My best bosses were women

There’s research going back decades that shows that women make better managers than men.

On nearly all of the relevant qualities that relate to leadership effectiveness, women simply outperform their male counterparts.

And yet, here we are in 2020, and still there are more men in top positions, more male CEOs, more male board members, more male heads of state, more male managers.

Worse, all through workplaces women are underpaid as compared to men (for the same work), as well as being underrepresented towards the top of the tree.

I won’t go into the all the reasons why, be it unconscious (or blatant) bias, the feeling that if we lift women up we pull men down (we don’t) or out and out sexism.

What I will say, is that across my now 34 year career in the UK, Singapore and Australia, I have seen the truth that women make better managers than men.

This is not to say there weren’t some great male managers along the way – there were – but overall, the women were better, more effective, more productive, easier to work with, more flexible, more engaged, listened better, spoke better and quite simply, they had an edge.

I can also say that I have had various people manage me (as my boss) over those three and a bit decades – some great, some dreadful, some mediocre, some OK – and I’d have to say that the two best were both women…

Singapore

For seven years, I was teaching in a large expat school in Singapore. It was an amazing experience. The school had 2,500 students drawn from more than 60 countries.

Their parents were either usually high performing business people or diplomats, and most of them were heading to top universities around the world. The school’s IB results placed it in the top 10 schools in the world.

The teachers were mainly men, mainly British, and they were colourful characters. Did not suffer fools gladly.

After a few years, the (male) Headmaster left for another international school, and the deputy head (another male) got the job. A New Zealand lady was in the final short list but was not awarded the top job. Instead, she was offered a senior management position, Deputy Head and Head of the Senior School. As such, she was my new boss, as I had just been promoted to Head of Year in the Senior School.

She made an instant impression. At the first school teachers meeting, before term started, she gave a short speech introducing herself. At the back, sat a few alpha male cynical male teachers, who were quietly awaiting this new exec to fall flat on her face.

Sizing up the situation perfectly, she ended her talk by saying “… and in closing, I note that although the men here make up about 75% of the total staff of the school, they are 100% of those sitting in the back row.”

Game on!

She was not someone for taking a backwards step. She was tough, but also open to suggestions. She gave praise where it was due, and spoke to you one on one if you needed help.

I came to admire her greatly, and she and her husband became good friends. She had to navigate some tough times, adolescents can be strong willed, and Singapore had its own rules that had to be respected. The students had to be counselled, cajouled, understood, reasoned with, helped… and in some cases a firm hand was required, in others a shoulder to cry on.

She imparted wisdom in a straight line, so you always knew where you were with her. I learnt a great deal about management, leadership, being effective. Quite simply, an exceptional human being.

Perth

A few years later, I was in Perth, running a tech startup through all the trials and tribulations that early stage businesses go through. We were an online real estate business, set up a few years before realestate.com.au came to town, and well before Domain or reiwa.com got their act together.

In our early years, we had approached the Real Estate Institute of WA (REIWA) to see if we could work together. What we did (web design for agents, CRMs and such) was not done by them, and perhaps a deal could be done? For 5 years, we received nothing but the cold shoulder. Until a new CEO, a lady, was brought in. Suddenly, the door was open.

On first meeting the new CEO, I was struck by a sharp intelligence and grasp of fact. No beating about the bush, here was clearly someone who could get things done, and would shake up REIWA a bit (which, by then, it required, as it had run foul of the ACCC among other things.)

With no particular end goal in sight, besides what we could do for each other for mutual benefit, we forged a partnership whereby we would send our properties to reiwa.com, and they would allow us to develop off the REIWA platform for our/their clients. This lasted 5 years, until in 2010, we met for a coffee, floated an idea, and within 6 weeks the company had been acquired 100% by REIWA.

Being a 100 year old not for profit members’ organisation, REIWA does not go along buying companies. I think we were the only one they ever bought. But the deal was done, quickly – as it was just so natural a fit – and they took on all our staff, on at least the salaries they had been on before, and I got to run reiwa.com for the next few years.

Was she perfect? No, she would be the first to admit that. But she was strong, you knew where you were with her, and you knew the direction we were all heading in. That’s what you want from a leader.

Two years later, she retired from the CEO position. I witnessed her wisdom, analytical skills and sense of humour up close. She reminded me of my Kiwi boss in Singapore. Not dissuaded from acting, she had a sharp intellect, was charming and much admired.

For both of them, there were some tough days, but I never saw them ‘down’. They exuded confidence. They consulted, argued, listened, and – crucially – acted. Unlike most males in similar roles, there was no ego getting in the way.

~~

Men – this is not an attack on you. We can all have better outcomes if we assist women to reach their rightful positions in management, calling out the artificial blockages and resistance along the way. Our organisations and world will be better because of it. Research has shown that the GDP of the world would be better by $24T if gender equality was reached. So, it’s not only the moral and right thing to do, it makes good economic sense.

Imagine if the planet were run by women. Hell, it’s been run by men for centuries. Let’s give it a try.

Also – have a look at ‘CEOs for Gender Equity‘ and ‘Male Champions for Change‘. Men. Join today.

Cold Calling

In the seventh post of this series, I cast my mind back 20 years to when I co-founded a tech startup …

So there we were. We’d launched our new tech onto an unsuspecting world.

A few early (aka brave) customers were trialling it. Likewise some brave staff members and investors were on board. Here we go!

Did we think the world would suddenly stop what it’s doing and turn to our exciting, new service? The world does not work like that. It’s too busy doing its thing, using the same services it’s been using. Why change?

Startups do not take off on their own accord. They simply don’t. Not even the ones that scale later. They all spend many years in the wilderness, stumbling around the foothills, before climbing the mountain peak.

Perhaps that’s as it should be. For many reasons.

