Investment | Paul Wallbank - Communications Professional

Crowdfunding a successful project

Crowdfunding is increasingly becoming a legitimate way to fund a project

How successful can crowdfunding be for IoT hard? We looked at some of the downsides of campaigns recently and story in Smart Company on some of the IoT gadgets at the recent Internet of Things World exhibition showed how many of projects are being funded by the crowd.

The notable thing about the projects at the conference was how many had not only been successful crowdfunding projects but had also smashed their targets.

The lesson from that is a successful campaign has to catch the imagination and excitement of the crowd, not just be a worthy idea.

How many if these products end up being successful remains to be seen, the test will be how accurately the founders have estimated their costs.

If it were just the enthusiasm of the funders, then the projects are almost certain to succeed.

Tech and tax write offs

Last week’s expansion of depreciation allowances for Aussie businesses is an opportunity to refresh your company’s tech

In last week’s Federal budget the biggest news for business was the expansion of the accelerated depreciation limits where items up to $20,000 can be immediately claimed as a tax deduction.

While this was a reversal of the previous budget that slashed the previous allowance, it was welcome news for businesses looking at replacing older tools and equipment or investing in new technology.

One of the notable things about business technology is companies have a habit of holding onto older equipment long beyond what should have been its use by date.

The consequences of using old technology are real, the older equipment is often not as fast as the newer kit which affects productivity and unpatched software is often the way malware finds its way into a business.

Point of sale risks

Earlier this week computer security vendor Trend Micro held their Cybercrime 2015 breakfast in Sydney where the director of the company’s TrendLabs Research division, Myla Pilao, described some of the threats facing businesses.
One of the top risks were Point Of Sale systems (POS) where Trend Micro’s research had found over a third of US retailers had malware on their cash registers, in Australia it was six percent.

Most of those infected POS terminals would be older units with many of them being software running on out of date versions of Windows that haven’t been patched or upgraded since they were bought a decade ago.

Similar problems exist with older workstations, internet routers and even photocopiers where the technology has moved on and security holes discovered. Basically old equipment holds businesses back and exposes them to risks.
Now the carrot of an immediate tax deduction gives Australian businesses an opportunity to refresh their technology. So what is the technology, smart company managers and owners should be spending their money on?

Kick out your desktops

“If it ain’t broke, don’t fix it” is the mantra for most business IT and desktop computers are the best example of this. In most companies as long as the word processing software or accounting package works the PCs continue to be used.

With the withdrawal of support for the decade old Windows XP operating system last year, many older computers started being a liability in a business so now is the time to replace them.

Consider tablets

It may not be necessary to replace the old desktop computer with new ones, for many job roles a tablet computer is often a better choice. With cloud technologies increasingly being adopted there’s less of a need for a grunty PC sitting on each staff member’s desk.

Upgrade the router

One of the areas where businesses often compromise is with their internet access. Having an old, cheap router designed for home use is just not good enough for companies who rely upon being connected.

A new business grade router will improve office internet access along with resolving most of the security issues older equipment is notorious for.

Going mobile

If you’re struggling on old mobile phones, now might be the time to upgrade to the latest smartphone. Amongst other things this will improve your office productivity, particularly if you combine the investment with some of the cloud services that make working on the road a lot easier.

Cloud services are not part of the depreciation rules as they are usually subscription models and this shows the weakness in the Federal government’s thinking.

Indeed for those vulnerable Point of Sale systems, a cloud based service running on tablet computers is probably a better solution than most server and PC based packages.

A lack of vision

The ‘ladies and tradies’ theme of the budget shows the Federal government is stuck in with the vision that Australian businesses are mainly mom and pop service operations in the traditional trades and professions.

While the depreciation changes are welcome they do little to help startups or companies in emerging industries and for the economy in general will provide not much more than a GDP ‘sugar hit’ for retailers’ cash registers as we buy imported equipment for our businesses.

For the Australian economy in general, the move really only benefits Gerry Harvey who can buy a few more racehorses from his stores’ and his rich mates who can afford some more expensive wine fuelled brawls in Sydney waterside restaurants.

Australian businesses owners need to be demanding better thought out policies from a government that claims to be friendly to industry. The economy is changing and 1970s style tax benefit is not the way to prepare for a changing world.

In the meantime, enjoy your tax write offs.

A great time to raise funds

For the right startups there’s plenty of investor money available right now

“There’s great availability of capital for young companies,” says Doron Kempel, the CEO of software defined data center company SimpliVity.

