Danny Maher

Visiting EntrEprEnEurs programDanny Maher

November 2015

Danny Maher BackgroundA summary of companies that I have joined in business building/commercialisation roles over the last 15 years:

UK focused– acquired onceUSA focused – acquired twiceAsia/Asia Pacific focus – acquired three timesGlobal focus – acquired twice

All focused - 1 at a time© Acquisition on average every 22 monthsHighest ROI: 250X (=25,000%)

© Danny Maher [email protected]

Current Project: Opmantek Ltd (ASSOB:OMK)

Global commercial open source software company

80,000 organisations around the world use Opmantek products

Founded in 2011 at the Gold Coast

All R&D at the Gold Coast

Australian Exporter of the year, American business awards winner, iAwards winner, Stevie Awards winner, top 20 Open Source companies globally – CIO magazine.

High growth


Something To Think AboutStartup OneGreat Business PlanSuccessful capital raiseBuild quality and innovative productHire the best people including an experienced startup management teamUndertake a good marketing strategy

Startup TwoNo business planLess capitalBuggy productNo money to hire experienced peopleNo money for marketing


CommErCialising innoVation


Commercialising Innovation


Sell the technology to someone else - work for them

Sell a share in the technology to someone else - work with them

Maintain full ownership and partner

Maintain full ownership and go it alone

BEing on safari


On Safari


Spend time thinking

Become self actualised

Protect yourself from the downs

Celebrate the ups

On Safari


Anything that you plan as simple will become complex and anything that you plan as complex you will never achieve

Network with people you want to become

When networking have a goal of giving – what can you do to help people.

On Safari


Watch your diet, rest etc – just as if training for physical achievement. It’s an intense race

Recognise it’s not the movies – there are not multiple sessions

There is no ready, set, go – just GO and keep going

Enjoy the journey – some people climb Everestsome go in “fun runs” some people have kidsno one says it’s easy, but it is enjoyable

BusinEss goals


Be Clear On The Goal For Your Business


To produce the highest performing drill

To produce the most fuel efficient engine in the world

To attract 100 customers within 5 years

These are not true business goals, these are methods, tools and sub goals to assist in reaching your business goal



Very few Entrepreneurs start a business to make money, they start businesses because they:

• are passionate about their innovation or service

• want to challenge the status quo

• want to live in a particular place

• want to do something which will be great for their family

• want to do something that aligns with their social values

• want to work less hours…



Like it or not the ultimate goal of your business almost certainly will be:

To make X amount of money in X amount of time.

at a minimum enough to live the way you want to and operate the business

Keep your “Entrepreneurial motivations” but never lose sight of the true goal or you will lose everything you are passionate about that relates to the business

thE EVolution of a BusinEss


Evolution Of A Business -Maher• The Dreaming

• Existing

• Validation of your existence

• Living

• Mastery

• Re-invention


Evolution Of A Business -Maher


• TheDreaming

• Existing

• Validationofyourexistence

• Living

• Mastery

• Re-invention

The Dreaming And Discovery


You will look back on this early stage and realise how different things actually turned out

You will also realise that this was the creation and while different, everything stemmed from here

During this stage you will:

• Overestimate your market size• Overestimate the value of your IP• Underestimate the timeframes involved• Underestimate the resources involved• Overestimate the demand for your innovation



During this stage you will encounter:

• People who don’t understand what you are doing (this is your problem – fix your message)

• Investors who doubt you/reject you as too early stage (you probably are)

• Friends and family who question what you are doing

• People that don’t return your calls

• Professional friends and colleagues who have “parked you” till further notice



During this stage you will need to:

• Develop your business plan (at least business model)

• Work our what will be your Minimum Viable Product (MVP)

• Great if you can engage a customer at this stage

Existing


During this stage you will need to:

• Release your Minimum Viable Product

• React fast to fix customer bugs/problems

• Focus your development on what your customers want – even if you only have one

• Value paying customers above all else, no matter what they pay

Existing


During this stage you will:

• Struggle

• No one will believe you are “real”

Value paying customers above all else, no matter what they pay

ValidationofExistence


During this stage:

• (Some) phone calls get returned

• People think you are more real than you do

• People think you are doing better than you are

• Friends ring you complaining you undersold the business to them and they would have invested

• Value paying customers above all else, no matter what they pay – build out our products

• Don’t panic – do realign your story/plan

Living


During this stage:

• You are real

• You can consider appropriate market pricing

• You can finally ditch that painful unprofitable customer

• Some people return your calls

• Investors are more interested

ExampleFocusAreasByStage


Customer Growth MVP Marketfit Hiring/HR Funding

The Dreaming 1 2 3 5 4

Existence 1 2 3 4 (?) 5 (?)