Overnight successes tend not to stick. Slow, organic growth is the one that multiplies, multiples upon multiples, hockey stick style. But before this, come years of travail and learning.

Once you become mind-blowingly successful – if that happens at all – you will look back on these early months and years as perhaps the greatest of times. They may have felt like the worst of times at the time, but later you may look back at their simplicity, their honest hopefulness as the most purest of times.

Scale up

So how do you get those first few customers on board, and grow this thing towards cash flow positivity and profitability?

If you are in the B2B (business to business) world – selling a service to businesses – then cold calling may be part of it. At least initially.

Cold calling. Even the name of it can send shivers down the spine of the most ardent entrepreneur or salesperson. It can make the strongest feel weak, bring on a nervous twitch, and keep many awake at night.

But it has to be done.

I did it. Perhaps you did it. It’s a badge of honour.

Some people seem to love it (“go on, hit me again!” they say as they reach for the next phone number). Most ordinary people would rather endure a severe root canal than have to cold call prospective clients.

Why? It’s probably something to do with the fear of rejection. It’s too personal. Too brutal. Too final. It’s your baby, after all.

It shouldn’t be cold

The first thing to note about cold calling is that it doesn’t have to be cold at all.

Pure cold calling is phoning up a potential customer, out of the blue, hoping to gain their attention, explaining what you have on offer and then trying to convince them to take a meeting with you.

Note – they need to be available to take your call at the precise moment you ring them. Ring them at the office? How and why will you be put through? (“What’s it regarding please?…. Would he/she know what it’s regarding…?” the gatekeeper will ask).

So, call on the mobile (if you can get it)?

No, no, no!

Really – does anyone think this is going to work? That’s akin to walking up to some random stranger in a supermarket and shouting ‘BUY MY PRODUCT NOW!’

Do you really believe that person will be ready to take your sales call, at that specific moment, and then be ready to buy your offering, or at least set up a meeting? What universe are you living in?

So don’t cold call. Not cold anyway.

Do your research, prep the call, make it a warm lead.

PPPPPP

Prior preparation prevents p*&% poor performance, as they say.

You would (should) have a list of potential targets. Maybe they are obvious prospective clients. The right type of business, in the right market, location, bracket… fine. At least give them the common courtesy of contacting them first, with a brief (2 paragraph) email or letter (yes, letters can still work) explaining the problems your solution is solving for the potential customer.

Start that first communication with a question that resonates with them. (“Do you need to increase your consulting business leads…?”). Make it plain, short and simple. Not salesy. Honest. Mention that you will be calling in the next few days.

That first communication gives you a hook to start your follow up (warm) call with. (“I sent you an email/letter a few days ago briefly outlining the problem we solve for you, and wanted to see if how we can help you…”).

Don’t give them an easy out. Don’t ask questions with Yes/No answers. Ask open, leading questions. Be calm, authoritative. State facts.

One salesperson I employed used to send a lovely 2 paragraph letter, addressed to the key decision-maker (do the research to find our their name, title, address), and enclosed a tea bag and chocolate frog in the envelope. The letter invited the person to take a break, make a cup of tea, enjoy the chocolate and consider the contents of the letter for a moment.

When the salesperson rang up a day or so later, they would say – to the gatekeeper – “it’s about the letter he/she received this week, just following up on this…”, and when the prospect came on the phone the letter would be mentioned, and if the prospect feigned ignorance (“What letter?”) the chocolate frog and tea bag would be brought up.

“Agh, THAT letter! Yes, I remember…”

A disarming technique, and now the prospect would have a moment to listen to the pitch. The real point of the call would be to make a connection, briefly reiterate the solution and find a time in the diary for a meeting. The eventual ‘pitch’ and ‘sale’ would then take place face to face.

Time consuming? Sure, but great relationships could be forged.

A cold call disaster

I remember cold calling within the first fortnight of the business.

I rang the prospect and launched into my spiel. As I got into my third sentence, hardly stopping for breath, the person interrupted me and said:

“Please stop talking now. If you carry on speaking, I will put the phone down. Email me no more than two paragraphs on what you are selling, and IF I am interested, then I will call you. DO NOT CALL ME AGAIN!

Ouch.

A few learnings here. Firstly, I had not warmed up the prospect. I had called them completely cold. Interrupted their day. They were not best pleased. (Remember, prospects are people too. They might be having a very bad day.)

Second, I had closed off any other approaches to them in the future. I was forbidden from contacting them any more. Not a great outcome.

Third, I had been told off. I felt bad. Memories of reprimands from dark, sarcastic school teachers flashed through my brain. A sharp pang hit my heart. Not a nice feeling.

This hit and miss approach to selling is not only nerve-wracking, it’s inefficient.

Make cold calling a game

As time went on, we hired a sales manager. Three of us – the 2 co-founders and head of sales – took the Yellow Pages (remember?) and divided up our category (real estate agents, in our case) into 3, and would devote an hour a day to cold calling our own lists.

We found that if we did it in the morning, we would be up for it, more energetic, and could pump ourselves up before the hour of calls. Usually between 10am and 11am.

Afterwards, we could get on with our day, and reward each other after the hour was over. We would celebrate if anyone had managed to bag an appointment, and compare notes on how we’d gone. We even developed cheat cards, and would listen in as each of us called a prospect, holding up a flash card if we needed some help.

We made it a game. We had fun. We were calling real estate agents remember, some of the most hard nosed sales people out there. (Strangely, they admired our tenacity, and were rarely rude.)

There’s only positives from cold calling

Another way to overcome any reticence and nerves when making the call is to remember that you can be no worse off after the call than before, no matter what the outcome.

At worst, one more prospective client knew about you and your service. At best, you secured a meeting with a prospective client in the diary.

Even a ‘no’ is never a ‘no’, it’s just a ‘not now’. If we were met with an ardent negative reaction, we would say ‘OK; not a problem; but can we ring you again in three months, and give you an update on how we are going and see if we can help you in some way?’

