Tag: startups

What do startup founders really earn?

A global survey of salaries drawn by startup founders illustrates some truths about being a business enterpreneur

One of the myths of the current cult of the entrepreneur is that everyone will be a winner as their startup gets bought out by Google for a billion dollars. The reality is life for a startup founder is a grind.

Startup Compass looked at 11,000 startups across the world to discover what founders really earn and the results show the reality of life when you’re starting up a business is that the wages are pretty poor.

In San Francisco, London and New York, the wages are piddling compared to the cost of living in those cities.

Low pay and business success

This is good news for investors though, as there’s a clear correlation between the success of a startup business and the salaries its key staff members draw – successful businesses are built on the back of founders ploughing everything into the venture.

It’s also high risk as a failed business can leave the founder with nothing to show for several years of hard work, something that’s overlooked by the ‘liberate yourself from your cubicle’ gurus advocating everyone starts up their own venture.

Australia’s high cost economy

Notable in the stats is the high rates demanded by Australian founders, more than 25% higher than their Silicon Valley counterparts and a gob-smacking 60% more than London or Canadian equivalents.

Australia’s high cost of doing business was emphasised last year where a comparison by Staff.com found Sydney was the second to Zurich as a place to base a tech startup. Worryingly, that survey didn’t consider owners’ drawings.

Part of Australia’s high wage requirements are no doubt due to the country’s lousy tax treatment of options and share plans but a bigger problem is property ownership – an Australian who hasn’t bought a home by 35 is destined to be one of the nation’s underclass.

So an Aussie entrepreneur has to earn enough to qualify for or service a mortgage, it also discourages Australians from starting even moderate risk ventures.

The consequence of the need to draw a high salary is that the proportion of investor funds that goes into founders’ wages is almost three times higher in Australia than it is in Silicon Valley. That’s a big disincentive for foreign investors to put money into Aussie startups.

If you wanted an example of how uncompetitive the Australian economy has become, this is a good start.

Regardless of where a startup is based though, the message remains that the road to a billion dollar buyout from Google or Facebook is not paved with gold.

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Defaulting to transparency

Messaging startup Buffer seeks to be open in every aspect of business, will this help the startup grow?

Social media scheduling startup Buffer takes transparency seriously, will it help the business?

Many fine words have been written about openness, sharing and collaboration in recent years but few organisations really practice what’s been preached. An exception to this is social media service Buffer that takes openness to extreme levels.

Buffer keeps few secrets with the company sharing its monthly operating figures, internal emails and even its formula for calculating salaries.

The company’s CEO Joel Gascoigne believes this helps build trust in his startup, saying in his blog:

There are many reasons we default to transparency at Buffer, and perhaps the most important is that I genuinely believe it is the most effective way to build trust. This means trust amongst our team but also trust from users, customers, potential future customers and the wider public who encounter us in any way.

Building trust is one of the most important tasks of any business owner or manager; whether it’s with customers, staff, suppliers or investors and startups have a bigger task than most. So Joel is onto something with this approach although one wonders how long the philosophy will last as the company grows.

One thing that stands out in Buffer’s figures is how little Joel and his staff earn; while $158,000 is a good wage it isn’t the massive income that those who glamourize startups pretend founders earn.

Joel’s experiment with Buffer is an interesting experiment and it will be fascinating to see how long the company continues the philosophy of extreme transparency and how many others follow the example.

While it might not be necessary to be as open as Joel Gascoigne and Buffer, the idea of defaulting to transparency is one that many organisations – particularly governments – would benefit from adopting.

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Finding the mythical pot of gold at the end of the crowdfunding rainbow

Raising capital through crowdfunding sites like Kickstarter is only the beginning for most businesses.

Raising capital is tough, while the Silicon Valley legend of a smart group of geeks finding wealth through fairy godfathers – aka VCs – throwing money at them may be true for a small number of outliers it isn’t the reality for most businesses.

For most businesses, even if they are lucky to find a VC or angel investor, raising that money is usually the start of the next phase of building a venture which can be even tougher.

With the recent rise of crowdfunding sites like Kickstarter, Indiegogo and Pozible which are a lot easier to raise capital through than finding VC or angel investors, there’s been a lot more commentary on how these services are a pot of gold for artists and entrepreneurs.

Mark Pesce discussed some the challenges of Kickstarter campaigns in an interview on the Decoding the New Economy YouTube channel about funding Moore’s Cloud.

Backing Mark’s views is a post on Fast Company’s design blog discussing what happens after  a successful campaign.

In Life after Kickstarter, Jon Fawcett describes what happened after raising over $200,000 for his project Une Bobine.

Having more than met his targets, Fawcett found raising the money was only the start of the business challenges with logistics, taxes and fulfilment being hurdles his team had to overcome.

Fawcett actually had an advantage in had tied manufacturers up before launching the funding campaign; for those who haven’t, the process would be even more fraught.

As the Fast Company story concludes, the successful fund raising was only a small, albeit critical, part of getting the products to market.

