Do you want to tap into a panel of experts to find out whether your brilliant business idea has legs?
Check out our Google Hangout to hear three business advisers discuss just that and offer advice on what you need to do as a start-up, the challenges you are likely to face and what support is available.
Taking part were
Andy Hamilton – chief executive, The Icehouse CEO
Andy is the founding chief executive of Auckland business incubator The Icehouse and is also a councillor on the Japan-New Zealand Business Council. He has been chairman of Incubators New Zealand and Angel Association New Zealand. The Icehouse Andy was a lawyer, PA, sales and marketer, and corporate VC.
Debra Chantry – Business mentor and coach
Debra works with the businesses at The Icehouse and is passionate about working with firms and boards to ensure that they grow profitably. She has held general management, leadership and governance roles across a variety of multi-national businesses with a particular focus on business, sales and marketing strategy. Debra is a member of the Institute of Directors, a Fellow of the Institute of Chartered Marketers.
Nick Churchouse – venture manager, Creative HQ
In his former life as a business journalist Nick saw big business at its best and worst, small businesses grow and fail, entrepreneurs try and win, deals fly and flop and international markets take New Zealand to task. Every turn was a potential story. Now, as venture manager for Creative HQ, he takes a similar ruler to its start ups and entrepreneurs. Great people with great ideas create powerful stories, and the businesses that come from that can be the legends to inspire the next generation of entrepreneurs.
TRANSCRIPT FOLLOWS:
Janine: Welcome to our business Google hangout. We are here to offer some advice to those of you who are starting small businesses or looking at start ups. We’ve got some experts here with us to answer your questions. If you do want to leave a question, you can leave it on the story that you’re watching on stuff that you’re watching down in the comment section, and we will try to ask as many questions as we can. Firstly though, I want to introduce our experts that we have with us. Let’s start with Nick.
Nick: Hi everybody, my name’s Nick Churchouse, I am the venture manager for creative HQ, Wellington’s startup incubator. Pleased to be here. Looking forward to it.
Janine: Right, and over to Andy and Debra.
Andy: After you Debra.
Debra: Okay, good morning. My name’s Debra, I’m a business coach and EIR, here at the Icehouse in Auckland, and I’m with Andy our CEO.
Andy: Good day, Andy Hamilton from the Icehouse. Been here for a while, since 2001, and I’m also an investor, and start up companies as well.
Janine: Great, thanks guys for taking the time from your busy schedules to be here. We’re going to spend the next twenty to thirty minutes talking about starting a business. First question I’m going to put up there is pretty broad. If you had a brilliant business idea, how do you know if you have an idea for a business, or if it’s just an idea?
Do you want to start with an answer there, Andy?
Andy: Sure, I’ll do whatever I’m told. That’s good, being told what to do. I think all of us know that you got to have an idea, you got to have a creation, and that’s critical, but the next thing you got to do is fit that to a market, and a market need, and so whether you call it lean start, or market validation, the fundamental philosophy is get the creation, and then get them to the market to kind of understand and identify what is called a pain point. And if you end up matching a pain point, you can build a business off of that, but there are lots of ideas out there that ultimately won’t go anywhere, maybe because they’re a crap idea, or maybe just because of timing.
Our advice on this is really think about how you do interviews in the market, to understand what people are doing, and how that’ll help you work out whether you could build a business off that idea.
Janine: Great. Do you have anything you want to add to that Debra?
Debra: Yeah, I think it’s really important. Often we’ll have an idea, we’ll talk to our family and friends, and of course they’re going to be one hundred percent supportive of you, but they are family and friends, and what they have to say is only an opinion, so it’s really important, as Andy said, that you actually go out there and develop market validation, you talk to some people who are in your target audience, and you get some real ideas as to whether it is, 1) an idea that solves a pain point they actually have, and b) if they will actually open up their wallet and pay cold hard cash for it.
Andy: I think the other thing is, seventy percent of the people that we work with on validation fail through that first phase. And I think Nick probably would have a similar story in Christ Church, you know, it’s a good thing, because you learn a lot about the market, and you also don’t waste your time on something that may not actually be that good of an idea at the end of the day.
Janine: Great. Good advice. Nick, do you have anything you want to say on that topic?
