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When Australian companies consider the US market they automatically think venture capital – and why not? There are 1000’s of VCs in America. Yet, less than one percent of companies – Australian or otherwise – meet the mark for VC investment. For the rest, other options and opportunities need to be pursued.

This webinar will feature experts in angel investing, bootstrapping, grants and combinations of funding sources that will get you thinking “outside the VC box” and into a can-do mode for serious US market exploration.

Other webinar events from the series:

13 JULY 2010 – 11 am (AEST) – Expanding Your Business to the US: Myths and Realities. You’ve got a great innovation and know it will play well in the US market, or your success in the Australian market has reached its apex. Now what? Why not pack the suitcases and spend 6 weeks visiting the major US tech hubs? You’ve heard Americans are friendly and love a good investment opportunity. So, now that you’re here, why won’t they take your calls?

This webinar will feature an Australian entrepreneur with a patent-pending technology who will share his experiences about living and working in the US and an American “Networker-in-Chief” who will discuss the intricacies involved in networking “American-style”. Hosted by ANZA CEO Viki Forrest, who has worked with 100’s of Australian companies exploring the US market and who will share her own experiences of coming to the US with an Australian startup and how she built a formidable US network.

21 JULY 2010 – 11 am (AEST) - Sizing Up the US Market: Facts and Fears. Fact: The US market is 15 times the size of Australia’s – and growing. Fear: It’s too big of a risk trying to scale a market of this size and you could lose everything you’ve worked for. The US and Australia are two entirely different markets – not only in size, but in depth and scope. What works in Australia does not always work in the US just by ramping up the team, the technology and the dollars.

This webinar will feature a VC with keen insight into investing in Australian companies in the US market and an Australian CEO who launched a successful US-based business who will share their fact and fear lists with you. Moderated by ANZA CEO Viki Forrest who has worked with 100’s of Australian companies scaling the US market and seeking US funding.

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1. [EVENT] Let’s Talk IP

1. Capital sought
2. Equity stake
3. Pre-Money valuation
4. Exit

1. Capital Sought

This is fairly straight forward, this is the total amount of capital you are looking for. For our example, let’s assume $15 million.

2. Equity stake

How much are the original investors and founders willing to give up in return to securing the capital? Some investors may want control (ie. greater than 50%) – although this is rare. Let’s assume, our company will sell 30% share for $15 million.

3. Pre-money valuation

This is the valuation of your company before the capital flows into the company. It is important to define this with the potential investor, as some may assume post-money valuation, which affects the way the equity stake is calculated. A great introduction to pre-money vs post-money valuation can be found at Investopedia. Valuing a company is a difficult process (especially for startups) but not impossible – working closely with a reputable 3rd party finance company will help convince investors of your valuation.

Let’s assume our company’s pre-money valuation is $20 million. So our valuation after investment will be $45 million ($20 million pre-money valuation + $15 million capital)

4. Exit

You will need to know the how, when and the target valuation of your exit strategy. An exit for an investor can mean different things over different timeframes. An investor may want to have their shares “liquid” on a stock exchange to moneytise all or part of their investments. Some will want a quick turnaround, some want to wait years to build up the value of the company and cash in. Some have different levels of the expected return on investment. The point of this is to provide a forecast of the valuation of the company at the time you decide to exit. In our example, we forecast that our company will be worth $211 million after 7 years.

(For simplicity, I have left out discount rates for the Return on Investment calculations)

So, the investor can now make a “quick call” on whether to take the discussion further. Obviously, there are other considerations that an investor will look at (management team, market potential etc.) but it is nevertheless important to have these figures at your fingertips.

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1. How Much Equity Should You Give to Employees?
2. Bill Makes Raising Startup Capital Even Harder
3. Legalise Insider Trading

Under existing law, startup companies can raise money easily and quickly from “accredited investors” — individuals with substantial wealth or income. There is no need for the companies or the investors to gain approval from any state or regulatory official.

All of this would change if Section 926 of the Dodd bill is included in any final reform legislation. That section would require, for the first time, companies seeking angel investment to make a filing with the Securities and Exchange Commission, which would have 120 days to review it. This would both raise the cost of seeking angels and delay the ability of companies to benefit from their funding.

The negative impact of the SEC filing requirement would be aggravated by the proposed doubling of the net worth or income thresholds required for investors to be “accredited.”

