Startup company

Deckr – Gamified Pitch Deck Feedback App

This is actually a pretty good idea for validating your new business idea. Put together a pitch deck, publish to Deckr and then get the feedback from the site visitors, judging the startups is a little addictive and I can see how they could build a business model around this.

You might have confidentiality concerns but the truth is most new startups can’t give their idea away, very few people are going to steal an idea (and its improbable its new or unique) and in all cases execution is what makes the startup successful and the core idea often changes over time.

Many successful startups had insights about their product or market that no one else believed for a long time, many successful investors passed on AirBnB because the team could not convince them that staying in other people’s homes would be a real thing (and effectively because it was so difficult to get the customer acquisition right they are the only major player in the space).

If you really have patentable IP then you are not going to disclose the method but you could provide an insight as to why you solve your particular problem better than anyone else and why the problem is important.

 

Startup NameDeckr
What problem are you solving?We provide a fast and free way for startups to validate and get early adopters while they play a game.
What is your solution?Startups send us ashort’n’sweet pitch deck which we show our visitors on a slick,gamified UI. VisitorsTell us whether they’d use the product and they get play cash in return. Then we send the analytics back to the startup and also provide them a way to contact those who said “yes” on their product.
Target MarketStartups on one side, random crowd of players on the other.
How will you make money?After our beta we’ll convert to a freemium model where startups can get priority to get their decks rated quicker.
Tell us about the market & founders, why is this a great opportunity?It’s a totally new and exciting way to get validation and early adopters. Not to mention it’s free and we’ll process startup entries in 24 hrs and statistics are available in a week.
Founders NamesBence Fodor
What type of funding has the company received?Bootstrap
Websitehttp://deckr.co
Twitter Handle@deckrco
[lc-response-form id=1]

19 Hot Australian Startups to Watch in 2015

Ed: An edited version of this article will be published in the December edition of My Business Magazine

Introduction

I spend a lot of my time reviewing inventions and startups ideas and attend numerous pitch events, mentoring programs so I see a lot of pitches, some are great, others less so.

So I know bad when I see it, likewise occasionally I come across companies that I think are on the path to success.

There a few things we look for reviewing a startup.

Solving a Real Problem.

We really need to believe it’s real and significant pain to someone. I see a lot of businesses solving non problems (I have been guilty in the past) or me too providing solutions. If no one really cares about the problem you are solving, then your business doesn’t have a future.

Team and Execution

We look for teams that are strong both technically and commercially with evidence they can execute. I met some the companies listed below when they were still at the idea stage and since seen them build working businesses. That gives me a lot confidence in the entrepreneur that they are going to continue to execute.

Scalable Customer Acquisition & Service Delivery

Have they worked out how to cost effectively acquire new customers. Can they scale service delivery with minimal effort, if they are doubling users every month, do they have to recruit 100 new staff each month or press a button and launch 30 virtual cloud servers? Most businesses are not built to scale, either the product, people or the process will break. Generally they either can’t acquire sufficient customers or the product/service can’t be replicated at high volume without increasing costs or headcount even faster. This is typically why we see software/ web application businesses being valued at such high multiples or even pre-revenue.

A great example is the new business software app called Slack.com from the US. In less than a year they have grown from launch to 120,000 paying business customers, TinyBeans has grown zero to 500,000 users in under two years, Canva has gained 1 million users in a year.

Software driven businesses are one of the few ways companies can create massive levels of growth without increasing headcount, each new customer provides incremental revenue with almost negligible cost increase.

Electronic Hardware is much harder but will scale well if you have great product design, customer acquisition, rock solid manufacturing, logistics and a reliable product. If you have a reliable product you will do well, however if you ship a batch of product with problems it will sink your company.

Some of these businesses have already raised capital and have serious revenue or users and valued at $100 million plus, others are still at a very early stage but appear to have their business model working and may be looking for capital.

Its probably too late to invest in the former, once professional investors are involved its almost impossible to get into a fund raising but some of the later group may be looking to raise money in the new year.

If you are interested in Angel investing you could start by registering on Angel list or our local crowdfunding platforms ASSOB  or attending some of the Sydney Angels events. Also launching next year is

If you want to see more early stage companies follow me on Twitter @MikeNicholls88 or subscribe to our regular email updates in the sidebar.

I believe the 19 businesses listed below are going to have a great 2015.

High Growth

Pocketbook

Pocketbook-App-img-all-devices-1

What? Online personal finance service which aggregates all of your personal finance statements, income, spending and budgeting.

Why? No one has done a good job of this in Australia. I met one of the founders a few years ago when he was pitching at a Sydstart (the biggest startup conference in Australia). He told me he was going to create a service that allowed people to see all their finances across all their bank accounts and credit cards.

I though he had no chance of convincing the 20 or so banks that matter to give him access to their systems, I also though he would have a hard time engineering a web application that would pass the banks security requirements.

Turns out two years later they have managed both and are growing quickly and have raised a small funding round and are frequently near the top of the Itunes Finance App list.

I expect they will either raise additional capital to continue growth or someone with deep pockets will make them an offer they can’t refuse.

Stockspot

Stockspot

Stockspot

What? Online automated fund management service with lower management fees and less human error.

Why? The managed fund industry is ripe for disruption. Humans suffer from a lot of biases, Fund Managers try to outperform the index by trying to pick winners but 70% of them under perform the general market after their fees are deducted.