Who could say no to that? They did not really expect us to ring them in 3 months time. But we would. We’d add that into our database or calendar (what we would call a CRM these days) and it would remind us to ring them again in 3 months’ time. On the dot.

We’d have some fun with it. ‘You said we could ring again in 3 months! Do you have some time in your diary to discuss what we are doing, and whether this could work for you and your business? Since we last spoke, x number of < customers > have joined us….’

From cold to hot

Six months or so after the abrupt (“Don’t call me, I’ll call you”) phone call alluded to above, the person in question walked into our office in Nedlands.

I greeted him with a smile – I knew instantly who he was – and asked if I could help.

“How do I get these properties onto your website?” he said, pointing to the brochures he was holding.

Most of his competitors were already listing on our site, he said. He realised he had to be on there too. His own clients were now demanding it. (Cue: happy dance.)

He had no recollection of the previous conversation (I only brought it up with him many years later at one of our Christmas parties, to which he laughed loudly, apologising if he’d been rude.) He became a client for life. A fierce defender of our site, even when larger, well backed competitors came to town.

Cold (or warm) calling is a badge of honour. Startups probably have to do it. in order to raise money, to win new clients. After a while, it won’t be required anymore. But you’ll look back and smile at a time when it was necessary. You’ll have some scars from it – sure – but you’ll also win some of your most ardent clients and admirers as well.

DO’S AND DONT’S OF COLD CALLING

1. Don’t do it cold – prepare a warm list
2. Contact them first by letter/email
3. Pick a time of day to do it, and do it every day
4. Make it fun, encourage each other
5. Don’t let them off the hook, ask open questions
6. Talk about value, not price
7. Don’t try and sell, just get the meeting
8. Reward yourself after you’ve done your calls
9. Follow up – the no’s only mean ‘not now’
10. Learn and improve your script and calling techniques

Go for it.

~~~

Photo by Markus Spiske temporausch.com from Pexels

Launch Day!

On the morning of the 6th December 1999, I took the 99 bus from near my house down to the aussiehome.com office in Nedlands, getting off one stop early to pick up the copy of the local newspaper.

There it was on the front page of the Business section, an article (with a photo) right slap in the centre, about a new online real estate website.

I recognised the photo of Nick and I, in a staged pose looking at the home page on one of those boxy 1990s monitors. The timing of the camera exposure only caught the bottom half of the screen.

How else do you show dotcom entrepreneurs?

What’s interesting about the piece is that it was written by Mark Pownall, who was working at The West then, but within a year had moved to WA Business News (somewhere I would move to 13 years later to work with Mark… he later followed me as CEO of the company in 2017.)

One correction – it says we had $70K of seed capital; we’d actually raised almost three times that, but had spent about $70K on the tech. Maybe that was how the confusion arose. Anyway, there we were.

I walked up to the office staring at the article, and showed it to some of our team members. We better make sure the site was up and running today, because you only get one chance to make a first impression.

It had been a frenzied few months since resigning my teaching job; yet I was still teaching, and popping in and out of school to run various errands, visiting and trying to win some early clients, spending as much time as possible to get the site ready in time for our launch date.

We had made it. It was now public. We would live or die on whether people looking for homes would find and use the site, and return. Would they like the site, be able to work the mapping, and then refer the site to others?

At least now the site was live, so we could hit up real estate agents, and demo it live. No more rushing around with laptops showing them a ‘fake’ site. We could ring them up, ask them to jump online and there it was. There were properties from their competitors. Would they like to be on board too? We’d give them a three month, no obligation free trial. Why not give it ago? We’d even put the properties on for them. Keep them updated (via fax!)

It was part exciting, part terrifying. Our reputations, our investors’ money, everything was on the line. But we can got there.

Now, for the hard bit…

~~~

Bubble, meet another bubble

I was speaking at a business breakfast the other day, and the subject of the morning was ‘creating an enterprise culture in WA‘.

With our long history in successful resources and other entrepreneurial ventures, one might think that we had a great enterprise culture already.

And we do. If you want to develop a mine, Western Australia is probably the best place to do that from. The capital and investment bankers are here, the lawyers, accountants, exploration and commercialisation people are all here and they all have buckets of experience. We even have two mining billionaires, two of richest people in the country, including the richest woman.

The WA economy is worth about $235B, and about $70B of this is mining – that’s 30%. The largest sector, a sizeable chunk. Many other states and countries would love to have this undeniable source of riches.

But what I was talking about, was the early stage tech sector, which often gets ignored in all this entrepreneurial talk.

In the era of digital foreign invaders such as Google, Facebook, Airbnb, Netflix, Amazon, Apple, Uber and others, where are the Australian scalable businesses that can grow to multi millions and even billions on an idea and some lines of code? Businesses that can create enormous wealth, jobs and capital in a fairly short time frame (such as under 5 years).

OK, you may have thought of Canva (now based in Sydney) or Atlassian (also Sydney, and listed on the NASDAQ). Name ten others. Three. One.

I am genuinely worried about the Australian-owned tech economy we are going to leave our children. Nothing wrong with the digital vikings, I use them all, but, relative to their size, they don’t create many Aussie jobs or pay much tax in this country (hence contribute less to the broader economy, such as building roads, schools and hospitals, yet they are taking advantage of that very infrastructure).

We (as a country, state and community) need to do all we can to help our own brave Aussie scalable tech businesses along. They can do amazing things in a relatively short period of time. If given a helping hand.

They often don’t need much money to get them going, and yet can scale (or fail) fast. You may not have to wait years and years for approvals, plying multi millions in just to see if there’s something there. Often, a 6-figure sum is more than enough to get them out there, if not a 5-figure sum.