It is difficult to know why these provisions are in a much larger bill whose primary aim is to address the fundamental causes of the recent financial crisis. Those causes are now well known and much commented on: excessive subprime mortgage lending combined with excessive leverage throughout the financial system. There is no evidence that angel investment in startup companies played any role whatsoever in events leading up to the financial crisis.

America became prosperous by its risk-taking and by backing their abilities and talents. It is such a shame that politicians should want to get in the way of two parties voluntarily agreeing on a deal. If this bill gets up it will only mean less deals, less wealth-creation, less innovation and more startup failure rates. Timothy Lee from Cato sums it up well:

It’s hard to overstate how important a favorable regulatory climate is to the success of startups. Some of the most important startups have been founded by 20-somethings without the resources to hire lawyers or navigate regulatory bureaucracies. And startups frequently find themselves within weeks of insolvency before they have a big breakthrough. Having a crucial round of funding delayed by four months can be the difference between success and failure. If this description of the bill is accurate (and I have no reason to doubt that it is), this provision would be very bad for the future of high-tech innovation in the United States.

UPDATE: Senate amends bill:

The changes included removing a 120-day waiting period for state regulators to review an investment after a deal has been made and allowing federal regulations to govern angel investments, as opposed to a hodgepodge of state regulations.

Although the amendment preserved annual income and net-worth requirements for angel investors to be accredited, it removed requirements that the levels rise with inflation. Instead, the Securities and Exchange Commission would review the requirements every four years to see if they needed to be changed.

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The obvious advantage of thinking global is that you are not limited to your immediate local market. Many people, especially in Australia, bemoan the fact that we have a relatively small and low-density population – and ideas do not succeed because of this fact. I do not buy this argument and neither do the hundreds of entrepreneurs who have taken their business globally after starting in small market. We are a lucky country with great entrepreneurs trying to make a difference. Going global also increases the perceived (I say perceived because real value comes from successfully building a business, not PR spin) valuation, which can help attract investors, licensees and potential suitors to your company.

Going global from day one is hard. It requires a lot of planning, research, foresight, risk and, most importantly, excellent execution. My investments, judging business plan competitions, and my own work in startups have always evaluated business opportunities whether it can efficiently serve a global market.

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Here is their latest news release:

Shock & Oar, the Australian Nautical & Leisure Wear Brand, has celebrated six months of trading in its flagship store in Fremantle, Western Australia. Yet another milestone for the Aussie Brand as it establishes itself in the international clothing and lifestyle market.
Shock & Oar Managing Director Brendon Westerhout says the brand has touched-down in almost every continent in the world.
“So far our customer base has stemmed from six of the seven continents, with overseas visitors keen to take home a piece of Aussie nautical style,” he said. “We are yet to greet customers from Antarctica, but given our proximity to the southern-most continent, it’s just a matter of time!”
In spite of opening its door amid the global economic downturn, Shock & Oar has been well received by locals, national and international visitors alike.
“Our customers have likened our store’s look and feel to a Polo Ralph Lauren store,” said Brendon. “This is a great complement that captures our mix of classic style and casual elegance.”
“We consider Shock & Oar as the unique Australian equivalent of overseas brands such as Nautica, Crew Clothing Company and Paul & Shark. And where better to start than Fremantle, a beautiful and vibrant port city renowned world-wide as home of the successful 1983 America’s Cup team and ’97 Cup defense,” he said.
With an enthusiastic and loyal customer base, Shock & Oar is well on its way to becoming the iconic Australian Nautical & Leisure Wear Brand.
The Shock & Oar store is open 7 days at 9 William St Fremantle, Western Australia. International customers can see the range and purchase online at www.shockandoar.com or contact us at info@shockandoar.com

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1. Microsoft Office (including Outlook)

Part of any IT setup is the ubiquitous Microsoft Office. Due to the shear scale of usage, this is a no brainer. Excel is my favourite for doing financial modelling, simple databases and charts. I use Microsoft Outlook as my personal information manager to organise email from my 11 email accounts, my tasks and calendar. Make sure you archive often to improve Outlook’s performance.

2. Firefox

The fastest growing web browser, Firefox, is easy to use, fairly light and fast. Good security and regular updates. 3^rd party plugins such as FireFTP, Google Toolbar and Roboform (see later) further enhance this product.

