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Don’t forget to ask for help

Say you scored a mentoring session or some time with somebody who you think can help with your business, excellent and well done – good people are busy people. Whatever you do make it count – a mentoring session isn’t just a verbal website tour or pitch – don’t forget to ask the mentor how they can help. They can only help if you get them fully into the picture.

Talking to people about their business for the first time can be a lot of fun, I often find that I get a good lesson in an area of commerce that I may have never had direct exposure to before. There are some constant fundamentals that are important but not everybody can be an expert in everything, and sometimes an outsider’s perspective is very valuable.

There are some valuable things to make sure you’re prepared to tell the person you’re chatting to. That person is probably hesitant to enter into a Non-Disclosure Agreement (NDA) for many reasons, if you can’t trust them do not talk to them. You need a high degree of confidence and faith in who you’re talking to. If you’re not comfortable do not talk to them.

Whenever I get the opportunity to mentor businesses, I want to know big picture things like:

What does your business do? Why does it exist?
Type of business (Software as a service, app, fast moving consumer goods etc.);
Stage of business maturity (pre-sales, post revenue, cash flow positive, profitable etc.);
Goal – how big do you want this business to be?

I tend to get down into the weeds pretty fast and get a sense of how well you know your business and market. This gives me a good illustration of you – a way to affirm that you are the right entrepreneur with the right mindset and skills.

Whilst a lot will depend on the type of business and its maturity level I usually start with my old favourites – tell me about you, your team, the problem, the solution, traction and other big picture items. Then I follow with lots of boring financial stuff like:

– What does your product/service cost to provide?

– What do you sell it for?

(BTW – if you stumble here get ready for grief)

– How do you find your customers?

– What does it cost you to get a customer to be a paying customer?

– How is your customer churn? (How many customers do you loss versus gain/keep)

– Who are your competitors?

– Why do people buy from you?

– Why do people buy from your competitors?

The list could go on forever but generally any advice I give will relate to the above topics. You are in business – that may be a startup but forget the romantic notion of entrepreneurship and startup – you’ve already made that leap – you now have to make money. If you do not make money you are a charity! Save the startup bravado for the bar or a meetup!

I also want to be sure that you understand the cost to deliver your product or service. I want to know that you know or are in the process of finding out the best way to get customers – the only really hard thing about business is selling (the second hardest thing is collecting the money – maybe for another article).

Understand how to find the customers and what their drivers are. Understand who your customers are – some sectors are amazingly stratified meaning that you may get better success using channel partners, integrators and the like. All of that comes with margin and cost overhead. I want to know that you understand this.

At the end of the mentoring session you need to remember to ask the mentor how they can help further. If you’ve had a productive session and they haven’t been put off by your approach the mentor will most likely ask if there are introductions they could make for you to customers or other stakeholders. Don’t blow your chance to ask for something.

All mentoring relationships start with a first session, some (not many) continue on. Subsequent sessions should be an update, they should also come with a request for more help or introductions.

It is rare that any two mentors will give the same advice in a given situation, everybody provides their own perspective. Before you chat to a mentor, research and try to spend five minutes thinking about their business journey – the advice you get from a successful ex-telecoms entrepreneur will be very different to that of an experienced digital marketer. Not that either are necessarily wrong – they have just been coloured by different journeys.

And the best part is that you don’t need to take any of it. It is advice, not a dictator’s edict. Understand the context, understand how or if it applies to you at all and most importantly – keep listening.

This article was originally published on Linkedin. Read the article here.

More entrepreneurs, less innovation please

I have just returned from a federal government trade mission to China, the bi-annual Australia Week in China. I attended the Innovation stream starting in Shenzhen, then Beijing and finally Shanghai. There were other streams with over a 1000 Australians attending, culminating in a very Australian lunch attended by the Prime Minister and many other government representatives.

I went to look and discover new networks. I did not go trying to promote any particular business as I was totally unfamiliar with the landscape in a business sense and truly went to discover. I had been many years ago as a guest of Huawei in 2007 but that was to look at fibre optic transmission equipment. This was a different trip.

