Finding The Happiness Particle

happyRecently I had the great pleasure of being guest of honour at Startup Grind in Auckland. We had a very frank Q&A session about the many challenges facing startup entrepreneurs. Some of the discussion revolved around bootstrapping and growing globally. But we also devoted a lot of time to the emotional challenges faced by business founders, because I think this is a topic that we don’t hear enough about.

Entrepreneurship is a hugely demanding calling and few of us get through it entirely unscathed. Along with the daily dramas of driving sales, paying the bills and keeping your team on track, there is the pressing need to balance work and home life. This balance becomes especially difficult if you have young children at home. With the need to put in long hours when starting a business, having the support of your family is critical to entrepreneurial success. So you must engage loved ones in the process early and set some clear expectations.

Funding rounds, media recognition and rolling out the next big software release are exciting and wonderful things, but all of that is fleeting. Family and friends are ultimately what sustain us in the long term – not money, public accolades or brilliant software code. Participating and contributing positively in the community and building authentic familial, personal and professional relationships is infinitely more rewarding.

Creating a palatable work environment is also important. Holacratic workplaces is one controversial approach to addressing this. However, there remains ongoing (and valid) criticisms from within traditional schools of management about whether holacracy can ever succeed. But perhaps the real issue is how you actually define “success” in this context. Tech companies such as Twitter, Medium and Zappos are the most well known proponents of holacracy, within which customer and employee happiness also figures large in company reporting.

At iwantmyname we built a virtually enabled company around a flat structure and uniform remuneration across the company. We engrained an ethos of self-management across the organisation, bringing with it both freedoms and responsibilities. Weaving elements of holacracy into our work setting has been extremely challenging at times and there have certainly been missteps. Whilst very rewarding, it is still a work in progress.

The face of management has evolved very little in the last century within the corporate world, despite the fact that there has been a huge migration away from assembly lines to desk-bound work. But companies that are disrupting traditional business models and leading change have a special responsibility to illuminate the way forward. Finding a suitable balance between home life, personal freedom and the demands of your business is essential to finding the elusive happiness particle.

Paul Spence is a commentator, technology entrepreneur, a co-founder of iwantmyname (a New Zealand based global Internet venture) and a mentor with Startup Weekends. You can follow him on Twitter @GeniusNet or sign up for a free weekly digest of startup, tech and innovation related events curated by him through New Zealand Startup Digest.

Back In The Air

FLT_nzle_smallBeing made redundant and then putting in the hard yards building a new online business put my lifelong love affair with aeroplanes on hold for a few years. But I’m very pleased to report that I’m finally back in the air again and loving it!

Aviation is something that gets into your blood, so it was hard to give it away. But sometimes life gets in the way and we have to refocus priorities for a period of time. It was sad to be grounded, because flying provided me with so much inspiration. Growing up with aviation has given me skills and knowledge that transferred over into to my business life such as practical approaches to leadership, planning and risk management. Being airborne also allows you freedoms and perspectives that many people never get to experience in their lifetimes.

So it was with a great sense of accomplishment that I recently flew some of the iwantmyname team to Lake Station aerodrome, near the township of Saint Arnaud on beautiful Lake Rotoiti in New Zealand’s South Island (see photo). A lot of good memories came flooding back – along with my self-confidence. I recalled many adventures from my younger days when I was a part-time commercial pilot, building flight hours on days off from my “real” job as an aviation meteorologist.

Consequently I’m enjoying greatly, the rather ominously named, Worst Place To Be A Pilot TV series. But for a quirk of fate, I very nearly headed down the same career track myself. It’s a steep learning curve for the young aviators introduced in the show, as they launch their flying careers in one of the most unforgiving environments on the planet. I’ve visited several of the featured locations in Indonesia and can totally relate to the situations illustrated.

That recent trip down south was the culmination of a lot of hard work and reminded me to confront challenges head on and never, ever give up on ambitions in life.

Paul Spence is a commentator, technology entrepreneur and is a co-founder of iwantmyname, a New Zealand based global Internet venture. You can follow him on Twitter @GeniusNet

How Long Is Your Runway?

runwayAs a pilot I love it when I can draw aviation analogies and experiences into my entrepreneurial life. Perhaps the most obvious comparison involves the “runway” metaphor.