3. Roboform

How many passwords do you have to remember? I have nearly 600. Roboform is a program that manages your passwords securely on your computer. One master password gives you access to all of your passwords. Web browser plugins (Roboform Toolbar) allows you to easily fill-out and submit login codes into websites. This has saved me countless hours of frustration. Well worth the investment.

4. Google Desktop

So much time is devoted towards searching for relevant documents and emails. Google has a neat program that indexes your computer and your servers for files, emails, chat logs etc. It has saved me a lot of time searching for those elusive documents and emails. While it does take quite a bit of processing power from your machine, it is well worth it in the end. And it’s free.

5. Maxtor BackUp

When you purchase a Maxtor external hard disk you get a neat backup program. You can schedule an automatic backup of your important folders on your PC. I set mine to run at 3am every day. It also has a “Safety Drill” Copy which takes an entire image of your hard drive. So if your PC hard drive fails you can recover it (including your installed software) on a new hard drive. I run the “SafetyDrill” every week.

6. Evernote

Have you ever been working on a project and wanted one area to collect your notes (handwritten and electronic), emails, websites into one area? I discovered Evernote a couple of months ago and have been a heavy user since. I use it to store my current projects I am working on. It even has rudimentary handwriting detection, which makes searching fairly easy. It also has a feature (which I do not use yet) to synchornise with other computers, servers and your colleagues. Plus it’s free.

7. MYOB

Having a snapshot of your finances at an instant is vitally important for a CEO. For startups, you can’t go past MYOB. It is fairly intuitive to use, although you may need your accountant to run through the basics with you.

8. Avast!

Avast! is an excellent and low-cost virus protection. It automatically downloads and installs updates so you don’t have to worry about checking to see if you have the latest version. Be sure to remove your current virus scanner completely before installing Avast as it will conflict with one another.

9. CCleaner

Over time, your PC will accumulate a lot of information in the system registry and in temporary files. If it fills up too much, it can have a detrimental effect on your PC’s performance and stability. CCleaner is a free software package that runs a diagnostic check over your system and automatically clean up any unnecessary files and settings that you no longer need. I run it every fortnight.

10. SpyBot

With the open nature of the Internet, there comes the threat of spyware, adware and malicious programs can infiltrate your computer via the websites. Note that these may not be picked up by your normal virus scanners, so I recommend that you install this and run it regularly. I run SpyBot automatically every night to keep my PC clean.

So that’s my Top 10 Software Tools on my PC. Stay tuned for next month’s article: Top 10 Online Web 2.0 Services for StartUp CEO’s

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Let’s consider product development as a “sausage factory”. The inputs include things such as: the creative team; the budget; marketplace trends; customer feedback; surveys; manufacturing or engineering; historic sales and the company’s overall strategic direction. The output is a brand new product or service that you want to test in the marketplace. Let’s focus on the customer-centric inputs of this “sausage factory” by breaking business types into four main organisation-types: High-Volume, Product-based; High-Volume, Service-based; Low-Volume, Product-based; Low-Volume, Service-based. Although I have broken them down this way, many of the tips below can be utilised in all four categories

High-Volume, Product-Based

Examples: consumer electronics, FMCG (Fast Moving Consumer Goods), software developers, fashion brands, web 2.0, internet businesses, media.

In this segment, there is often a large research and development team developing new products and ideas. In most cases, these companies will have large global distribution networks that reach right to the end consumer:

The important type of marketplace information is:

• Feedback from your customers. This is usually a gold mine of information. Make sure it is part of your product’s evolution.
• Competitor trends and market share. What are your competitors doing? Can you do it better or with a discernable difference?
• Split A/B testing. This is where you release a control product together with slight variants of the product. You can then analyse the effectiveness of each product variant. This is popular with direct mail and BETA trials. Release new versions and variants, test and apply. Rinse and repeat.
• Analysis from focus groups. This can include surveys and organised group sessions or one on one interviews with subjects in your target market. Be sure to spread the results to all of your members in your product development team.
• Previous sales. What were your previous sales history? What products were stars; which ones are dogs?
• Partners and Distributors. What are your partners, agents and distributors saying about your products and your brand? Do they have any data that they can share with (or sell to) you?