Fawcett’s story is a reminder that a product’s journey doesn’t end with funding. While Kickstarter has democratized and decentralized the process of raising capital, concerns of manufacturing, shipping, and storage still retain the unglamorous grit of the real world. There’s no flashy website for setting up your supply chain. Perhaps that’s the next part of this grand process prime for disruption.

While raising capital is tough, it’s only part of the story of a successful business. Jon Fawcett story is a reminder of that.

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Passion and LinkedIn – how Connect2field went global

Connect2field founder Steve Oronstein tells how a combination of passion, smart investors and LinkedIn helped his business grow.

Passion is the key to building a successful startup business believes Connect2Field‘s Steve Oronstein.

Running an IT support service is a tough game and it was the lessons Steve learned in running a PC service business during his teens gave him the passion to solve some of the industry’s problems and the idea to launch what’s become part of a global business.

“My very first business when I was nineteen was an IT support business,” Steve says. “During that business I saw it was an absolute nightmare being able to manage all those field workers, managing job sheets and invoicing customers.

“I did that for four or five years and then decided I didn’t want to do that all,” remembers Steve. “I started seeing some opportunities to do some work in job management. From the knowledge I had from the problems in the previous business, I could see there was an opportunity for a product.”

Finding international investors

Steve quickly realised there was an international market for that business and Connect To Field quickly caught the attention of global investors, “I would constantly receive emails from VCs about investing the business.”

One day Steve received a LinkedIn connection and the path to being acquired by a larger company started.

“At the time Fleetmatics came along there were two businesses that were looking to acquire the business. That happened through a LinkedIn connection.”

“A request one morning from someone from Fleetmatics wanting to connect with me and wanting to talk about a partnership. That happened very quickly and we were acquired.”

The importance of smart investors

Steve thinks investors have been a critical part of the business’ growth and not just for the capital they bring in, but also for their expertise.

“The key thing in the very beginning was to raise investment from people who could also be mentors,” says Steve.

“I formed a board with five of people with skills in different parts of the business – legal, marketing, sales, technology”

“When we went through the acquisition space it was invaluable having a board we could bounce ideas off and strategise with.”

For Steve, his advice to other entrepreneurs is to be find a problem and be passionate about solving it.

“I was very passionate about being able to provide a solution for my customers and I knew that what we were delivering would add real value to those business.”

“Finding something that you’re passionate is the number one thing and the rest of it will follow,” says Steve.

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Tuxedos and cocktail dresses — the real cost of being an entrepreneur

Correcting the myths about startups is the mission of venture capital investor Mark Suster

venture capital investor and blogger Mark Suster said at the Dreamforce 2013 conference yesterday.

Suster’s mission is based upon having seen the process of building business up close having been involved in two successful startups and trade sales before joining Salesforce as head of product development then branching out to the investor side of the business.

There’s also a personal reason for Suster wanting to tell the truth about starting your own venture, “the reason I’m on a personal mission to explain this is because a friend committed suicide.”

“His company had raised four million dollars but, by his standards, it wasn’t succeeding.”

Suster’s story resonates with anyone who has founded a business — it’s not something everyone is suited to and it’s a tough, demanding lifestyle.

Tuxedos and cocktail dresses

Part of the problem is public perceptions, Suster describes a conflict between “public persona and cognitive dissonance”; while an individual startup is struggling with their own flaws and failings, it appears that everyone else is doing well from their carefully crafted and placed publicity stories.

“Everyone else’s PR is their tuxedos and cocktail dresses,” Suster points out. “You on the other hand are seeing yourself naked in the mirror every morning.”

On being a marriage councilor

It’s often said that a business partnership is like a marriage and Suster finds much of his work as a venture capital investor involves counseling founders over their relationship.

“Sometimes one has to go,” Suster says. “It doesn’t matter what your preference is — and we all have our favourites — but the business cannot survive with the two of them.”

When two founders split, there is also the problem of equity, should both have equal shares then it becomes difficult to split the business; “should one partner leaves, it’s often easier to shut down the company and start again.”

Buy in your skills

A similar problem happens when there’s more than one partner and Suster cautions it’s better to employ people with the skills you need rather than offer equity in a new business.

“Having too many founders is the greatest dilution you’ll ever face,” Suster warns and his advice is to hire the skills required by the business rather than give away equity in your business.

Another benefit of hiring people is having a good team on the payroll is the validation good investors are looking for. “Having a good team proves you’re able to hire good people which is the most important skill an entrepreneur needs,” Suster explains.

Ultimately, Mark Suster sees the journey of building a business as a decade long process, the billion dollar startups are the exception rather than the rule.

The biggest advice Suster has is to understand your goals, “if you don’t define what success is, you’ll never achieve it.”

Building a business is tough, and not everybody is suited to doing it. Mark Suster’s advice isn’t just appropriate for technology startups, it’s also valid for anyone starting any type of business.

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A tour of Google’s London Campus workspace

Google’s London Campus offers a free coworking space in the basement that’s open to small businesses, startups and entrepreneurs.