Nick: I’m going to endorse all of that. Andy, just for the record, we’re in Wellington, not Christ Church, but I love the fact that you think we’re across everything. The only thing I would add is, I often say to entrepreneurs that are at the stage of validating your ideas, that if you don’t know your customers by name, you don’t know them at all. I get a lot of generic, “Oh yes, I understand my customers.” and I get a lot of generic descriptors, but if you’re not talking to real people and understanding who they are, where they’re coming from, what their buying behaviors are, and how they see your product, then you’re not really validating in a way that Andy and Debra have described.
Janine: Okay. Move on to the next question, we’re off to a great start. So you’ve decided that your idea can actually be a business, but what then, are all things that all startups need to know or to do in the first six months, when they try to kick their idea off? Maybe we can just go around in the same order again, starting with Andy.
Andy: I’m going to hand over to Debra, because I got distracted.
Debra: Okay, the question was what were the four things they need to know?
Janine: Yeah, to get started in the first six months.
Debra: Okay, the first thing you need to understand is, as Andy said before, is what is the pain point you’re actually solving, who is the potential target audience for you, and then you have to start thinking about being really clear about what your long term goal is for the business, and what you personally want to get out of it. We do a huge amount of work with people on the leadership side of things, because there are very many different reasons why people want to go into business. Unless you’re really clear about what you want to achieve, it’s very difficult to measure success along the way. So the fourth thing you have to have is a plan to achieve that success.
Janine: Sorry, Nick?
Nick: Yeah, hi. I agree with that. Starting with that first question, it’s very important to get in front of those customers, and understand who they are, but also to quantify how many of them there are. A lot of people will say that they’ve got a product that the entire world wants, I would say that’s perhaps too many, pair it down and find the niche number of people that you can actually start to target and talk to. Equally, if you’re too niche, or you’re getting very specific, you need to understand whether there is a global market for this, in which case, the hundred people that might buy in New Zealand could become a couple of million, or ten million world wide, and that’s really important, to understand the size of your market, in terms of getting people to buy into the potential.
The last thing I would say is, what can you actually do? What’s your skill set, what’s the skill set of your team? And if you haven’t got what I call the Three Hats in your team, you need to look for support outside of them. And the Three Hats are your market, what we call the main knowledge, do you understand your customer, do you understand the demand to which you’re selling, all of their behaviors, how the market works, the sort of political forces that are at stake.
Secondly, do you have someone on your team that can actually build your product, can it actually be done, if you’re relying on hiring someone in to do that, it’s going to cost you a lot of money, it’s going to take a lot of time, and they won’t necessarily be invested in the outcomes the same way you are.
And third hat, I would say, is that business hat, understanding how you can apply a business model to your product that’s actually going to turn out profits, and a future that you actually want to invest your time and money in, because this stuff is hard work. You put your time, you put your effort, you put a lot of money in, and you’re often asking other people to do the same, so you need to understand how this is going to play out in terms of the business.
Janine: Right, thanks for that. We’ll move on a little bit then, and thinking about the strategic way people can sort of get their business ideas and plans happening. What would your advice be in what people should include in the business plan, as they’re putting that together? Nick, do you want to start?
Janine: Sure. First and foremost, objective proof of all the things we’ve talked about to date, a lot of people will start with a business plan, and start putting down lots of assumptions. These are great, and as Andy said, you have to start with an idea, you have to start with that blue sky thinking about what’s possible, that’s where all the great brainstorming comes from. Your next job is to list those assumptions of what you think the market’s going to do, what you think your product can do, how you think it will be received by your customers, and then you go and prove those.
So every time I hear a entrepreneur, or a wannabe entrepreneur come to me with a whole lot of assumptions, they’re typically coming to me saying, “I think this, I think that.” I tell them to listen to yourself. Every time you hear yourself say, “I think”, you turn it into, “I know.” and if you have objective proof of all those things, then that makes an excellent business plan. And business plans can look all sorts of ways, but that’s the most important thing, is proving those assumptions up front.
That’s me. I’ve lost Janine.
Janine: We are heading over to Debra and Andy. You guys there?
Andy: I can hear, we’re back in. You hear us all again?
Janine: Sorry everyone.
Andy: Hey, that’s cool. Just what I wanted to say was, who needs a business plan? The reality is, if its the purpose and the stage you’re at in your business, so what I would think about is everything that Nick said, and being really focused on getting through the next phase, as well as what Debra said earlier, which is about getting your vision, but then getting really technical around the stuff that you need to do to take it to the next phase.
