Tag: startups

  • Building digital communities

    Building digital communities

    “When is the government going to build a startup hub in the Hills District?” Asked one of the audience following the Meeting The Future Head-on panel.

    The question was directed at Karen Borg, the head of Jobs for New South Wales, whose marquee program is the establishment of a startup hub in central Sydney.

    It’s not an unexpected question, placing a taxpayer funded project in the heart of the city risks raising the ire of suburban and regional voters who perceive the less advantaged areas being neglected while the rich are favoured.

    The limits of government

    Of those areas in Sydney and New South Wales, the Hills District is far from the poorest or disadvantaged at all so the question is how can an affluent community establish itself as an digital, or industry, hub.

    It’s likely the government won’t have much influence in what areas will become hubs, Silicon Valley’s success was largely an unintended by-product of massive cold war and space race spending while most other regions have been more due to the accessibility of suitable skills, raw materials and transport links.

    So the obvious answer to the question was ‘don’t wait for government’. Which leads to asking what can communities do when they want to create a digital community.

    Understand what you have

    The first step is to identify the strengths your community has. Which business are doing well and what does the region have in the way of education, major industries, logistics and communications?

    It’s hard, if not impossible, to build an industrial centre from scratch – and rather pointless if no-0ne in your community doesn’t have the skills or inclination – so knowing what you have is essential.

    Having mapped out the landscape and understood where your community’s strengths lie it’s time to start talking.

    Get everyone talking

    Once you understand who are the leaders, who has the skills and who has the capital in your community, it’s time to get them talking.

    A key lesson in setting up the Digital Sydney initiative was that many of the groups didn’t know of the others’ existence so one of the key aims of the project was to let the industry find out about each other.

    Stimulating the growth of local networks is probably the easiest things a community can do to build a local industry hub.

    Find a focal point

    Having a place to get together helps build that community, this is where local governments and chambers of commerce can come into play.

    Bringing the broader business community into the conversation has the benefit of widening the base and getting local services companies – the web designers, accountants, lawyers, etc – into the emerging sector which in turn grows the ecosystem.

    That focal point doesn’t have to be a massive startup or innovation hub like the Jobs for NSW project, it could be a regular event like a coffee morning, Friday drinks or a business drop in centre.

    Engage the stakeholders

    While governments can’t create these ecosystems, they can help. How San Francisco attracted the tech community into the city from Silicon Valley and London’s support of Silicon Roundabout are good examples.

    London’s startup renaissance is an interesting case study in itself with many attributing Google’s Campus as being the catalyst for the sector’s growth.

    At a local level providing an environment for collaboration and starting businesses – such as rate relief, space for events or resource centres – can help while at the the state and national level education and long term industry policies will help.

    The corporate and academic sectors are important too, both with investment, skills development and supporting growth sectors.

    Don’t wait for government

    By definition governments are risk averse, which is not a bad thing as they are spending taxpayers’ funds, which means they are unlikely to lead these projects. As a consequence it’s up to the business community to develop the local ecosystem.

    Once there are successes and a public profile, governments will follow. Often though that support will be late and misdirected.

    Ultimately, it comes down to the community itself being what it wants to be – it’s up to the community to create the environment that encourages growth in whatever sector they think is right.

    So stop waiting for government and start talking with your local business and community leaders about what they think are your region’s strength and vision.

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  • Rethinking startup rules

    Rethinking startup rules

    What are some of the barriers to increasing diversity in the startup community’s monoculture? Yesterday we had an insight into some of the changes needed at the Women in VC forum held in Sydney.

    Samantha Wong, partner at early stage startup accelerator Startmate and Head of operations at Blackbird Ventures, described how Startmate identified some of those barriers among the 51 companies that went through the program and the steps to overcome them.

    What Samantha and her team found illustrate how the Silicon Valley model of founding and funding businesses inadvertently creates obstacles for women, older workers, disadvantaged groups and poorer people.

    Insisting on Solo Founders

    “Previously we had a rule that you couldn’t be a solo-founder. It’s too much work to do it by yourself,” she explained.

    There’s good reason for that belief as building any business on your own is hard, regardless of whether it’s a tech startup or a dog walking franchise.

    It’s understandable that investors are reluctant to get involved with a ‘one person show’, although a lack of capital is going to make life extraordinarily harder for a sole founder or proprietor.

    The myth of the tech co-founder

    “You had to have at least one technical co-founder in the team.” Samantha explained, “the reasons for this rule were historical.”

    This belief goes back to the origins of the Silicon Valley business model where companies like Apple, Hewlett-Packard, Microsoft and even Google were founded by ‘two men in a shed’ where one was the marketing or sales whiz and the other delivered the product.

    Interestingly many of the recent successes like Facebook, Uber and AirBnB haven’t had that dynamic, probably because the technology industries have matured to a point where developer and product managers are established trades or professions are easily available as well as cloud based tools making technology itself more accessible.

