.”   Scevak says if everyone gave away a lot more equity, then there would be a lot more successful companies and “a lot more tax for the tax office”.   “But it’s stuck in this micro-optimisation of trying to get the most tax in the beginning, which is self-defeating because they won’t get more tax in the longer term,” he says.   “The legislation is definitely a step forward, though. It fixes probably 95% of what was wrong – at least for early stage startups. It can be nothing but a good thing that these changes are being brought in but there are obviously ways things can be improved and made better.”   Follow StartupSmart on Facebook, Twitter, and LinkedIn.

Three ways to build a better relationship with your co-founder

11:50AM | Monday, 17 November

Like any working relationship, the bond that ties co-founders together can come under strain.   StartupSmart spoke to a number of co-founders – from a sibling duo, a couple, to a team of four – for their top tips on how to make sure you and your co-founder don’t get into a fist-fight when it comes to making tough business decisions.   1. Set aside a regular time to talk about the direction of the business   Catherine Eibner co-founded time-lapse photography app Project Tripod with her partner, and says entrepreneurs should never underestimate the power of good, ongoing communication.   “We talked upfront about what we were going to put into it, what were the roles, divvying up shares, what were the things for both of us that meant it was time to walk away and, importantly, how we would resolve disputes,” she says.   “At that point it is really important to stop and look forward. Building a business in any way shape or form is hard.”   However, the discussions didn’t stop once the pair decided to build an app together. Eibner and her partner have what she calls a weekly “Friday pub night”.   “We go on a Friday afternoon – normally around 4 o’clock – and sit down and brain-dump,” she says.   “It adds a bit of closure for the week as well so we can try to not think about work on the weekend. It makes it a bit more casual, which works for us.”   Another entrepreneur who recommends a weekly meeting between co-founders is Didier Elzinga, chief executive and co-founder of Culture Amp. The Melbourne-based HR startup has a total of four co-founders, so communication is extra important.   “Part of the reason [why we have a weekly co-founder’s meeting] is we are a 13-person company and we wear different hats in the business,” Elzinga says.   “The one thing you want to be clear about when you’re talking about an issue is whether you are talking about it as a founder or the role you fill. You have got to keep the line of communication clear inside the company.”   2. Don’t take things personally   Eibner says entrepreneurs can often be passionate, intense people and learning to separate yourself from the business can be difficult.   “One of the key things is working out how to resolve disputes about business things without making them personal,” she says.   “You have to work out between the two of you how you can distinguish between disagreeing between a tech and business decision, and not making that about the two of you disagreeing personally.”   Eibner says when two co-founders are particularly close and their startup takes up a huge chunk of their life, it can be a fine line between disagreeing with someone personally and with their idea. But she says co-founders arguing about the direction of a startup is healthy and, in a way, necessary.   “We come up with some of our best ideas when we argue them to death,” she says.   “We call them ‘highly animated discussions’. It works really well for us in terms of how we make the big decisions.”   3. Trust that your co-founders can get the job done   Tim McDougall launched elderly care and insights platform Curo with his brother Matt earlier this year. He says trust is essential to a strong and resilient relationship between co-founders, and he is lucky to run a startup with a sibling because it “too out the element of surprise”.   “We can be extraordinarily honest with each other without fear of retribution,” he says.   “If you’ve got someone where you have absolute trust in the other person, it makes things a lot more efficient when you know you can leave things in each other’s hands and know they have the best of intentions and motivations.”   McDougall says trust stops a lot of the “double-up” that can happen when co-founders have to constantly check-in with the other person to see how they are progressing.   “Take time to understand the person and what motivates them,” he says.   “Particularly in a startup environment where people aren’t taking salaries or not huge amounts of money… it’s important to understand each other’s threshold. The worst thing that can happen is one person wants to carry on and the other person wants to get out.”   Elzinga agrees, saying you have to believe in your co-founders if the relationship is to carry on for the long-term.   “If you get a co-founder, that’s for at least seven years – if not more. So it doesn’t matter what values someone is creating today… it’s how we are going to get down the path. You’re in it together and in it for the long haul.”   Follow StartupSmart on Facebook, Twitter, and LinkedIn.