And a couple of things I want to mention, if you haven’t read Eric Ries’ The Lean Startup, or Rob Adams If You Build It They Will Come, have a look at that. Both of those books are fantastic, I suppose manuscripts you could use to guide you through your journey. Another thing is, it’s easier to read a book, it’s harder thing to stay committed to that execution side of it, so I would just think about how you can ensure that you stay on the plan as you go through the execution. Debra.
Debra: Yeah, no, I back up everything that both Andy and Nick have said. I think the other thing is being very careful around what is defined as a business plan. A business plan you put together for a bank, for example, would be very, very in depth, and often a very workable document. I prefer to break things down into pragmatic bite sized junks. So looking at your sort of thirty, sixty, ninety, hundred and eighty day plans and goals, and something you can actually work with on a daily basis, so it becomes a working document, rather than something that gets shut in a drawer.
Andy: And that you could share with your team, and your advisors. One of the things that we heard Nick talk about is building a team that matches the risk and a challenges that you have over the next wee while, you know, you want that plan, whatever that is, to be owned, not only by you, but your advisors, your investors, even your customers to some extent, so they all get on the journey with helping you actually make this thing real, and successful.
Nick: If I can just add something on the end there, it’s a point Andy made, which is really important is, your business plan has to be fit for purpose, and so it is an active document that’s constantly changing. Typically what you’re using a business plan for is to present to someone else, whether it’s a bank, like Debra said, or it’s an investor, or someone who thinks they need a busines plan to see, and one of the key things, which people will be looking for, in terms of buying in to what you’re about, buying into your dream, and helping you with it, is what you’ve done. What momentum do you have, what’s your traction?
Even if you haven’t sold to any customers, show exactly what you’ve achieved in the time that you have had this idea, because most people won’t buy into an idea, into a business dream, even into an operating business, unless there is a definable history of momentum, and you show that you can actually execute on your idea, even with limited resources.
Debra: I’d like to add to that as well, please. Nick, I think you’re absolutely spot on, you have to show the success you’ve actually achieved to date, and also the next step, sort of the next step to actually going to do, because quite often people will come in, and say, “We’ve done this, this, and this.”, but investors, and banks, and other people who are interested want to know what your next steps are as well. So you’ve got some momentum as well, you’ve got some real customers you want now.
Janine: Okay, I’m going to go to a couple of questions that we’ve come through from people watching our hangout. This one is a question here, “I have just started a new tech company, launching a new app in the south island, what are the biggest things I should be looking out for? Is it things like IP protection?” Andy, do you want to start?
Andy: Wow, that’s one of the great things about apps, and in this day and age, is that you can launch anything from anywhere. IP protection is really just about barriers to entry, and in the software world it’s a lot harder these days, to be able to patent things, and the reality is, it’s often an execution game. That doesn’t mean that you shouldn’t consider IP protection, it just means you got to think about how do you protect, or build value in your business. And execution may be the best way to do that, unless you’ve got something that is truly inventive.
There’s cross sections of how you do IP protection, but I think the other thing to reflect on, when we had the first app stores, it was easy to get measurable in that app store. Now, it’s really changed, so I’d just be thinking about you can get that product out, get partnerships, to get you scale, so that you can click the ticker on the way through, in terms of just building that scale of usage. Same fundamentals exist, in my view. And if in doubt, go and see some IP lawyers, to get some advice around what your IP strategy should be.
Nick: Can I jump in here, Janine?
Janine: Yes, do.
Nick: Look, this is something I hear a lot, and I’m quite hot on it, because an app is not a business, an app is a channel to market, and you need to be more specific about what exactly you’re doing. It’s like saying, “I’m starting a shop.” or, “I own a car.”, you need to be more specific if you’re looking for specific advice on your business, I need to understand what that app is doing, and equally, if you’re asking questions like, “Do I need IP advice or protection?” and certainly, if you’re looking for help a lot, I think it’s really important that you don’t describe your business as an app.
Your app is just how your customers interact with your business. As Andy said, it’s a great mode of connecting with the market, because it scales really well, you can get it out to a lot of people fast, and you can change it fast, you can be really nimble, which is cool. But focus on what actually you’re doing for your customers, through that particular medium, being the app. It’s just a small part that I think is important when you’re talking about your business.
Janine: Thanks for that. Did you have anything you wanted to add, Debra, or should we move on to the next question?