    So a ‘tech co-founder’ will almost certainly be useful but isn’t essential to get a business off the ground in today’s tech environment.

    Being in attendance

    “We had a blanket rule of requiring participants to be in Sydney for the full duration of the program,” says Samantha. “The reason for this we know from experience that ninety percent of the program’s value comes from that sharing which happens between founders, the support and the friendly competitive pressure you get from them. It brings the best out of you.”

    Startmate changed its policy so only one of the co-founders needs to be in Sydney. While it doesn’t solve the problem of solo founders with family obligations that don’t want to move, it does make it easier for those with dependents to participate.

    Dropping the blanket rules

    Over the six years Startmate has been running, they’ve seen a change in the nature of startups joining the program. “When the program started in 2011 we gave a small amount of money to a couple of people to build a product and start attracting customers,” Samantha said.

    “By 2016 we were attracting much later companies that already had revenue and the program’s focus became growth and fund raising.”

    “So instead of blanket rules we started to ask ‘what does this company need to grow in the next three to six months?’ Do they enough resources right now? Is the product good enough to sell? If you can get good answers to those then it’s worth considering them joining.”

    The lessons from Startmate in increasing diversity among their intake are instructive and it indicates the limits of the Silicon Valley model that favours young, middle class men over other groups.

    For the tech industry, that focus on one group is a great weakness and means investors are missing a world of opportunities. Ditching existing biases and established wisdom could be a very profitable move from everyone.

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  • Australia’s changing startup landscape

    Australia’s changing startup landscape

    Last week, the annual Startup Muster report on the Australian startup sector was released, giving investors, founders and policy makers a valuable snapshot of a vibrant sector of the economy.

    The 2016 report had 2711 responses to the online survey which the researchers whittled down to 685 startup founders, 239 potential founders and 474 startup supporters.

    Compared to the previous years, the replies are an increase from the 602 in the 2015 survey and 385 the year before. It shows how the Australian scene is growing and evolving.

    Still a boys club

    A key finding from the 2016 Startup Muster report is the changing gender composition of a group that, quite rightly, has been criticised for being too much of a ‘boys club’. This year’s survey found 24.6% of founder respondents were female, up from 17.4 and 16.1 in the previous two years.

    One area where Australia’s startup community does boast diversity is in its industry composition with 17% of the country’s startups in 2016 being focused on the most popular category of Fintech. Notably that sector came in at seventh in 2015.

    2015 2016
    Marketing Fintech
    Content/Media Retail
    Retail Content/Media
    Big Data Internet of Things
    Health Education
    Education Marketing
    Fintech Social media

    Also notable in that list was the disconnect between startups and investors. While 17% of Australian startup founders were focused on Fintech, 42% of investors were. The area most of interest to investors was medical technology (47%) with the Internet of Things second (43%).

    Over the next few years it will be interesting to see how investment fashions change, in the UK the bottom seems to have fallen out of the fintech boom while global investments seem to have increased. It’s likely Australia will follow a similar pattern to the wider global trends.

    Sydney’s decline

    Another interesting shift is the balance between cities and states with New South Wales and Sydney remaining dominant but its position slowly falling,

    2015 2016
    outside capital cities n/a 23.1
    NSW 44 40.9
    Vic 17 18.8
    Qld 16.5 19.3
    WA 8.9 7.3
    SA 2.9 6.3
    Tas 0.6 2.3
    ACT 6.4 6.2

    The fall in Western Australia is probably due to the state’s economic collapse in the face of the dying mining boom – many of WA’s skilled and affluent workers are moving out rather than struggling with a declining economy.

    Efforts by the Victorian and Queensland governments to promote their startup sectors seem to have had some success although the real winner is South Australia, something underscored by US incubator TechStars’ recent launch in Adelaide.

    The big question though is how attractive Australia is as a location for startups and investment capital.

    Funding woes

    In the 2016 Compass Global Startup Ecosystem Ranking report, Sydney fell four points from the 2012 survey to 16th while Melbourne fell out of the top twenty city rankings.

    Due to its position as the second lowest on the Growth Index within the top 20, and its comparably weak statistics around Performance, Funding, and Market, Sydney now ranks #16 (down from #12 in 2012).

    Compass’ findings show a critical problem for the Australian sector, regardless of its location, industry or founders’ gender – the lack of later stage investment funds.

    That lack of funding means Australian startup founders are particularly sensitive to money issues with Startup Muster finding the most common hindrance to people launching startups is life circumstances requiring a stable income. In a high cost society, the need for a regular salary isn’t surprising.

    Startup Muster’s 2016 report is a very useful snapshot of the state of Australia’s tech startup community. It serves as a good guide to what business founders, investors and policy makers should be considering.

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  • Scamming the Jobs Act

    Scamming the Jobs Act

    When the Obama administration approved the US JOBS Act in 2012 it was almost certain the crowdfunding aspects would attract charatans looking to separate gullible investors from their money.