And the upside is tremendous. Canva got going 7 years ago and is now worth over $3B.

So, there I was rabbiting on about this, and I mentioned the fact that while over $9B was invested in all WA businesses in 2018, only 0.3% of this made its way to early stage tech businesses.

One of the audience members then shot to their feet to deplore my statistic (“I don’t know where you got that from…” … err from Business News and Techboard actually – see full sources below) and they felt there was plenty of investment in innovation and we were a fantastic economy doing great things.

While I agree with the positive sentiment (I love WA, the economy and the life here), I was a little bemused for a second. They did not like the stat, they so they were simply choosing to ignore it (fake news, obviously). In the era of Trump, this is what we have come to.

Which brings me to the point. We all live in our own bubbles, gathering information that the internet and social media already knows we like (we’ve previously clicked on it, liked it, searched for it, read it… so it sends us more stuff like that).

When we are confronted with some data that contradicts our world view, it’s uncomfortable. Our natural inclination is to rail against the source, query the author, or just flatly refute it.

The speaker from the floor was a well-healed stock broker. He’d done various ASX/mining deals before and was no doubt extremely well off. Had he had any experience with early stage tech startups, that were pre-revenue? Had he visited a co-working space? Been to a meetup? Had he sat down with startups to hear their views, and see what they were doing? Had he invested in them?

I doubt it.

But then again, what do I know about his world either? Have I done ASX mining deals? No. Do I live and work with junior miners, and truly understand what they do? No.

My bubble (which is predominantly early state scalable tech startups – I love em!) and his bubble (ASX listed junior mining exploration and commercialisation businesses) rarely meet. We rarely talk. We rarely listen to each other.

Even though we inhabit the same city, breathe the same air, drive down the same roads and sometimes frequent the very same breakfast events, we move in very different circles.

I reckon we could each help each other. But it starts with listening, and being open to data that may not conform with your existing world view, and decades of experience. I am open to this. I’d love to know more about his world. Perhaps I could teach him about mine.

Bubbles need to meet other bubbles. When they do that they pop, and something quite new happens.

~~

PHOTO: by Pixabay from Pexels

SOURCES

  1.  “Goldman, Freehills top deal tables”, Mark Beyer, Business News, 21 Jan, 2019
  2. “Australian Startups and Young Tech Companies Funding Report”, Techboard, 31 Jan 2019

What’s in a name?

In the fourth post of this series, I recall 20 years ago when we decided on a name for our startup, and the issues it then caused for the next decade…

Before the idea, there was context, an unforgettable comedic event before we talked to people we trusted about our idea.

Now, a few weeks on in mid 1999, we were actually thinking seriously about forming a business, raising funds and building a prototype.

We jumped on the ASIC website to buy ‘aussiehome.com Pty Ltd’ business name (having landed on ‘aussiehome.com’ as the best website domain a few days earlier).

We gave ourselves 50% ownership each, and with the company now formally established, we could set up a bank account to hold our initial seed capital. We valued the business at $1M (nice round number) post money, and would look to sell 20% to investors for $200K if we could.

Before that, we needed a business plan, and a rinky dink prototype of the site.

I remember being up in Exmouth during that mid year winter school holidays. I was still teaching, and had somehow agreed to go on a Year 9 camp. In order to get emails, I had to climb onto the tin roof of where we were staying to get reception, so I could contact co-founder Nick.

Weirdly, 20 years on, I’ve just been back to Exmouth again for the first time since 1999. Memories of that time flood back. Exmouth had just had a cyclone back then, and I remember farmers asking us if we’d seen any sheep out in the bay or on the islands. Apparently 50,000 had be swept out to sea during the storm.

Everything was moving fast. Within a few weeks we had bashed out a very ugly html prototype, and had the first draft of our business plan. We went back to our MBA professor, and he seemed interested in investing. He gave us a few names to follow up on, and we would go and show our demo and idea to several high net worth people around town.

One meeting would become three more as we asked for more introductions.

Looking back, I’m sure we made sensible decisions during this time, but there was certainly some gaps in our knowledge. We failed to set up a shareholder’s agreement between us (mistake), as we rather naively presumed all would be well. Or perhaps did not give it a thought? Later, when things got tough, we had no clear exit for either of us. We were locked in.

The name ‘aussiehome.com’ would continue to cause confusion with ‘Aussie Home Loans’ (or ‘Aussie’ or ‘Aussiehomes’) for years and years. Even nine years after the sale of the business, friends of mine still get the name wrong.

It’s aussiehome.com, not aussiehomes.com, I still say. So many people said they could not find our site, because of the confusion over our domain name.

We did not realise the high profile name of the ‘Aussie’ brand would create issues for us. Oddly, we never heard from Aussie Home Loans. They would never complain about our brand name being so close to theirs. We even approached them in the early days to see if they’d like to partner, and they ignored us.

And so we marched on. I thought the name was distinctive, clear and cool. Very Aussie.

A year on, there was even an ASX-listed Perth company called ‘Aussie’. They did a quick IPO (or back door listing? I can’t recall) but did not last long. We remember having a few chats with them, but it went nowhere, and they got bought out by Aussie Homes anyway.

Years later, I was speaking at an event, and even had a clear type written intro the MC would read out to introduce me.

“Ladies and gentleman”, said the announcer, “Please welcome Charlie Cunningham, from Aussie Home Loans.”

Agh well. Twas my cross to bear.

~~

These days, I speak about naming and trademarks every now and again – here’s my slide deck on the very subject.

Photo by Matthew T Rader from Pexels

Markets are conversations

In the third post of this series, I recall 20 years ago when conversations with various people massaged ‘an idea for a business’ into a business itself …

Before the idea was born, there was context. Then – spookily – an unforgettable comedic event would herald the idea.

