Innovation Ecosystem Worries Unfounded

Posted on Monday, 13 November, 2017 by Paul Spence

It was very disappointing to read Mike O’Donnell’s recent comments about the supposedly tragic state of New Zealand’s innovation ecosystem. Now whilst I respect what those guys have built, it seems like not a year goes by without a member of the TradeMe cabal bagging our community and what we have achieved. It’s starting to get a bit old.

Let’s deal with the obvious hypocrisy first. O’Donnell draws on a marine ecosystem analogy that he picked up at a recent conference. He describes startup companies as bottom feeding low life species, feeding off the stronger, larger fish in the ocean (read – TradeMe, Xero). Like his mates previously, O’Donnell goes on to lament the confusing proliferation of incubators and accelerator opportunities available to aspiring startup companies. However there’s conveniently no mention of the actual economic value created or new jobs that have been delivered by such institutions.

On the other hand, he loudly sings the praises of two companies led by extraordinary women and illuminates them as exemplars of real startups that deserve success. He’s right about both of them of course, but he conveniently neglects to mention that both companies received a leg-up from the very ecosystem that he dislikes so much. Furthermore, some of the the commentators backing his position are folks who also benefited from being part of the startup community. That’s hard to reconcile.

Opposition to state funding of startup programmes springs from a deeply held philosophical belief in some quarters that only well funded companies with friends in the right places should be allowed to succeed. Now it’s very unlikely that the incoming Labour government will roll back recently announced funding for accelerator programmes, but they will no doubt be reviewing how to deal with promoting innovation and entrepreneurship in New Zealand in the future. That’s an opportunity, so understandably Mike wants to influence that debate. But I disagree with his position and here’s why.

Whilst many of us agree that the startup venture model is less than perfect, that’s not a good reason to pull public funding from the sector. As a nation we must diversify way from commodities and move up the value chain. Let’s take the wins when they come and accept there will also be some failures along the way. Government support comes in many forms across the spectrum from enabling academic research commercialisation through to co-funding accelerators. Arguably we are not doing enough compared to others globally. I don’t see any criticism of Israel or Australia, nations that actively and successfully apply substantial government support to their innovation ecosystems.

Having taken a company through the Lightning Lab accelerator this year (and bootstrapped a previous tech company from nothing), I guess that makes me one of the “bottom feeding” losers mentioned in the article. I find that analogy quite offensive, especially since (for the record) we received no funding handouts whatsoever within this year’s Lab. Let’s work together to achieve good outcomes for New Zealand and ensure there are a mix of great programmes with excellent community partnerships in place and that solid companies with real customers get oxygen to move forward.

Postscript:

Mike O’Donnell reached out to me recently and we had a chat about the context of the term “bottom feeder” that he used in his article. Mike sees bottom feeding species (such as Snapper) as the healthy foundation of the ocean ecology and I accept that his analogy was not intended to be derogatory. As I originally mentioned, we all have huge respect for what has been achieved by companies that have a connection to the TradeMe story. There’s a role for all kinds of fishes in the ocean. We should try to work together to ensure sustainability and longevity of the fishery.

Paul Spence is a commentator and serial entrepreneur, a co-founder of Wellington, New Zealand based technology ventures iwantmyname and Polanyio and a founding mentor with Startup Weekends and Lightning Lab. You can follow Paul 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.

Innovators Online Again

Posted on Saturday, 1 July, 2017 by Paul Spence

It seems like half a lifetime ago that myself and Annick Janson established New Zealand’s first online community for innovators and entrepreneurs (ION). It was a clunky PHP forum site that we managed for hundreds of users thanks to the support of University of Auckland School of Business and Revera. After ten years and a couple of post-graduate research projects between us, we reluctantly moved on to other endeavours. But the need for a community platform did not go away.

So I was thrilled to discover recently that the NZ Innovation Council now has a community site on offer. The new site provides lots of fresh content about New Zealand innovators plus a discussion forum and event listings. In the tech world timing is everything and I guess ION was a little bit ahead of its time. I remember sitting through numerous dull meetings with risk averse public servants who just couldn’t see the opportunity and chose not to support us (including one in particular who subsequently thought spending half a million on a boxing match was a great use of public funds – go figure). Judging by the list of sponsors now backing this new initiative, the change of guard at both NZTE and Callaghan has been a positive thing. </rant>

One of our first sign-ups on ION was a bloke working hard on building a little accounting software startup that you might have heard of. There was lots of great conversations on the forum and we helped a bunch of people. What we learned from our initial efforts in this arena was that valuable knowledge truly arises when you facilitate social engagement. In New Zealand we tend to work in silos, but only through collaboration can we create meaningful impact in the world. Online communities are part of the mix, because we need to push beyond the mindless dross of the big social platforms that do not have our interests at heart.