A few years ago I attended a trade trip to Israel with the Australia Israel Chamber of Commerce but this was far different to that. Given the recent signing of the China-Australia Free Trade Agreement and the fact the trip was done under the auspices of Austrade this style of visit was very different to something organised by a private chamber. Not better or worse just very different – more diplomats. As a regular attendee at conferences over the years I can assuredly say that this was no conference but it was a stage managed and deliberate attempt to join Australian business to Chinese business. I congratulate the government for the week – Australia-China trade will be all the better for it.

China is big. Big cities, big regions, fast grown regions (from fishing villages to 30M+ residents in 30 years). Regions of 20 million and 30 plus million just roll off the tongue. They are doing lots things in many places at once. If we, in Australia, are doing or would like to do one thing, each region has at least 4 or 5 different versions of it underway. Is that a reason not to do it – hell no – it is a reason we must; we just need to understand where we fit and/or who we can cooperate with.

A good example of this was our visit to HAX, the world’s first and largest hardware accelerator, situated in Shenzhen next to the largest electronic component retail space in the world in a district renowned for their design, manufacture and support of all things hardware. If you are going to do anything in the hardware space you need to understand their story as much as you can, whilst they have recently opened in the US it is their proximity to this density of electronic manufacture that makes HAX in Shenzhen a worthwhile place to visit and understand.

The Internet in China is hamstrung by the information restriction policies of the government (the great firewall) making Internet access hard if you like certain things that the Chinese government doesn’t. VPNs I found to be a so-so solution – they had a habit of dropping and/or not establishing and whilst I found that my iPhone worked OK in Shenzhen on 4G it only had sporadic Edge network access elsewhere. In Shanghai some overseas websites actually “slipped” through the firewall. One speaker mentioned that the Internet in China was a parallel universe and they weren’t wrong. For all of that it has not held them back – they have embraced ecommerce voraciously where local firms – thanks to the trade barrier that is the great firewall – can get a leg up past their overseas rivals.

One of the first speakers mentioned something that caught my attention, something we don’t seem to get in Australia – they spoke of the Mass Entrepreneurship and Innovation program (MEI). The subtly of the statement is as important as the scope of it: mass – they want lots of it. Importantly it places the correct emphasis on Entrepreneurship first – good entrepreneurs will use innovation to seize market/create share. It seems to me that everybody wanted to be in business, maybe that is an artefact of some other economic factor but from the people launching tens of thousands of startups each year in the Shenzhen region alone to the lady on the street recycling old mobiles for their constituent components and resources to be recycled, they talked about enabling business and having that drive/ innovation – they get it. They want businesses to use research and employ PHDs and understand that PHDs and research alone does not grow a business.

Want to go to China and check it out? Just go and do it. It is probably easier than Silicon Valley – it is surely cheaper. Just like Silicon Valley though do not go there and expect to have any impact early, if you plan to do business there (maybe raise money) you need to be all in. You need to learn the local language, you really need to use WeChat, you have to learn the cultural things that will see you have a value rich engagement. This is not that different to Silicon Valley – people over there do not like blow-ins, they want to see you operate maturely in that market and China, in that respect is no different. Before you go make sure you learn some Chinese, understand cultural habits to help ease into relationships, make sure you understand issues around intellectual property, talk to others who have been and get warm introductions.

Everybody we met was warm and friendly, one example outlined starkly how much you need to be prepared to enter any market when five Aussie investors took an hour to catch a cab (and a special thanks to the two girls in Beijing on the street who helped us get the hotel address translated into Mandarin on a post-it note so cab drivers could have some idea where to take us), if you can’t catch a cab then you probably aren’t ready to boot up in China. That being said, you need to start somewhere. #startsomething

This article was originally published on Linkedin. Read the article here.

If innovation really counts

I watched a debate recently on innovation on Q&A on the ABC that descended into an expert-free, free-for-all on NBN, where a quantum physicist had the ‘best’ opinion – where the desire for people to have the nation subsidise their internet connection came through loud and clear. I do not like the NBN, it was foisted onto us by dishonesty and naivety, it has proved very hard to unpick but there is maybe a way we can turn it to the good for our economic future. Before we try that – how about we all try to understand it ?

