Paul Wallbank – Brilliant Communications

Tag: startups

  • Staging a sales blitzkreig to win the market battle

    Staging a sales blitzkreig to win the market battle

    Part of the Silicon Valley greater fool model requires ramping whatever metrics are necessary — page views, unique visitors, revenue or profit to attract prospective buyers to acquire the business.

    Elizabeth Knight in the Sydney Morning Herald looks at the cracks appearing in online retailer The Iconic where revenues of thirty million dollars were subsidised by forty-four million in losses in the e-commerce operator’s first year of trading.

    The Iconic has all the hallmarks of a classic ‘buy me’ Silicon Valley operation — big marketing spend, high customer acquisition costs and fat operating losses in an effort to build market share.

    Getting market share is one of the key aspects of the greater fool model, being the leader in a segment almost guarantees a buyer, usually the one of the shellshocked incumbents.

    Knight quotes emails from one of The Iconic’s founders, Oliver Samwar, on the importance of being number one in their sector.

    ‘‘The only thing is that the time of the Blitzkrieg must be chosen wisely so that each country tells me with blood when it is time. I am ready – anytime!’’ one said.

    ‘‘We must be number one latest in the last month of next season. Full month, not a discount sales month

    ‘‘Why? Because only number one can raise unbelievable money at unbelievable valuations. I cannot raise money for number 2 etc and I have seen it how easy (sic) it is for me in Brazil and how difficult in Russia because our team f….d up.’’

    As we’ve seen with companies like Groupon, being number one can impress gullible corporations but when that market position has been bought by investor’s money subsidising operations, the business is rarely sustainable.

    Whether investors are prepared to continue subsidising The Iconic’s losses or if the business can attract a buyer will depend upon the business maintaining momentum on its key metrics.

    Probably the most important thing for companies like The Iconic though is the availability of easy credit and accessible funds.

    As we saw in the original dot com boom, when that easy money evaporates so to do most of the businesses.

    For the incumbent businesses threatened by well funded upstarts, some might find the best hope for survival is to hope challengers run out of money.

    In the meantime though, they may have to survive a market blitzkrieg.

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  • Startups and stress

    Startups and stress

    An article in Business Insider describes how staff morale has collapsed at recommendation service Foursqure as the company struggles to maintain its relevance and solvency.

    Something that’s missed in the current startup mania is that building a business from scratch is hard work for everyone from the founders to the staff – not to mention the investors.

    While many people working in safe jobs for big organisation wax lyrical about the romance of startups, the reality is most corporate employees would be found under their desks weeping after a couple of weeks at a new business.

    That stress should be something anyone considering starting or joining a start up should give deep thought about, along with all the other factors.

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  • Airtasker’s crazy idea

    Airtasker’s crazy idea

    “Anyone who says something is crazy these days is crazy themselves,” says Jonathan Lui, the founder of Sydney based startup Airtasker.

    The crazy idea Jonathan shares with co-founder Tim Fung is to create a global marketplace for small tasks.

    If you need someone to walk your dog, do some gardening or be an extra in elaborate marriage proposal then Airtasker is a site to find the right person.

    Since launching last year Airtasker has advertised more than 54,000 tasks with users looking for everything from dog walkers to computer repairers and actors.

    Tim and Jonathan came upon the idea of a site for small tasks when moving house with the various hassles of cleaning, moving and packing. Instead of relying on friends and relatives to help out, they saw the opportunity for connecting willing workers with small tasks.

    The site turns around how traditional classified advertisements work by paying on results rather than advertising. Lui sees it as “de-centralised social commerce.”

    It’s not just small household tasks either, Jonathan sees Airtasker helping out larger companies with tasks like market research, mystery shopping or even local council inspections of street signs.

    Unlike many of the crowdsourcing sites, the Airtasker team want to keep away from commoditising labour, instead seeing their ‘runners’ providing valuable local services.

    One of the interesting aspects about the internet is how two opposite forces are working against each other – while the internet creates globalised marketplaces it also gives people new channels to discover local services.

    Jonathan sees Airtasker as being at the forefront of hyperlocal marketplaces, with a global website enabling small traders and microbusinesses to deliver services locally.

    That may be a crazy idea – but we live in crazy times.