I commend the NZ Innovation Council for this initiative and encourage everyone to sign up and get involved by sharing ideas and content.

Paul Spence is a commentator and serial entrepreneur, a co-founder of Wellington, New Zealand based technology ventures iwantmyname and Polanyio and a mentor with Startup Weekends and Lightning Lab. You can follow Paul 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.

Is Lean Thinking Killing Creative Thinking?

Posted on Thursday, 13 October, 2016 by Paul Spence

As a frequent Startup Weekend mentor (and co-founder of a successful boot-strapped tech company), I have had plenty of real life exposure to the doctrines of lean startup. But a recent experience has started me questioning whether we are doing ourselves a disservice through slavish adherence to lean methodology and an overly prescriptive approach to starting up.

Let me be clear. The Lean Startup framework provides a solid foundation for anyone who has not previously been in business and for whom resources are scarce. Starting a business is hard and developing a new business model is especially difficult. Coming from a science background, I’m very interested in how Lean Startup takes an experimental approach to testing hypotheses. This makes a lot of good sense. What makes less sense is when being Lean constrains our imaginations.

But I think there’s a way to resolve these tensions. There are two fundamental issues faced by a new startup and (to put it bluntly) not much else really matters outside of these two.

Are you addressing a real problem that people will pay you money to solve?
Can you position your solution in front of those people?

If you can answer these two essential questions, you have a shot at building a business. If not, fail fast and start over. At the forefront of your mind should be that customers are your chief source of capital, not investors. Engaging with customers early and identifying their problems is essential. Gaining venture funding is not a business model. Most businesses in the real world are NOT funded by venture capitalists.

By all means deploy Lean Thinking in your startup to discover customers, create value and extend your runway without becoming reliant on external funding. Indeed, a successful first product iteration that earns an income stream can provide a pathway to explore bigger ideas in the future. But please don’t let Lean Thinking kill your dreams. Many of the greatest tech companies started small and created their own markets. Be an entrepreneur scientist. Keep experimenting. Entrepreneurship is a creative endeavour, which is why many of us are drawn to it.

Paul Spence is a commentator and serial technology entrepreneur, a co-founder of iwantmyname (a New Zealand based global Internet venture) and a mentor with Startup Weekends. You can follow Paul 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.

Finding The Happiness Particle

Posted on Wednesday, 11 May, 2016 by Paul Spence

happy Recently 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.

When Good Ideas Have Sex: The Case For Innovation Networking

Posted on Saturday, 2 April, 2016 by Paul Spence

w2w Last year I attended the final pitching session at Get Funded 36, a compressed accelerator course for budding entrepreneurs from within the academic community. Callaghan have produced a blog article explaining how it all worked, nicely showcasing PhD student Brendan Darby and his spectroscopy solution for testing turbid fluids. During the one and a half day event, the participants were walked through the fundamentals of lean startup methodology and coached on how to develop a short pitch to promote their proposal with investors and funding agencies.

I have been involved in promoting this kind of innovation networking through startup community events for some years now, including developing Unlimited Potential Wellington to the World (see photo above) a tech and research innovation showcase and helping to run a special Startup Weekend for researchers last year. The results were mixed, but Get Funded 36 went on to tailor the model a little more and I hope there will be other similar events in future. There’s certainly a strong case for developing more short course formats for giving researchers and academics a taste for entrepreneurship and for exposing the business community to new ideas.

Technology research forms the basis of most high value ventures, but New Zealand has traditionally been a poor performer in commercialising academic research. Part of the problem has been an obsession with “publishing” research, instead of turning it into a business. Our university commercialisation offices have had some successes at licensing intellectual property, but less success at seeding high growth ventures in which most of the economic value has been retained locally. Those mindsets need to change if we are to earn our keep as a nation in future.

There are other initiatives in the New Zealand research and academic community such as Velocity (formerly Spark) and KiwiNet that have gained some traction over recent years and which welcome engagement with the broader innovation and business community. We need more of this! I firmly believe researchers need to get downtown and mingle with entrepreneurs and investors more often. As a friend of mine is often fond of saying, “when good ideas have sex, great things can be achieved”.

