Category Archives: Start-Ups

Cutbacks Sour Sweet Taste of Success

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Almost everyone agrees that New Zealand needs to produce more high value, knowledge based goods and services to pay its way in the world. But the gestation period from good idea to global superstar can be in the order of five to seven years – and that’s just the ones that survive. Changing the policy settings for research, development and business growth to accommodate political cycles creates uncertainty for long play economic development projects.

In 2004 I made some introductions for a little known Wellington company called Open Cloud. They had a Java based middleware product for telcos that had the potential to go ballistic, given the exploding mobile market. Seven years on the company has a UK office, solid investor backing and mobile telecommunications companies beating its door down. Research and development remains based in New Zealand, a commitment the company made very early on in its evolution. Some forward thinking individuals at New Zealand Trade & Enterprise made sure that doors were opened, even though the company had only a handful of staff at the time.

Waikato company BioVittoria developed a plant based food sweetener that has caught the attention of global markets. Again, this company is a prime example of the kind of enterprises we need to be cultivating in New Zealand. But it too started out small with just its founders and a small number of contractors. The company leveraged research done in New Zealand and diligently built up a supply chain and manufacturing plant in China to process locally grown fruit and distribute the product globally. Even though BioVittoria suspended plans for a share float in 2009, the company instead secured an influential equity partner that will help with growth.

In the face of government funding constraints NZTE recently announced yet another senior management reshuffle and cut the number of direct client-facing roles. They also dumped the Escalator programme, which has been educating small business owners for many years in the art of capital raising. So now that New Zealand Trade & Enterprise has eased itself out of minding small businesses, will there be any support for the next generation of technology and science based ventures that are stepping forward? Intermediaries such as government agencies and consultants do have a role to play in building the networks that small ventures need to scale upwards. We should not rely on economic Darwinism alone to identify winners and losers.

Riding the Wave

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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.

Startup Weekend Comes to New Zealand

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Startup Weekend is a life-changing creative workshop for web entrepreneurs that has been held all over the world from Boston to Bangalore. Participants have 54 hours from 6pm on the Friday evening to strategise, build and launch a brand new web business. It’s a pressure cooker event that ensures everyone leaves with new ideas, brilliant personal networks and maybe even a new business. The great news is that the very first New Zealand Startup Weekend will be held in Auckland on 1st-3rd of April.

About a year ago, Startup Weekend global director Marc Nager approached me about bringing the event to New Zealand. But anticipating a very full year at Unlimited Potential plus lots of hard work growing iWantMyName, regrettably I had to decline. So I’m really pleased that Jason Armishaw and his team have stepped forward and I’m chuffed to be invited along as an advisor to the initiative. I’m looking forward to rolling up my sleeves and getting stuck in with some brain-storming on the day. It’s an opportunity for me to share some of the lessons learned within a high growth web start-up business and no doubt to learn heaps myself from a bunch of much smarter people.

With the event only a few weeks away, we need to muster resources and get folks signed up pronto! Developers, designers, business strategists, marketers, investors. Get your dream team together or just rock up by yourself and be ready to contribute your particular skills. If you know of any companies that can help out with some resources please contact Jason as soon as possible. There will be media involvement, so it’s a great opportunity to share what you do. See you there.

StartupDigest Offers Event Buffet

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It has been a busy year, but I always manage to keep some time free for an important project close to my heart. It involves curating content for the New Zealand StartupDigest. The weekly publication provides a quick reference summary of all the best start-up, technology and innovation events across New Zealand.

StartupDigest was co-founded by Chris McCann who describes himself as an “entrepreneurial activist”. Based in the heart of Silicon Valley, Chris has managed to motivate around 50 writers, entrepreneurs and fellow activists from around the globe to contribute all of the event content that goes into the various digests each week. It’s a much needed (free) service that helps everybody to connect within the tech start-up ecosystem.

You can subscribe to StartupDigest by selecting a country, city or university community that interests you. It is also possible to subscribe to specific verticals such as green tech or mobile, for example. This week’s NZ StartupDigest is available here. If you have any start-up, technology or innovation related events coming up in 2011 we’d love to hear about it. There is no cost for listing an event and it’s a great way to connect with hundreds of people interested in the tech start-up scene.