Since being founded in 2009, the company has had five rounds of funding and raised $276 million dollars in equity and debt.

The notable thing is Kempel says the banks are keen to lend money to his business, something that probably underscores how difficult it is for banks to find suitable places to place funds.

As one of the unicorns – Simplivity’s last fund raising gave the company a valuation of over a billion dollars – it shouldn’t be surprising that banks are comfortable lending money to the business but it also underscores just how much money is available to startups with the right investors.

For those investors the paper returns are good as well, with Kempel observing each round of funding sees the company’s valuation triple.

So for companies with good ideas and unique stories it seems right now is a good time to be raising money, particularly if the founders can get one of the pedigree venture capital firms to invest.

The question now though is how many coffee apps and delivery services can the also ran VCs support?

Stemming the Innovation drought

Science, Technology, Engineering and Mathematics studies are essential to the future economy a PwC study shows.

When discussing how industries are changing, the constant question is ‘what will happen to today’s jobs?’

Even in the Future Proofing Your Business webinar earlier this week this question was asked by a number of the small business owning listeners.

That concern forms the basis of the “A smart move: Future-proofing Australia’s workforce by growing skills in science, technology, engineering and maths” report released by accounting firm PwC yesterday in Sydney.

PwC’s report warns 44 per cent of current Australian jobs are at high risk of being affected by computerisation and technology over the next 20 years.

The report highlights that Science, Technology, Engineering and Maths (STEM) subjects are critical in the jobs that are going to benefit, or be created, by that technological change.

Finding the right courses

Sadly for Australia, and most of the western world, STEM courses are deeply out of fashion with students preferring to study in business related courses such as accounting, commerce and law.

As PwC flag, those industries are at risk with accounting at the top of the list for job losses.

On the other hand, PwC forecasts professions in health, education, personal care and – worryingly – public relations will be in increased demand. Something that may underestimate the effects of technology on those industries.

Competing with STEM

PwC’s main contention is that economies which want to compete in the new economy are going to need more STEM graduates.

The shift to STEM education is something the OECD highlighted in its recent report, OECD report How is the Global Talent Pool Changing?

In their report the organisation forecast that the number of students studying around the world would increase from 130 million today to 300 million by 2030 with all of that growth being in Chinese and Indian STEM courses.

Already that science and engineering emphasis is clear in today’s numbers.

To counter the drift away from STEM courses among students, PwC suggests a campaign to engage young people while they are still at junior school.

The Australian conundrum

Sadly, that’s unlikely to work in Australia given the nation’s economy is built upon property speculation driven by the wealth effect of rising real estate prices.

Two nights before the PwC report one of the highest rating shows on Australian television came to its 2015 finale. The Block, which features couples renovating and flipping properties, finished its season the apartments being sold at auction at record prices and the contestants pocketing between 600 and 800,000 dollars for a few month’s work.

For young Australians the message from their parents and society is clear; don’t innovate, don’t create, just buy as much property as you can afford.

In the US on the other hand, the business heroes are the builders of new enterprises; people like Steve Jobs, Elon Musk, Bill Gates, Mark Zuckerberg and the founders of Google.

Other countries like Israel, India and China, are aspiring to be the next generation of tech leaders. That’s what’s necessary to build a dynamic economy.

Creating enduring jobs

As the PwC report claims, “the jobs most likely to endure over the next couple of decades are ones that require high levels of social intelligence, technical ability and creative intelligence”

Harnessing that combination of social, creative and technical intelligence is going to be one of the challenges for all economies in a decade of change.

Getting the supply of STEM skills right will be essential for success for all countries at a time when digital technologies will drive most industries.

Wandering around Wellington

How New Zealand’s capital is becoming a centre of the new economy

It bills itself as ‘the coolest little capital in the world’ however something is going on in Wellington, New Zealand’s capital city, as its technology sector takes off.

Last week I was in Wellington, partly to attend the Open Source, Open Society conference and also to have a look at how the city is doing so well as one of the leading startup cities.

While I’ll have a number of posts about the city, startup scene and conference over the next couple of weeks, it’s worthwhile noting some basic impressions that came from the visit.

The size of the city, Wellington is a small town with a population of 200,000, brings both advantages and negatives for the business and startup communities.

Small is sweet

One of the advantages of being so small is the business community is relatively accessible, a number of entrepreneurs told me how easy it is for them to find the specialists they need given there’s usually two degrees or less separation between everyone.

Normally having a small business community means it gets insular, particularly in a capital city where the business of government can create a bubble effect. What’s notable about Wellington is most of the businesses are looking outward towards the US, Australia and East Asia.