How much do we really care for innovation in Australia? I hope you can continue reading to the end as this is really important, there is tech and economics in this as there has to be. There is no quick understanding of the issues around NBN but if people are to have a debate they need to be better informed and as a nation we need a goal for such an undertaking as the NBN. If we are going to pour tens of billions of dollars into this maybe we should be even braver yet – stay tuned to the end please.

If the goal is ‘to have fast internet’ then we are missing the bigger picture. The NBN in Australia needs to be turned into a network that will ensure that innovation and enterprise in Australia is that well positioned that we will reap the benefits of it over the decades to come. No current NBN proposal from either side does this. The NBN we are getting will not allow that – it needs to change. And none of this has to do with fibre versus copper, vendor, Telstra or anything else.

Journalists who, in the same the article, decry that they do not understand this topic due to its technical nature but then bay for the NBN construction without any clue or understanding into what is being forced onto us carry much of the blame for the state of the debate. This is a complicated topic and unless you get it then you actually shouldn’t have an opinion – not when tens of billions are at stake not to mention the shape of the most important infrastructure we are yet to have. There are too many parts to this puzzle to pick and choose which bits you want to understand. There is no easy button on this one. You need to understand the technology and the ramifications of the new competitive landscape if you are to have a voice in this debate. Simple ‘fibre versus copper’ sound bites have led us into where we are today.

There are many other things you can do to fix competitive telecoms in Australia before you bring back a monopoly owner, things like straightening out land access for network build to prevent gaming including road, rail, power utility carve outs; regulate facilities access and similar competitive regulations to prevent richer carriers gaming them; undertake a re-costing exercise of duct and facilities access; the number and location of network interconnection points, concentrating on outside metro areas where service levels and choices are diabolical – but given some recent press and a looming election campaign I will stick to access related issues around NBN.

I encourage people who want to be informed to research these topics – where research isn’t reading the blogs of pundits! I am out of the telco game and have no dog in this fight – I just want a real debate fuelled by facts where experts get to supply the facts, not politicians, theorists, academics and those NBN fans who want ‘NBN or bust’ because ‘NBN and bust’ is an option here.

Before you start you need to know a few things about networks. If you own a network that has a certain amount of capacity – say 100mbit/sec then the cost to operate that network (not the price charged to the user) is materially the same between 1% of utilisation and near 100% utilisation.

Before NBN, a broadband provider could build a network out, connect up customers based on relevant technology for their product offering, the technology would vary based on local issues and market factors. But the provider would make its own investment decision, own the network and have a fixed cost to operate regardless if it operated at 1% or 95%. The cost to service the customer for access was fixed, the only time you really started adding incremental costs was when you had to purchase capacity from outside your own network (international Internet capacity or networks you didn’t own for example, this term is transiting off network).

What’s more, adding capacity later is usually cheaper than the original construction because telecommunications equipment has reduced in price per unit of capacity in line with Moore’s Law for the last thirty years. There is no sign of this slowing in the foreseeable future.

Network ownership is great as the upside leverage is huge. So why price in scarcity when it does not exist?

If you build and own a network it has a fixed cost to operate – so why would you bother to set speed hurdles for customers to access it? Sure there are some contention issues in the network – the FTTH network has about 80Mbit/sec to each house[i] – not bad; where you have an xDSL last few hundred metre FTTN solution there is no sharing but the headline speed may be lower[ii]. The point is – why do we have access product speeds such as 12/1, 25/5, 50/20, 100/40 when the network operational cost for everybody to run at top speed (up to 80Mbit/sec on FTTH) does not increase[iii]?

People will say a few things on this – if you use more it must cost more? Wrong. We are just talking about using the NBN here – not transiting off it and using the internet in general where real expenses add up pretty fast. This is just about going from your home on NBN to the edge where NBN hands you off to your ISP. There is zero incremental cost in this if it is engineered correctly[iii] – it sounds illogical but it does not cost any more if it stays on network. If we can keep all of the network traffic inside of Australia there are further cost and economic benefits as well – see interconnection points further down.