Now, the idea needs testing. Could it become an actual business? What problem would be solved for customers, and why would they pay? What did the existing market look like? Were there any competitors and threats (there always are)? What skills and experience would we need on board if we are to launch this thing? Who would build it? How much money would we need to get this off the ground?

A gazillion such questions occupied our thoughts in those early weeks and months in mid-1999.

I was still teaching – but the buzz had gone out of it for me. My co-founder Nick did some relief teaching at the same school, and we chipped away at the idea in our spare time. I would drive to his place one evening a week or he to mine, and we’d spend a half day every weekend on it.

We drew out some sample pages for what we wanted in a map-based property search website. We researched existing sites, and map data, and the tech behind mapping (which is GIS, apparently). Nick even walked onto UWA campus and knocked on the door of a GIS Professor. She told him that what we wanted to do was eminently possible.

We approached our former MBA professors, to see if we were ‘mad’ or actually had something that might have legs. One of them sat us down in his leather sofa’d study in Nedlands surrounded by shelves of hard back volumes. We showed him our one page of bullet points for what we had called ‘Real Simple’.

We wanted to “make real estate simple”. Make it easy to find properties for sale or rent, all on interactive, zoomable maps of Perth.

You’d be able to see the properties (colour coded depending on whether they were for sale or rent) on maps, plus see the local parks, schools, roads and transport routes. All the things people actually want to see when they are choosing a place to live. After all, we figured, people buy into the lifestyle of the suburb, as much as the property itself.

The Professor made encouraging noises, but there was much work to be done. He wanted to see a proper business plan, cash flow projections. ‘Come back with something a little more fleshed out, and we can discuss it,’ he said.

Unfortunately, the ‘realsimple.com’ domain name was already being used by a Californian IT company. Today, it seems to be a home and lifestyle magazine.

We thought ‘PerthHome.com’ would be good, the domains were available, but the 2 ‘h’s in the middle looked odd, and you could hardly go with ‘Perthome.com’. Anyway, we thought the idea had potential beyond just Perth, so we landed on ‘aussiehome.com’.

We liked the ring of it, and we could play on the ‘aussie’-ness of the brand. (‘Want to find your next Aussie home?’) The .com was available, so we grabbed it. Later the ‘.com.au’ domain also became available, so we had both.

We then set up the business using the ASIC website, aussiehome.com Pty Ltd, with Nick and I as 50:50 shareholders. We decided to put a few thousand up each to cover admin and other out of pocket expenses.

Looking back now, we were a little too trusting. How well did I know Nick, or he know me? Going into business is a big step, and I’m not sure we had “the conversation” about each other’s rights and expectations. We certainly did not draw up a shareholder’s agreement between us, nor had any exit plan, should, for any reason, one of us want to leave.

Naive you might say. A mistake, certainly. It would later turn out, when things got very tough in those early trading months and years in 2000 and 2001, that we both felt ‘stuck’ with the business and each other. There was no exit, no way out, except to make it a success. Perhaps that drove us on. Maybe it was brilliant, in hindsight, or we just got lucky..?

For now though, it felt like the start of an exciting new adventure. We weren’t thinking of the worse case, we were solving problems and pushing it forward.

We spoke with people we trusted about the idea, and after each conversation we’d learn something more about our business. Talking it out really helped. As a general rule, people don’t steal your idea. They are busy living their own lives. Pick who you tell, for sure, but don’t keep everything to yourself.

I would later learn this through the excellent ‘Cluetrain Manifesto‘ book, which was published that same year. It would come to define markets as just as ‘series of conversations’ between people. If you think about it, every market is just people talking with each other, persuading each other, selling to each other, buying from each other (or not).

During these weeks and months – it took 7 months from that Dame Edna night to our official launch in December that year – I had the feeling that something would eventually derail us. A door would be closed in our face, and we’d think ‘Agh well, it was a good idea, but it was not going to work.’

Quite the opposite happened. We seemed to open every door put in our way. And so we marched on.

As hard as we looked, we could not find a map-based property website anywhere (in the world). This was 6 years before Google Maps was launched (interestingly, in Sydney, Australia).

Property websites, such as they were, had very little content on them, hardly any listings, and seemed to be out of date and very clunky to use. Certainly in Western Australia, there was little direct online competition to concern us. We were more worried about someone else getting out there with our idea, than the incumbents. Or perhaps the main newspapers getting in on the act. They would have most to lose, and could have owned this space if they wanted to. As it would turn out, they didn’t, much to their cost.

As we researched the tech, we found a local GIS consulting company that could build a prototype for around $50-$70K. Take an isolated mining town like Perth and there you shall find GIS expertise. We happened to living in a global GIS centre.

We figured we needed to raise $125K or so to have enough get us to launch. We wrote various drafts of a business plan, and spent more time on the tech, acquiring the required map databsets and the like.

As two co-founders we had a lot of energy and drive for the project, but between us we had little or no experience in real estate, technology or business. Nick had done property deals before, but was mainly a hedge fund dealer and investor. I was an Economics teacher. We had few contacts in business or real estate in WA. We had few business connections in Perth.