W2W Strengthens Entrepreneurial Ecosystem

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Recently Unlimited Potential ran Wellington to the World (W2W), New Zealand’s leading showcase event for early stage web and software ventures. W2W is about building bridges, so we invite technology innovators, entrepreneurs and tech investors to network over beer and pizza and encourage young companies to share what they are working on through either talks or at the demo zone. This was the third year that we have run the event and  I’m personally very proud of what has been achieved so far.

Much of the progress that is being made in promoting technology entrepreneurship in New Zealand is underpinned by communities of interest that are flourishing right now. I shared some remarks about this at the opening of W2W in my capacity as Chairperson at Unlimited Potential. We think it’s important to support developer communities and start-up groups because they nurture the seeds of future ventures and provide a deep pool of knowledge for new entrepreneurs.

If you didn’t make it to the event this year, check out the W2W entrepreneur videos. There is also some images and an event review available.

Thank-you once again Wellington City Council, Grow Wellington, Viclink and Summer of Tech for helping make this event possible.

W2W – Innovators Ready to Roll

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Global Entrepreneurship Week has rolled around already and Unlimited Potential is once again doing it’s bit to promote technology entrepreneurship as a career option. I’ll be working hard this week on a few last minute details for our Wellington to the World (W2W) event on Thursday.

Wellington is alive with tech talent at present and there has been somewhat of a renaissance as geek-preneurs have got cracking launching some great products onto the world stage. In some cases these are second or third generation ventures where there has been an earlier exit. W2W is a showcase event that brings together technology innovators, entrepreneurs and investors to share ideas and celebrate emerging tech ventures from around the region. 

We have a cool new venue this year, so have included a small demo zone adjacent to the bar area in the programme. There will be plenty of opportunity for hands on experience. Some of the companies in the demo zone will also be presenting during the entrepreneur flash talks. The event begins at 4pm on Thursday 18th November with talks by technology researchers from Victoria University. A number of these projects have commercial potential and will be seeking partnerships and investment in the future. Victoria University commercialisation arm Viclink is an event partner, so please support these speakers. 

The event also encapsulates the Summer of Tech launch for 2010/11. Summer of Tech is a great initiative that matches software and engineering companies with students looking for work experience over the summer holidays. It’s an important plank in a strategy to build up capacity and grow employment in hi-tech around the region. This year we are very pleased to have Xero CTO Craig Walker to speak at the launch. There are a small number of places left at the event, so be quick, registration is essential.

Innovation Investment For Tech Minnows Drys Up

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Last year the government signalled its intention to invest heavily in “primary sector innovation”. As an efficient producer of food with a huge and growing consumer market emerging on our back doorstep, it absolutely makes sense to invest in this area, but it should not be treated in isolation. It also sends a disturbing message that high carbon, environmentally damaging industries are the priority.

The official announcement of a $144M investment into the Primary Growth Partnership (PGP) springs from a promise made in 2009 to form a public-private partnership to invest into developing more innovative high value added products and services based upon our existing expertise in farming. But this funding was purloined from an almost identical programme that had already been set up just prior to the demise of the previous government. While the Nats rebranded the package, nothing happened for over a year. In the meantime the global economy tanked and the public’s attention was diverted away from the issue.

The recently announced and much lauded additional $189M in funding for high tech industries also sounds good at first glance, but is worthy of closer inspection. It’s spread over four years and is entirely targeted at larger firms. The problem here is that a lot of the most interesting ideas are being generated in smaller companies that are already being hit hard by the recession. Small companies don’t have a lobby group and tend to be way too busy innovating and simply staying afloat to complain anyway.

Starting-up and growing a tech company has always been a crucible of fire and only the best and brightest will succeed. That is why I’m sometimes a little bit ambivalent about publicly funded handouts. On the other hand, larger firms now have better access to government grants than smaller one, which seems a little unfair. New Zealand is way too reliant on commodity exports and certainly needs to add more value through innovation. But let’s not forget emerging software and high tech manufacturing companies that build and export high value products and services with almost no pollution or carbon attached.

There is a real disconnect between innovation at the coal face within small and enterprises and the resources being made available by government to stimulate these enterprises, some of which will grow to be bigger fish eventually. Under the new system, small companies will self assess their needs and receive training to improve “capability”. That is both laudable and necessary, but it doesn’t help get new products developed and to market faster.

Postscript: In response to my friends at TechNZ. My comments above refer to the new funding. There remain avenues for small firms to access co-funding for small projects from the existing funding pool.