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

Your Startup Weekend Toolbox

Posted on Sunday, 25 October, 2015 by Paul Spence

toolbox November 2015 was a bumper month for Startup Weekends here in New Zealand. With more events in the pipeline, it’s time to begin thinking about your game plan. Here’s a short primer on the fundamentals.

Team – At Startup Weekend we take you from an unformed idea, through to a working business model with a team that can capably execute on the project. Teams of one simply don’t fly and you cannot scale a business without a good team around you. But Startup Weekend helps you connect with people who bring a diverse range of skills. Be ready to share and engage. Choose your team mates wisely – you may be together a long time.

The Problem – Have you thought hard about the problem you are solving? It’s too easy for entrepreneurs to become infatuated with their own idea and overlook whether or not they are fundamentally solving a point of pain for customers. Get out of the building. You might be surprised what you can learn from potential customers and how this can be applied. Testing your hypothesis is the scientific part of being an entrepreneur.

The Solution – Are you creating a product or service that offers a compelling advantage over other similar offerings in the marketplace? Is the related intellectual property defensible or secure? Research the competition and don’t forget to check for trademark and domain name availability. If you can’t find any competing businesses, then ask yourself why.

Customer Acquisition – Forget about all the startup investment mythology. Your best source of funding is real, live customers, not investors. Ultimately someone has to be willing to pay, otherwise you will sink. Here’s a great article that explains customer acquisition versus lifetime value. Building a long term relationship with your hard won customers is key. Venture funding is not a business model.

Business Model – How does the business deliver customer value on the one hand, whilst generating growth revenues with an engaged audience? Look at where your venture sits in the global context and how it could scale up to something really big. Are you a pipe or a platform? Become familiar with using the business model canvas as a framework for your thinking.

Startup Weekend bundles these questions around a lean methodology and provides experienced entrepreneurs to mentor and challenge you along the entrepreneurial journey. Find a New Zealand Startup Weekend near you and sign up yourself (and a friend).

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

Image credit: Jason Rhode

Sowing The Seeds For Investment

Posted on Sunday, 12 July, 2015 by Paul Spence

Alan Jones is a well known Australian angel investor who was one of the early hires when Yahoo was just kicking off. So he’s been at the forefront of the tech industry since the early days. As a marketing and tech guy he now works with Aussie startups at BlueChilli incubator in Sydney. BlueChilli provides an integrated suite of services to early stage ventures and is part of an explosion of interest currently happening in tech incubation across the ditch.

Alan joined us at Startup Garage recently and provided a very thorough exposition of how early stage companies should be preparing for presenting to potential seed round investors. Key to building a good relationship from the outset is doing your homework and identifying angels that have an interest in your type of business, he said. If you want some more tips on how to reach out to investors, check out Alan’s slide deck.

On the other hand, if you are lean boot-strapping your start-up, you might be able to delay (or avoid) raising funding and consequently drive a better valuation and hold on to more equity. Recently I’ve been tracking some interesting case studies detailing how a variety of different entrepreneurs essentially self-funded. Remember, getting investment is not validation for your product. The best form of validation is actually selling to customers.

Startup Garage provides a series of sessions with visiting guest speakers aimed at informing the startup community in the Capital. The events are hosted by Creative HQ and sponsored by Grow Wellington and iwantmyname.

A Special Event For Entrepreneur Researchers

Posted on Wednesday, 17 June, 2015 by Paul Spence

Compared to many OECD nations, New Zealand underperforms at building great global companies based on smart commercialisation of knowledge. That’s a shame, because we have no shortage of intellectual talent and we also enjoy a fantastic natural resource base.

So we are putting on a very special Startup Weekend event here in Wellington focusing on science and research. It’s all part of our efforts to strengthen the entrepreneurial ecosystem in New Zealand and get more people in science and technology thinking about entrepreneurship as a career. Encouraging a culture of entrepreneurialism and building bridges between the research and business communities are important themes in driving value-added economic growth that we need to underpin our future.

It is a fantastic opportunity for young researchers who are interested in research commercialisation to spend a weekend with some very cool mentors as well as investors and people from across the business community. The McDiarmid Institute and Kiwinet are actively supporting this event. It’s mostly about teaching a lean methodology for developing and testing business ideas, as well as networking with potential future collaborators.