Validation of Existence 1 2 4 5 3

Living 1 5 4 3 2

Mastery 1 5 4 2 3

Market Estimation By Phase


Product Development


Product development within a startup is not a one dimensional or circular flow – even ideas should be tested internally and released to a customer for feedback

Develop and

Produce

INTERACT TestIdeas

Release/Customers

MVP(MinimumViableProduct)


No - MVE!

MVP(MinimumViableProduct)


Release your Minimum Viable Product ASAV

• Early adopters of your product wont be surprised by issues

• Fix your customer impacting bugs/faults rapidly

• Early adopters of your product are expecting rapid feature enhancement – supply a roadmap and get their feedback

• Gettingyourproducttocustomersasearlyaspossibleisincrediblyuseful NOT incredibly risky

• NEVERbuildoutanypartofabusinessexpectingsuccess–buildinline with revenues

Why Would Any Organisation Buy First?


• You are allowing a small number of organisations with appropriate skills to engage directly with your product development team

• Assuming their requests can be reused/marketed, you will adapt the product for them (for free)

• You will oversee the implementation and ensure success directly

• You will co-fund if they will be a reference

Competitive Advantage


• Your product and IP

• Your personnel

Also

• Market intelligence

• PartnersBut most importantly

• YOURPRICEYOUR CUSTOMERS

Developing Your Business Plan


For you:

• Ensure it is a working document not a “write and execute” document

• Check back to it at regular intervals, update forecasts

For others:

• If seeking investment your business plan will be the key document – make sure it is easy to understand and absorb including an exit strategy

Developing your ‘Canned’ Product Pitch


The concept of a single elevator pitch is nonsense

You should never have a single canned pitch, you must target it by management level at a minimum – you must be aware of who you will/should pitch to

Always reference an appropriate use case/customer in your pitch – customers follow customers

Example:

• Executive Management – we have a technology your competitor is using to reduce their OPEX by 8% over the next 3 years Middle Management – we have a technology that managers like you use for better reporting and oversight of your team

• Operational Management – we have tools to make your team’s day to day jobs easier and your day to day life better, I can put you in touch with P&O Cruises who implemented this last month – they love it

Developing Your Business Plan


• Sales and Marketing Plan

• Communication Plan

• Product Roadmap

• Operational plan/hiring plan

• Operational Forecast (including hires)

• Sales Forecast

• Peel back OPEX and have a lower forecast to de-risk the business

ExitStrategy


• Do you want to exit??

• When?

• Trade sale? IPO? LBO? Partial exit?

• What industries might converge with yours?

• Is there consolidation within your industry?

• Who will help with your exit - investors are often handy during an exit

• Competitors and partners are often acquirers

Mentoring


• Mentor’s are very useful

• Don’t be afraid to ask someone to mentor you

• You may want to work in another organisation where you have a good mentor/good learning prospects

• No one goes to university to become a student, think the same of taking a “learning job”

Capital raising


Attracting Investment


• Government, VC, Angel, Bank, Stock market• Ideas do not get funded (unless linked to the funder)• No one invests in something they can’t understand• No one spends a lot of time trying to understand, they’ll move on to something in their comfort zone• Selling equity for early stage funding is not easy and will prove very expensive if you are successful• The best place to get money is from customers• YES THERE IS SHITLOADS MORE MONEY IN THE USA – YES WE KNOW ABOUT SANDHILL ROAD• It is changing

Attracting Investment pre revenue/validation


• FFF (Friends Family and Fools) Structure to keep at arms length, Shareholders agreement, TechFundr, ASSOB etc

• Indigogo / crowd funding

• Invested customer

• Work for equity - What is the purpose you are raising money for can you pay for those purposes with equity?