Stockspot is a similar business model to Wealthfront in the US which has been wildly successful growing faster than any fund manager in US history.

This is not an easy business to setup, barriers to entry are relatively high to new competitors, existing fund managers are conflicted and probably can’ adjust their business models or costs to compete.

Their website offers a very compelling story, their business model is clear cut and will scale very well if they can keep customer acquisition costs under control.

This is also a very sticky business, customers rarely switch fund managers. I believe there is an general mistrust of the funds management industry so a manager who is aiming to reduce management costs and provide transparency around the investment process with a slick customer acquisition routine is probably going to be successful.

Vinomofo

Vinomofo

Vinomofo

 What? Wine Ecommerce

Why? These guys are simply the best online email and video marketing company I have ever seen.

Wine is not a particularly easy e-commerce business, the freight costs are high and its tough to deliver a single case of wine to the consumer at a cost that matches the big liquor chains sale price at the store and the whole industry has an endemic discounting culture.

The one thing that singles these guys out is their relentless marketing execution and customer acquisition and in most businesses that is the biggest battle.

Shoes of Prey

Shoes of Prey

Shoes of Prey

 

What? Online custom shoe maker who lets you design your own shoes and then makes them and ships them to you.
will make a shoe to your design and ship in

I like the concept and they have traction, most e-commerce companies resell other brand merchandise which is a high volume low margin game and most of them struggle to get scale.

Marketing, shipping and inventory costs make it a tough business for all but the enormous and the very niche.

Shoes of Prey own and make the product so they capture a much larger share of the margin in the supply chain and they have an incentive to invest in their own brand.

This model also benefits from not having to stock which is attractive, I imagine they actually generate net cash as they grow as they probably don’t have to pay the suppliers for a few weeks after receiving the cash from the buyer, I like this concept a lot and there isn’t many businesses that can pull it off.

They have also just struck a deal to expand in the US by opening counters in Nordstrom department stores which is a massive win.

Airtasker

Airtasker

What? Airtasker.com is a web service that allows consumers/businesses to post tasks or jobs they want performed and service providers or individuals to bid for the jobs.

Originally it was pitched at individuals doing tasks for other individuals but has turned into a significant lead generation service for businesses.

Why? They fill a gap in the employment market and are producing good gross margins (~15%) with strong growth on approximately $1 million in revenue a month.

They have traction in a double sided market, these are hard to attack, in order to be successful you need to have both critical mass of both consumers and service providers, if you are missing either you don’t have a service.

Generally double sided markets end up with a few large competitors and are tough to crack once established, it appears Airtasker is going to be one of the winners for casual labour.

Canva

Canva
What? Canva is an online graphic design tool that does just about everything your average user needs to create great quality banner ads, newsletter designs and other business graphics with prebuilt templates and thousands of images and effects available with templates setup for creating and operating Social Media accounts.

Professional quality graphics design is typically the domain of hipster designers who speak a different language, wear different clothes and generally don’t work for you. They use tools like Adobe Photoshop and Illustrator that cost $1000s and have all sorts of tricks to create beautiful work.

Why? The company hit a million users within 12 months of launching. The app is slick and works extremely well and replaces a very expensive suite of products for the majority of business users.

The CEO is the networking master of the universe and has convinced a very high profile set of investors to both invest and publicly promote the platform including Guy Kawasaki who is an icon in the tech and startup industry.

This will be a major business.

TinyBeans

TinyBeans

What? Social Network for new parents

Why? This site is experiencing hyper growth, in October 2013 they had 40,000 users, in October 2014 they have over 500,000 users. Just raised $2 million in September. Great monetisation opportunities.

Catapult Sports

Catapult-Sports Catapult

What? Catapult Sports is a wearable sensor package for professional sports people that tracks their training and game performance and provides performance data back to their coaches and trainers in real time. Think of it like a Fitbit on steroids

Why? Catapult is on fire, they recently raised capital from Mark Cuban the US Billionaire owner of the Mavericks Basketball team.

They dominate a new market which is growing very quickly, they have hundreds of professional, national and Olympic teams using their product with strong positions in US NFL, Rugby League, Rugby Union, Soccer (football), every Australian Football team, Basketball and various athletic disciplines.

Expect a year of strong growth, expect to see the data gathered from the athletes shared on the TV/Web and possibly an acquisition offer from a large player such as Google, Apple or Nike (yes, completely different industries) or Fitbit.

wattcost

What? Wattcost is a smart power meter that can adapt to existing meters both digital and analogue and provide power monitoring and help reduce power consumption.

Why? This industry is ripe for efficiency gains, we have no idea how much power we use until we get the bill. We would however like to reduce our costs and consumption, but its not possible to get this information in real time.

Existing smart meter solutions require an electrician to attend the site and remove and replace your meter with a smart meter. The costs can be significant.

Some newer homes have smart meters but are primarily for the benefit of the energy company, there is no software or systems to help the user save energy.

Wattcost is user installable and works with both digital and analogue meters and is shipping now. Expect either a huge capital injection or a big acquisition offer in 2015.

Special Mentions

These companies are still very early stage, some have only just started shipping product but I think they are going to be special.

Tzukuri

TzukuriSmart fashionable glasses with bluetooth embedded in the frame so you cant lose them. Massive press coverage in the last few months and rumoured to have a deal with a large Multinational electronics company to sell these in their stores.

Vistr

Vistr-Screenshot

What? Cash Flow Management for Businesses – Integrates with Xero

Why? Real Problem, cashflow management has been a problem for businesses forever, very few workable software solutions exist, most small business accounting software does not solve this problem well.