But one thing we could do was talk. And so we did…

~~~

Ideas can come at odd times

In the second post of this series, I recall 20 years ago when an evening with Dame Edna led to a memorable phone message, and a dotcom idea …

Before the idea was born, there was context. A back story. A breeding ground for an idea, with a few push factors that made me look away from teaching, and some pull factors that drew me towards the dotcom idea.

But ideas are just that, ideas. Nothing more than a thought. We must have hundreds a day. What always interests me though is why some ideas become more than an idea, and how they translate into action…

An Evening with Dame Edna

It was a totally unrelated evening out that led down the path to the business that became aussiehome.com.

I’d always loved Barry Humphries, and after a particularly frustrating day’s teaching I was looking forward to a good chuckle with the brilliant Aussie comic.

For some reason we had seats in the second row. Not a great idea if you want to stay a safe distance. Humphries is renowned for ripping into the audience and making them part of the act. Personally, I’m not a huge fan of humiliating paying customers. If I wanted to be part of the act I’d sign up. You entertain me. That’s what I’m paying for. It feels like a breach of the relationship to make fun of the audience, but it’s a long trodden path for many entertainers.

During the first half, he did all his other characters … Sandy Stone, Sir Les Patterson and all. I remember him making eye contact with me a few times. Was I imagining that, or was he sizing up potential victims for the second act?

It was the latter. After the interval he bounded onto stage as Dame Edna, and lights went up on the first ten rows. We all shifted lower in our seats.

After a few minutes he started down our row asking what we each had for dinner. When he got to me I blurted out something or other. Rather than moving on, he stopped and said “What a delightful couple we have here, ladies and gentlemen, what are your names darling?”.

I suddenly felt my face reddening, and within a few minutes he was ordering a meal for Lisa and I from the Subi Hotel from across the street – on a gold plated phone brought out on a silver salver no less.

Twenty minutes later, the meal arrived and was set up on the side of the stage.

Agh, where’s my lovely couple?” he said, as he motioned towards us both. Now, I am happy to be on stage, but I was not sure how well Lisa would go. ‘Losing face’ in public is about the worst thing for Asian culture.

The old professional that he is, Humphries understood this instinctively. He gave Lisa a huge peck on the cheek, and settled us down on the table on stage, and carried on his act. I was too nervous to eat, so tucked into the white wine. Over the next hour he got other people up on stage, and was perfectly lovely with us. He was very motherly with Lisa, and we actually relaxed and enjoyed the rest of the show.

Perhaps, we had the best seat in the house.

Lisa and I with the Grand Dame, on stage, March 1999

Phone call

Arriving home there was a message on the answerphone. “Hey Charlie, Nick here, ring me back; we’re going do properties on maps, you and me baby!”

So I rang my fellow MBA grad Nick Streuli back and we chatted for a while about his idea of a map-based property website. You have to remember that in 1999, property listings were almost exclusively in the weekend papers. Property web sites were few and far between, clunky, had little content and were not updated. Print ruled.

We both knew the internet would make an impact on this market, and disrupt the way properties were marketed, and how people would search.

It was a big idea. But what would convert this idea into a business, one we could actually run and what should we do next..?

~~~

To be continued…

How do I value my startup?

Valuing a tech startup is one of those ‘how long is a piece of string’ questions (which is no help at all), but it’s still an important factor in trying to raise money for your early stage venture…

Naturally, both sides will look at valuation in opposite ways.

The plucky founder will want to give away as little of the company as equity for as much cash as possible (the highest valuation), thus retaining more for themselves, their co-founders and any future funding rounds.

Meanwhile, the investors will want some meaningful slice of the company, so if things really do take off and the company is worth something in the future, they will get some kind of nice return on their money. As they may invest in several startups knowing most will fail, for each one they do invest in, they will want to see 10 times return on their money (to cover those that fail to give any return at all.)

Maybe, somewhere in there is a deal. Maybe not. You may have to speak to dozens of people before you raise a cent. It can take months. It might not happen at all.

But if you are venturing out to get some equity funding, my best advice is ‘be realistic‘. That means, don’t go crazy over your valuation, don’t do it slap dash (invest the time to do it properly), prepare yourself and practice.

I am assuming we are talking about a brand new, pre-revenue startup with no trading history. You have an idea, a business plan, maybe a prototype, have set up a company, put in some of your own money, and have something (an app, website, some users) to show for it. But you are otherwise brand spanking new.

Are you really going out with them?

Before worrying about valuation, please think carefully about WHO you get on board as an equity stakeholder in your business, and think WHETHER you actually need new shareholders at all.

Investors tend to hang around (as there are only limited opportunities to get them out). It can be very awkward if – later on – you think you’ve made a mistake. Also, some future investors won’t touch you if you have the wrong people on your share register. The same goes for co-founders and sometimes employees too. Be careful what you wish for.

You will be assessed by who you associate with, and having investors in your business is about ‘as associated’ as you are going to get in your life. Like a marriage, it can take a lot of nasty unravelling to undo.

Also, have a real think about how far you can go on your own.  With your own money, or some cash you can cobble together from some kind of early or trial revenues, partnering, R&D tax incentives, rich Uncle Tom Cobley and all.

Do you really need to raise money? Can you not get your customers to fund your business, at least a little bit further… to profitability? In many ways, that’s the best way.

But let’s say you’ve done all that and exhausted all other avenues. Equity fund raising it is. It will just take more money to give this thing the push it needs.

How to value it?

Simply put, the price of an early stage tech company is whatever the founder is willing to sell a piece for, and whatever someone is willing to pay for that piece. This is also not very helpful, but it’s true.

It’s a bit like selling your car, or your house. There is only one unique version, and a limited amount of buyers. But you only need one (or a few) brave buyers, and then the deal could be done.

From the outset, try not to sell more than 20% of your company at any round of funding, as this makes it harder for any future rounds. (There’s less to sell!)

If you need, say $50K, and are willing to sell 10% of your startup for this investment, and someone is willing to pay you $50K cash that for the stake, then, by definition, your company is valued at $500,000 pre-money.

Pre and Post Money Discussions

The ‘pre-money’ bit means that BEFORE they put the $50K in, your company was worth $500K (as $500K is 10% of $50K).

Note that AFTER they have put it in, it now ALSO has $50K in it, so technically your business is now worth $550,000 (‘post money’). Talking ‘pre-money’ is cleaner and easier to calculate in any valuation discussion. ‘Post money’ gets a bit fiddly.

With your startup now valued at $550K, the new investor does not actually have 10%, they have 9.09%. What was 10% pre-money is now 9.09% post money.

