Paul Wallbank – Brilliant Communications

Tag: investment

  • High hopes for the innovation dreamtime

    High hopes for the innovation dreamtime

    The Turnbull government and its ministers face a big test in the upcoming innovation statement this week and will need to follow through with tangible results.

    In 1976 Clive James visited Sydney fifteen years absence from his hometown. In his book Flying Visits he described the changes that had happened during his time away including some observations on the nation’s thriving movie industry with the comment “premature canonization is the biggest threat facing the young Australian film director today.

    James’ words came back to me at an Australian Israel Chamber of Commerce in Sydney last week where the hosts were gushing over 25 year old Wyatt Roy, the Federal Assistant Minister for Innovation, last week.

    There’s a lot to like about Wyatt Roy, he’s an intelligent and articulate minister with a self depreciating sense of humour and a touch of humility – qualities generally not associated with Australian politicians – though the old guard gushing over his youth and the achievements of his two months in office can be embarrassing.

    In many ways the fawning over Wyatt Roy is emblematic of the general sense of relief in Australian business now the Turnbull government has left behind the nightmare of the vindictive and petty middle aged adolescents who made up the Abbot administration while also being a world away from the backward looking grey Liberal Party stalwarts of the Howard era and the self interested suburban Labor apparatchiks of the Rudd and Gillard years.

    The question though is whether the hopes pinned on Turnbull and Roy can be realised which is why there are so many hopes being pinned on this week’s expected release of the government’s Innovation Statement laying out a policy framework for the nation’s economic pivot.

    For Australia the stakes are high, the resource sector is collapsing and the property market – the real key to the nation’s suburban prosperity – is looking brittle. Policies that encourage new businesses and industries are now essential to maintain the country’s living standards.

    To date Canberra’s policy makers have not managed the economic changes well; the Intergenerational Report earlier this year blithely ignored the effects of technology on the future workforce and its implications to incomes, jobs and government budgets, while three years after the Gillard government’s Australia in the Asian Century report it’s remarkable how dated the document with its underlying assumption of never ending resources demand now looks.

    So the Innovation Statement matters in laying out a strong view for the future of Australia however even if it does prove to be a strong, forward looking document, the Turnbull government will need to follow up with substantial actions.

    The real risk with all the talk of innovation is that it will be siloed, along with IT, as “something the geeks and young kids” do. For the this week’s announcement to be anything more than more fine words from the Innovation Bureaucracy then it has to be backed by strong reform to taxation, social security, immigration and corporate governance regulations.

    While the canonisation of Wyatt Roy and Malcolm Turnbull may well be premature many Australians, including this one, are hoping those hopes are well founded. This week’s Innovation Statement will be the first test.

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  • Creating a digital spaghetti divide

    Creating a digital spaghetti divide

    Are we seeing a new digital divide develop between big and small businesses, particularly in areas like retail and hospitality?

    This thought occurred to me during a radio spot earlier today where we were talking about Apple Pay’s Australian launch. Many small businesses don’t have the capital or expertise to implement many of these new technologies.

    A number of factors contribute to this including the legacy systems installed in small businesses, the proprietors having a poor understanding of technology and, most importantly, the lack of either capital for reinvestment or cashflow to fund the monthly charges that are standard for cloud computing services.

    The expensive cloud

    One unstated factor with cloud computing services is how the cost of services add up. For example a Premium 10 Xero customer with Receiptbank attached is looking at a $100 a month in charges. It’s not hard to see how adding cloud based Point of Sale, rostering and customer service software could see a small business incurring $400 a month in fees, throw in Salesforce and you could be looking at a very expensive exercise.

    No doubt for those companies that can afford these services this is money well spent but for many margin or low turnover businesses, the charges could be a deal breaker.

    Spaghetti Junction

    Another aspect to the cloud services is the myriad of different platforms that need to be stitched together in most businesses, one cloud service founder calls it “digital spaghetti.”

    Managing this bowl of complexity isn’t easy and raises a number of business risks as different services apply varying policies and practices to the data they collect and store. A breach or service failure at one could cause a ripple effect through all business operations.