I met the founders a year ago when this was an idea on a whiteboard, they have executed well and now have a working business model and paying customers.

Cartesian

cartesian-argentum-1024x575

Launched the Argentum printer earlier this year which prints PCBs (the green boards in electronics) Given electronics hardware has seen a massive resurgence in funding in the last year, I expect their product to be very popular.

Podplants

Podplants

New hydroponics solution for making greenwalls in commercial buildings (ie walls of flowers and plants). I have seen this founder iterate his initial concept through a bunch of variations from idea to shipping product and he now has a great product and is winning commercial business.

Farmbot

Remote sensing and communications for farms and the environment.

Agtech is one of the key opportunities for startups in the next decade. Demand for food and efficient production methods will continue to grow. Sensing and communications on the farm is a big problem and these guys have a good solution. Once they are established this will be a solid recurring revenue business.

Ninja Blocks

NinjablocksWhat? Smart home automation hardware devices and Apps to allow home owners to monitor and control security, air-conditioning/heating, lighting and other power related utilities. Home automation and monitoring is another of the top 5 market opportunities for the next decade, due to low costs micro-controllers and components companies such as NinjaBlocks are able to drive prices down to mainstream pricing.

Asset Guru

Provides Asset Tracking for Enterprise & Businesses. This is a big problem, most companies just use a spreadsheet which doesn’t work very well. Recently launched so no customer data yet but they look like they have a credible solution to a real problem with slick customer acquisition. Could develop into a solid recurring revenue business.

PicPac

App for stop motion & time lapse video and photography – Grown from 80,000 to 140,000 users in the last 6 months.

Makeupsocial

Social network for sharing your cosmetics and beauty tips. I know this is not exactly solving a big problem but you cant ignore the fact that they have 80,000 users up from around 10,000 a year ago months ago.

SwarmFarm

Robotic Farm machinery, using GPS and sensing can handle routine farm jobs such as spraying using a robotic lightweight tractor. Based in Queensland and with help from Queensland University of Technology and The University of Sydney Field Robotics team this is a low impact, low cost solution for a farm to cut their labour and fuel costs.

I spoke to the founder about a year ago and instead of spending a year building out a special farm robot, they simply equipped a relatively cheap lightweight farm UTV (pictured below) and spent all their time and effort on the robotic control systems (which is where the problem really is, not with the actual machinery).

Swarmfarm-Agbot - Credit QUT

Swarmfarm-Agbot – Credit QUT

Once they had the robotic control system working in the proof of concept vehicle they have now built a very lightweight sprayer system which is perfect for spraying, cheap to run and low impact on the soil.

Swarmfarm-new

Hackathon? Startup Weekend? Pop-up Accelerator??

Wikipedia tells us “A hackathon (also known as a hack day, hackfest or codefest) is an event in which computer programmers and others involved in software development, including graphic designers, interface designers and project managers, collaborate intensively on software projects”.

On the model of Startup Weekend, Wikipedia explains these are “54-hour weekend events during which groups of developers, business managers, startup enthusiasts, marketing gurus, graphic artists and more pitch ideas for new startup companies, form teams around those ideas, and work to develop a working prototype, demo, or presentation by Sunday evening”.

Both are phenomenal approaches to giving structure to teams of young, innovative teams in producing high quality projects in short time periods.

As for outputs of these two categories, a hackathon generates working prototypes of new technologies that solve a problem, whereas a Startup Weekend (according to a contact on the inside) generally lacks the time required for strong execution of prototype but does amazingly at validating a problem, solution, business model and performing a pitch at the end of the program.

So what if we could bring the two models together, over a slightly longer period, and judge teams on both work done on external validation of problem, solution and business model but during their final pitch ask not only for slides to be presented but also the working prototypes they have coded up?

What if mentors from accelerator programs like AWI Ventures (main program partner), SlingShot Accelerator and Venturetec Accelerator were collaborating in providing world class mentoring and support to these teams?

What if investment groups like Optus Innov8 Seed and Tank Stream Ventureswere side by side giving mentoring to teams from an investor point of view?

What if the likes high-end tech development agency First Order founder, Alex North, was a key mentor into the program?

What if a passionate group of entrepreneurial UNSW alumni, led by Jonathan Barouch (who has already built a killer app for the same CBA platform the program is targeting with his startup Local Measure) gave up their time, expertise and skills to support each team as a means of “giving back” to their university?

What if the participants were both local and international students and alumni from a variety of faculty, schools and backgrounds – from the obvious Computer Science majors but also across many other Engineering disciplines, and of course the UNSW Business School (who hosted the event in their new flexible, flipped classrooms on campus)?

Then imagine 15 Commonwealth Bank staff divided themselves into hipster, hacker and hustlers categories and provided another layer of mentoring for the students competing. With my colleague Melissa Ran and her team of 20 volunteers making things go smoothly in the background, it would be difficult to think of a way to improve “people power” for a single program.

This is what happened with the UNSW CBA Hackathon we ran September 27 – October 2 this year and the results were very interesting. One of the exciting results was that we have ended up with at least three startups with real solutions to real problems and the support of a major corporate who cares: Commonwealth Bank Australia. Some of the teams are already making use of the mentoring from CBA domain experts and access to the brand new CBA Innovation Lab. In addition, the teams are making use of the free incubation services provided by the Student Entrepreneur Development team at NewSouth Innovations.

