Paul Wallbank – Brilliant Communications

Category: Investment

  • Crowdfunding the energy revolution

    Crowdfunding the energy revolution

    “We have no shortage of investors,” says Tom Nockolds of Sydney community solar farm group Pingala in an Australian Broadcasting Corporation’s report on small business power projects.

    The ABC’s report focuses on Bakers Maison, a suburban Sydney bakery that raised 400,000 dollars to extend its solar solar electricity system to slash its power bills and promises investors a seven percent return on investment.

    Seven percent is very good in these days of low yields so it’s not surprising investors are lining up for projects.

    It’s also an indictment on the modern banking system that smaller businesses like Bakers Maison have to issue debt directly to the market rather than getting a loan, which would have been normal a generation ago but today Australian banks would rather lend to property speculators than productive businesses.

    This isn’t to say such fund raising is without problems as there is a real risk of fraud which Australia’s prescriptive fund raising laws are designed to avoid, even at the cost of stopping genuine investments.

    “We’ve had to duck and weave our way through the regulations to set up this kind of operation,” says Warren Yates of Clear Sky Solar Investments – another volunteer group – about the laws which were developed after the financial scandals of the 1960s mining boom and the 1980s entrepreneur period.

    As a consequence, the ABC story points Australia is lagging jurisdictions like Germany, Denmark and Scotland in developing these schemes.

    With the banking system having left the field of funding growing businesses and responsibility largely falling on volunteers to provide services, reforms encouraging community crowdfunding need to be developed to provide capital to industry and local initiatives.

    That many of the current reforms in this area such as America’s Jobs Act or Australia’s Innovation Agenda focus on a narrow set of industries – specifically the tech startup sector – which means we’re missing most the value in an evolving economy. A bakery, factory or hotel deserves the same investment advantages as the next potential tech unicorn and they could employ just as many people and deliver even more benefits to the broader economy.

    New technologies have always demanded new investment and business rules and we’re seeing those pressures developing today, all of us have to demand regulators and politicians pay attention to the changing needs of our economy.

    With investors clamouring for new opportunities and businesses wanting capital, it would be a tragedy to miss the possibilities of today’s technological, financial and energy revolutions.

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  • When the middlemen get desperate

    When the middlemen get desperate

     

    Sometimes business practices go bad. A good example of this is a survey of restaurant reservation systems by the Marketing4Restaurants website.

    A striking allegation in the survey is how some of these services advertise on Google against their own clients, called ‘adwords arbitrage’ by one competitor to the established booking services.

    One of the failed promises of the internet was the removal of the middlemen. Many of us thought the web would enable businesses and individuals to communicate directly to the public without the need for intermediaries.

    We were wrong, rather than eliminating middleman the internet gave birth to a new breed of bigger global breed with the rise of Google, Facebook and Amazon being the most prominent.

    The success of the ticket clipping culture has seen thousands of platform services and online exchanges that do little more than try to lock small businesses and contractors into into their systems for little if any benefit.

    However advertising against your own customers as Open Table and Dimmi are alleged to do is another level of bastardry and, at least in Australia, quite possibly illegal.

    Even if this behaviour does turn out to be within the letter of the law, a business competing against its own customers is being run by ethically challenged people and is almost certainly doomed in the medium term – what client is going to pay to subsidise its competitors?

    As internet startups struggle to justify huge investor valuations we can expect more behaviour like this. Hopefully though most of those businesses, and the investors who fund them, are doomed.

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  • Juicing innovation

    Juicing innovation

    Every tech boom has its excesses and it’s hard to go past the Juicero as the most egregious of today’s mania.

    A number of high profile investors, including Google’s venture capital arm, have poured $120 million dollars into the internet connected device that squeezes juice from pre-prepared pouches of pulped fruit and vegetables.

    Bloomberg found the devices don’t a great deal as the juice can be squeezed out of the packs by hand, which is just as well given the microchipped pulp containers can be disabled by the manufacturer.

    While the Juicero aims to be the juicer equivalent of the Keurig coffee capsule, the device’s expense, built in obsolescence and unnecessary waste is emblematic of everything  that’s wrong with the current Silicon Valley culture.

    The fundamental question of any business idea is ‘what problem does this solve?’ It’s hard to think of anything the Juicero fixes.

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  • Bootstrapping to success

    Bootstrapping to success

    One of the downsides of the current tech startup boom is the obsession with investor funding, the race to be a billion dollar ‘unicorn’ like Uber or AirBnB obsesses most of us reporting on this space.

    The paradox is while we gleefully report businesses raising hundreds of millions of dollars at ever increasing valuations, we’re also discussing how the cost of entering industries or launching new companies is collapsing, making it easier to launch a venture than every before.

    Which leads us to good old fashioned ‘bootstrapping’ – funding a business’ growth out of sales.

    A recent story I wrote on Sydney based HR tech company Expr3ss! reminded me of that where owner Carolyne Burns described how she financed her business initially through the sale of her house and has never taken a cent from investors over a decade of profitable operations.