Most of us appreciate that the numbers we drafted in our start-up business plans are (let’s face it) rather meaningless. How can we possibly predict several years worth of revenue and cost data when we are still testing our initial business hypothesis? We simply cannot – but that doesn’t mean we shouldn’t have a plan. Cashflow distress is one of the leading causes of business failure. I’m not too proud to admit that I experienced a “near miss” myself in the past. Here are some tips to avoid a plane wreck.

The good news is that a cashflow crisis is entirely avoidable, if you have a robust planning and reporting process. Obviously, one of the goals of business is to generate a profit, but even profitable businesses are not immune from cashflow problems. If your bill payment cycle is out of sync with your revenue cycle, be wary. If you operate a web-based business, you have a particularly lumpy cashflow because your payment gateway provider may only pay you monthly initially. After a period of trading it is generally possible to negotiate weekly payments. Arrange this as soon as possible.

For other kinds of businesses, the chief risk is aged receivables. In other words slow payers. You aren’t a bank, so why should you loan precious operating capital to your customers?  Which is effectively what you are doing. There’s no law that says customers only pay on the 20th. For consulting or services work, I generally apply terms of 10 working days. Make sure you discuss the terms up front however, so everyone is on the same page. If they can’t be flexible – is that the kind of customer you want to be involved with?

Even if you don’t know exactly what your revenue is in advance, make an intelligent guess based on past experience. But be conservative. A cashflow forecast is quite possibly the one tool that will keep you out of the shit. Figure out your burn rate and balance this against cash on hand and income. That’s how you work out your runway. You should be able to forecast how much cash will remain at the end of each week, at least a few weeks ahead, preferably more. Initially this is tough, but it becomes easier as you collect more data.

Most businesses start out under-capitalised. Provided your business model is sound and revenue starts flowing early, this is not always a problem. But the reality is that under-capitalised businesses fail more often and grow more slowly due to less investment available for growth initiatives. If you are worried about excessive burn rate there are only two possible solutions. Sell more product or reduce outgoings accordingly. Unfortunately salaries are usually the first target, so be realistic with your early employees or co-founders and be clear about what the options are if cashflow drops.

Paul Spence is a commentator, technology entrepreneur and is a co-founder of iwantmyname, a New Zealand based global Internet venture. You can follow him on Twitter @GeniusNet

 

Talent Attraction Narrative Needed

Creating an innovation economy has many challenges, not the least of which involves locating and securing skilled workers to help build and grow high technology ventures. There is little point in cultivating a tech start-up culture without the fundamental building blocks in place to fuel growth. Tech founders need to be proactive about building a team, as well as extolling the virtues of New Zealand as place to re-locate to.

Recently I received several requests for assistance from aspiring tech entrepreneurs eager to find a technical co-founder for their start-up project. Of course I was happy to help, but I needed to prompt for some basic web based information, so that I could share the opportunity. If you are a tech founder and you value an open approach to enrolling people into your project – please do yourself a favour and start telling your story online!

I probably reach around 4000+ individuals in the New Zealand tech scene directly through my social media channels, community groups and various blogs. My advice to start-up founders is to take a similar approach. Turn up to events, write blogs, tweet, organise and support stuff in your community, if you want to reach the kind of people who can help get your start-up going. I don’t just mean making a Facebook page or sending a Word document around to a few likely suspects. Get creative, if you want to surround yourself with creative people.

You might also need to look offshore. I’ve recently been involved in recruiting a new employee for iwantmyname and we ended up engaging a guy from San Francisco. When you look around at the most interesting emerging tech companies in New Zealand, at least half were established by skilled migrants. So there’s certainly no harm in attracting more people from abroad to deepen our talent pool; but remember we are competing with every other economy around Asia-Pacific. That’s why we need to get our brand values aligned in a regional sense, so we can be clear about what we have to offer.

We began some important work on this last year through the Inspire event with KEA and Grow Wellington. I’m looking forward to continuing that conversation in 2013.

Paul Spence is a commentator, technology entrepreneur and is a co-founder of iwantmyname, a New Zealand based global Internet venture. You can follow him on Twitter @GeniusNet

Old Industries Are The Pits

Railways, coal mining and industrial scale manufacturing were all economic activities that had their origins in the 19th Century. This week has not been a good one for anyone employed in those businesses in New Zealand, with widespread redundancies having been announced. The reasons for the collapse of these industries differ, but they share the historical hallmarks of “creative destruction” as expounded by Austrian economist Schumpeter.