    For many small business owners, particularly older proprietors, managing this complexity is intimidating if not downright scary.

    It may well be there’s a number of opportunities for a canny service provider to offer an out of the box small business solution, but for many older small operators with limited capital and restricted cashflow affording such a product might also be difficult.

    The risk though for those businesses is they will find themselves falling further behind as markets, consumer demands and the workforce’s expectations evolve. A business digital divide could be fatal for those caught on the wrong side of it.

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  • Israel and the long term tech view

    Israel and the long term tech view

     

    Things are going crazy in the Israeli startup scene as investors and multinationals and startup pile into the country’s tech sector.

    In order to understand what’s happening I spent the morning at The Bridge, an Israel Australia Investment Summit staged by the Israeli Trade Commission and Invest in Israel.

    Of the morning sessions, the two panel segments gave the most insight into what’s driving the Israeli tech sector with Nimrod Kolovski of Jerusalem Venture Partners emphasising the industry-g0vernment-academia collaboration, military spending and tight personal networks.

    “In Israel we can make two phone calls – to someone who was with them in the army and to someone who they worked with at the last company. You don’t get a chance to repair your reputation in Israel,” says Kolovski of those tight personal networks.

    Kolovski also highlighted an important part of venture capital culture – just as much in the US as Israel  – is the willingness to admit failure, “if you don’t then you’ll lose credibility”.

     

    The broad message from the morning’s sessions is that the Israeli tech sector happens to have the combination of factors that aligns with the Silicon Valley and US corporate view of the world coupled with a strong underpinning of high level, defense led research and personal networks forged to a large degree during National Service.

    For a long time I’ve been skeptical of the Israeli and Silicon Valley model being replicable in other countries, particularly Australia, and the morning’s sessions only confirm that view. There is more to this which I intend to explore in some future blog posts.

    The lesson for other countries though is that personal networks, research and access to capital matter in creating new industry hubs. The challenge for each country or region is to find the combination that plays to their society’s and industry’s strength.

    For Israel, it’s hard to see how their tech sector isn’t going to continue to thrive in the current climate however it’s the result of long term focused investments, research and policies. Taking the long view is probably the most important lesson of all.

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  • Living Social and the group buying unicorpses

    Living Social and the group buying unicorpses

    Four years ago group buying sites were the hottest businesses in startup land with the market leader, Groupon, being lauded as the fastest growing company in history and competitor Living Social following close behind it with a $4.5 billion investor valuation at its 2011 peak.

    This week the New York Times has a feature on the dire straits Living Social now finds itself in as the company slowly fades away, now only employing 800 people after boasting 4,500 staff at its peak.

    Living Social’s big lesson is the risk in chasing customers at all costs. Unfortunately for most of today’s ‘unicorns’ that’s a key part of their growth strategy as an important metric is how many new users are coming on board – the fact a company is making anything from them is largely irrelevant.

    While Living Social, and Groupon, are two of the early ‘unicorpses’ – fading or failed billion dollar unicorns – undoubtedly there’s more to come as market realities hit many of today’s chronically overvalued tech startups.

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  • Testing the limits of Silicon Valley equity

    Testing the limits of Silicon Valley equity

    Ride sharing Lyft is beginning to show all the weaknesses in the current Silicon Valley startup equity model as the company sees ‘ratchet clauses’ invoked by investors seeking their returns dilute the stakeholdings of earlier supporters.

    One thing a lot of people will be the effects on early employees as the equity they took in lieu of a market wage is eroded by the increased stake of later venture capital investors.

    What we’re seeing with Lyft are the limits of the 5-4-1 model of the current tech boom where for every ten dollars invested; one dollar goes into product development, four into customer acquisition and five into marketing.

    The idea in the marketing is to attract more investors and ultimately to seduce a trade buyer or impress the stock market ahead of an Initial Public Offering.

    In Lyft’s case the company is spending $96 million a year on marketing, twice its income. The company has raised a total of $800 million since it was founded giving the company a valuation of $2.5 billion.

    As we’ve discussed before, these billion dollar valuations are as much a curse for a startup as a mark of success. Now the realities of a being unicorn are dawning on the employees who are often the oldest shareholders.

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