Other will say – but it should cost you more – if you use it more then you should pay more – that is just fair right? Why? I pay one charge to use the road for my car – registration, a little more through petrol but I can regulate that through fuel efficiency choices. I do not get charged more if I travel at 100km/hr instead of 85km/hr, nor do I get charged more if I fill all 5 seats instead of just one. Why don’t we have this approach to the network ? Why can’t we view NBN more as a road network in the way it is paid for, used and charged for?

The next mind warping feature NBN has baked into it is the Connectivity Virtual Circuit charge – the CVC. This is a fee levied onto your ISP to connect to NBN concentration points, it is a fee charged per megabit per sec (Mbit/sec) per month and currently stands at $17.50 which in volume can come down[iv] to $11 (if you average 1.5M per user per connection point under a current 2 year trial). ISPs gets to aggregate this across all users at a connection point but if you use 1mbit/sec for one month (320G downloaded in one month is 1Mbit/sec) then you will cost your ISP at least $11 and generally around $16 with various standard volume discounts[v]. They will have to recoup that or go broke – economics. Right now, under a temporary fast start plan each ISP gets 150Mbit/sec CVC thrown in, this has led to the cramming of users into this free allocation, it doesn’t take very many users to overflow 150Mbit/sec – 2 technically who enjoy a 100Mbit/sec home connection. This is temporary.

Under the previous, non NBN, competitively owned setup this did not exist at all. Operational expense was present in the form of aggregated and average fixed costs to operate a network but the operator got to set those costs through investment decisions in many cases and a competitive market for backhaul[vi]. It would come in costing a lot less on average and it would be fixed and known, this cost to the ISP was closer to $1 per month[vii] if you were to calculate it.

CVC was included in order to induce a commercial return to ensure the cost of NBN stayed off the budget as it was a ‘commercial’ return – and that is the hard part about changing it – monkey with that and the build cost goes onto the budget. Mind you we are still borrowing and paying interest on NBN capital – we just ignore it for the most part as if it is irrelevant. Magic puddings taste great.

Netflix, Stan and others have brought the realities of the broken NBN model into clear focus. No longer is it if we will use heaps of data across a modern broadband network because we are, every day we seem to get more ways to view, download, post, update etc – more data usage is a given. What does 1Mbit/sec mean – it means 320 gigabytes per month if you use it 100% flat out every last second of the month. For the most part we do not use our internet connections that way but the rise over the last decade of the Silicon Cockroach (a term invented by John Sidgmore[viii]) whereby things, programs, software will, at all hours of the day and night tend to our needs has increased the average ‘noise floor’ of home minimum usage at all hours of the day. Think of your iCloud, Drobox and other similar things constantly syncing up files or transferring our sleeping/walking habits etc to the cloud. Lay on top of that the multiple devices we own, the rich media that we now want streamed (and are finally being allowed to acquire legally) in ever increasing numbers, to ever more rooms in the house… we need the speed a modern broadband network can offer and we need the ability to move traffic over it at an economically rational cost to us. Having a network charge us at least $11 extra for every new increment of traffic/speed is not that network.

For every 320G of extra data you need 1Mbit/sec ($11 to $17.50 per month under NBN), if you download that faster than every 30 days you need more. It is also true that not everybody uses all of that speed all of the time and some efficiencies can come due to the distribution of usage patterns but, and the introduction of Netflix is testament to this, users are starting to use more and more. We get around this currently by the data quota – how much we are allowed to download before some form of extra tariff or some technical means of speed limits come into place. If the network costs no more to operate then why charge more to the end user, why do we ration a service that has no coupled cost for additional use ?

Now for the really innovative bit.

Open the ports, remove restrictions – give us all the highest speed the network will allow for – not the solution the budget needs to hide the cost from us. Opening the ports means no speed tiers (you connect at maximum speed for your technology) and no data usage charge (no CVC) therefore no quotas for downloads. Will it cost more to build? – Not materially, if at all[ix]. Will it cost more to operate? – No. Will it charge customers less? – No it shouldn’t, if the requirement to meet NBN Co operational expenses is not coupled to usage of the network (NBN expense does not materially rise for usage) it can generate the same revenue but allow end users to grow their Internet use so Australia can be more productive after its introduction, don’t link price to variable usage. Will customers use it more? – Yes, and isn’t that the idea. Remember that the way the NBN tariffs are currently structured means that if you have a 6 seat vehicle you pay more than a 5 seat vehicle and if you drive that vehicle at 100km/hr instead of 80km/hr you also pay more.