$7,500 was up for grabs for the 9 teams who were competing with a focus on the retail transaction space and leveraging the Commonwealth Bank platforms Albert,Leo and Pi.

Some of the concepts teams developed during the program included:

  • tyca (customisable receipts)
  • Easy Dining (an entertaining self-service dining application)
  • Go Get Goods (an app for buying regular grocery items cheaper and easier)
  • Gift (a location gift recommendation app for merchants and shoppers)
  • Notify (a queuing systems specifically for the merchants Albert device)
  • PayRun (an app that allows you to pay faster and save time on waiting)

The icing on the cake was the quality and diversity of the judging panel.

A heavy hitter and such an amazing fit for this program, Brian Long is both the Chairman for the UNSW Audit Committee in addition to being a Board Director at CBA. UNSW alumni entrepreneurs were represented by Jonathan Barouch and CBA by Dilan Rajasingham, Executive Manager Technology Innovation and Senior Solution Architect Jason Chisholm who was able to judge on technical viability regarding how the concepts would work in practice with the CBA platforms at hand.

So who were the winning teams?

In 3rd place, and perhaps the most entertaining pitch, was Cabert – an app that allows one device to replace all others in a taxi. Given the controversy of Uber in terms of disrupting the taxi industry it will be very interesting to see how far Cabert can go and what attention they pick up along the way.

2nd place was taken out by ShopLink, a communal network for merchants. It allows merchants using the CBA Albert and Pi platforms to give each other competitive advantage over similar vendors outside of the network.

The winning team was CrowdSauce, a simple yet effective solution that combines self-payment with user ratings. The judges were impressed by the depth of validation the team had achieved in such a short time – particularly the way the team engaged potential customers (who they are still in touch with) and at the same time put together a prototype which was presented to judges during their final pitch.

The lead speaker of the 3 person team CrowdSauce, Ishaan Varshney, is completing a Computer Science degree from the Faculty of Engineering with a minor in Actuaries from UNSW Business School, “To be honest, the event wasn’t what I expected – it wasn’t a typical hackathon. I didn’t realise how much I would learn about pitching my product. As someone from the “hacker” category, I now recognise how important pitching is in getting your idea off the ground. I found it really valuable learning to validate a problem with the real world in real time – then follow up by validating our solution and business model – its really exciting for us to be able to now access ongoing support from CBA in their Innovation Lab too”.

So was the program a success?

We think so. We have brought together our UNSW startup ecosystem around the new batch of potential entrepreneurs out of the university. We’ve generated some great media exposure in The Australian, CIO and ComputerWorld for our sponsor CBA, the winning student team and UNSW itself. For our main sponsor, CBA, as opposed to looking at this program as a way of getting an early view on talent for recruitment purposes, it was more about testing concepts and validating new potential applications for their payment gateway platforms – and feedback has been nothing but positive so far. The biggest success for me though has been the 4 or 5 teams of students who have approached us post-event to continue with their startup ideas beyond the competition.

So, a “hackathon”, a “Startup Weekend” or a “Pop-up accelerator” – whatever you classify this program as, we certainly want to do more of them in 2015!

Giveaway – Two Free Tickets to SydStart 2014 – Tuesday Sept 2 – Massive Lineup Announced

SydStart and Startup88 are giving away two free tickets to SydStart at the Hilton Hotel on Tuesday 2nd September.

Fantastic Lineup with the following speakers confirmed and more to be announced tomorrow:

  • Mike Cannon-Brooks – Atlassian
  • Ash Fontana – AngelList
  • Matt Barrie – Freelancer
  • Melanie Perkins – CEO Canva
  • Charlotte Yarkoni and Annie Parker – Muru-D Founders
  • Hugh O’Brien – Entrepreneurial Author
  • Max Kraynov – CEO JetRadar
  • Simone Eyles – Cofounder 365 Cups
  • Clover Moore, City of Sydney Lord Mayor
  • Alex Greenwich MP
  • Torsten Blackwood , Photographer to the Tech Rockstars & Billionaires
  • Dan Friedman – CEO NinjaBlocks
  • Matt Symons – CEO SocietyOne Australia’s first Peer to Peer Lending Platform
  • James Windon – Co-founder Brigade

These will be drawn on Saturday morning and the winners will announced and emailed by Saturday 6pm.

To enter the draw fill out the form below.

SydStart Giveaway
[wysija_form id=”3″]

* We don’t spam, by entering the draw you are agreeing to receive occasional emails about Startups. Startup88 and SydStart won’t share your details with 3rd parties. Of course you can opt out at any time.

 

 

Get Rich or Save the World Trying: Social Entrepreneurs

There has been a lot of buzz around “social entrepreneurship” and social startups over the last few years and with it a lot of confusion over what a “social startup” actually is. Whilst some camps define social startups as not dissimilar to a charity or NPO, others dismiss them as businesses using a social cause for pure marketing and differentiation purposes.

Among the 215 or so student entrepreneurs and startups coming out of UNSW in the last few years we have had an impressive batch of social entrepreneurs with varying takes on social entrepreneurship, interesting social impact strategies and with impressive degrees of success.

FoodBank Local is a food aid logistics software company run by current UNSW Computer Science student, Brad Lorge.

Foodbank-Local

Foodbank Local

Chuffed is a crowdfunding platform for social causes run by UNSW Biomedical Engineering alumni, Prashan Paramanathan.