If they wanted 10% post money, then they’d have to put in $55K (which is 11% pre).

If you, as founder, owned 100% of the business beforehand, you now own 90.91% after the transaction. The issue of the new $50K of shares has diluted you a little. But you will have over 90%, which is almost as good as 100%. You have complete control, except you now have an investor, who one day hopes will get more than $50K back for their investment, hopefully half a mill or more. That is the point of investing, after all.

Now, with the $50K in the bank, you can get on with business and ring every last ounce of value out of that fresh investment. The hope is that if used wisely, future valuation will be way more than $500K by that stage. Which is the whole point. You and your investor wins.

Stuck in the Middle with You

Except, the investment is not liquid (they can’t get it out of a bank as cash) and you won’t be able to borrow against it. Effectively, it’s stuck in there until there is some ‘liquidity event’ (someway down the track) like the future sale of the whole company, an IPO or new investors come in allowing some original ones to exit some or all of their shares.

This latter eventuality is a rarity. What new investor wants to see their money used by original investors exiting stage right?

Another way of earning on shares is dividends, but I am assuming you are a long way out from profits.

Valuation Ranges

So, back to valuation. How do you come up with $500K, or $1M or many millions as the fair market valuation for your early stage tech business?

There’s a basic rule of thumb, which seems to be ‘accepted wisdom’ in these parts.

Assuming the business is a truly scaleable tech startup with a clear defensible position, a significant market to go after and with good founders…

1. If it’s just an idea and a slide deck, you can’t value yourself more than A$500K. That is, if you wanted $100K to build a prototype, then you’d have to sell off 20% for that (pre-money). Better to try to cobble together $100K, or whatever you need, or code it yourself, and get to MVP that way? Many startups can get to MVP on less than $20K if they are frugal and clever. Startups usually turn to “family, friends and fools” (the 3Fs) in this round. (Hint: don’t get fools.) If you expect your business to be worth a few million over time, why even start at a valuation so low, give away so much for so little and raise money on an idea? Go further.

2. If you have a MVP/prototype, but are still pre-revenue/launch, or perhaps have a trickle of early sales, then you may be valued in $1M-$2M range. So if you wanted, say $500K for growth/sales and gain market traction, then you’d be selling off 25%+ for that. Or ~10% for $200K, etc. This would be ‘Seed Angel’ round (pre-VC) from high net worth investors most likely. This is perhaps the hardest money to get, as you are still very early, and too small for VCs. Raising $20K is much easier, finding people who can part with a lazy $50K or $100K each takes more effort.

3. If you have launched your product, have paying clients, revenues, growth and traction, you could value yourself more than $2M, and really the sky’s the limit the more of that (and the more time/evidence & unmet potential you have). Once you’ve been around for a while, have good market share, growth… you get more into normal business valuation metrics like annual total and growth of sales, net profit, clients, market share, etc… You’d need to know your ‘Cost of Client Acquisition’ numbers really well, as well as ‘Lifetime Value of Client’ etc.. Investors will be all over this. You may then be in VC and Series A territory, so would looking at investment here of at least $500K, probably $1M or several millions.

If you are a WA-based early stage tech startup and have an idea/deck and perhaps an MVP, and think you’re worth $4M or $5M+ then I would have to say ‘you’re dreaming’.

That’s not to say you won’t be able to raise money at all on that valuation. There’s always someone out there with more money than sense, and might be persuaded by a slick slide deck and some fine words. But even if you did get early stage money at that price, how can you sustain it? How will you be able to build an upside for your investor(s)?

Knowing how risky it is, most investors into early stage ventures are looking for a 10x return over time. If the valuation starts too high, that makes the 10x even less likely and they will shy away. Remember, it’s easy to buy things, but when you buy you are setting the base price from which you want to see a multiple. The buyer can make a profit when they buy, depending on the purchase price.

Finally, it’s more than money

Of course, this all depends what you want to do; how much money you need, what you want to sell it for, and (more importantly) the VALUE the investors bring besides money.

It’s YOUR company remember.

How much do these investors ADD in more ways than money? Can they open doors to your next round? to new clients or partners? Do they have experience commercialising what you are doing? Have they been there and done it before? How have their other investments gone? What are their real motivations for investing? Are they going to be active or passive investors? Involved, but not too much, or just plain annoying?

If you’re not happy, 100% rock solid happy with an investor, don’t take their money. Listen to your gut. It’s usually right. Making the wrong choice is simply not worth it, no matter how much money they throw at you.

~~

Photo by rawpixel.com from Pexels

We need to educate the investors

Startup-image

In the recent Business News corporate finance report for calendar year 2018, I added up over $9.58B worth of equity capital raisings for WA companies, across 548 deals. That’s $17M+ per deal. And this does not count another $41B+ in M&A (merger and acquisition) activity.

How much of the capital raising money went to early stage private (Pty Ltd) tech companies?

Go on, have a guess… no?

$28M.

That’s less than 0.3% of total raisings.

So, this proves there IS money in Perth ($9.5B of it in our calendar year!), but NOT yet for early stage private tech companies. Well, there’s $28M a year, which is not nothing (and MORE than there was a few years ago), but it’s still a drop in the relative ocean.

A company I came across recently – one of the best startups I have seen – told me they went to 130 meetings, and pitched their business 130 times before raising a cent. They had 129 ‘no’s; before a single yes. There was no one else I could introduce them too, they’d seen them all.

Where did they raise money from? Singapore. (Everyone in WA and Australia passed.)

Over the past 6 years we’ve seen the development of a pretty strong local ecosystem for startups – startup weekends, meetups, co working spaces, accelerators, incubators, pitch nights, media interest.. etc.

