If you were to come up with a formula for creating a successful start-up, well, you’d be very popular. Many have tried, there’s a whole industry of journalists and analysts and opinion-heads working feverishly to pick winners and distil that special essence that defines success.
In the past we’ve reported on some of Australia’s biggest start-up success stories, but this time we’ve spoken with a fresh batch of Australian companies that are growing at a rapid pace.
We chose fledgling companies from a range of divergent industries; such as accounting (Saasu), IT (Scriptrock), media (Omny) and music (Chinese Whispers). Despite their differing backgrounds there are some key experiences and insights that all of the founders and CEOs had in common.
Most prominent was the imperative for founders to be jack-all-of-all-trades. Growing an innovative idea into a viable business requires a plethora of skills, but at the start you’ll have only yourself and a partner or two. Flexibility and a willingness to wear a range of hats is a defining feature of the start-up entrepreneur.
Similarly, there is a shared acceptance that while the Australian market is a great place to start out. A company that wants to grow needs access to the global marketplace.
Here’s what they had to say.
Saasu – The elephant in the room is the huge tax burden on small businesses in Australia.
The acronym SaaS (Software as a Service) has come to define the pervasive power of cloud computing and it’s this power that the Saasu team have harnessed to revolutionise accounting and book-keeping for SMEs.
“I was working at Deutsche Bank and I had a colleague who had a bag full of receipts from his property management, it struck me that there’s got to be a better way of doing this,” explains one of the Saasu founders, Marc Lehmann.
“Even people who had a bit of money around, who were financially savvy, still weren’t very organised.”
“With our system a payment can flow from a sale on eBay into the Saasu system, the old world wasn’t like that, it all had to be punched in manually,” Lehmann says.
“It’s straight through processing and finally it’s real for small businesses.”
Saasu have a viable product, they have an eager customer base, but they’ve also got serious competition, which places differentiation at the heart of what they do.
“I’m a believer in the blue ocean strategy. I’m all about creating new markets and differentiating yourselves from our competitors. Rather than a red ocean scenario where you’re all fighting like sharks.”
By its nature Saasu requires regional customisation of tax rules to move into a new market. Lehmann is eyeing off the plump markets in US and Europe but he still sees advantages in starting up in Australia.
“In the States there’s a real pressure cooker kind of sales culture that you need to get ahead. While in Australia people are more about the product and a little less about the sales and marketing. I think that suits the Australian personality and it’s a big advantage for Australian tech companies.”
Lehmann is, however, keen to stress his frustration at the home-grown policies that are pushing many of the best companies off-shore.
“The elephant in the room is the huge tax burden on small businesses in Australia. It’s the single most infuriating thing about doing business here and it’s seriously made me certain that, at some point, we’ll have to leave Australia,” he says.
“You can claim a lot of things and it's manageable when it’s just a small team but when it gets bigger it just becomes too painful.”
Lehmann was a capital trader and he had some software development skills from managing the bank’s systems, but in the end, like all of our entrepreneurs, he had to learn the bulk of the game on the job.
“I’m not an accountant by trade, there’s so much stuff that I learned through meeting the right people, going to events and talking to people, going to Google university days, and… I watched lots of Youtube videos,” he says.
“I’m an experiential learner and I think if an entrepreneur’s got that they’ll be right. I just don’t think businesses are built on degrees. In the end, you can’t be taught to be innovative.”
Scriptrock – We showed everyone and they all lost the plot, they were saying we need this now!
They analyse some of the biggest systems in the world, but you’ve probably never heard of them. Scriptrock have created a diagnostic tool that has proved vital to systems architects and developers where disparate servers and software inputs makes it hard for an organisation to see the forest for the trees.
“Most large scale enterprises find it really difficult to get their heads around all of the systems they’ve got," says ScriptRock co-founder Mike Baukes, from an office in Palo Alto.
"They’re dispersed and we help companies establish what they’ve got, how they impact the business and we give them one place where they can see from end to end how they’re configured and how they’re performing.”
The founders of Scriptrock all came from systems management backgrounds and it was in a moment of innovative problem solving that they built themselves a monitoring tool.
“We showed everyone and they all lost the plot, they were saying we need this now! Can we have it? And that’s when it dawned on us that there was probably a commercial application for this. We asked ourselves; let’s see if they’ll pay for it, and they did,” Baukes says.
From this genesis the rise has been rapid, but success wasn’t handed to them on a plate, it was a diverse team and a willingness to learn that set them apart. “It’s great to have some domain knowledge, and we came from an enterprise background. But you need to have the flexibility to do multiple jobs and having the willingness to learn different roles.”
Scriptrock was founded in Australia but it seems the nature of an enterprise system has made a move to the US inevitable.