Finder, Minder, Grinder

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What kind of attributes do you need to make a start-up dream team? When we think about high flying tech companies, a single high profile founder often springs to mind. But the reality is that start-ups with high growth potential need a mix of skills to build something long-lasting.

A lot depends on the type of business that you are thinking about starting. But for a definition of a basic start-up team I quite like the analogy of “finder, minder and grinder”. The Grinder is the person with domain knowledge. In a software start-up it’s obviously a skilled developer, at a micro-brewery it’s the brewer, in a restaurant it’s the chef. The Minder looks after the accounts, makes sure the money gets banked and the bills paid and later on, helps to raise capital. The Finder is your marketing guru who gets out there and makes the all important sales, without which there will be no business.

When we established ideegeo and started developing domain registrar iWantMyName, that was pretty much the roles we each took on. Being a web start-up we also had a designer at the outset, which was important for us. Now I don’t want to be too prescriptive because there are always exceptions to a rule and there is almost always some overlap in these early co-founder roles as well. But “finder, minder, grinder” is a good rule of thumb to get your team started. 

On Thursday 9th September Unlimited Potential will be running the Co-founder Match-making Event in conjunction with the Bright Ideas Challenge and Grow Wellington. This event is specifically aimed at taking people with I.T. related bright ideas and matching them with others who have technology or business skills to take these projects forward. The event is NOT for consultants looking to sell services to companies; it’s for folks who actually want to put their time into a project in return for equity and a bigger potential return downstream.

If you are a developer, designer, web marketing expert or just have a great tech idea you want some help with – come along to this facilitated networking session and find your dream team! We will also be having inspiring Minimonos co-founder and serial tech entrepreneur Melissa Clark-Reynolds join us for the evening.

Please create a short profile on the new Unlimited Potential website and register for the event.

Why Customer Acquisition Is Trumps

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Companies traditionally put a huge amount of resources into carving out and dominating niches within a particular product category. Airline loyalty programmes are one example of the lengths marketers will go to in order to retain customers. But in more dynamic markets such as web-based services, the old rules no longer apply. Customer acquisition trumps retention every time. Do the math.

For argument’s sake, let’s say that there are a total of 100 customers in your target category and that 20% change their loyalty each year. So, ignoring any organic growth, there is a total pool of 20 customers up for grabs in any given year. A start-up entering the field does well and secures 5 of these floating customers in the first year. But they will lose one of these customers at the end of the first year on average. In the second year there are still 20 customers looking to change provider. If the start-up succeeds with customer acquisition at the same rate it will still more than double it’s user base.

Being a small brand in a market with high defection rates is risky. Growing customer numbers as quickly as possible is insurance against future defections. A larger brand can weather the storm. For many product categories in fact, 20% loyalty churn would be extraordinarily high. So a new entrant has its work cut out for it on both fronts because in some industries the number of shifters is fewer.

I’ve over-simplified the figures, but you see my point. Acquiring customers from the pool of dissatisfied users is the primary goal of a start-up. In the case of web-based services, create a better user experience and you immediately tap into that pool. Customer retention will also take care of itself. Because the domain registrar industry is in dire need of innovation and there is a large number of disaffected users, this is the approach we have taken at iWantMyName.

The Hills Are Alive

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The hills of Wellington may not be alive with the sound of music as such, but they are home to some of New Zealand’s coolest emerging technology sector companies.

Providing a network forum for entrepreneurs to connect with investors, future employees and other innovators is part of what we do at Unlimited Potential. This week IN-Business magazine published its fantabulous SmartNZ technology supplement and were kind enough to include an article penned by yours truly. In the article I talk about the resurgence of tech entrepreneurship and how we can enjoy New Zealand’s lifestyle whilst scaling our businesses globally.

The publication leans heavily on the people and events happening in the technology scene around the Greater Wellington region and is a beacon of light for those of us working within smaller tech companies. Being an entrepreneur has its ups and downs and we all need a little dose of inspiration at times. Tim Collins and the team at IN-Business have done an outstanding job with SmartNZ and I would highly recommend grabbing a hard copy or checking out the digital version of the magazine.

The article I wrote for SmartNZ also mentions Startup Digest, a weekly listing of startup, innovation and technology events. If you would like to subscribe to the New Zealand digest or find out how to get your tech event or product launch listed, you can find this week’s edition here.