This is for using the NBN only – as soon as you transit off NBN[x] there will be external charges but this would also give a non-incrementally charged data path between every Australian on NBN. This is how it essentially works now under a non NBN model – an ISP has a fixed low cost to operate their network but a high variable (in many cases) cost as soon as traffic goes to another network.

Without artificial speed and data transfer constraints the NBN would be a world leading innovation fostering tool that would see us actually be able to hold our heads high in these stakes, it would be the equivalent of a 4 lane road on every street with accompanying highways to handle the load – a revolution.

While we are at we need to fix interconnection – this is how ISPs in Australia exchange traffic between themselves, sometime separated by mere metres in a data centre, many times this can cost more than to buy internet access from overseas – ridiculous. Through a small enquiry and regulatory instrument the government could make modification to carrier licences and service provider conditions to mandate that they interconnect and exchange traffic on a more equitable basis. This has improved over the years but needs to be streets better. As part of a license to connect customers to the Internet there needs to be a mandate to interconnect more rationally – maybe as a requirement to connect to NBN as an ISP. If this is done right we will also assist in the building of more local content for these NBN wide open customer connections to consume.

Why is it we can have a Hume or Bruce Highway without per kilometre per hour levies, kilometre travelled fees or toll gates that restrict shape, colour and speed of vehicle. We seem to be content to understand that the cost of the road will be paid for in time with an increase is economic activity, community benefits and subsequent lift in the revenue base – we do not restrict their use because that makes no sense. We do tax vehicles through registration and fuel excise but the spending on roads has been decoupled from the revenue for some years and the cost to build them does squarely sit on the budget. When the amazing positive upside of an NBN style network is actually clear to all in the debate why don’t we take a highways style approach?

Many dangers lie ahead with proceeding on the NBN even on the terms I am proposing, let’s not see a repeat of the regulated return on asset shambles that have dogged the power industry, where gold plating is seen as a way to increase the asset value and therefore allowing for a greater actual revenue take based on the asset value. Putting a network in the hands of a monopoly provider WILL lead to monopoly behaviour, fibre networks will fail and need repair, their failure mode is different to copper but if the owner of the NBN displays as much care for the asset as Telstra showed for its copper network then it will break and this problem will just be kicked down the road.

There are real risks with this more utopian style NBN but the reward can be amazing, if we build it for innovation instead of as a way to win an election then we can start to realise the benefits of what could be a truly world leading network.

NBN is currently about the monopolisation of the telecommunications access networks in Australia, it is the emasculation of facilities based competition and in return we are getting the world’s most expensive and commercially inflexible network – if we are truly going to reregulate ourselves into this corner let’s at least make the prize worth the pain.

If the answer is to build a new monopoly – did we really understand the issues and then ask the right question?

[i] FTTH based on a 2.5G GPON drop, 32 homes using 2.5G equates to about 80Mbit/sec each

[ii] FTTN speeds average 46M – up to 100mbit/sec if close.

[iii] Work in the core of a network may be required to ensure large capacity throughput in the entire network such as increasing trunk capacity.

[iv] $11-$17.50 bracket is a two year trial of dimension-based discount tiers

[v] As of March 2016 a mbit/sec/month of internet from LA to Sydney cost less than $5/mbit/sec/month – under NBN that same traffic transmitted from your local NBN exchange will cost between $11 and $17.50!

[vi] Backhaul is the carriage of data between different location on a network

[vii] Highly depend on user penetration, technology choice and other factors and could include a variety of other costs such as end customer access, depreciation for build, exchange access costs and many others.

[viii] http://whatis.techtarget.com/definition/silicon-cockroach

[ix] This will depend if intra NBN trunk routes need to be re-engineered to remove contention in the core

[x] Transit is when your internet data leaves one network to go to another, in the NBN context when your data leaves NBN and goes overseas to (say) Facebook, it would also mean when you exchange data between to an Optus user if you are a Telstra user.