High-Volume, Service-based

Examples: Airlines, fast-food chains

In this scenario, there is less “physical” products to produce but are more intertwined with your systems and processes. Due to the high volume, high turnover nature of your business, ensuring that you streamline your customer service processes is paramount. So when your team is creating a new line of services offering consider:

• Customer feedback about your processes. Do you have the systems and processes in place to support a new line of service? What can be improved? Let your customers know what happens with their query.
• Competitors. Have a group of people from your office (or outsource this) to sample what your competition is doing and report back. What was good and bad about the process?
• Web analytics. Many services can be ordered over the web. What service lines are working? Where are you getting your hits from? Do A/B split testing (see above).
• Focus groups. As with product based designs, involve focus groups early. Alternatively, try sampling a service in a defined geographic area to gauge interest and feedback.
• Front line staff: in many service businesses your people are the “face” of your company. Make sure you include them when trying in your development process. They are the ones that hear customer complaints on a daily basis. Have a system of capturing and synthesizing your front-line employee’s thoughts and opinions when developing new lines of business.

Low-Volume, Product-Based

Examples: commissioned artists, construction projects, industrial manufacturers, large software development projects, industrial designers

In this category, we can range from small commissioned art pieces to large million-dollar building projects. In most cases, companies in this sector have a very close (and sometimes rather complex) relationship with their customer. So what can you do as part of your product development strategy?

• Evaluate your requirements process. At the heart of every successful project is a thorough investigation of your clients needs. Be sure to include your sales and engineering/technical team early to understand your clients project aims.
• Get early feedback. This is a common practice with software developers – show incremental progress to your clients and get their feedback. Even with “physical” goods such as buildings and product packaging design, show computer models of what you are planning to your customer. I have found in the past showing incremental progress can spur further discussion and changes to the original design (just make sure you have a solid specification change process!)

Low-Volume, Service-based

Examples: law firms, accountants, custom software developers, dentists, advertising agencies.

By definition, this segment requires your business to be close to your customers to provide close, personal service. This is an increasingly popular area for small business entrepreneurs. To engage with your customers to continually improve your products and service to the marketplace consider:

• Feedback forms. When you are an owner operator of a business, sometimes it is hard to ask for feedback from clients. Sometimes your customer will be “polite” and not offer their true opinion. However, it is an important aspect of your business to an overall feel of your customer’s future needs. Think about hiring a third-party organisation to collect this data for you to get a more objective view of your customer’s perception of your business.
• Industry groups. With a limited budget, smaller companies can leverage industry groups as a potential source for market trends and try to get a gauge of where your competitors are at.

Conclusion

By adopting these tips in a systematic way, your business can use these customer “inputs” into making wonderful “outputs” – products and services that help you grow your business. Be open to sharing customer and marketplace data with your employees – you will be amazed at how they use it to improve product and service offering in organisation.

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At the head is senior management. In many cases the CEO Founder (who is generally from a technical background) may want to step aside into a CTO (Chief Technical Officer) role and bring in an experienced CEO to take the company through to the next phase of growth. Having a strong CFO will bring in financial discipline and capital injection options to fund further growth. The senior management team must posses the leadership skills to steer the company through change to fuel growth. The senior management team must be comfortable in driving change throughout the organisation and be able to articulate the company’s shared goals and vision to its employees.

Sales are the lifeblood of a profitable organisation. A growing company must create a sales and marketing team capable of a) executing on a practical marketing strategy and b) being able to foster to the right growth environment to make it happen. Too often, we see sales teams and marketing teams separated and not working cohesively in the same direction. Sales teams need input into marketing activities and the marketing department needs to be able to practical and usable market knowledge to their sales teams.

One of the problems faced with growing technology companies is that as the number of projects (internal or customer facing) increase together with the number of people involved. This adds complexity in the operations and communications among staff, and can lead to a lack of focus and inefficient use of resources. One method is to control this is to create a project management discipline that will co-ordinate business activity and business data in order to oversee the scope, schedule and cost of projects. This can be a huge cultural shift for the founders and the initial technical team as there may have been limited project administration in the past and will now be expected to report to a new office / project administrator. There should always be a delicate balance between innovation and control. Like it or not, it is an essential part of the growth DNA in every emerging technology company.

So, in conclusion, change must be driven by a strong, talented management team; sales and marketing must work together to improve the “top-line”; and strong project management discipline will improve the “bottom-line” and therefore grow the “most important line:” profitability.