 

Chuffed Crowdfunding for Charity & Social Causes

Chuffed Crowdfunding for Charity & Social Causes

 Conscious Step is an e-commerce platform aligned with UN causes headed up by UNSW Medical PhD graduate Hassan Ahmad and UNSW Business School Finance major, Prashant Mehta (on exchange student from the US).

NewSouth Innovations has had the pleasure of working with both Brad and Prashant via the Student Entrepreneur Development program and more recently with Prashan who is looking to pull together a UNSW social entrepreneur community.

To dig deeper into how and why social startups like these work and what makes a social entrepreneur tick, I asked these co-founders 5 questions regarding perceptions, motivations, challenges, success and future plans.

ED: I saw Hassan pitch at the original Startup Games 18 months ago and thought the guy could sell Ice to Eskimos, very talented at getting his message across and convincing people to get involved, I have also worked with Brad and from the early days found him organising events, arranging competitions, getting sponsorships from companies to support the University Clubs he is involved with, it wasn’t a surprise to me to see his team win.

1. What is your definition of “social entrepreneurship / social startups”

Brad LorgeFoodBank Local:

Brad-Lorge-Imagine Cup-77_0

The UNSW Imagine Cup Team – Brad Lorge on the right

I see it as redefining profit to include something important to both the entrepreneurs and other members of the community. I think the best social startups have their impact and core business directly aligned.

Prashan ParamanathanChuffed:

Prashan Paramanathan - Chuffed

Prashan Paramanathan – Chuffed

There seems to be a whole industry of people who spend time trying to come up with a definition for ‘social enterprise’ – I’m hesitant to add to the muddle. Generally what I find is that there are two types of organisations that call themselves social enterprises:

1. Businesses that have a social purpose embedded into their actual trading activity (most commonly commercial businesses that employ some category of disadvantaged people or businesses that service the not-for-profit sector); and

2. Businesses that redistribute (a portion of) their profit to social causes (eg. charity water, who gives a crap, tom’s shoes)

Prashant MehtaConscious Step

Prashant Mehta - Conscious Step

Prashant Mehta – Conscious Step

Social Entrepreneurship allows for a company to have a primary mission or focus on giving back or making the world a better place, while leveraging the advantages of being a for-profit company. Allowing advantages for developing better products, paying for better employees, and having additional funds to test and develop stronger and more unique marketing campaigns.

Concious-Steps-Promo2

2. What motivates you as a social entrepreneur

Brad Lorge, FoodBank Local:

The same things that motivate me as a social entrepreneur motivate me as an engineer – we want to build something that has an impact for others. We want to make a contribution to our profession.

Prashan Paramanathan, Chuffed:

Tech in the non-profit sector is very often done very badly. Much of this is due to non-profits deprioritising tech spending, but it’s also due to a lack of tailoring of products to the sector. Most often people assume that giving non-profits a free version of the software design for commercial customers will lead to a good outcome – it very rarely does. The sector needs products designed for the sector, by people who understand the sector – and understand tech. That’s where I want to play.

Prashant Mehta, Conscious Step:

Motivation comes from delivering a better product than anything available in today’s market, while creating awareness for the changes I’d like to see in the world. In the case of Conscious Step, providing people with fun solutions for the problems that affect our day to day lives.

3. What are some of the challenges and misconceptions for social entrepreneurs?

Brad Lorge, FoodBank Local:

Identity crisis is a challenge, and knowing the difference between good and bad ideas and practice. A misconception is that you need to give up on growth of investment because a social startup has a social objective. Social startups with the right business acumen grow faster, have stronger support and break through barriers better than any other.

Prashan Paramanathan, Chuffed:

The two that I worry about are:

1. Social entrepreneurs not focusing enough attention on whether there’s a commercially-viable business case behind their venture. There’s not enough focus on delivering a great product or service for your customer, which manifests in several ways including: directly copying businesses from the commercial sector and assuming they’ll work for the non-profit sector; focusing too much on servicing a beneficiary, instead of a customer; or assuming that being a ‘social enterprise’ gives them slack in the market on delivering an excellent product.

2. As a social sector, we need to do a better job of attracting smart startup brains from the commercial startup sector. There is a very large bank of knowledge on how to run a startup well which needs to be imported into the social enterprise scene. I think we confound these startup skills with general ‘commercial’ skills and seek them out from experienced corporate types – this isn’t the best place to get them.

Hassan pitching Concious Step at the Startup Games - Credit Startup Games Bart Jelema

Hassan pitching Concious Step at the Startup Games – Credit Startup Games Bart Jelema

Prashant Mehta, Conscious Step:

Some of the challenges as a social entrepreneur include:

a) Financial Constrains – Most startups do not have a lot of financial backing. This forces you to really work to prioritize how money can be best spent to continue growth, but continually improving the back end of any business.

b) Testing- Getting out of your head and getting feedback on whether your idea is viable, learning the best ways to generate profits and revenues, and understanding the main reason people are interested in your product or service.

c) Networking- Networking is so important and can sometimes even be a bit costly. Meeting people in the same industry or working on similar projects can provide advise or knowledge that can save a lot of time, energy, and resources. More importantly, teams can usually accomplish more than individuals. More importantly the skills of meeting people and presenting can take one far in life.

As for misconceptions, one of the biggest misconceptions among social entrepreneurs is that there social mission will be its primary driver. The truth is your product has to be superior to the rest of the market, offer competitive advantages, and a social mission and presence is the cherry on top. Mission driven companies, whether startups or major corporation are becoming more and more common, and almost now an expectation with increased awareness of the many issues around the world.