Stephen Baxter (@sbxr) is a telecoms and Internet Entrepreneur with over 20 years actual and successful experience in ISP and telecommunications companies, he foundered early Internet Service Provider SE Net; co-foundered PIPE Networks – a wholesale provider of data centre, internet interconnection, backhaul fibre networks, submarine fibre networks and more; he worked with Google Inc in California building multi terabit networks across North America before becoming an early stage investor in tech startups and foundered Brisbane tech startup co-working space River City Labs, foundered and underwrite the Startup Catalyst program; he has been on the boards of listed carriers including Vocus Telecoms; he has been heavily involved in the early days or founding of numerous industry groups and forums such as the South Australian Internet Association, SAIX, ADNA, AuDA, INTIAA, IIA, AusBone and AusNOG.

[I want to get across some core concepts and realities in this article but I have deliberately tried to mainstream many technical concepts, probably not well enough but too much for some, to help the reader so I apologise to my former industry colleagues for some parts of this, I thank JSL and others for the proof read – all mistakes are mine not theirs]

This article was originally published on Linkedin. Read the article here.

Keeping your startup alive

Last week I sat down with the team at Tanda to chat about all things startups. Here’s how it went…

You’ve toted the hashtag #fundedbycustomers which is about the value of paying customers for early stage startups, why do you think this is important?

A lot of early stage startups get wire wrapped about raising money. Do you know what the term wire wrapped means?

For our readers, go ahead –

Wire wrapped is getting wire wrapped around the axle so to speak, a term when you’re driving in the bush and you get wire wrapped under your car. People tend to keep driving and make it worse. For some reason startups feel they absolutely need to raise money. But something thats dead sure is after they raise money they’ve then got to go and sell something to a customer. The reliance on selling to customers never goes away. If you sell something to a customer first it proves a couple things. The customer wants it, it proves they’re willing to pay for it and it demonstrates too to an investor you might meet in the future customers will pay up which is a huge thing when you’re selling. And you get to own more of company. When you’re investing equity in your company investors don’t give you money, they buy part of your company from you so there’s no gift involved here. Raising money from investors is really hard. They want to give you money less often because they want to see the durability of your company. As a tactic they like to slow things down. They dont want to make a rash decision and if you’re coming across as desperate that’s a reason for them to stay away. There’s a bunch of reasons why it’s easier to fund from customers.

Tanda is a big fan of treating your customers as your best investors, what are some theories and practices you’ve picked up on that support this mentality?

The big thing in the startup space is to give your product away and then when you gain traction work out the business model. If you can fund everything else in the meantime that’s even better. Being able to charge for a demo, charging a customer for a trial is very important. A lot of large corporate customers won’t take you seriously unless you’re charging money. You’ve got to engage enough to get them to spend money. Getting it for free means they have nothing to worry about, whereas if they’re paying they don’t want to lose anything on it and they will engage you more for that fear. Being able to convince your early stage customers as a part of a trial is maybe counteractive but paying nonetheless is very important. At some point you have to convince a customer to put their hand in their pocket.

On the flipside you have strategically funded some start ups. What are the do’s and don’t’s for those searching for venture capital opportunities in Australia?

Do, have your product built. Investors are hesitant to fund ideas. Have the first version built and ready. If you can’t technically do it you’re fundamentally broken at your core. Don’t expect it’s going to be easy, well it’s never easy. Don’t expect once you’ve got your investment you’re going to be able to pay yourself a standard wage. In the two success stories of mine, SE net and Pipe networks we took no wages for a very long time and then minimum wage for probably even longer. Sales people always made more money than us. There’s usually a lot of people in the company that make more than the owners. If you try to make money at the front end you’ll never be successful. Start ups always make more money at the backend in the beginning. You manage to get the scale you need to do something else.

You mentioned when SharkTank started you didn’t get many tech startup pitches at all. Do you know why that is?