“It was very much a conscious decision, we could follow the Atlassian model but then we worked out we had enough of a product to take it to the US straight away, so that’s what we did," says Baukes.
"We polished the product until we finally launched in October last year and it’s just been insane since then.”
While broadband communications and the cloud have made the world so much smaller, the tyranny of distance still stalks Aussie firms.
However, Baukes is quick to add that Australia had been good to them.
“Australia is home for us,” he says.
“The entrepreneur community is tight knit and it makes it easy to build contacts and learn. A lot of people pay out the government over there but there are some great tools [like commercialisation grants and the R&D tax credits].”
“When we made the decision to go to the states we knew we would forgo all of that. That’s the reality but it’s still a great place to start a business.”
“But for growth, there are just so many more opportunities to expand in the states and Europe.”
Omny – We avoid having to pay the obscene Silicon Valley salaries here. It really helps start-ups.
The appeal of radio has always been its carefully curated mix of music, news and advertising, in recent times this was superseded by the flood of content made available on smartphones. And it’s here that the Omny has stepped in to pull together snippets of your favourite streaming services to offer a hands-free experience that learns your tastes.
Technology Spectator spoke to Ed Hooper about the Omny experience of starting up in Australia, which has been somewhat of a mixed bag.
“There are some things that are great and some things that are a real pain," says Hooper.
"There’s some excellent grants. We got the Commercialization Australia grant, the Australian government matched dollar for dollar money we got from investors. It gave us some breathing space."
“And the R&D tax credits have been really helpful for us. We get 45c in the dollar back on that, which has increased our runway.”
He adds that the Australian market may be small but there is plenty of engineering talent here that is keen to get to work.
“It’s far less competitive than in San Francisco, developers are like mercenaries for hire there,” Hooper explains.
“They’ll jump from Facebook to a start-up and they expect food and gym and stock and a huge salary. It’s crazy how much it costs to build an engineering team in the US.”
But, as is so often the case, the tax burden of employee share schemes is troublesome.
“Issuing stock has been a pain; it’s so much easier in the US,” Hooper says.
“We wanted our guys to take a piece of the company and so we took a hit on setting that up. It would be better for everyone if it was streamlined.”
But for the small but diverse team at 121cast, the parent company that built the Omny, this was vital for early growth.
“When we started it was just the three founders, Long Zheng does design and product, Andrew Armstrong is CTO and my role is business development. There are good books, so many books; up-skilling was vital. We had to learn about patents and trademarks, other start-ups who had been there before taught us a lot,” Hooper says.
The 121cast team works out of the York Butter Factory co-working space. This is the home of the Adventure Capital VC who saw the potential of their Omny from early on. They also received funding from Singtel Innov8 and Optus.
“The co-working spaces put on heaps of great seminars and talks about processes and services. Being in that space opens a lot of doors to opportunities and services.”
Chinese Whispers – Ideas are a dime a dozen but it’s the execution and the ability to iterate and pivot until you find the business model that works for you.
The name evokes images of a story twisting and evolving as it moves from one person to another. That's the basis behind the Chinese Whispers collaborative music platform that sees random connections creating musical teams that would otherwise have never come together.
“It’s all about looking at the potential that lies within randomness. Throughout my musical and business careers, and my personal life, it’s been the serendipitous meetings that have led me to my strongest relationships.” explains Tim Hodgkinson, the programs founder and CEO.
He is an enthusiastic proponent of the Aussie start-up scene and sees benefits in a small and tight-knit community.
“The Australian start-up scene has an amazing quality of passion. Because it’s new, no matter what door you knock there is a lot of time and energy available for an innovative company,” Hodgkinson says
It’s clear from all our entrepreneurs that knowledge sharing is vital for finding one’s feet and Hodgkinson is no different.
“The eco system is incredibly supportive,” he says.
“It comes from its small size, it’s a niche sub-genre and there is a valuable support network. Whether it be conferences or incubators, the camaraderie and unity has made me feel really at home. It’s the industry and community in which I’ve found myself flourishing.”
Chinese Whispers was taken on by the Slingshot start-up accelerator and Hodgkinson is in no doubt about its value to him and his company's development.
“In three months at Slingshot I progressed in understanding in execution in iteration probably three or four years of personal progress. The network of mentors, the support, the experience and trips to the Valley, it’s all put me in a completely different place and mindset.”
They’ve received funding through Slingshot, Artesian Capital and directly from high-net-worth individuals.
“With backing we’ve now got a12 month runway, we’re hoping to have a revenue stream hit in April; our model aims to self-fund for the next 12 months. At that point we can make the call about taking Series A and B stages and taking the platform to Silicon Valley.”
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