    Bootstrapping is the traditional way generations of business owners and entrepreneurs have funded their ventures and it’s only in recent years with the rise of the tech startup that venture capital or private equity has been seen as investment sources for most small businesses.

    That rise of VC and PE investors though could be partly due to the banks stepping out of their role of financing small businesses as they’ve focused on financial engineering and funding speculators.

    Also driving things in the last decade has been the flood of cheap money that’s washed across the world as governments and central bankers try to stave off deflation.

    Many businesses needing money to fund capital investment or expansion have found it’s become harder to go to banks or traditional investors and that partly explains the rise of VC’s, Private Equity and the range of new online lender and crowdfunding platforms.

    Venture Capital and investor money though never really comes cheap and having raised funds from investors, a founder or business owner’s job becomes as much about managing investor expectations as running the company.

     

    For many business founders, the whole reason for starting their own company was to run their own show. So answering to a bunch of investors defeats the purpose of going on one’s own.

    Carolyne Burns’ story is a reminder that the best, and cheapest, form of business financing is profitable sales. It’s something we should remember in an age that celebrates loss making companies dependent upon indulgent investors.

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  • Beating the shock clock

    Beating the shock clock

    With a range of tech companies floating as corporations lose their appetite for acquisitions, companies like Boomi which was bought by Dell in 2010 believe they have an advantage over competitors like Mulesoft which have to answer to the public markets at sky high valuations following their recent stock market listing.

    If Chris McNabb, CEO of Dell Boomi, is concerned about his competitor’s successful IPO, he wasn’t showing it when he spoke with Decoding the New Economy at a restaurant in a Sydney office park last week. With Mulesoft’s stock popping 45% on the first day of trade, attention was on how his company would react to such a vote of confidence in his market rival.

    “We continue to grow very rapidly, well north of market growth rates. I think you’ll see us consolidate our position at the top of most boards in terms of the number of customers. If you look at Mulesoft’s S1 (the company’s official stock offering document) it shows them with around 1,078 customers while we have 5,300 customers. We almost have an unfair competitive advantage.”

    Part of that unfair advantage McNabb cites is the breadth of services now offered by Dell’s merger with EMC where he flagged an increased push across the organisation’s sales team starting in the second half of this year.

    “For us to say six months ago that we’d sit here and say that the merger of two 25 billion dollar plus businesses could be bedded down is really saying something. I think it’s one of the best integrations that I’ve ever seen.”

    “For Boomi it’s been terrific and continues to be terrific. We get unequivocal support from executives, Michael Dell and the ELT – Executive Leadership Team – has been nothing but a hundred percent supportive.”

    “Now we’re looking at what we can do with the EMC Solutions sales team, what we can do with our brothers in the strategically aligned businesses, specifically Pivotal, Virtustream and VMWare. What are the opportunities to go to market more collaboratively with them?”

    Boomi’s recent ManyWho acquisition fits into that range of offerings and McNabb believes the workflow platform’s role as a tool helping CIOs manage their organisations’ transitions to cloud services will be a compelling offering.

    “Workflow automation – redoing business processes in a structured and an unstructured way – was always a key strategy of ours.”

    “Hybrid IT is here for the next ten years, so how do we enable it so customers can buy all the best of breed software they want yet still have a suite like experience?”

    “We believe hybrid IT is creating challenges for CIOs and as you  get all these different cloud applications from vendors you’re breaking apart your ERP and creating an integration problem and you’re creating a data management problem along with governance, API management and orchestration.”

    “It’s our vision to give CIOs the unified platform the necessary fundamentals in cloud services to address these issues.”

    With a solid market position in North America, McNabb sees the Asia-Pacific as the big growth driver for Boomi with channel partners leading the company’s expansion across the region.

    “Worldwide EMEA is going through a ton of growth and this region (APAC) is going through a ton of growth. Our expectation is this region will have the highest growth rates – Australia, New Zealand, South East Asia, these are key target areas.”

    “If I look at things strategically and how important the channel is to us, is it’s a force multiplier as it allows you to get entire teams being certified and ready to go across regions. It also helps execute in a better way in local markets, you have to be in a region in a big way and if you can get really good certified partners you can do that much better and faster than if you’re hiring and building it yourself.”

    Returning to the topic of Mulesoft, McNabb sees not being part of a publicly listed company as one of Boomi’s big advantages.

    “We don’t operate on a ninety day ‘shock clock’, we know what the market’s growing at, we know what our platform is capable of, we know we’re going to raise our targets. There isn’t increased pressure to perform.”

    “As it turns out, those in the public eye do have the ninety day shock clock to attend to and it will be interesting to see how those first, two, three or four quarterly reviews go. I’ll certainly be an eager listener to their investor calls.”

    Ultimately though, McNabb thinks Mulesoft’s IPO and it’s 45% pop on listing vindicates Dell’s ongoing investment in Boomi and the potential of the cloud integration marketplace.

    “I look at it as a terrific validation of the marketplace…. It’s good for everybody.”

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