Debra: No, that’s fine. I guess going back to the Rob Adams, If You Build It They Will Come, the same thing kind of applies to when you’re building an app. Your apps, and you’re right Nick, it is just about the way you do business with your customers, a lot of people think they’re going to put an app out there, and they’re doing to get hundreds, and thousands, and millions of people signing up to it. It doesn’t quite work like that, you actually have to have some pain point first of all, some reason for them to open their wallets.
Andy: Yeah, hey, just on that note, Rob Adams is actually going to be in the country in July, and is going to be running some regional workshops across the country, so it’s a great opportunity really, in going to a world wide expert around how you validate your new product or service. Find that out, more information on the Icehouse website, if you’re keen to come along.
Janine: Thanks. I’ve got another reader question here, it’s quite a long one, from Andrew, and I’m going to paraphrase the way that Andrew, if you are watching, “I’m a young south islander who four years ago, found a market for a product that didn’t currently exist. Hummed, and hawed about if you three years, before I took the plunge, and I spent a decent chunk of my savings having a beta product developed and am in Australia testing. The response has been incredibly positive, but I’ve been stuck on what to do next. I want to get it to a saleable standard, into the market in the coming months, it’s an international product, which in specific countries will be in high demand, and the product is mainly a software product. Is there any chance that you could give me a rundown of what you feel I should do next? Should I get in touch with an incubator straight away, find funding from family, or develop the product to a saleable condition?”
Over with Andy and Debra, would you like to answer that one?
Andy: Well, you know, the curse of an entrepreneur is the product is never good enough, and more and more money gets spent on the dev, to make it perfect. The reality is, the minimal viable product approach just goes, if you can get them to the market, and it matches a need, you can get some experience, get some knowledge, and good enough is good enough. I’m not to say that Microsoft is the way to build your business, but they built a pretty successful business, so my advice is there’s nothing better than cash flow that comes from customers. If you can convince some early adopters to even come on board and pay you money, that just helps give you the funding, and gives you the experience to work out where to go to next.
My attitude, in terms of whether to reach out to incubators, reach out to people who can help you get through the next fights. Whether that’s an incubator, a mentor, an investor, it doesn’t matter. Friends and family are great, because they believe in you, and they love you, that doesn’t mean they’ll actually help you, so I would just think about basically, I think there’s a saying, would you stand on the shoulders of giants to do what you want to do, or would you do it yourself? Why do it alone? Find somebody who’s been there, done that, get him or her to help you, and get some customers paying you some money. That’s the best validation you could ever do.
Debra: I agree. I think the best thing a small business owner starting could ever do is just ask for help. Don’t be afraid to ask for help. And learn from those that have already done what you’ve done.
Janine: Anything to add to that, Nick?
Nick: Yeah, I agree, it’s about asking for help. But the thing is, you can plug into so many avenues of support around the country, there are some great courses that are run through some of the [inaudible 00:19:04] education institutions around the place. Local incubator’s probably a good place to start, because they’ll know where all these things are. They might not be the actual outfit that can help you, but they’ll be able to plug you in to the often tech circles, or some of the local meet ups, where you might be able to meet these team members that Andy and Debra talk about, and meet their advisors, you might be able to engage with your business, and give you some early advice, and if they’re interested enough, then they can become really key members of your team. Whether actually they’re working along side you, and have a stake in the business, or whether they become an early advisory board, and start to steer you in the right direction.
The most important thing is that when you’re asking for help, that you’re identifying that these people ca actually take you forward, and that they understand where you’re going. But if they ask hard questions, that’s a good thing, if you start getting a lot of easy questions, and you feel really comfortable, then I’d question the advice you’re getting, because it gets harder from here, when you’re actually connecting with the right people. I think incubators are a great place to start. There’s plenty of stuff out there.
Janine: Thanks you guys.
Debra: I’d like to add to that as well, please, very quickly.
Janine: Surw.
Debra: I think what Nick was saying about the whole advisory board, and having many different people actually critiquing what you do is really important, and so often just asking one person who may have been there, done that, may give you one view, one opinion, one of experience. Once you get involved with an incubator, or the programs that we run, you can actually get a whole group of people who can offer different perspectives, different insights into it, and can be quite critical of the business. Whether, a formal advisory board, or through a networks through the incubators is a great way to get that varied advice.
Janine: Okay, moving on. How does someone who is trying to get a startup off the ground, how do they decide which sort of finance is for them? Nick?