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  • Australia’s entrepreneurial opportunity

    Australia’s entrepreneurial opportunity

    The recent PwC report Startup Economy – How to support tech startups and support Australian innovation focused, naturally enough, on the barriers to developing a Silicon Valley like business community in Australia.

    Unlike most coverage of the report, The Economist raised an interesting point from the findings, that entrepreneurial Australians are far more likely to start up businesses than many other nations.

    PWC-international-entrepreneur-funnell

    On one level this isn’t suprising as starting a business in Australia is easy compared to many other countries with the World Bank’s Doing Business survey rating the country second after New Zealand for the ease of setting up an enterprise.

    Interestingly though, the number of Australians setting up their own businesses is falling reports Smart Company, citing the Productivity Commission’s Forms of Work in Australia report.

    The Productivity Commission speculates this might be because the mining boom is encouraging workers to take resource contracts rather than set up their own businesses.

    No doubt there’s some truth there, as much of the nation’s investment has been directed into the mines and associated infrastructure in recent years however there’s probably some more mundane reasons.

    Top of the list would be the nation’s property obsession; it’s difficult to service a massive mortgage while running your own business.

    Fifty years of mainly increasing property prices has groomed Australians into believing that having a steady job and a brace of investment properties is a much easier path to success than taking a risk with your own business.

    Added to that is the increasing hostility towards businesses. As the nanny state grows, regulations that make it harder for business multiply, the latest example being a Sydney council that wants to charge professional dog walkers for using parks.

    Overwhelmingly these petty regulations hurt those starting new businesses rather than bigger corporations.

    The good news though is that people still want to start their own businesses. In an economy that’s increasingly concentrated in fewer hands, diversification is critical.

    In a world that’s becoming increasing automated, we need smart startups finding ways to use the new tools and create the jobs to run them. If Australia can get its policy mix right, kick the property and nanny state addictions then it might open some great opportunities.

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  • Are Australians too risk adverse for startups?

    Are Australians too risk adverse for startups?

    Last week I had coffee with Clive Mayhew who chairs the board of Sky Software, a Geelong based student management cloud service.

    Clive covered a lot of interesting aspects about Sky’s business; including the opportunities for regional startups, government support and his experiences in Silicon Valley during the dot com boom. All of which I’ll write up in more detail soon.

    One notable point Clive raised was how he struggles to get Australian staff to take equity in the business – people want cash, not shares.

    The question Clive raises is why and that question is worth exploring in more depth.

    My feeling is that it’s a cultural thing related to property – four generations of Australians have been bought up believing housing is the safest way and surest way to build wealth.

    As a consequence young Australians are steered into getting a ‘safe’ job and plunging as much money into accumulating property equity as early as possible. Just as mum and granddad did.

    Even those who don’t want to play the property game are affected as property speculation pushes up prices and rents; the landlord or bank won’t accept startup stock to pay the bills so employees need cold, hard cash to keep a roof over their heads.

    The other angle is tax and social security policies, through the 1970s and 80s various business figures used share option schemes to minimise their taxes and successive Australian governments have passed laws making it harder for businesses to offer these incentives.

    Interestingly this not only affects the Silicon Valley tech startup business model but also hurts the aspirations of Australia’s political classes to establish the country, or at least Sydney, as a global financial centre.

    Putting aside the fantasies of Australia’s suburban apparatchiks – which if successful would see the country being more like Iceland or Cyprus than Wall Street or the City Of London – it’s clear that the existing government and community attitudes toward risk are reducing the diversity of the nation’s economy.

    That the bulk of the nation’s mining and agricultural investment, let along startup funds, comes from offshore despite the trillion dollars in compulsory domestic superannuation savings is a stark example of risk aversion at all levels of Aussie society, government and business.

    For those Australian entrepreneurs prepared to take risks, the risk adverse nature of most people becomes an opportunity as it means there’s local markets which aren’t being filled.

    The problem for those local entrepreneurs is accessing capital and that remains the biggest barrier for all small Australian businesses.

    How this works out in the next few decades will be interesting, it’s hard not to think though that Australians are going to have to be weaned off their property addiction – whether this takes a harsh recession, retired baby boomers selling down their holdings or government action remains to be seen.

    In the meantime, don’t base your business plan on staff taking equity as part of their employment package.

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