Google’s London campus is credited by many in the City’s Silicon Roundabout district as being one of the catalysts for the explosion in the local tech centre.

One of the features of the London facility is the free co-working space the company offers which has become an important landmark for the city’s startup and small business community.

Getting into the basement co-working space requires pre-registration and, in theory, you’ll be able to pick up an access card when you first arrive.

In practice the cards are long out of stock, so just showing your registration confirmation with it’s code to the rather rude and brusque receptionists will get you buzzed in.

The coworking space takes up the entire basement with four distinct coworking spaces – a courtyard, an array of tables, a lounge area and a shared bench.

  Google-campus-london-workbench

Immediately inside the door is the communal bench that seats around twenty people. These are probably the best if you’re happy to socialise while you work. Even if you don’t it’s worthwhile grabbing a spot here if you see one available during busy times.

Google-campus-london-device-lab

Directly beside the workbench area is the Android demonstration station. This is a clever initiative by Google to showcase their mobile platform and encourage their developer community.

Across from the Android test bench is the lounge area, this will be your best bet to find a place should you arrive when the coworking space is busy. It isn’t the most comfortable and quiet place in the room though as it gets lots of foot traffic and is across from the café.

Google-campus-london-cafe

The café serves a standard range of sandwiches, coffees and drinks with specials on certain days. Prices aren’t dissimilar from most of the coffee shops in the neighbourhood although you might find better range and a quieter spot eating elsewhere.

One of the missed opportunities in the cafes is the opportunity to sell computer accessories like chargers and cables, during each visit this reviewer noticed how there was always someone asking to borrow other users’ accessories to charge their phones or synch their devices.

Google-campus-london-outdoor-working-area

Alongside the coffee shop is the courtyard; on nice day this would be a good place to work or to enjoy a beer and a chat with fellow geeks in the afternoon. During this visit in November, the weather was dark and dank with the outdoor area only being used by people making phone calls.

Google-campus-london-working-area

Beside the courtyard is the desk area where the serious workers hunker down. These spaces tend to get taken early and some people seem to arrive shortly after opening at 9am and don’t leave until the room closes at 6pm. Get there before ten if you want a spot.

Google-campus-london-powerboard

One of the problems in the room is the fight for power sockets. By mid-morning it’s almost impossible to find a spare plug so if you’re looking to recharge a device you may want to consider a local café.

Another problem with the coworking space is it gets very crowded and some of the regulars have a habit of spreading out or hogging power sockets. It may be necessary to be quite pushy to get a seat or power socket when someone is taking up too much space.

Overall, Google’s London Campus is a good facility that many other cities could use. However with its congestion mobile workers may find it easier to set up in one of the many geek friendly cafes in the neighbourhood like the nearby Ozone or Shoreditch Grind right on the Silicon Roundabout itself.

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A swarm of electronic dragonflies

A Spanish startup shows how the internet of machines is changing the business world having installed their sensors into everything from space ships to koala bears.

A Spanish startup shows how the internet of machines is changing the business world having installed their sensors into everything from space ships to koala bears.

“Libelium comes from Libelula which means dragonfly,” says Alicia Asin, of the sensor company she co-founded with David Gascón. “The company was named after a swarming insect.”

“We try to solve the problem of dealing with a lot of different sensors and a lot of different protocols and different information systems so we created a hardware platform that sends any information using any communication protocol to any computer system.”

Bootstrapping a global business

Particularly impressive about Libelium is the business has grown to a global brand employing 40 people since 2007 when Alicia and David founded their business on their meagre savings.

“We started with literally wïth nothing, just 3,000 euros which is all you have when you are twenty-four” says Alicia.

After raising funds through some grants and investors, the company got on with selling their products.

“We never wanted to be a company where it’s comfortable for three years without making money so we shipped a product in seven months.”

“We realise now how smart that was.”

Agriculture and smart cities

Connected cites and agriculture are the sectors Alicia sees as being the greatest opportunities for the company.

“I think that cities are very interesting, not because of the technology but what it really means,” says Alicia. “If you are able to have a dashboard of the city’s performance and governments are willing to apply open data then you are really promoting transparency.

“That’s the best legacy of the Internet of Things.”

In Agriculture Alicia sees opportunities in high value crops like vineyards, “we can reduce the amount of fertilisers, we can prevent illnesses in vines and you can even design the type of wine as you can control the amount of sugar in the grapes.”

For Spain, companies like Libelium represent the future of the nation’s industry. “We really need to re-invent the country,” says Alicia.

“I’m always saying that Spain is becoming the Silicon Valley of Europe when it comes to smart cities. Not only in Barcelona but you also have Santander, you have Malaga, Madrid and Zarazoga.”

So it may be that along with a swarm of Libelium sensors, Spain also has a swarm of smart cities. It may be enough to re-invent the country along with the agriculture industry and local governments.

With more bootstrapped startups like Libelium, Spain may even build its own version of Silicon Valley.

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