Nick: Good question. Typically your own. In my view, and it’s backed up by stats internationally, that the top three sources for startup financing, your own savings, family and friends, and I always ask people what’s the number three, and they always say it’s investors, and it’s not, it’s actually credit cards. Right around the world startup founders load themselves up, and they do it themselves, and that is through their own means. That speaks volumes, when you actually get to the step when you’re asking people outside your close knit circles to engage in your business. It’s no easy road, going down the investor path, it is frought with pitfalls, and can often be an extremely challenging place to be.
Equally, I get a lot of questions of people saying, “Hey, can I get some government grants on in?” No, that money is out there, but it’s not free money. There’s no such thing as free money, it comes with a lot of hoops to jump through, it comes with a lot of reporting to do, and often it’s not aligned, long term, with what you’re trying to do. I would start by looking at your own resources, and making sure that you have invested in your own idea, and if you’ve done that, then I would say start talking to those people that we talked about in the last question about where the options lie for you locally, because there will be options out there.
Andy: You know, so why, and what for. I would say, everything Nick said is right. The other thing I would just think about is investment money that comes, that doesn’t help you accelerate quicker is money, but it’s not money with a cherry on top. And so I just think about how money can be a bit of oxygen with talent that can really help get you there quicker. The biggest insight I’ve had, working at the Icehouse over twelve years is this, an entrepreneur thinks differently to an investor. For you to get an investor on board, you need to think like the investor, to understand because I don’t want to hear you talk about sixty things you’ve got to do over the next three weeks. What they want to hear is the one thing you want to do over the next three weeks that will increase value in the business, and that’s just a different perspective.
Janine: Did you have anything else you wanted to add, Debra? We’ve got quite a few written questions, so I’m wondering if we might be able to power through, and get into it. Let’s get into it, okay. We might need to keep the answers a wee bit shorter, so we can get through what we’ve got.
Andy: Okay, Nick, short answers, mate.
Janine: “I just started an online business which supplies information and advice to landlords. I would like to know what medium you suggest for advertising, and your views on LinkedIn, and other social media.” and that was from Carrie. Should we head over to Debra and or Andy for this one?
Debra: Sure. You know what I’d be doing? I’d be going and talking to some landlords, and finding out where they hang out. You know, social media is just another channel to get out there to people, so I’d be going, talking to your landlords, to your customers and saying, where would you expect to hear about this kind of information. And from that, build a picture, build a persona of the type of people you’re actually going after, and then target those places they hang out naturally.
Janine: Anything else to add, Andy?
Andy: No.
Janine: No, okay, we’ll move on. “Hi team, I have an idea for a new gaming genre. I’m working on promo videos to highlight they key points, as well as the differences with current genres. My plan is to start a website with these promo videos to introduce the concept to the world. Do you have any suggestions?” Who wants to go with this one? Andy, why don’t you.
Nick: I’ll talk on this one.
Janine: Great, great.
Nick: This is a really hard thing to get a handle on. Gaming genre promo videos, creating website to push it to the world, haven’t actually got too much idea of what exactly you’re looking to get back from your market, who your customers are, how you’re engaging with them. What I would say is, this is a really hot space, there’s a lot of interest around gaming. Traditional businesses are looking to gameification models to try an accelerate what they’re doing in the online space. So I say you’re on to something, but go back to those tenants we’ve been talking about right through this is, talk to the customers, identify who you’re speaking to, who you want to get in front of this website, and why they’re there. If this is a business, or are you doing them a public good by educating the market. Both are valid, one of them will pay more money than the other.
Andy: Yeah, and I just jump in, the whole fundamental principle of marketing where we all want to get to, is word of mouth. And there are a number of different tools today that you can use to get to word of mouth, including websites, including social, including mobile, and they’re all just going to go into the mix of your tactical strategy to actually get the word out. And the great thing these days is that you can get access to some of these also celebrity people, who give you huge reach when they start talking about you. I just think about word of mouth, and how I can make that happen.
Janine: Thanks. Along the similar lines to that, we have a question about a startup for helping suppliers engage with external retail staff, who advise customers on what product to purchase, centered around online training, and what I want to know, how can I generate publicity around it to create general awareness that it exists at head office level corporates, preferably internationally, and get corporate sales outside of hosting blatantly promotional plugs on news websites?
Debra: As Andy just said, it’s quite good to look at who the influences are, so people who actually have influence on the people you’re trying to reach, and get them on board with you, so they can actually start to talk in a more heartfelt way about the business, rather than you just blatantly promoting it.