Schumpeter was remarkably prescient for a man of his time. Drawing upon the political organisational theories of both Marx and Weber he concluded that innovation was the primary driver of economic change and that every industry was subject to a cycle of emergence, ascendance and decay. He controversially proposed that democracy could never truly empower the ordinary citizen because the electorate were largely ill-informed or ignorant. His predictions that social democratic governments would emerge in the West (rather than socialist revolution) have largely come true.

None of this will be of any consolation to our miners, factory workers and railway engineers. But it does underline precisely why we need to be moving up the value chain through exporting our knowledge rather than relying upon filthy, dangerous and extractive commodity based industries. After more than a decade talking about it, the penny has finally dropped and the government is now attempting to reorganise commercialisation of publicly funded research and has been increasing the investment in research, science and technology. Bullish talk by government ministers about opening up more public land for mineral exploitation also seems to have faded for the time being. That’s why I spend a lot of my time promoting and supporting knowledge based entrepreneurship and emerging technologies and industries.

Paul Spence is a commentator, technology entrepreneur and is a co-founder of iwantmyname, a New Zealand based global Internet venture. You can follow him on Twitter @GeniusNet

iWantMyName – The Next Steps

A lot of people have been asking me recently how iWantMyName is going. The short answer is that it’s going great! We’ve been profitable this year and have had our heads down working hard laying both the technological and business organisational foundations that we need to grow. The challenge has been in making the transition from a small start-up business to a fully fledged, high growth technology story.

I certainly won’t say that it’s been easy. Everyone on the team has made sacrifices and we even had one or two nervous moments during the early days when we wondered if we would make budget and be able to pay salaries or rent. It comes with the territory. Being a start-up entrepreneur is like being on a mad roller coaster ride. It can be both thrilling and terrifying, especially if you are bootstrapping.

I meet a lot of budding web entrepreneurs and one of the first questions I ask them is, “are you ready for 2-3 years without a proper income?” It can easily take that long to carve out a niche for yourself and get meaningful revenues going. That’s without factoring in the vagaries of foreign exchange rates.

Notwithstanding the challenges ahead, we’ve got big plans for lots more features and fresh content on our New Zealand domain registrar site plus a major makeover of our search functionality across all four of our sites globally. There are also new and popular hosted services being posted almost weekly, so users can have smart one-click DNS set-up on their domains. We’re positioning iWantMyName as a next generation domain and DNS management service with an eye on future opportunities emerging with the new top level domains and internationalised domain names.

In addition, we’ve also started a new venture to advise young web entrepreneurs and share some of the experience we have gained on the journey so far. In fact we continue to be actively involved in supporting tech community events such as through Unlimited Potential, Startup Weekend, PXLJam and Perl Mongers to name but a few. We think it’s an exciting place to be as technology entrepreneurship continues to gain a greater profile as a career and lifestyle choice.

Keep in touch with us on Twitter @iWantMyNameNZ

Decoding Startup DNA

A recent joint study by Silicon Valley VC firm Blackbox and academics from Stanford and Berkeley universities provides some interesting insights into what makes Internet start-ups successful. The project involved 650 web start-ups predominantly investor funded and based in Silicon Valley. However the findings also have relevance for tech firms outside of the Valley ecosystem.

“Entrepreneurship is strongest at the intersection of science and art”, say the research authors who set out to define the science of technology entrepreneurship more clearly through a better understanding of what drives entrepreneurial success. By codifying the features of high performing tech start-ups the researchers hope this success can be replicated elsewhere. The research findings naturally extend much of the methodology ingrained within the lean start-up movement; for example it was found that companies that pivoted once or twice did better than others in terms of both market growth and capital-raising.

The study identifies a typology of three major types of Internet start-ups based on the approaches to customer development and acquisition. It also describes a set of common milestones and stages that start-ups tend to have in common. Companies that skipped stages tended to do less well. But perhaps the most interesting finding was that start-ups with balanced teams of business and technical oriented founders achieved the most success overall and chose the right time to scale up after validating their markets.

The report can be downloaded for free.

Wild About Wellywood

Just when we thought common sense had prevailed, the sneering face of Wellington Airport’s Australian born CEO appears in the media to inform us that the hideous and ill-conceived “Wellywood” sign will go ahead after all. Haven’t they got better things to spend their time on?