4. How would you summarise your success so far?

Brad Lorge, FoodBank Local:

We achieved a 70% efficiency increase for food distribution. We have partnerships with some of the biggest brands in the world as well as the biggest charities.

Prashan Paramanathan, Chuffed:

Since launching Chuffed.org in October 2013, we’ve grown by about 30% every month and will soon have raised over $1 million for over 200 social cause organisations in Australia. The biggest of these campaigns was for a sanctuary for rescued farm animals – Edgar’s Mission – which raised over $162,000 from 1,785 donors in 14 countries, making it the largest Australian social cause campaign to run on any major crowdfunding platform. To support this growth, we have raised $460,000 in seed funding from the Telstra Foundation.

Prashant Mehta, Conscious Step:

Some of the press we’ve received early on includes our Indiegogo Campaign/Commercial , United Nations coverage, exposure during the Business for Good Competition, success in the BFG PitchSydney SEED Fund Competition Top 50 Social Entrepreneurs in Australia and finally a feature in the Women’s Wear Daily/ Footwear News .

5. So where to from here?

Brad Lorge, FoodBank Local:

We will keep building momentum behind a movement to push technology forward and end hunger.

Prashan Paramanathan, Chuffed:

We believe there is still a very large amount of room for growth in the Australian market, both in the rapidly growing not-for-profit and social enterprise sector, but also for crowdfunding in the school and university sector as well as for personal cause campaigns. We are also likely to expand internationally as broaden our product line to support more tailored online donation products for the social enterprise and not-for-profit sector.

Prashant Metha, Conscious Step:

Conscious Step intends to continue to raise money spread awareness for additional causes, while growing its presence in the U.S and Australian market. We plan to continue to educate people on the causes that are resulting in the most issues around the world, and simple ways they can get more involved and help create more solutions. More importantly, we intend to use organic materials and promote the values in fair-trade working condition to provide our customers with a superior sock experience.

It’s inspiring to work with and be supported by people like Prashan, Brad and Prashant and exciting to know they are in talks about potential collaboration based on a shared desire to foster a really strong social entrepreneur community around the university and within the broader Australian startup and business community.

I tend to think social startups are neither a fad, marketing ploy nor driven by a simple NPO charity goal but are the tip of the iceberg for what will become a normal part of corporate ethics for most successful companies. At some point, those companies that do not include social related considerations – across the supply chain – will fall behind those that do.

Clerky helps startups get legal stuff done right – Cool #Startups

Clerky.com automates all the legal paperwork that startups need to get incorporated, staffed up and funded. Incubated by the team includes a number of veteran Startup Attorneys and Y Combinator’s General Counsel.

They have been running in stealth mode for a few Y Combinator intakes and as a result has got a great group of early customers including one of my old Organisation mates David Hassell and his 15five.com.

Frankly , employment docs, connotes are boring and expensive aspects of launching a business but have to be done properly.

For many years I have held the opinion that much of this is done straight off a form letter that resides on the Lawyers assistants hard drive.

Whilst more specialised work like later rounds of funding with multiple parties and detailed terms that are likely to result in major consequences absolutely need a Lawyers full attention, a lot of the grunt work probably doesn’t.

Given a body of Lawyers there is every chance the less able amongst them is producing sub standard documents, so assuming Clerky managed to get a top Lawyer to write the first version, it’s probably that many startups might be better off using Clerky.

This space is ripe for automation for the basic work and whilst Lawyers are absolutely required for important deals, to sue or when you are being sued (don’t get cranky with me guys) there are aspects of their trade that are really form letter templates that don’t have a lot of legal smarts to re-produce once the original has been created.

I like the concept a lot, I wish them good luck

 

Many start-up entrepreneurs think that patents are a waste of time; the data suggests otherwise

I was recently asked why so many entrepreneurs and investors in the modern era appear to have no interest in patents and sometimes are actually quite negative on the value of patents in start-ups.

So I did a ‘soft’ survey of a few entrepreneurs and investors in my home city of Sydney.

What I heard back was that patents are a ‘waste of time and money’ in this era of software and internet start-ups.

The arguments to support this position were typically very qualitative, full of apparent misinformation and certainly using data-points that were cherry-picked.

As were the counter arguments proposed by parties with vested interests in patents (such as patent attorneys).

I have previously written on the subject of why start-ups should have patents[1] but in doing so I had assumed that the rationale for having patents would simply be accepted by any entrepreneur or investor that had at least finished high school.

It seems that I have been wrong in this assumption. So I turned to Google to put together a quick summary on the financial value of patents in start-ups, from the perspective of both entrepreneurs and investors.

Of course all the data is already there; it just doesn’t seem to have been brought together nor analysed in a simple-to-digest fashion. Firstly, a quantitative study by Mann et al[2] (the Mann study) has shown that software start-ups that develop patent portfolios have much better returns for investors and entrepreneurs.

The 2007 study examined 877 venture-backed software companies in the US that received venture funding between 1997 and 1999.

Only 9% of these companies obtained a patent before their first financing but many may have filed unpublished patent applications beforehand.

In line with this assertion, by 2005 over 24% of the companies in the study had at least one patent.

This correlates well with the industry norms; at that time about 30% of top 500 largest software companies in the US also held patents (it would likely be much higher now).