Nick: One of the key things on this is case studies. If you can get involved with a corporate that understands your business, that can lend some value from your business, and then get them talking about it, it’s much more compelling than you saying, “You got to buy this.” You got an existing customer who’s seen value in it, so you can seek out those early adopters, and get them on there.
Andy: Yeah, and one thing that’s really important to that, we hear time and time again startups signing deals with Microsoft, and HP. All those deals, they normally never make money out of those deals, but what it does is, it gives them the credibility that other people look at them, and that’s called momentum. So don’t always reach too fast at the early stage on getting pricing, that enables you to make merger. You’ve got to build momentum that other people start to go, oh, I believe in those guys. And then one day, maybe somebody will come along, and maybe buy you, if you’ve got good momentum.
Janine: Great. Thanks for that. We have a question now on, what are the biggest issues with New Zealand’s entrepreneur network, and how can New Zealand make it a better place for start ups? I’ll start with you, Nick.
Nick: That’s a really good question. It’s the big question, and it’s the question all of us are, in this core, particularly are asking, because that’s what we’re trying to do every day. That’s why the Icehouse exists, it’s Creative HQ exists, and why a lot of the organizations who support us exist. The biggest issues with the entrepreneur category in New Zealand, I think one of the key things which I would get on is, the DIY gene that we tend to have in our New Zealand psyche, that rarely begets the thing that we’re talking about a lot here with the team, the focus on team, getting people alongside you, asking for help.
And more importantly, is actually sharing on the journey. Getting people on board, but also rewarding them for the particular help that they’re giving It’s the old adage of grow the pie, don’t try and grow your own slide. So I would say, get that DIY gene, and flick it over your shoulder, move on, and wait to get better.
Andy: Nick’s right, we all spend a lot of time kind of working in the system, but what kind of solves this is that, my view is, actually things are going pretty well in New Zealand. Do you know, it doesn’t matter if you’re in New Zealand, or in the Valley, or in New York, or in Ohio, it’s bloody hard starting a business, and there’s going to be a lot of failure rate. The cool thing’s some of the stories. I mean, listen to the companies, SLI’s listing today, Vin, Zero, Diligent, Orion Health, Howard By Proxy, the Lighting Lab companies that have just pushed over the last few weeks, it’s a cool time to start a business, and some guys are making really good money here in New Zealand.
It’s still really hard to get up to the Valley, but I’m just going to end with one final story. This young fellow called Ollie, from Talpo I think he is, he’s building a business, he’s just spent three months in the Lightening Lab in San Francisco. How did he do that? Who cares? But he got off his ass, he got on a plane, and he went to the Valley, and he’s had an incredible experience, he’s come back, because his Visa’s run out, and he’s moved to Auckland, as I believe, to continue his business. There are no problems in New Zealand, it’s just hard, and I encourage anyone to get out there, have a go, if it doesn’t work, try again.
Janine: Anything else to add to that, or are we moving on to the next one?
Andy: Next question.
Janine: Next question. Okay, what have we got? We’ve got quite a few coming in here, let me grab, sorry, I’ve got to pick a minute. “Hi team.” Oh no, that’s a different one. Okay, what have we got? “I’m involved in an online startup, which is very close to launch. We aren’t sure what to expect following the launch. We could grow very quickly, or things may go a little slower than we initially anticipate. Is there any advice growing too quickly? And on the other side, not quite taking off?” It also says, “Nick, I actually met you last week at your Lightening Lab presentation in Queenstown, and really enjoyed it.” So maybe we’ll go to you to answer that one, Nick.
Nick: Excellent, I met a bunch of people in Queenstown, and they’re all awesome, so good to have you on board. In terms of growing too fast, I mean, it’s a nice problem to have, isn’t it? But absolutely, you need to be able to deliver to your customers, and I would say you want to stage your growth, and understand what you can actually service. One of the key things that online startups don’t factor in is actually that customer service aspect. They think if we can get a website up, then a million people can use it tomorrow, you know, quite aside from the actual [inaudible 00:32:35], and the server issues, and it being able to cope with the volume.
Depending on what you’re doing, you may well have a bunch of people that need help using your product. It’s easy to access online, but sometimes it’s not as easy to use as you think it is. And I’ve spent a lot of entrepreneurs spend a lot of time answering emails, we’re in there twenty four seven, it’s affecting their families, and all sorts of things, and it becomes an absolute onerous burden. So I’d make sure you get that customer service up front.
