Paul Wallbank – Brilliant Communications

Tag: investment

  • Are small businesses too old and slow?

    Are small businesses too old and slow?

    Yesterday I hosted the second day of the CPA Australia Technology, Accounting and Finance Forum that looked at how the accounting profession is being affected by the changing technology landscape.

    There’s plenty to write about from the day and how the accounting profession is facing technological change which I’ll write up shortly but one theme from the day was striking – that older small businesses owners are struggling to deal with adopting new tech.

    Gavan Ord, the CPA’s policy advisor warns older practitioners are opening themselves to disruption and  the Australian business community is in general is at risk as older proprietors aren’t investing or embracing technology at a rate comparable to their overseas competitors.

    Older small business owners

    That older skew in small business operators is clear, in 2012 The Australian Bureau of Statistics found 57% of the nation’s proprietors are aged over 45 as opposed to 35% of the general population.

    Even more concerning is many of those small business owners expect to retire with a 2009 survey finding 81% were intending to retire within ten years – it would be interesting to see how those ambitions changed as the global financial crisis evolved.

    A risk to the broader economy

    This blog has flagged the risks of an aging small businesses community previously, but Gavan Ord’s point flags another risk – that older proprietors being reluctant to invest in new technology means a key segment of the Australian economy is unprepared for today’s wave of technological change.

    A key message from the CPA forum was that the shift to cloud computing is radically changing the business world as sophisticated data management, analytic and automation tools become easily available. Companies, and nations, that don’t take advantage of modern business tools risk being left behind in the 21st Century.

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  • A tale of two social media networks

    A tale of two social media networks

    This week showed the disparate

    At the time of its IPO in February 2012, Facebook claimed to have 845 million active monthly users. Eighteen months later at the time of their stock market float, Twitter boasted a more modest 232 million.

    This week Facebook reported 1.19 billion monthly active users while Twitter still languishes at 300 million, a number that disappointed the market and saw the smaller company’s shares drop 11% after their quarterly earnings announcement.

    Even more worrying for Twitter, and competing networks like Google, is Facebook’s success in mobile services with 874 million people accessing the service through their smartphones every day last quarter.

    So successful is Facebook in engaging roaming users that some pundits are predicting the company’s Instagram product may well overtake both Twitter and Google in mobile advertising revenues over the next few years.

    More concerning for Twitter is the company is still not profitable – of the business’ $957 million gross profit, an astonishing $854 million was eaten up in administration and sales costs which indicates their overheads are in need of some dramatic pruning.

    What is clear that Facebook and Twitter have very different user behaviour and, as a consequence, the revenue models are not the same. Twitter is never going to be Facebook.

    So the question for Twitter is what does it want to be? Certainly the current quest to drive up revenues seems doomed. Perhaps it’s time to accept the company is a smaller operation and start to plan accordingly.

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  • Stripe joins the unicorns

    Stripe joins the unicorns

    Payment service Stripe joins the unicorn club as credit card company Visa becomes the latest investor reports the Re/Code website.

    Two years ago this site interviewed John Collison, one of the Irish twins who founded Stripe about their mission to bring the payments industry in the 21st Century.

    With the Visa investment it now means two of the world’s three major credit card companies are investors in Stripe, the other being American Express, and this shows the incumbent players are acutely aware of the changes happening in the payments world.

    That credit card companies are investing in the businesses that threaten to disrupt their industry indicates the incumbents’ savvy management; while there are cultural and ethical barriers in trying to undercut the existing profitable products, having a stake in the new competitors gives companies like Visa and AmEx to remain relevant in a post credit card world.

    For Stripe, investment from what could have been their major competitors not only takes some of the pressure off the the business but also opens opportunities for technology sharing and access to bigger markets.

    Probably the most important thing for Strip with the Amex and Visa investments is they legitimise the business and the entire payments startup sector. It’s an important vote of confidence in the technologies and market.

    For the Collison twins it also helps build better businesses, as John told Decoding the New Economy two years ago, “if we just building a business to take transactions from PayPal and get them onto Stripe, that’s not that interesting. What is interesting is if we can create new types of transactions that would not have existed otherwise.”

    “By providing better infrastructure for anyone to build a global business. That will change the kind of things people will build.”

    Now more people will be looking at what they can build on these payment platforms.

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  • 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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  • Chasing the food delivery startup hype

    Chasing the food delivery startup hype

    Every few years the tech community goes through a mania for a type of business. Five years ago it was deal of the day sites led by Groupon where around the world copycats firms gleefully accepted the money of eager investors.

    Today it’s food delivery services and industry analysts CB Insights have mapped the investments of US Venture Capital firms in the sector.

    Recent years have shown that tech investors like to flock in packs and the current focus on delivery apps is just another example. So right now if you want to pick up some VC money, setup something that delivers food to people.

    If you’re lucky, the greater fool model might deliver a nice pay off as larger companies suffering from Fear Of Missing Out (FOMO) desperately grab some of the more higher profile players.

    Be quick though as the mania tends to dissipate quickly as the hundreds of Groupon copycats eventually discovered. When the hordes move on, they don’t leave much for those left behind.

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