PostRevenue–Angels


• Typically achieve higher returns than VC funds

• Typically have more domain knowledge in the business they are investing

• Claim a closer business relationship and that their domain knowledge will assist the business

• Pitch or build relationship

• Update over time

PostRevenue-VentureCapital


• VC funds have specific rules relating to how they invest

• Find the right VC for you

• Make sure your pitch is right

• Update over time/build relationship

Some ASSOB stats


Here is a look at the past 5 years:

• Total number of individual investments in ASSOB listed companies 2328

• Total number of individual Investors 2005

• Average investment per investor $38,023

• 176 Companies received investment

• 152 are still operational

• Average invested per Company $503,305

• Highest individual company raise $3,540,000

• 2054 Australian investments and 274 International investments have been made

• 179 invested in 2 companies



• 10 invested in 5 or more companies

• On average 11 investors per company

Main investment segments of companies receiving funding

• IT & T 11%

• Food & Beverage 8%

• Mining / Oil 8%

• Technology 6%

• Software 6%

• Green technology 5%

• Health & Beauty 5%

• Media / Entertainment 5%

• Health 5%

• Web Based 5%

• Biotechnology 4%

• Environmental 3%

TechFundR(www.techfundr.com.au)


• New Australian based equity crowd funding platform

• Linked to a VC fund also!

• Six focused platforms: Health, Agriculture, Energy, Aviation/Defence, Social Enterprise and Mobile/Gaming.

Heathfundr.com.auAgrifundr.com.auFlightfundr.com.au

Energyfundr.com.auSocialfundr.com.auGamefundr.com.au

PostRevenue-VentureCapital


• Create a short pitch – 3 or 4 minutes (this is tough!)• Often the organisation you are pitching to has a recommended structure• Company history and milestones• Current revenues and customers• Funding requirements – how much and to fund what activities• Proposed equity in exchange for funding• Management team• Market and competitor analysis• Products/IP• Revenue• Method to market• Risks /SWOT analysis• Exit strategy

pitCh DEmo – opmantEk


The Best Ways To Spend Early Investment $


• It is a common mistake to spend early stage $ to “finalise”, “complete”, “enhance” the product

• It is a common mistake to spend early stage $ on the wrong type of executive

• It is a common mistake to overspend early stage $ on marketing – especially conferences

• It is even a common mistake to spend early stage $ executing the business plan

The Best Ways To Spend Early Investment $


1. Customers2. Customers3. Customers

• Funding a customer to use your product

• Getting your MVP to a customer

• Adapting your product for a customer

• Keeping your customer happy

• Funding more customers

Increasing your customer base adds more value to your business than furthering your product or any other activity.

Business Partnerships


• Partners have a habit of telling you what customerswant (incorrectly assuming they know) and will not fully understand your product

• If an organisation wants to resell your product be wary of how much time you put in and make sure you have a direct relationship with end customers

• Don’t confuse who is your partner and who is your customer


Something To Think AboutStartup OneGreat Business PlanSuccessful capital raiseBuild quality and innovative productHire the best people including an experienced startup management teamUndertake a good marketing strategy

Startup TwoNo business planLess capitalBuggy productNo money to hire experienced peopleNo money for marketing

Something To Think About


Startup Two will out of necessity

• Get their product to a customer as soon as possible

• As the product is buggy they will have to take customer feedback and fix it

• They will scale their business as revenue ramps

• Readdress their plan and continue to evolve the plan

Something To Think About


Startup One:

is highly unlikely to undertake ANY of the activities mentioned for Startup Two

It is VERY common for companies well funded early on to:

• Perceive the funding as their success

• Develop the product according to their specification, not the customer’s

• Execute too rigidly on their (funded)business plan without adapting sufficiently

• Hire the wrong executives for their stage of development (safari)

• Utilise their funds in their business not their customers

Startup two is far more likely to succeed under this scenario

from QlD to thE WorlD


Why Qld?


• Because you want to live here?

• Because you will find it easier to operate within your own culture/ environment/with your support?