    And so it has turned out, with the New York Times reporting how some crowdfunding sites are worried by the poor quality of startups touting for funds on some platforms.

    The Times piece follows the story of Ryan Feit, the founder of New York’s Seedinvest who tells how he has rejected substandard proposals only to have seen them embraced by other crowdfunding platforms with often terrible results for investors.

    One of the early companies he rejected was shut down by regulators — who labeled it a fraud — after it raised $5 million from investors. And Mr. Feit expects it won’t be the last.

    That fraudsters would be attracted to crowdfunding sites is unsurprising and with regulators still working out how to manage investor protection the field is still very much ‘buyer beware.’

    High valuations are also an investor warning sign.

    Mr. Feit has been particularly worried about companies that have assigned themselves sky-high valuations that will make it hard for investors to ever make their money back. In several cases, companies that he rejected because of their high valuations have shown up on other sites with the same valuations

    The unicorn mania of recent years is the cause of this focus on high valuations and is strange for investors as those richly priced stakes are not in their interests or those of employees taking equity in the business. If anything, a ridiculous market valuation should be the biggest warning of all to potential stakeholders.

    Ultimately though it may be that crowdfunding equity isn’t about taking a stake in a business but more showing one’s support for a venture suggests, Nick Tommarello, the co-founder of Wefunder.

    Mr. Tommarello also noted that many small-time investors so far were viewing their investments more as donations to businesses they like, rather than as investments that will make money.

    As JOBS Act equity crowdfunding campaigns are limited to a million dollars each, being the modern equivalent of the ‘friends, families and fools’ may be the future of these capital channels. Hopefully there won’t be too many fools.

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  • GorillaStack – the weekend hacking exercise that grew into a business

    GorillaStack – the weekend hacking exercise that grew into a business

    As a business born out of a weekend hack  Sydney based GorillaStack is almost a classic tech tale.

    “I was involved in a startup previously,” says GorillaStack’s CTO, Elliott Spira, recalling how the company was his co-founder Oliver Berger at the AWS Re:Invent conference in Las Vegas last week.

    “We noticed we had spikes in our AWS spend, there was a big attribution issue and one day we said ‘how about we do a weekend project and try to spin something up that listens to our Cloudwatch metrics and tells us how much we’re spending at any time of the month.”

    As the challenge was accepted, the team went to work. “We hacked away all weekend as we like to do, being nerds, and by the time the weekend was over we had the basic cost dashboard that told us how much we were spending each month.”

    Adding more features

    “The next weekend we decided to add another feature and we decided to add cost alerting where we’d get an email when we passed a certain threshold. That was really cool as we could budget and know when we were spending too much.”

    “On the following weekend we started working on periodic alerts on how much we were spending over a set set time and from there the idea started to prosper, we thought ‘oh wow, we have a bit of a product going here. Let’s show some friends who also use AWS.’ From that feedback we found people wanted to keep the dashboards up and keep track of what was being spent.”

    Today GorillaStack offers a service that allows companies to manage their AWS usage, something that can easily get expensive for organisations not closely watching what they are using. “What we try to do is make a cultural change where people become conscious of what is actually theirs in the cloud.” Elliott says. “We’re actually seeing that change.”

    Living the culture

    “In terms of that culture, we try to live that culture as well. We have private Slack channels with each of our customers so there’s a constant line of communication,” says Oliver. “Those Slack channels have proved to be an effective customer support and product development tool. “we’ve fostered quite a good community.”

    With the initial hack being successful the company was formally founded in June 2015 and to date is bootstrapped, having not taken any investor’s money. “We want to get to a stage where we’re comfortable with the product,”says Oliver.

    Currently the user base includes paid customers like Citrix, Bauer Media, Health Direct and the Australian Football League. “We have quite a good spread in terms of geography and mix of customers,” observer Oliver. “Right now the breadth suits us.”

    Applying the freemium business model

    Following the freemium model, the company also offers a free tier offering a single switch. “If you want anything more you move onto our paid tiers,” says Elliott.

    To the question whether the company is looking at catering to other services such as Microsoft Azure or the Google Cloud, the dominance of AWS comes into play. “Right now we’re definitely sticking with the giant, we’re really looking at growing our capability so we do more and offer more to our existing customers,” says Elliott. “I think it’s really important to focus on delivering value to them and our business’ future,” Elliot says.

    Looking to the immediate future, their focus is on extending their current customer offering. “We’ve a fair bit on our roadmap, we have a bit focus on chatops with a more in depth integration with Slack and Hipchat integration with our existing product,” says Elliott.

    In talking to the Gorilla Stack founders, it’s striking just how the startup follows the classic tech model of a bootstrapped company that started by a bunch of hackers solving their own problem. How the business evolves will be fascinating to watch.

    Paul travelled to AWS Re:Invent in Las Vegas as a guest of Amazon Web Services

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