The city’s intimate business environment also improves trust within the community as one Aussie expat told me, “if you rip off anyone in this town pretty well everyone knows about it by the end of the weekend. It keeps everyone honest.”

Being small, the city makes it easy to walk around which compounds the business networking opportunities. A businesswoman, who is also a lifelong Wellingtonian, observed how she allows an extra 15 minutes to walk anywhere as she finds herself stopping for conversations.

Three dominant businesses

Having three successful businesses in the city – TradeMe, Xero and Weta – has both its upsides and disadvantages with the bigger players tending to dominate the employment market and funding opportunities.

Of the three businesses, TradeMe is the most domestically focused while Xero is growing in the tech sector and Weta is the most diverse with its range of special effects and movie production services.

With Weta, the business is exposed to the vagaries of the global film industry as Statistic New Zealand survey of movie production shows.

The film industry is one of Wellington’s important employers with the sector supporting around two thousand businesses in the city, although I didn’t get time to explore how much of an overlap there is between the tech and film industries.

TradeMe is largely a domestic focused business that provides a steady work and skills base for the local workforce. While it’s the least internationally exposed business of the three, it’s probably also the most consistent.

Xero, like Weta, is a globally expanding business and its success is attracting investors and expats from North America and Australia. While its the smallest of the three it’s probably the business that has done the most raise Wellington’s profile in the tech industry.

Community spaces

What’s particularly notable are the number of coworking spaces in Wellington ranging from the straightforward Bizdojo startup space and Creative HQ through to the quirky Enspiral coworking space.

The availability of shared spaces makes the city attractive to startups and adds to the vibrancy of the local tech community which links into hipster pursuits such as craft beer.

Communities like Enspiral also add another dimension to the local startup and creative industries environment by connecting entrepreneurs with their peers and service providers.

Partnerships with government

One aspect I didn’t get to explore while in Wellington was the relationship between the city’s business community and educational institutions, particularly Victoria University.

Similarly I didn’t get the opportunity to discover how much of a role local and national governments have had in the development of Wellington’s tech scene. It seems to be relatively hands off although some government agencies have supported Weta with co-investment funds.

What I did meet though were plenty of immigrants; from Croatia, Denmark, Holland, the US and, most of all, Australia.

Talking to some of the US and Australian expats it was clear that lifestyle combined with opportunity with lifestyle, as one Aussie emigre told me “I couldn’t get the water views, access to the city and be able to walk to work back home like I can here.”

While these are superficial thoughts that I’ll expand on over the next week as I decipher notes and listen to interviews, there’s no doubt that Wellington is carving a position as one of the global centres of the new economy. How big it becomes will depend on how many other businesses grow to the size of Xero or Weta.

Rolling out the smartcity – the role of government and business

Both Government and businesses have a role in building smartcities

“It’s amazing what can be achieved when government is committed and prepared to partner with industry,” was the AIIA Internet of Things summit MC’s reaction to a presentation from Steve Leonard on Singapore’s quest to become a connected city today.

Leonard, the head of Singapore’s IDA, had laid how the nation had embarked on a smartcity project due to the pressures of increased population and an ageing society. The government sees technology as a way to deliver health services more effectively and use scarce resources more efficiently.

One of the areas Leonard cited was in traffic management where the city’s bureaucrats asked “how can we double the traffic on our roads without building anything new?”

The answer lies in smartcars and autonomous vehicles, Singapore has partnered with MIT to run a driverless car pilot on some of the city’s roads. Leonard points out that cars can travel closer together when run by computers rather than being driven by humans.

For governments traffic management is one of the easiest ways to introduce the internet of things into smart cities says Lutz Heuser, Chief Technology Officer of Germany’s Urban Software Institute.

Heuser worries that many cities are “sitting on the fence” when it comes to rolling out IoT and smartcity initiatives and sees “the humble lightpost” as being one of the ways technology can be rolled out into urban environment.

This echoes the Geek’s tour of Barcelona where street light poles are a key part of the city’s digital infrastructure, providing a base for sensors and the Wi-Fi connectivity needed for devices like intelligent rubbish bins and digital services.

One of the advantages of using intelligent, or at least half smart, lightpoles is that local governments are replacing them on a regular basis – around three quarters of Europe’s poles are more than twenty-five years old – which means they can be rolled out as part of a planned maintenance programs.

Having rolled out connected city initiatives like Barcelona’s smartbins or Singapore’s ‘fibre hydrants’ – fibre nodes around the city that government and emergency services can tap into when needed – local businesses can then leverage off that infrastructure to further improve the well being of citizens.