• It’s not a natural choice for a startup, nor is Australia – you need to leverage external ecosystems

• If you’re going to be small, you may as well be a startup

To Leverage in Australia/Qld


• ResearchandDevelopmentGrant(“taxconcession”)* - 45 cents per $1 spent when in loss making – cash payment.• ExportMarketDevelopmentGrant* - Approx 50 cents in the dollar up to a maximum of $150k.

*thesegrantsarenotcompetitive–theyareyours• Entrepreneurs scheme• Advance Queensland - includes investment matching of $125k - $2.5M• Some assistance from local Council• Commercialisation Australia• Quality staff and people



• SmallMarket - Get established/proven here then grow – less competition• DevelopedCountry - While we are adverse to failure, we do take up new innovations• WealthyCountry - Especially in certain industries – mining, gambling, boat building…• Asianbusiness - Cultural bridge for USA etc, time zone

Use tools such as compass.co



They are all behind you:

• IncubatorsandAccelerators

• GovtDepartments

• TradeInvestmentQueensland

• Austrade

struCturing for groWthtools to assist


When to establish overseas


• Neverifpossible

• Whenthelawrequiresit

• Whenacustomerrequiresit

- If you can’t transact through a partner

• Whenafunderoracceleratorrequiresit

- Flip - US lawyers commonly do this

• “Partners”–employeesascontractorstoAustralia

• DirectemployeesoftheAustralianEntity

• Partners–Donotconfuseapartnerwithacustomer,Partnersaresometimes

necessarybutcanbreakyou–theydonotgobankruptifyoudon’tsucceed.

Some of my favourite supporting tools


• WesternUnion - Payments system, multi currency, low cost and the best - Not a bank, can only keep funds in there for 90 days

• SuncorpBank-foreigncurrencyaccounts - Lowest cost – couple with Western Union

• SiliconValleyBank - I believe the only bank that can open a US account (in the US) for an Australian company.

• Specialiststartupaccountants - Who understand EMDG, R&D and startups (I use Altezza partners in Brisbane but there are others)

• StartupCompass-www.compass.co - Automated business advice and benchmarking/measuring the path of your startup vs other similar startups.

Tools and outside of Australia


•GoogleApps - Email, Calendar and more - All mobile devices, desktops/laptops etc pay as you grow

•Hosting/website - Host your website near your clients not near you

•UseadwordstoolswhenconsideringyourSEO - Even if you never buy an adword, great tools

•GoogleAnalytics - Excellent insight in to activity - free

•ClaimyourplaceofbusinessonGoogleMaps - Helps search and we do live in a great place

•VirtualOffices-REGUS - Can use ad-hoc or can pay a small monthly fee



• ASSOB,Techfundretc - Not for everyone, I enjoy the benchmarking of the companies valuation

• Internetmarketingexperts - Opmantek does in-house, I haven’t found the perfect firm yet

• Firmstoassistinraisingfunds - Opmantek uses Bluemount Capital primarily due to ASSOB “listing”

• Lawyers - Consider linking early with a good law FIRM (not just a lawyer)



• Domains - If you are going to operate outside of Australia you need the .com

• SupportingDomains - Community site, review sites

• VideoContent,Wiki’sblogs,socialmedia,reviewsites, podcasts,advetorials - But especially video and review sites

• Mobilesite/Responsivesite


Summary

• Enjoythejourney Reward yourself when things go well Your passions are your motivations and you are lucky to pursue them

• Don’tgetlostinyourenjoymentandcreation/product Recognise and track your revenue goals in particular Always develop your product for real customers

• Getstartedandbeagile - if you do nothing: nothing happens and there’s nothing to adapt

• Gettingfundedisagreateventbutisnotasuccessinitself

• Youwontnecessarilyknowyourgooddecisions

• RecogniseyourbaddecisionsFAST


Summary

• Leverage local tax and grant schemes

• Focus on speed to market and MVE

• Be ready to deviate from the business plan

• Leverage local resources including coworking spaces

• Leverage the internet, especially to create external linkages

• Find good mentors/people/groups or take a “learning job”

• Much more !

The Beginning


Current Project:

www.opmantek.comwww.assob.com.au/OMK

Danny [email protected]

Small Business & Entrepreneurship

Danny Maher