Janine: Over to Nick, and Debra, anything to add on that one?
Debra: No, just more the same really. Just be prepared, that way, if things do go wrong, and often they will, just have that really, really great customer service. Twitter, when it first launched many, many years ago, crashed on a regular basis, but they managed to deal with it in a way that people didn’t seem to mind, and that’s kind of in the valley you want to get to.
Andy: And I’d just like to say, hope is a virtue, that’s not a strategy, or a tactic. You should know whether it’s going to go well or not. If you don’t know, then that’s a problem.
Janine: Okay. I guess sticking around that idea of focusing on what you’re doing, and being aware that there might be challenges, what do you think that biggest challenges someone starting, trying to set up a startup is going to face?
Andy: To me it goes back to the validating the market, I think we all think in a linear way. I fall in love every day that a new business comes in, because I want them to succeed, and the reality is, only a very small percentage of those ones will even have a good market. So for me, that is the single greatest challenge. Is getting through that first phase.
The next phase is how you have to become a chameleon, as an individual, as you grow, and you have to move yourself into different areas, and functional capabilities, which really stretch you. So first phase, it’s all about finding the path, and ensuring that you’ve got the right market to go after, the second phase is how you can grow and change as a person to help the business as it goes through that.
Janine: Do you have anything that you would like to add to that, Nick?
Nick: I think one of the biggest things I see intro entrepreneurs stumble with is typically these people are pretty good at building a product. You’ve got to get your head out of your product, product actually doesn’t matter at the end of the day, you got a team that’s you, and your team, and you have your market, whatever goes in between, as long as you’re solving a pain in the market, and someone will pay for it back the other way, the product, what it is doesn’t actually matter. Once you get your head around that fact, it becomes a hell of a lot easier.
Janine: Thanks for that. What’s the main reason why startups do fail?
Andy: They don’t validate their market, one, two, they don’t grow their team to cope with the challenges.
Janine: Nick? Debra?
Debra: Going back to that whole addressable market as well. Often people will come in and they say, “I’ve got a product for dogs, and there are three million dogs in New Zealand, therefore my market is three million dogs.” That is not your addressable market. That is the number of dogs that are actually in New Zealand, your addressable market gets a lot more leash than that, because there are people who won’t buy stuff for their dogs, there are working dogs, there are people who just won’t pay money for that sort of stuff, so you have to think very, very critically about how big that addressable market is, and I think the other reason they fail is, because they don’t think about what it will actually cost, in terms of time and money, to get this thing up and running. Most people completely underestimate the amount of time, and the amount of money required to actually get something off the ground.
Andy: And what’s really interesting is that you go on to the, I think it’s on pandodaily, it was a great blog that I saw around the cost of ses service businesses, and looking at the list of companies in the US. The amount of money that these companies spend to get into ses market as a company is just mind boggling.
It almost turns you off, doing any ses business. You got to look at Zeroes, however, they’ve been able to get into the market way cheaper than a lot of other have, and so I think a lot of this just comes back to having clarity around where you’re going, and the costs, and being ahead of the curve every which time. The old adage, work on the business, not in it.
Nick: I’d support that. I’d just say that I see a lot of young business run our of runway, they run out of resources, all the things that Andy and Debra have talked about in terms of time and money. They always disappear, and what you have to be is, you have to be looking ahead a year, and know what resources you need. Often entrepreneurs will go into a funding round, and win, and get some investors on board. That just makes it harder, because that money will run out, and you need to know where it’s going to come from in the next round.
Typically in New Zealand we don’t have the access to the types of funds they have in the US. The one key thing I would say that Andy mentioned earlier is early revenues. If you can get people paying for your product early, it gives you a lot more of a comfort factor, in terms of cash flow for your business, which will extend your runway.
Janine: Thanks, Nick. We’ve only got time for a couple more questions, I think. We’ll see how we’re going for time. For those startups that are trying to get off the ground, what kind of support is there available, that they can tap into, to help them succeed? Andy and Debra, take this one.
Andy: I actually think there’s a plethora of support out there. Whether it’s expertise, whether it’s networks, or whether it’s funding, there is a bunch of organizations, twenty or thirty organizations in New Zealand, and just as I told the story about Ollie, there’s nothing to stop you jumping on a plane, and going and staying in a backpacker’s place in Silicon Valley, and reaching into things like the Kiwi Landing Pad which is out there.