For governments, the rolling out of smartcity technologies is to deliver better services more efficiently. As Singapore and Barcelona have showing, by working with local businesses it becomes far easy for agencies to deliver real improvements in their communities.

Seizing the agricultural technology opportunity

Can a regional city like Fresno become a centre of agricultural technology?

Does the real opportunity for tech entrepreneurs lie in the agriculture sector? An article by James Fallows looking at Fresno’s startup community for the Atlantic Magazine suggests that might be the case.

Fresno, in California’s agricultural Central Valley, doesn’t have the glamor of the global startup centres but offers a focus on neglected sectors as Fallows quotes Jake Soberal of Bitwise Industries.

“My guess is that 5 to 10 percent of the tech need of the farming industry is now being met,” Fallows quotes Soberal as saying. “You could build a technology industry in Fresno based on that alone, not to mention the worldwide need in agriculture.”

While there isn’t a great need for another coffee app, pizza delivery service or online store, there are far more opportunities in other sectors to address unmet needs.

This is probably where the opportunity lies for cities like Fresno that are trying to create their own mini Silicon Valley – build a technology sector to address the needs of your existing industrial base.

In agriculture there’s a plethora of Internet of Things, Big Data, analytics and other technological applications that addresses issues in the industry. Farming is not the only sector which presents these opportunities.

Fresno’s ambitions aren’t unique but as Fallows points out this is not a zero sum game and there’s no reason why dozens of cities shouldn’t be able to build their own niches with new technologies.

Picture of Fresno from David Jordan via WikiPedia

Why Singapore is building a connected city

Singapore is creating the first connected city to meet the challenges of the 21st Century economy

“What if we were to wire up every corner of Singapore?” Asked Steve Leonard, the Executive Deputy Chairman of Singapore’s Infocomm Development Authority, at the CommunicAsia 2013 Summit.

Two years later that question has been answered as the island state has covered the entire island with a fibre network, putting the country on course to create what Leonard describes as a ‘sensor fabric network.’

Speaking to Leonard ahead of his visit to Australia for the AIIA Internet of Things conference in Canberra later this month, it’s impressive what the IDA looks to do in building Singapore as a connected nation.

“We think we have an opportunity to use some of the natural advantages Singapore has,” Leonard says. “In this case being relatively small and an island. The idea that constraints mean creativity.”

One of the areas Leonard sees as an opportunity with the IoT is in the health care industry where chronic care care can be moved back into the community while hospitals and clinics can be used for acute patients.

One of the challenges for every city rolling out an IoT infrastructure is the plethora of standards, “we’re trying to think about IEEE standards and we’re trying to think about interoperable as possible with technology as it evolves.”

“Whether it’s East or West, Singapore wants to be a place where business can be done and people can be healthy,” says Leonard. “What we don’t want to do is develop a standard that might work for us but exclude us from something that originates in another part of the world. We want to be open to things that evolve.”

Becoming a connected city is key to being a leader in a connected world, “we’re always making sure we seek to have more wireless access points.” Leonard says, “we also have one gig ninety-five percent fibre coverage across the island. We also want to enhance our capabilities through 4G and Wi-Fi.”

“All of those things together in some sort of concert create that fabric that we’re working on.”

Historically Singapore’s place in the world has revolved around being a trading hub which has led it to being one of the world’s biggest cargo shipping ports.

With broadband internet access available pretty well throughout the island, it should open opportunities for entrepreneurs, businesses and government agencies to explore how ubiquitous internet creates opportunities.

As the world becomes moves from physical goods to bytes, Singapore is looking to becoming as much a technological centre as a goods hub. For Steve Leonard and the IDA the task is to make sure the city takes its place in the connected economy.

Managing the great transition

How can countries manage the great economic transition?

At present the global economy is beset with low expectations; trade is at its lowest point in 20 years, many of the worlds economies are teetering on the edge of depression and investment is barely keeping ahead of depreciation.

The world is slowing and The Great Transition report by Colonial First State Global Asset Management looks at the reasons and some of the effects of this change.

Senior economic and market research analyst James White suggests in the report that the current state of affairs is a permanent shift as global productivity rises due to Chinese production and the widespread digitisation of most industries.

Compounding the problem in White’s view is the traditional measures of economic growth understates the size of the service economy as between ten and twenty percent of transactions go through the ‘black economy’ in most countries.

In looking at their own field, the Colonial First State researchers suggest that investment strategies are going to change as ‘capital light’ industries begin to dominate advanced economies.