The education of startups & founders is happening and well entrenched. There’s no excuse now for your lonely tech entrepreneur not to know what they are doing – they could wander down to Perth Morning Startup, join the upcoming Startup Weekend or pitch at Perth Angels, Innovation Bay or plus-Eight tech accelerator. They should find their way, knowledge and people if they put their mind to it.

What we need now is the EDUCATION OF INVESTORS.

People with money to invest in businesses need to be taught HOW to do this in the early stage tech sector.

People who’ve made money will fall back on what has worked for them in the past. That’s perfectly natural. And if you are a Perth investor, then that probably means via ASX companies, mining investment & commercial property, whipped up by the brokers of West Perth.

We do not need much to swing the startups’ way to make a material difference.

If we could raise it from 0.3% to just 1% then we would be tripling the amount of investment. To $90M or so a year.

Imagine what that could do.

Not for ASX companies or rushing companies (too early) to a listing. For private, early stage, little or no revenue tech companies that could scale and become the next Canva.

99% can still go to ASX, mines and property. Just carve off 1% of early stage, scaleable businesses, that could “do a Canva” and grow to $1B valuation in 6 years.

By the way, Canva failed to raise money in WA too. They tried, for many years. In the end, a chance meeting with a visiting American VC in Perth set them off on their road, assisted by Lars Rasmussen (ex of Google Maps and then Facebook). Canva moved to Sydney.

Yes, we need more startup success stories. You can point to a mining billionaire or two in Perth, and several property or ASX multi-millionaires. Business News is full of them. You bump into them walking down the Terrace.

But to get more success stories, we need more early stage investment. We need to ‘throw more darts at the dartboard‘ to see if we can hit some bulls eyes.

I don’t know which ones will succeed, but I know within the 500 or so startups in Perth, there will be the next Canva, HealthEngine, Moodle, or whatever.

So, we need to EDUCATE the investors on HOW to invest in startups; how to value them; how to spot the potential wheat from the chaff; how to be patient; how to give advice; how to mentor.

The monied classes have a lot to give in this respect. They offer much more than money; they have hard won experience, contacts and savvy.

Perth Angels do their master classes – which is great! – but in a way they are preaching to the converted. Members of Angel groups.

We need to reach more of those that have money, know they probably need to invest in tech, but have no idea how to start; but are willing.

How do we reach them I wonder?

~~

[Sources: Business News, Techboard]

Being your own (digital) worst enemy

A few days ago I was trying to get me some car insurance, having bought a little run around Toyota for the eldest child, who is now learning to drive…

So, there I was looking up the usual car insurance companies, and comparison sites, and seeing what kind of a deal I could get for my precious first born. I began with a Google search – of course – and scoured some of the websites thereto thrown up in my direction.

A few minutes later I was trying to complete an online quotation form and seeing what the thing would cost me. The number seemed a bit high, so I tweaked a few variables, and was still getting an answer I didn’t much like.

So I rang the company – their call centre number was clearly displayed on the same page – and a very nice lady answered and helped with my query. It seems you don’t need to insure the driver, as they are an L-plater, and cannot get insured anyway. YOU, as chief driver, sitting in the passenger seat, would be the insured driver.

Ah-huh. Makes sense.

So I tweaked the online quotation form and – bingo – out popped a number that was far more to my liking. Simultaneously, the nice insurance lady told me her number, and it was $100 more than the same number I was staring at on the screen.

So, we had the same, exact insurance, from the same company, at the same time, and the online quote was significantly less than the one I was being quoted on over the phone.

How could that be? Had I done anything wrong online? Nope, it was all correctly done.

So I asked the lady if she could get me the same quotation, and I could buy from her. To which she prompted said (and this blew me away)…

“Sorry sir, I cannot help you with the online quotation. Is there anything else I can help you with?”

This response flummoxed me for a few seconds. What the..?

‘Hold the phone,’ I thought, ‘Is she saying that she cannot help me complete an order online for her own insurance, on her company’s own website, the same one with the phone number showing that I rang her on?’

Her silence was golden. My jaw dropped.

After a few seconds, I think I said “Oh… thank you very much, goodbye”, got off the line and duly completed my insurance online saving myself $100 or so.

This whole nonsensical episode got me thinking as to the logic of the rules that she was (presumably) being told to follow.

Did the company only provide phone assistance to those not able to do all the quotations online? As the online quotation involved less cost (no human being being paid to be on the end of a phone) is that why they offered it cheaper online? For the exact same product?!

But as I was already online and used their published phone number – ON THE SAME WEBPAGE! – to contact them in person, why were they not then allowed to even help me submit online?

They could have lost me as a customer at that very point.

I could have printed off the quotation, gone to a rival car insurance place and told them to match or even beat it.

Or I could have shoved their business through a fit of pique. (Happily, dear reader, I am not that small. Well I think not anyway.)

Surely, the call centre staff in the insurance company should be empowered to use their common sense, help close the deal, provide a service and take the customer’s money? No matter what mechanism that is done by? Online, phone, letter, walk in, carrier pigeon, steam engine, wax tablet..!

Why compete against yourself? Isn’t the market competitive enough?!

Here we are, 25 years or more into the internet age, and people are perfectly happy to buy online, and in many cases, happier. They are doing so in droves. Have you been to a shopping strip lately? Yeah, nor have I.

Online, customers don’t get hassled by pushy sales people, can shop when they like, compare what they are buying easily, get independent reviews, have their order placed immediately and get back to what they were doing 3 minutes earlier. No commuting, no parking, no rain, no 40 degree days, no fines.

If businesses are going to fight against online, and put up unnatural barriers for their customers, then they will struggle to maximise the benefits of their digital transformation. Indeed, they could be sowing the seeds of their own digital disruption. Butting heads against themselves.

Think like the customer. Think user interface, and customer experience. It’s not you you are trying to better, it’s the customer you should be focused on serving.

Always. And in every way.