Paul Wallbank – Brilliant Communications

Category: business advice

  • Getting fat on venture capital

    Getting fat on venture capital

    “Raising money is like ordering dinner,” says startup founder Geoff McQueen about attracting investors. “If you’re only a little bit hungry, you should only buy an appetizer.”

    McQueen was writing about his company, professional services platform Affinity Live, achieving its first round of funding. While the amount raised is a relatively modest two million dollars, the main gain for the company is getting some experienced business people on board.

    Unlike many of the high profile billion dollar ‘unicorns’, cash flow positive businesses like Affinity don’t need large swags of cash to grow. As McQueen points out, big investment rounds put pressures on management and risks the company’s culture changing “from one of discipline and taking on the world to one of comfort and entitlement”.

    Pushing out the owners

    Another risk for founders is they could end up diluting themselves out of the business they’ve built, as venture capital investor Heidi Roizen points out it’s possible for the creators of a billion dollar startup to find themselves broke.

    Roizen observes “venture capital is not free money. It’s debt. And then some”, something that’s overlooked by many commentators who think a fund raising – and the resultant valuation  – goes straight into the pockets of a company’s founders.

    Unless it’s Google Ventures doing the investment, it’s unlikely the founders will be buying Porsches after a VC round and usually the funding goes into growing the business. For many big name startups those capital needs can be huge as we see with Uber where reports indicate the company is currently losing two dollars for every dollar it earns.

    Beating the burn rates

    Most businesses though can only dream of burn rates in the hundreds of millions a year and their needs are far more modest illustrating McQueen’s point about excess capital.

    As we saw in the dot com bust it was the lean and focused companies that survived the downturn, there’s little to think the next industry shake it will be different. That’s why companies like Affinity Live and founders like Geoff McQueen will probably still be around when the dust and hype settles.

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  • Shifting Microsoft’s culture

    Shifting Microsoft’s culture

    “What would be lost if we disappeared?” is the question Microsoft CEO Satya Nadella claims is driving the company’s direction in his latest memo to employees.

    In the email obtained by website Geekwire, Nadella told his staff redefining the company’s culture is key to success, “we can do magical things when we come together with a shared mission, clear strategy, and a culture that brings out the best in us individually and collectively.”

    That culture though is not static and Nadella is describes how the company needs to focus on helping its customers through its cloud and Windows based products.

    For Microsoft this is not new, the change from a desktop and server based licensing business to one dependent upon cloud subscription services has been a huge change for the business since the iPhone was released nearly a decade ago.

    The challenge for Nadella however is to keep revenues coming in as the river of gold that was Microsoft’s Windows licenses slowly dries up.

    One of the biggest changes to Microsoft’s culture could be in coming to terms that it isn’t such a huge and powerful corporation any more.

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  • The Chinese sock fallacy

    The Chinese sock fallacy

    “We have an addressable market of four hundred million dollars a year. It’s a huge opportunity and we could win half of it.”

    The business manager speaking – who we’ll call John – was talking about the potential market for his company’s small business product that promises to earn around two hundred dollars a year.

    How John came to the four hundred million dollar number was simple. He multiplied the two hundred dollars by the two million small businesses in Australia.

    John had fallen for the ‘Chinese sock fallacy’ where a simplistic assumption creates the illusion of a huge market. The idea being that there are a billion people in China all of whom will own five pairs of socks so therefore there’s demand for five billion pairs of socks.

    The key part of the fallacy is not knowing whether those billion Chinese or two million Aussie small businesses want your socks or cloud computing services.

    Other complications include who are the incumbents currently selling to that market, how many pairs of socks do most Chinese people own, how often do they replace them and what do they pay for a new set?

    Suddenly things get complex and the assumptions don’t look so promising as we find with John’s projection of his market.

    Looking at the figures for Australia’s small business sector with 61 percent of enterprises having no employees, it’s hard not to conclude most are contractors or consultants who mostly don’t need John’s cloud service.

    So the Chinese sock fallacy strikes again.

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  • Management in an age of information abundance

    Management in an age of information abundance

    The Twentieth Century was defined by abundant and cheap energy while this century will be shaped by our access to massive amounts of data.

    How do managers deal with the information age along with the changes bought about by technologies like the Internet of Things, 3D printing, automation and social media?

    Management in the Data Age looks at some of the opportunities and risks that face those running businesses. It was originally prepared for a private corporate briefing in June 2015.

    Some further background reading on the topic include the following links.

     

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  • Your own little part of the internet

    Your own little part of the internet

    Five years ago I did a presentation describing how a website was essential for every business’ online strategy.

    The Business Cornerstone was delivered at the time where many advisers proclaiming Google Places and Facebook as adequate for building an internet presence.

    Over time, the importance of having your own domain and website has been proved as different platforms have messed users around with changing terms, arbitrary rulings and often simply closing down services.

    The importance of doing things your own way was underlined yesterday with the announcement by Medium, and Twitter, founder Ev Williams that the company is restructuring and shouldn’t be considered a publishing platform.

    For those who’ve published pieces on Medium that the service is not a publishing platform would have come as a surprise given the company has spent the last 18 months encouraging people to contribute to their site.

    That Medium is pivoting into something else – a Facebook, an Instagram or a Google Plus – shouldn’t be surprising but once again it illustrates the interests of this services are not necessarily the same as yours and when they conflict it’s your interests that will come off second best.

    While platforms like Medium, Facebook and LinkedIn are useful for distributing your message, the best long term online presence you can have is your own website. It’s a lesson those who rely on free third party services keep having to learn.

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