I think when Channel Ten started with it they promoted it as an inventor’s show. Thats a theme that’s a hit with Australians and they would have market tested this too. I think Season 1 has been quite successful. I don’t think they got it wrong. I’ve gotten some great investments out of the show. From our personal perspective regardless of the media side, in that respect it’s been successful. We could change the mix of those businesses, just not that many tech start ups.

In an article for BRW it was said tech startups have the potential to contribute 4 per cent of GDP, or $190 billion by 2033, and create 540,000 new jobs. What’s required to make this potential a reality?

Lots of things are involved – we need lots more start ups. I’m not talking dozens, I’m talking thousands every year. Startup culture is about trying different things. I’m 44 and I have no idea what’s going to work. I really don’t. It’s people, your age, at Tanda who understand the trends and have the nimble brain power to follow those trends. Whereas when you get older you’re fixed in your ways. So we need lots of younger people with technical skills to give it a go. If it doesn’t work – stop it, change it, do something else. It’s not failing, it just didn’t work. We need the feedstock of thousands of technical startups. We need our universities producing tech minded graduates for the startup sphere. Because it’s suffocating and limiting. We want to get them into the real world, solving real world problems. In every sector, let’s not talk about four pillars, let’s talk about no pillars. Once we have that we need to close some funding loops, especially in education. I see labs are doing these events, even Tanda put on the hackathon, that was a great community event. We had the Unearthed guys do the startup weekend.

You successfully launched the first Startup Catalyst trip that our CTO, Alex Ghiculescu, was lucky enough to attend. What motivated you to start this program and what are some of the results you’re seeing?

StartUp catalyst is a program that took twenty technically wired 18 to 23 year olds to Silicon Valley for two weeks. We immersed them in the san fran bay area ecosystem. I actually wanted to call it StartUp Ebola because it illustrates what I was trying to do. I wanted to send people over there and infect them with start up. Bring them back and let them run around and infect other people. But then of course ebola happened during the planning and it didn’t seem politically correct to say the least. We just want to get them exposed to other technical people. I believe there’s a lack of younger technical people with entrepreneurial skills starting startups. We need multiple hundreds in Brisbane every year alone. We’ve got a 20 fold gap to close to get to where we need to be.

I’m not sure how you could quantify that but have you seen the gap closing since Catalyst?

Not really unfortunately. We got one or two actually in start ups and as many as four. I’m actually having a meeting following up startup catalyst tomorrow. I dont know the stats. From talking to people it was well received. I think the requirement was for people to come back and spread the startup vibe, and we didn’t enforce that as hard as we should have. But we’re doing it again. There’s some things we’ll change. We won’t make the same mistakes twice.

Any last words for Tanda?

Good luck. I think Tanda’s going well. I’ve been to the office, enjoyed their beer … Yeah you gotta set a culture. Be successful. Be rich. Give us hundreds if not thousands of new millionaires. Wash, rinse, repeat.

This interview first appeared on Tanda. Read it in full here.

If you want to be the next Menulog, you’ve got to be prepared to fail

It’s been a mixed week for Australia’s startup scene. On the upside, we’ve seenAustralian online ordering platform, Menulog, acquired by UK corporate, Just Eat, for an incredible $855 million. By unfortunate contrast, the founders of one of Australia’s most promising startups, Ninjablocks, had to shutter their business after struggling to deliver their third Kickstarter-funded project on time and on budget.

In any given week, hundreds of startups and small businesses fail in Australia and hundreds more are formed.

What separates the startups that see their investors and founders walk away with multi-million dollar payouts, from those that fail?

When it comes to Australia’s top startup talent, in my experience it’s often a matter of timing.

The right idea at the right time, sure. But also the ability for a talented startup founder to be willing to get up and try it all again. Maybe with another idea. Maybe in the form of adapting their idea, and pivoting to a new market or industry.

Take Three65 Underwear, who pitched on last week’s episode of TEN’s Shark Tank as an example. It has a fun and interesting subscription model that solved a real problem for millions of men. Anybody who’s ever reached the end of their laundry hamper, or had to wear odd socks, can appreciate the benefit of a monthly package of briefs and socks.