Why one Australian startup put culture before funding

10:57AM | Wednesday, 8 October

Late 2013. San Francisco. As a fast growing software company with a client list that reads like a who’s who of Silicon Valley, we began talks with some of the best VCs about the possibility of doing a series A. Having their portfolio as your client base certainly makes getting a meeting easier…   Meeting with various partners and firms, our eyes were opened to just how staggering the growth rates that their most successful companies achieved. What also became apparent is that most VCs have a playbook — what to do when you need to scale something, and you need to scale it fast.   VCs’ approach to culture varies a lot. Some are very engaged in it, others less so. As one person said to me: “I’ve never been to a partners meeting talking about the culture of the company that they are considering investing in.”   The further down the path we went, the more we realised that some aspects of those playbooks felt intuitively wrong for us as a company – specifically around sales and how you build a sales team to grow revenues quickly.   It made us think — what type of company do we want to build? Are we just afraid of the hyper growth that Silicon Valley is famous for?   I talked about this at length with my co-founders — both internally and in discussion with companies that had variously raised, hadn’t raised, had grown and had shrunk.   It wasn’t until a few months later that we came to an “aha” realisation. At Culture Amp we believe the world should be a better place to work — something we seek to achieve by building the world’s leading survey platform for People & Culture. When our customers buy our product they are meeting a need, and looking to utilise our expertise via our software, but they are also aspiring to be a better company — specifically a better culture.   I like to say “a brand is a promise to a customer, and culture is how you deliver on that promise”. For us, culture is our brand promise — if we, as a company, don’t put culture first how can we deliver on the very brand that we are founded on?   As soon as we realised that, everything made sense. Normally when you raise money you need to be able to prove you can scale your business model far enough and fast enough to engage some of the brightest people in the room. We’ve set ourselves a higher target — we not only need to prove we can scale our business model (to them), we need to prove we can scale our culture (to us). If we can’t do that then we can’t raise money — simple.   Just like the giants on whose shoulders we seek to stand (Australia’s earth shaking software companies like Atlassian, Campaign Monitor, 99Designs, Envato etc) we set out to change the world.   And we are doing this by building a culture first company.   As we head towards the end of 2014, I couldn’t be happier with the decision we made. We have tripled customers and revenue and are now growing at 10% month on month — all without taking any funding. Most importantly we have built an amazing team both in Melbourne and San Francisco.   Am I against raising money? No. The VC model consistently helps to build companies much faster, and much bigger, than could possibly happen without them. The question though has to be more than just how big? and how fast?   It has to be how well?   Will we raise in 2015? Maybe. But if we do, it will be to scale our culture — which is our business model.   Didier Elzinga is CEO/Co-Founder at Culture Amp. This post originally appeared on Medium.   Follow StartupSmart on Facebook, Twitter, and LinkedIn.

Australian HR start-up named as one of the coolest vendors of 2013

6:12PM | Tuesday, 25 June

A Melbourne-based start-up has been named one of the coolest vendors in human capital management by international technology research group Gartner.   CultureAmp’s key product is Murmur, an online platform for managing staff and tasks in fast-growing organisations.   The software-as-a-service is used to gather and provide ongoing feedback, track progress and use data to help companies understand their workforce.   Founder and chief executive Didier Elzinga told StartupSmart CultureAmp’s success is due to a shift in how people work.   “The key to unlocking productivity and getting value out of people is culture and creating an environment in which people can and want to operate,” he says.   “If you look at the work we’re asking people to do these days, it’s cognitively driven. So there is a really, really big difference when someone who is engaged and enthusiastic.”   With team members in Melbourne and San Francisco and a client list boasting big names such as Hulu and 99designs, Elzinga attributes their growth to having an idea right at the heart of several trends.   “We’re on the right wave. A lot of our customers are in Silicon Valley, and what they’ve all got across the board is they’re using data everywhere. And they’re building companies at a ridiculous pace, and the hardest thing to build in a business is people,” Elzinga says.   The idea for Murmur emerged during discussions about the lack of innovation in the human resources and people management sector.   “In the world of marketing in the last five to ten years, there has been a torrent of new innovations and people doing cool stuff with data. But if you look at HR, there’s been nothing new and different since 1993,” Elzinga says. “It was about taking marketing analytics to how we listen to our people.”   The CultureAmp team is focused on developing its core engineering staff in Melbourne, and then developing a presence in Silicon Valley over the coming years.   Elzinga says being an Australian start-up can be challenging, but it also helps create the attitudes needed to scale globally.   “It’s hard but also good that we don’t have a big enough market here, so we’re forced from day one to think global,” he says. “It’s there if you want it – go and get it.”

How can I go about bootstrapping my new start-up?

1:05AM | Wednesday, 30 January

This week’s Secret Soloist is answered by Event Arc founder Scott Handsaker.

Pulling up your start-up by its bootstraps

4:01AM | Friday, 27 April

Recently, prominent VC blogger Mark Suster was asked who his favourite bootstrapping companies were.

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