I think there’s a lot out there, including business mentors, in New Zealand, and the like, but the key is the value that that organization or person brings to help you, and the relevance. The thing I’d say, if you’re doing something for the first time, find somebody who’s done it before, who can actually help and guide you. They won’t necessarily want to do it, and don’t be afraid of sharing some of the upside with that organization, or that people. But be demanding on what they can actually do for you.
Janine: Debra, do you have a comment on that as well?
Debra: I agree with everything Andy just said.
Janine: Right. Nick?
Nick: Absolutely. Keep the noise up, squeaky wheel gets the oil. We have a couple venture companies, about twenty on a rolling average in the Creative HQ portfolio, and the ones that I see that move the fastest are the ones that are constantly looking for help, constantly putting their hand up and saying, next please, next please, I need more help, I need more help. Because when you ask, it comes. New Zealand’s got a very strong entrepreneureal support ecosystem, and if you put your hand up, people will crowd around if they like what you’re doing.
Andy: And just think about that. Sometimes when you’re starting out, it’s quite a good idea to get an advisor who’s got a bit of a reputation, who will then bring in other people as well, so think about your networking, just like you get early customers to build momentum around advisors. You know, if you get a Sam Morgan, or a Rod Gery, if they had time, but you probably won’t get them on the first go, so just think about other advisors that can help bring credibility to your business, and that will just help take it to the next level.
Nick: Now, one thing I’d just add on support, is make sure you do something with it. Go into these conversations with mentors and such with open ears, and a willingness to listen, but more important, a willingness to act on the advice. You’ll waste a lot of people’s time if you just add it off, and do what you were always going to do in the first place.
Janine: Well, this is a question that maybe we should’ve actually started off this whole chat with. Is not actually a good time to start a business in New Zealand? Nick, I’ll pass that to you first.
Nick: Absolutely. People often ask me, does the economic cycle effect startups, and some people have the opinion that in a down cycle there’s more startups, but it’s also more challenging to get enterprised customers on board, because budgets are tighter, etcetera, etcetera. Typically what you see around the world is that startup are doing it hard, no matter what the time, what the economic cycle, what the climate is. They’re always doing it hard, lean and fast, so the main thing I would say is momentum. The earlier you start doing the things we talked about, validating your market, talking to customers, and getting those early revenues on board, the faster you’re going to grow in any economic situation, so yeah, today’s the day to do it.
Andy: And you know, what I’d say is any time is right, any time is wrong. The great analogy these days is the baseball analogy; get in, get out. If it works fantastic, ride it, if it doesn’t, go to the next idea, or go get a job from a corporate somebody, some of the young New Zealanders, there’s nothing better than getting some experience from working inside a corporate multinational, because later, when you go sell your starter to them, you’ll know how they work. So just think about how you can map that out.
The other thing I would say is, the cost to get into a business these days is way lower than ten years ago, which means that’s cool. It also means payoff will be lower, but that’s really attractive, because it’s not such a barrier to actually getting into business.
Debra: And I think if you’ve got a real, and growing pain point, and a real and growing audience, then any time is a good time to be starting a startup, with the right team.
Janine: Okay, I think that’s pretty much all we’ve got time for, and we’ll wrap it up now. Do you guys have any final advice that you would like to pass on, maybe we’ll go to Debra first?
Debra: I’ll just go back to what I said earlier; I think it’s really important you ask for help. I’ve been in New Zealand for about twelve years now, and I’ve found that when you actually go out, and you ask people to help you, and ask them to put you in contact with their networks, they will do it for you. So don’t be afraid to do that, and yes, ask for help.
Andy: Yeah, and be discerning on what they can actually do to help you. And I think just get on with it.
Nick: That’s been fantastic. Thanks for all the great questions. I’d just like to say that, look, I think early stage business, and young startups, either tick, or non tick, are the future of this country, it’s what we’re looking for, we’ve got a huge undercurrent of innovation that runs through every kiwi, and all the people that are on here, tell all of your friends all the things you’ve heard, because it’s good advice, and you’ll heard it when you reach out, as Debra has suggested. Go for it.
Janine: Thanks again. I’m sure that advice has been really helpful to those who asked questions, and for those who are watching. We really appreciate all of you guys taking the time out to help us out with us, and take part in our Google hangout. We hope we can do it again soon. Thanks everyone. See you all later.
Debra: Thank you.