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3. 13 Offshoring Tips for Start-ups

1. Choose a good intermediary service.

One question I am asked often are “how do you actually find your developers?” We use two online services: RentaCoder.com and oDesk.com. The main difference between the two is that RentaCoder is for fixed-priced projects whereas oDesk is mainly for projects charged on a per hour basis (Although oDesk recently introduced a beta version of fixed-priced projects).

Once you are registered for these sites you can search for developers and post a job. Developers will then respond to your posting and you can review and select which candidates are best for the job. Each candidate will have feedback history and an overall rating (just like eBay’s system). Once the job is complete you can then pay the developer through the intermediary service.

1. Fixed vs Per-Hour Charging

Fixed rate projects are a great way to get price security. However, price is only one third of the picture; you need to also consider the project schedule (ie. timelines) and scope (ie. what is it that wew have to do). Make sure you have a tight specifications together with your expected deadline before engaging with an offshore developer.

1. Ask for their CV and portfolio

As you would with hiring any person for your team, make you they give you their CV and with a portfolio of previous projects they have worked on. Portfolios are mandatory for industrial, interface and graphic designers.

1. Communicate!

As with any project, communication is the key and with offshoring this is critical. Make sure you schedule voice calls and regular progress reports. For small questions and issues, I use instant messaging for small issues. For larger issues and general project tracking, I use Basecamp to track and monitor projects. For even larger projects (ie. $500k+), think about meeting them face to face to build trust and rapport.

1. Try to get your developers in the same (or close) timezone

While getting developers in the same timezone may not be possible try to choose a timezone that overlaps at least a few business hours. Ask you developers to shift their working schedule to fit yours.

1. Use confidentiality and intellectual supplier agreements.

Do not be afraid to force your developers to sign confidentiality agreements. Have a standard template ready for them to print, sign, scan and email/fax back. Whilst you cannot be guaranteed that they will adhere to it, it sends a strong signal that you are serious of breaches of confidentiality. In your agreement, make sure you state that any IP developed by the programmer belongs to your organization.

1. Hire a local project manager

If you are not comfortable managing a project, hire a local project manager. The cost, scope and schedule issues that exist with traditional projects also exist with offshore projects. Having a local project manager ensures project communication is strengthened and any issues can be dealt with face to face.

1. Are they fluent in English?

Some offshore developers struggle with their use of English. If your specifications are a little loose and you need to problem solve and find creative solutions, then having someone who is fluent in English is a must. oDesk actually runs online fluency tests and rates a developers command of English..

1. Follow a design methodology

Be it waterfall, agile, spiral or extreme try to pick a design method and communicate your preference to your developer. Make sure you have links and documentation about your methodology that you can send to your developers to read before the commencement of your project.

1. Track progress

As mentioned, we use a combination of technologies to track and communicate progress. Aside from email, phone calls and instant messaging we use:

• Basecamp for tracking projects, setting milestones and capturing project know how.
• Subversion for version control
• A Wiki for project and technical documentation
• A online bug tracking system.
• Instant Message
• Skype (or Voice Over IP)

1. Make sure you are still eligible for R&D grants and tax breaks

In Australia, we have grants and tax breaks for R&D expenditure. In most, if not all cases, a significant amount of R&D spend must be done in Australia for your organization to be eligible. If your country has a similar program, check to see if you are still eligible. If not, then perhaps your offshoring project may not be cost-effective in the long run.

1. Use PayPal instead of bank transfers

PayPal is an easy way to transfer money overseas and offers some rudimentary fraud protections. Bank transfers are useful but you some institutions charge a hefty fee ($22 in our case) for international payments, which can add up over time. However, some developers force you to pay a “PayPal tax” of 1-2% to cover their withdrawal fees.

Most intermediary service providers like oDesk and RentaCoder provide a escrowing service and will facilitate the transfer of funds to your developer.

1. Get personal

Although offshore developers are in different country, they are people too. Make sure you ask how their families are, send birthday e-cards, exchange photos, invite them into your online social networks. Inspire them about your company, your dreams, your ambitions. You will be surprised how far your developers will go if they believe in you and that you really are the “good guy.”

Disclaimer:

The author is an affiliate of RentaCoder.com and Basecamp. Sharcmedia.com is an affiliate of eBay.

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