While White and his co-author Stephen Halmarick are optimistic about what the changes mean and suggest a focus on people and attracting global capital as the key to competing during the Great Transition, the challenge is on policy makers to increase human capital in their economies.

The question though is what can individual countries do to be competitive in this context? While nations like Switzerland and Singapore can quickly develop pro-investment policies, it’s harder for larger and more diverse societies.

Perhaps the services driven economic model is really only one for high wealth, small nations with well trained and skilled workforces? If that’s the case, then the Great Transition might be a tough time for many of the world’s developed economies.

Copying the Silicon Valley Bubble

Is the Silicon Valley funding model creating a bubble in tech investments

Staying private sucks if you’re a tech company writes Felix Salmon in Fusion magazine.

If you’re giving away stock in lieu of wages to employees or taking early stage funding for equity, then listing, or selling to a larger business, makes sense as staff and investors need to see a return. It’s the unspoken truth of the Silicon Valley funding model.

The Silicon Valley model though doesn’t come without risks, investor Mark Cuban warns a valuation bubble greater than that of the Dot Com Boom has developed as angel investors and early stage venture capital firms have thrown money at startups after Facebook’s massive buyouts of Instagram and WhatsApp.

While Silicon Valley and the US tech market might have plenty of opportunities for buyouts and IPOs, most other places around the world don’t have the deep financial markets and the cashed up software companies to make similar exits possible for local startup businesses.

Again that difficulty in successfully funding exits shows that simply trying to copy the US tech industry model is probably not going to work for most places tying to building their own Silicon Valleys, although it seems China is about to try.

The other message is that the IPO or buyout route is not necessarily the right path for every business, as Salmon says: “Maybe the best solution is not to take any outside funding at all, and not to try to grow too fast.”

“Some family companies have been around for hundreds of years: if you own your own business, and you don’t get greedy, you can build a very pleasant life for yourself. You just won’t end up on any list of young billionaires.”

Formulas for successful crowdfunding

Crowd funding is proving to be a great way to raise funds for projects, but it isn’t without its risks

Pebble have achieved the biggest Kickstarter fund raising in the service’s history with a $14 million fundraising for its latest smartwatch.

Over at competing crowdfunding service Indiegogo Flow Hives, a Tasmanian beekeeping invention, has raised nearly five million dollars for its innovative beehives that put honey on tap.

Crowdfunding is fast becoming the way for smaller manufacturers to secure preorders from the market and secure scarce capital for the business.

Pebble and Flow follow the success of Ninja Blocks who have had two successful crowdfunding ventures and their CEO Daniel Friedman spoke to Decoding The New Economy last year about raising money for hardware projects.

Not every hardware crowdfunding project works out well though as Mark Pesce described in relating his experience with the failed Moore’s Cloud fundraising. Mark said he’d “rather eat a bullet” than engage in another crowdsourcing campaign given the pressures upon manufacturers to deliver.

As Moore’s Cloud shows there are risks and complexities in looking to the crowd to raise project capital. Even a successful campaign faces potential problems in completing the project and delivering a product that meets the expectations of those who’ve contributed.

Crowdfunding has opened a new way for artists and entrepreneurs to raise funds for their projects, like all tools though it does have it’s risks and isn’t for everyone.

Why being a unicorn could be a bad thing

Most businesses don’t need big VC type investors to help them grow

Andrew Wilkinson doesn’t want to be a unicorn. In Why I want to be In-N-Out Burger, not McDonalds, Wilkinson describes how he’d rather his business is a sleek racehorse rather than a beautiful, mythical creature.

One of the misunderstandings in the current startup mania is the motivation of founders and proprietors; many haven’t gone into business with the aim of flipping the company to a rich sugar daddy for a billion dollars.

In his great presentation “Fuck You, Pay Me” – essential viewing for anyone starting a business – San Francisco designer Mike Montiero describes “We wanted to pick and choose the clients we were gonna work with and we wanted to be responsible for what we’re putting out in the world.”

For businesses like Montiero’s and Wilkinson, having a venture capital investor looking over their shoulder would be as bad as working for a corporation; ceding control of your work is exactly the reason they started their businesses in the first place.

While the Silicon Valley venture capital model is valid for high growth businesses that need capital to scale quickly, most ventures don’t need those sort of large cash injections early in their development – for many, a million dollar cheque from a VC could prove to be a disaster.

There’s myriad reasons why someone starts a venture and all of them pre-date the current startup mania, it’s why every business is different in its own way.