It makes sense for mature start-ups to own patents at roughly the same proportion as the industry giants that they wish to be acquired by, or to compete with (take note entrepreneurs!).

The key results from the Mann study were that:

  • Companies with patents received about 73% more funding than those without patents, representing an average funding gap of $10.7m
  • Companies without patents are twice as likely to go bankrupt compared to companies with patents
  • 13% of the companies in the study with patents went to IPO compared to only 3% of companies that did not have patents. That is, the companies with patents were more than 4x more likely to go to an IPO!

Unfortunately the Mann study did not appear to have access to data on the financial returns (by IRR or multiples on capital) to investors in, or founders of the companies in the study.

However we can be sure that the companies with patents had a higher financial return because of these four factors:

  • IPOs usually represent the most lucrative return for venture investors; for example the median IRR for investors from IPOs was 3.2x greater compared to IRR for exits via trade sales for a selection of 531 start-ups in the period between 1971 and 2003.[3]  In addition the median dollar value of the exits by IPOs was over 4x greater than exits by trade sales in a study of 3,047 exits in the US for a period up between 1997 and 2004.[4] That is, startups with patents are 4x more likely to go to an IPO where the financial returns are 4x greater; does this point need to be made any clearer?
  • The much lower rate of bankruptcy for companies with patents means better portfolio returns for venture investors. Typically it can be difficult for venture capitalists to get their funds to “profitability” (typically requiring anIRR greater than 20%) where there are multiple bankruptcies within a portfolio (composed of, say, between 10-15 companies).In fact it is my personal experience that, in the instance of portfolio company bankruptcy, patents offer the highest value assets to help recoup investment losses; especially considering that most venture capital investments are in liquidation preference shares (meaning all proceeds from liquidation of assets go to the investors up to a figure representing at least the investors’ cumulative investment in a company).
  • In the original study by Mann et al. the software companies with patents received 73% more funding.This is because these companies with patents represent much better business investment opportunities, both on the upside return and also on the downside risk. Venture Capital funding flows based on perceptions of risks versus return; because these perceptions are self-correcting, through the impacts of fund profitability and the follow-on impact on capital raisings into subsequent VC funds, it can be argued quite unambiguously that companies with patents are much better investment opportunities with better risk and return profiles.

I would also note that, on average, the companies with patents in the Mann study had just 3 patent families. The cost of developing 3 patent families is typically not more than $50,000 per annum which is effectively inconsequential when compared to the extra $10.7m typically raised by these companies.

I find this data so compelling that I would advise entrepreneurs to only invest their time and effort into businesses (internet, software or otherwise) where it makes sense to patent certain inventions.

That is, they should only invest time and effort into segments of the market where it is possible and likely to achieve significant patent protection for new business opportunities (and related products and services).

Unlike their investors, entrepreneurs usually have only one business opportunity in a single time period (typically this is 5 years or more) and therefore it is incumbent upon them to only invest their time in the highest value business propositions.

The outcomes for entrepreneurs are unfortunately quite binary; either they get a financial return from their businesses or they do not.

Unlike investors there is no protection as offered by a portfolio of business investments nor is their ten years’ worth of management fees.

The data presented here clearly shows that the highest returns and lowest risks are achieved for businesses with patents and any entrepreneur that chooses to invest their time and energy into a business that cannot or does not have patents is wilfully destroying financial opportunities for themselves.

Shame on them.

For investors the same advice applies with the additional benefit that, in the instance of the bankruptcy of a portfolio company, start-up patent portfolios offer a good opportunity to recoup losses through the monetization of patent assets.

This can be done by the sale of patents, licensing from a holding company, or even enforcement of patent rights against operating companies (often in partnership with specialist law firms in the US).

Indeed I would argue that the patent assets of a start-up not only offer the benefits to a start-up as described above but in the modern era they also represent an alternative higher value business proposition to that of an operating company.

There are numerous examples of start-ups that have reinvented themselves as Patent Assertion Entities (or Patent Trolls) and gone on to make more than $1b for their investors.

Another thing that worries investors is patent assertion against their start-ups by patent trolls;[5] this can represent a substantial loss of time and money for start-ups. A start-up with patents is going to be far more aware of the patent landscape it is operating in and will be far more insulated against spurious assertion by avoiding certain infringing activities, by licensing key technologies, by creating corporate partnerships, by seeking indemnity insurance against patent infringement, or by joining defensive patent funds. Patent awareness is the key here, and this reduces unnecessary risks of investment.

I can already hear the counter-arguments coming my way. The main one will be that the data I have used is almost a decade old and that the business world has ‘changed’ in the interim – the main area of investment is now in ‘internet and mobile’ space.

Well this can’t be helped – this type of data can only be collated sometime after the fact because the average period from seed investment to exit is about 7 years.

My gut instinct is that with the uptick in patent assertion by the major companies in the key areas of current venture investment that the value of patents to start-ups has only increased in recent times.

For example the number of patent infringement suits filed in the U.S. increased 59 percent between 2001 and 2011 — from 2,520 cases in 2001 to 4,015 cases in 2011.[6] In the same period the number of patents granted increased by 35 percent; most of those gains in exactly the same market segments that venture capitalists are ploughing their funds into.

To investors and entrepreneurs that still want to argue against the data presented in this essay I would remind them that relying on subjective arguments in the venture capital and start-up space simply adds unknown and unnecessary risks.