Participants can bring a project of their own that they wish to explore or join another team simply for the learning opportunity. We are looking for researchers from any field plus engineers/developers, designers and business gurus to get involved as well. Who knows where it might lead?

This will be a smaller event than usual and spaces are limited. Sign up for Startup Weekend Science & Research today!

Imagination Key To Winning Online Retail Race

Posted on Thursday, 11 June, 2015 by Paul Spence

Last week three iconic local retail brands shut their doors in my city. Whilst traditional “bricks and mortar” retailers continue to blame their demise on the growing threat from online, the real threat is complacency in the face of a changing market. But it’s an issue that e-commerce businesses need to be mindful of also.

Listed on the New Zealand stock exchange, Kirkaldie and Stains had an amazing history catering for high-end retail in the capital city. The firm was started in 1863 by a pair of immigrant entrepreneurs and is one of the oldest surviving retailers in the country. But the writing has been on the wall for some time, with ongoing financial losses and flagging share price. Subject to shareholder approval, the company will be acquired and re-branded by Australian retail giant David Jones.

The historic Bank Arcade is one of the few tasteful retail venues in the region. Longtime tenant Rixon Groove was an upmarket shirt and tie retailer and manufacturer that opened to much fanfare in 1991, catering for inner city businessmen and office workers. I often walked past that tiny shop and noticed, unlike its busy neighbours, there was sadly almost never a customer in sight. With the price of a shirt hovering around $200 and fashion trending away from formal attire in the workplace, it’s not hard to see what went wrong.

Shoe retail is sometimes regarded as the most competitive category, but boutique shoe store Minnie Cooper was always a hit with the ladies. Rather than go the way of the other dinosaurs, the business has elected to close its stores and go 100% online. They will continue to face huge competition, but without the substantial overheads of a high street presence. It will be tough, but least Minnie Cooper is attempting to adapt to the changing market.

Online businesses also face challenges and must be prepared to adapt and innovate. Customers online are fickle and have the attention span of a small fruit fly. Barriers to entry are relatively low and very few online retailers have a natural monopoly in their market. So e-commerce properties that fail to remain fresh and relevant have a limited lifespan in cyberspace. Addressing a huge global market is a far more interesting proposition, but shirts and ties all look much the same. Clearly differentiating your product offering against dozens of competitors requires a lot of imagination.

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

Stop Making Sense

Posted on Sunday, 24 May, 2015 by Paul Spence

A recent article in the Washington Post implored society to stop focusing on tech start-ups and begin encouraging more entrepreneurs to start mainstream businesses, because these have a greater chance of both generating new employment and staying the course.

The logic behind this proposition is based on demographics. As “millenial” entrepreneurs come of age, there’s an opportunity to further empower the founder pipeline with better business education and a stronger emphasis on mentorship. Idealistic young people from this generation have a more diverse view on what kinds of businesses interest them and a more holistic understanding of what the art of entrepreneurship looks like in the context of social and environmental responsibility. An overemphasis on tech sector could therefore be limiting because of its somewhat linear narrative.

Much of the mythology around tech start-ups is media driven and does not necessarily reflect the wider tech industry of course. We generally only hear about the success stories of companies that raised millions in funding or had huge exits. We are rarely informed about the 98% of tech start-ups that never get funded or those that crash and burn within a few months due to lack of product-market fit. Moreover, we do not hear often enough about value creation and social equity as measures of performance.

This is partly why I cringe whenever someone suggests we need to build an entrepreneurial ecosystem just like Silicon Valley. There’s more than one way to grow a company. But much of the prevailing wisdom involves companies “getting offshore”, setting up shop in the Valley and networking madly until they score a round of funding. This is not the only pathway. With iwantmyname we proved that it is entirely possible to bootstrap without capital and grow organically, simply by consistently delighting customers.

Furthermore, the Valley is no longer the centre of gravity it once was. The focus is shifting as increasingly affluent Asia-Pacific economies look outwards for investible opportunities across a wide variety of sectors. Our friends across the Tasman already know this and have become very successful at building bridges and welcoming more productive inflows of capital. The face of business investment is changing and it’s no longer defined by slick, white guys in big suits. Making sense of this involves us being able to adapt to the new environment through clearly articulating our personal values as entrepreneurs and as an entrepreneurial nation.