141014 ForPeanuts

You toiled how long to get some income?

Yesterday I attended a start-up event hosted by Incubate at the University of Sydney where Bill Tai and Rebakah Campbell gave keynote speeches. I felt disturbed by two things I saw.

But first a little from the keynote speaker Bill Tai. Bill gave an overview of the waves of technology that have swept the world which certainly resonated with me:

  1. The Silicon Wave from the 70’s and 80’s where Fairchild’s commercialised transistors and started the process of getting more on a chip. Bill showed a slide with the company Zilog mention which reminded me of all the Z80 assembler I wrote during this time (and later): a FORTH compiler, Crossword Maker, Spreadsheet and Address Book and how I really wanted a 140K floppy disk drive but it was too expensive at 400 GBP. Tape works but it was so slow… 15 minutes to load the source for the compiler. The memories! But this is off topic.
  2. The Infrastructure Wave 90’s and 00’s where computers, routers, etc. were created and sold.  This is when I founded the messaging company Gordano and security company DeeZee.
  3. The Cloud Wave of 00’s where services were provided on the web e.g. AmazonWebServices.
  4. The User Interface wave of the 00s to 10s where companies made it easier to access the infrastructure and services. No longer did users need to know what FTP was!
  5. The Data Visualisation Wave 10s to 20s where more and more data is being accumulated and mined – the Big Data we all hear about.

Bill predicts that the next waves are Genomics and Crypto Currencies. While this is all very interesting and retrospective, what was it that disturbed me?

Firstly Rebakah Campbell has achieved a lot in the last four years with her company Posse which is all about “Discover[ing] the Best Places on Earth”. I am impressed but couldn’t understand how the salary bill was going to be paid. Towards the end of the talk Rebakah mentioned that they were finally at the point where they were going to test if they could make money… I was disturbed to hear that it’s taken four years to create what I would suggest is the Minimally Viable Proposition to start testing the value of the idea!

Secondly Bill Tai asked his colleague to show a video about MaiTai which was presented as a place for Entrepreneurs to network with Investors while learning to Kite Surf. In fact Richard Branson hosted the first event at Necker Island. Bill is encouraging entrepreneurs to attend in Perth this year since he is looking for the unicorn companies of which there are around 5-10 per year created (according to his analysis).  What concerned me was the image that was being sold: “Have a brilliant time Kite Surfing and get money for your venture… it’s real easy. All you have to do is attend.”

While I think it is great that brilliant people are taking their time to help other people achieve I’m not sure about the way it is being sold. I am reminded of an article in the Economist which suggested that Incubators, Accelerators and the start-up scene in general is like the Cotton Mills of the 21st century.

Do you think that 4 years to have an income stream is too long? Or too short?

What do you think of the Cotton Mills of the 21st century analogy?

This Post Has 4 Comments

  1. What are the chances of finding a unicorn or thunder-lizard?

    A service business is less likely to put 100% into big R small D which could cause a radical technology disruption. I would think I’m lucky to be involved in 2, perhaps 2.5 (see how the third pans out) and its taken the first 10 years to get to the manufacturing stage (admittedly a hard engineering problem with long infrastructure purchasing cycles). So putting in a generous 50% time zoom for pure software, 3-5 years may not be impossible. However, even during that 10 years, income was generated via consulting and pre-sales evaluation so whether it applies to software which is half-baked is a good question. Frankly the number of visionaries / lead users is really small so perhaps its not so much the unicorn, but the maiden with golden pockets which is the rarity.

  2. Great article and a poignant reminder that ultimately, all start ups require at least some sense in the early stages that they’ll be able to commercialise the concept.

    This is a frustration that I’ve encountered with many of my friends in the start up space – they’re 4-5 years into a company and still have no idea of how they’re going to pay the rent.

  3. Great article Brian. I totally agree that In a startup you always need to know when you will make money. I think that has been one of my challenges in the past – leaving the payback period completely open.

    If I am selling a product I need to know exactly when I will make money – because thats the primary measure of sustainability and success – but I think a lot of tech startups are selling a database to investors. So that question is what size database do I need to create to attract the right funding at the right time.

    And I suspect a substantial portion of the blame for the 90% failure rate of startups is due to the lack of clarity around these questions.

  4. Brian, you got it spot on.

    I had a cursory look at the Posse site and I’d have to wonder why you’d bother.

    As the late Gary Halbert (one of the 20th Century’s greatest copywriters) said, The only advantage I want in business is to find a starving crowd. To which I’d add, one that has money to pay for what I’m selling!

    A fundamental marketing principle drummed into me by real world multimillionaire mentors (not academics) was find a market first. Test if they have the problem you want to solve and are they willing to pay for it. Do the psychology and economics stack up.

    To waste 4 years before even figuring out how you’ll make money is to me, ludicrous. But that’s just me 🙂

    As to Bill suggesting you can just turn up and have money thrown at you, he’s obviously never worked in the real world of venture capital. Never been through the fire of the dot com.

    Rashid.

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