Of course I have also been asked whether the relationships between startup success and patents, as documented in the essay, are ’cause or effect’; the answer is both, and complex. However I believe that it comes down to one key factor – great patents can only be achieved in technologies areas that are new or ‘white space’. These areas also happen to be where there are the highest returns on investment, which in turn attract the best teams and the best investors. That is, patents are a proxy for the ‘experience’ of the team and investors of a start-up.

And yet, for any entrepreneur out there I would say that the only way to get the right experience, in the context of patenting, is to start patenting even if it’s new to you. The process of patenting will teach you much, much more than just how to go about getting patents. And this is what a lot of people who decry patents simply do not understand.

And, finally, I would note that patents are a necessary factor for maximising start-up returns and reducing risks, but by themselves they are not in any way sufficient.

[1] IP Strategy for Start-ups, Ian Maxwell, http://zh.scribd.com/doc/105435827/IP-Strategy-for-Startups

[2] “Patents, venture capital, and software start-ups”, Ronald J. Mann, Thomas W. Sager, Research Policy 36 (2007) 193–208

[3] “A pecking order of venture capital exits – What determines the optimal exit channel for venture capital backed ventures?”, Carsten Bienz, http://www.wiwi.uni-frankfurt.de/finance/common/brownbag/04_SS/papers/venture_exit.pdf

[4] “Value Creation in Venture Capital”, Hellmann et al., 2005 http://strategy.sauder.ubc.ca/hellmann/pdfs/Value_Creation_in_Venture_Capital_Hellmann-Egan-Brander.pdf

[5] “Patent Demands & Startup Companies: The View from the Venture Capital Community”, Robin Feldman, 2013 – http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2346338

[6] “Myths of the Patent Wars: An “Explosion Of Patent Litigation” Greater Than Any in History?”, David Kline and Bernard J. Cassidy, http://ipstrategy.com/2014/05/12/myths-of-the-patent-wars-an-explosion-of-patent-litigation-greater-than-any-in-history/

Photo by The U.S. National Archives

 

 

Ian Maxwell

Ian Maxwell

Ian A. Maxwell is a veteran Technology Entrepreneur and Venture Capitalist. He is currently CEO of BT Imaging, Chair of Instrument Works and Co-Founder of Accordia IP as well as an Adjunct Professor at RMIT. He has a PhD in Chemistry and has either founded or worked at Memtec, Allen & Buckeridge, Redfern Photonics, Sydney University Polymer Centre, James Hardie, Viva Blu, Enikos, Wriota, RPO and Instrument Works. You can connect with him on Linkedin au.linkedin.com/in/maxwellian

Enhanced by Zemanta

Tech Startups are expensive

Not long ago, when speaking to someone with plenty of experience in technology transfer he emphasized the elegance of tech startups – low assets.

He probably still thinks tech startups are cheap and I respectfully disagree.

The opposite of a tech startup might be one based on hard goods or hard science. For the purpose of this article, we will compare two fictitious early-stage startups TechStart and HardScience.

According to Staff.com, the cost of running TechStart in San Francisco – a designer, developer and office space is $263,088.

Credit - http://Staff.com

Credit – http://Staff.com

 

This is $81,000 for the developer, $79,008 for the designer, $22,080 for the office along with an additional $81,000 for other stuff.

Assume both startups are in the idea phase. Over the course of the year TechStart needs to build their MVP and generate users whilst HardScience needs to generate enough data to file a prototype-backed provisional.

In 1999, just under half the articles published in Science, a decent scientific journal were authored by postdocs and these scientists earn about $36,000.

Moreover, in San Francisco, the cost of a dedicated lab bench, a couple postdocs, professional intellectual property searching and provisional filing works out to about $94,000 ($12,000 + 2 * $36,000 + $10,000) or for the bells and whistles lab and office space this is closer to $132,000.

Thus, leaving $131,088 for bits of equipment, consumables, insurance, pizza and beer along with an epic end of year (or end of startup) party. This is roughly $11,000 per month for the extra stuff and many academic labs spend less per year.

But what about all that fancy lab equipment that costs millions of dollars? Do not worry about it. A 3D printer that used to cost more than a hundred thousand is about to cost a few hundred.

Services like scienceexchange.com can be used to outsource experiments to verified labs or, if you are the DIY type, equipment time can be rented from a nearby research institute for reasonable hourly rate. No dramas.

Tech startups are expensive.

ryan-pawell-290x2901Ryan Pawell is  PhD candidate at the University of NSW and is developing an affordable disposable microfluidic chip to bring down the cost of delivering gene therapy to HIV patients.

He received his BSci, Mechanical Engineering at the University of California, Santa Barbara and led a team of engineering students to prototype a tool for anterior cervical discectomy and fusion.

He also worked in R&D at Inogen developing a portable oxygen concentrator for the treatment of chronic obstructive pulmonary disease.

You can connect with Ryan here linkedin.com/in/rpawell  and see more about his work in the Youtube video at the end of the article

Ryan Pawell is  PhD candidate at the University of NSW and is developing an affordable disposable microfluidic chip to bring down the cost of delivering gene therapy to HIV patients.

He received his BSci, Mechanical Engineering at the University of California, Santa Barbara and led a team of engineering students to prototype a tool for anterior cervical discectomy and fusion.

He also worked in R&D at Inogen developing a portable oxygen concentrator for the treatment of chronic obstructive pulmonary disease.

You can connect with Ryan here linkedin.com/in/rpawell  and see more about his work in the Youtube video at the end of the article

 

Photo by snre

Enhanced by Zemanta