First it was the turd shaped international terminal, then they wanted to block off a public roadway, now the ridiculous “Wellywood” sign is back on the agenda. It’s clear that Wellington International Airport Limited (WIAL) have no interest in considering public opinion when it comes to their development plans. What is less clear is why 34% shareholder Wellington City Council is not strongly representing the public’s views at board level. Even Mayor Celia Wade Brown admits that the proposed sign is not a suitable reflection of the city.

WIAL management just don’t seem to get it. If you want to market a region as creative and fresh, why would you purloin an overused and derivative icon from an entirely different culture? Furthermore, why would you enflame the public with such a thoughtless and arrogant approach? The “Wellywood” sign concept is so tacky and poorly thought out it beggars belief from those of us who love and value Wellington’s beautiful seascape and are hugely proud of the achievements of all the digital creative industries across the city.

Majority WIAL owner Infratil is currently appealing to our national pride in a bid to encourage more customers to embrace their newly refreshed and wholly Kiwi owned fuel brand “Z”. Yet they seem oblivious to the conflict that is brewing with the airport’s proposal. “Wellywood” says nothing at all about Wellington, it’s not even funny and it certainly sends the wrong message about our ability to be creative. One can only hope that WIAL management will have a change of heart, for I fear a great many people will not take lightly to having their noses rubbed in it.

 

Riding the Wave

It’s exciting being at the forefront of innovation in your industry and riding a growth wave. But there are dangers lurking in the breakers for service oriented web companies with big goals.

Selling services online front loads a business with customer acquisition costs including infrastructure, marketing and customer support. But if sales are subscription based then cashflow can be lumpy and tends to lag well behind sales conversions. Another reason for this problem is that, for online sales, the payment gateway at your bank holds funds until they are cleared. If you are a new company, the holding period can be up to a month. In the meantime there are bills to pay and mouths to feed.

There are only two ways to get around this problem, bootstrap the business or raise capital. By bootstrapping, the founders are effectively providing the operating capital by contributing their time until the business reaches profitability. This is the approach we took at iWantMyName. Bootstrapping generally leads to slower, more manageable growth and allows founders to retain control. Raising growth capital is a valid strategy as well, but the task itself takes up a great deal of management time and head space that can distract from improving the core business. Ultimately, happy customers are your best source of capital.

Whether or not you go for raising capital, the ultimate goal should be investing time in improving the service offering. This in turn lowers the cost of customer acquisition. By improving the customer experience you should attract more referrals, have fewer support enquiries and enjoy better margins through additional sales of premium services. It seems intuitive, but for us it was a thrill seeing organic growth tick upwards as we gradually improved our site. Happy surfing.

A Tale of Two SOEs

Two recent media articles illustrated the different approaches to innovation taken by a pair of high profile state owned enterprises (SOEs) with which I am well acquainted. What these stories have in common are the fact that both businesses were turned around by strong leadership.

Rod Oram’s pre-Christmas cracker about Air New Zealand’s cabin layout innovations was a timely reminder about how (with an injection of taxpayer funded capital) the national carrier went from being a basket case to business success. I love Rod’s work and the fact that he has been for many years a tireless champion for innovation and technology as a way for New Zealand businesses to add value to exports and grow the economy.

The second story was about MetService, my former employer. The NZ Herald article outlines how the company leveraged a stake in a UK company to acquire expertise in the European marketplace. The company executed this strategy under the tutelage of Paul Reid, who is about to move on from the company. Reid inherited a mess when he took over the CEO role several years ago but he forged ahead and infused the senior management with some core competencies that had been somewhat lacking previously. Incredibly for a knowledge based business, the company had limped along for many years until this time without either a human resources manager or a CIO. He also took the time to genuinely listen to any staff member, his door was literally always open.

Being a former Air New Zealand staffer himself and mindful of the highly competitive nature of the industry, Reid actively led MetService away from its traditional aviation market base and into the media and consumer markets of Europe and the Middle East. This has proven to be a good move, although in light of volcanoes and snowstorms and rapid developments in platform technology, aviation still looks like a missed opportunity for the company. Unfortunately, it was very clear to me at the time that it meant a death warrant for the position I was employed in. But now that I’m engaged in a challenging role developing a high growth technology export business that I actually have a stake in, it seems like the best possible outcome all round.

Best wishes for 2011.