Nothing wrong with that idea. A lot wrong with the timing. I was out as soon as I heard that founder, Will Strange, had split focus, dividing his time between underwear and another concern that provided GPS tracking for sports teams. As I’ve said before – if you’re not 100% committed to working on your startup, I’m 100% not putting my money behind it.

One thing you learn very quickly (or if not quickly, very expensively) about early stage investing is that not every deal will bring a return. It’s one of the reasons why most VCs invest in people, not in ideas. You look at the background, capabilities and experience. For me, if they have the technical experience, and I trust they can deliver and do what they say – a founder is in with a good chance of investment.

If Australia is going to create more billion dollar tech businesses, and if investors are going to reap the windfall similar to Menulog, we are going to also have to see more failures like Ninjablocks. The reality is not every startup makes it, not even close. That’s why Ninjablocks’ blog post explaining what happened should be essential reading for entrepreneurs.

In Silicon Valley, entrepreneurs wear failure as a badge of pride. We’re not quite as accepting here in Australia. For me, failure has never been something to be celebrated. Instead, you learn from your mistakes, shake yourself off and give it another go. One thing I know is we need people like the founders of Ninjablocks ready to take the leap into startup and aim big.

This article first appeared on Business Review Weekly. View the original here.

John Gorman is a legend…but here’s why I couldn’t back him on Shark Tank

“Growth hacking”. “Pivot”. “Exit”. Sometimes it seems like the startup scenehas it’s own language. But there’s one word that tells me everything I need to know about your venture: traction..

I’m not talking about dragging something over a rough surface. Ironically, once you get traction in the startup world, you’ll find everything starts to move a lot more quickly.

I’ll never forget when I realised I was really onto something with my first business, SE Net. It was when the number of people demanding our product, a fixed-line dial-up internet service, began to outstrip our ability to deliver it with the team and resources we had. I found myself working 12-hour days, and it dawned on me that we needed to rapidly grow our team and systems to take advantage of the opportunity in the market, we were lucky we could access debt and had no requirement to sell equity. This is what traction feels like.

On Sunday’s episode of TEN’s Shark Tank we saw a legend of a startup entrepreneur: a true-blue farmer who I think represents everything that’s right about Aussie ingenuity. John Gorman came to pitch what could be a fantastic, world-changing product. He had, off his own back and using $700,000 of his own money, invented a panel-board produced from the excess waste left over from rice production.

John had teamed up with Grant, a finance guy, to launch the product under the AMPAN brand. They were asking the Sharks for $250,000 to build a factory capable of producing over one million metres of the AMPAN board over the next 12 months.

Great product, great founder – but terrible business strategy. They had no traction: they had not yet proven that one single customer wanted to use their product. To sink a quarter of a million dollars into building a factory without first proving demand is not something any Shark was keen to finance. Sadly, they walked away empty handed.

Above all, what investors want to see in startups, is signs of traction. Proof that your idea is delivering, based on solid numbers (be it sales, users, revenues or profits) is essential in getting investors over the line.

It doesn’t have to be shifting a million metres. If John and Grant had a few glowing customer reviews talking about how AMPAN board was better, cheaper, easier to use than the rest – I’d have been in, and probably fighting off other Sharks to clinch the deal.

Inventing new products and service can be an expensive game. Discovering whether your product will gain traction in the market can make a massive difference, between throwing hundreds of thousands of dollars into a black hole, or changing your course to find how your startup can work.

Robbie Adams of Mobilyser had found this out the hard way, spending nearly half a million to develop his startup, which aims to help people track and differentiate between work and personal calls on their mobile phones. For me it’s a solution in search of a problem, and I begged Robbie to stop pursuing this idea without validating the market for it first.

If you want to avoid the risks of building a startup without gaining traction, there are methods to do this. The answer is to test, test, and test some more – and get your customers to help you develop the right product. Read Eric Reis’ The Lean Startup, participate in a Lean Startup Weekend. If you’re initial idea isn’t gaining traction, stop and take a breath. Try to understand why you are not getting the traction you expect then, if need be, take a different path.

Once you have people willing to pay for your product – and you see increasing numbers of them coming to your door – you’ll know what traction feels like. That’s when the real work begins.

This article first appeared on Business Review Weekly. View the original here.