Meet the start-ups that want to eat your lunch
Tuesday, March 27, 2012/
They’re young, they’re smart and they’re coming after your business.
Australia’s economy might be patchy, but the 50 companies that feature on StartupSmart’s second annual StartupSmart Awards have enjoyed a brilliant year, with total revenue hitting $115.6 million, well ahead of last year’s total of $88 million.
Once again, the awards feature an eclectic mix of companies, from retailers and recruiters through to tech businesses and a new group of social enterprises.
But with average revenue of $2.3 million and six businesses making their first million dollars in revenue in their first three months of trading, the message is clear – fast growth is still very much achievable, if you start smart.
The awards, which are open to the most innovative and promising Australian business aged four years and younger, are in their second year and were sponsored and hosted by leading national accounting firm, Pitcher Partners.
Target Media Australia took the top prize, named the country’s fastest-growing young business with revenue of $14.1 million.
The business operates the TopBuy.com.au retail portal, which has attracted more than 400,000 Australian customers to buy products across more than 30 different categories.
It was founded by Peter Xie, Mike Xie and Richard Liu, who ditched their electronics wholesale business when they realised their margins were being squeezed, in favour of jumping onto the online retail boom.
The founder poured $1 million into their start-up costs, which underlines a trend towards a greater initial outlay by company founders. While 26 businesses on the list started with less than $50,000 (and 10 began with less than $10,000), average start-up costs were just under $154,000.
However, start-up entrepreneurs remain adept at keeping their initial costs down – three quarters started their businesses from home.
The demographics of the list were similar to last year. A total of 17 businesses came from New South Wales and Victoria, while 10 were from Queensland, three were from Western Australia, two from South Australia and one from Tasmania.
The average age of the company founders on the list was 36. The oldest entrepreneur in the top 50 is 56 (David Whitfield from enLighten Australia) with the youngest aged just 25 (Elliot Ramler from ELJO).
Looking at the list by industry, the retail sector and the property and business services sectors were heavily represented, with tech businesses also performing well.
The top 50 is full of start-ups that are breathing new life into old markets, such as You Pack Removals, which racked up $4.3 million revenue in its fourth year after introducing self-packing containers to the traditional removals process.
Elsewhere in the top 50, there is a business that allows bored office workers to play golf on a virtual course on their lunch breaks, a firm that’s developing a world-first pair of alternative reality glasses and an innovative crowdfunding platform.
Scale is not the key objective of many of the businesses – they want to dominate a niche.
Target Media co-founder Peter Xie says category leadership is crucial in his sector.
“In online retail, if you’re not growing rapidly, someone else will be. You need to be the category leader or you will be gobbled up.
“There is much more competition than when we started, but we moved quickly to have the range and brand names that people want.”
One terrific trend from the StartupSmart Awards is the emergence of a real community of early-stage entrepreneurs. A number of businesses on this list have been specifically set up to help their fellow start-ups.
Take digital services business The New Agency. It’s the brainchild of Alan Jones, who is also a co-founder of Yahoo! Australia and New Zealand, HomeScreen Entertainment, Trippything and Trainerplatform.
“Start-up founders who don’t have geeky friends to code for them still have great ideas,” Jones says.
“We help enable those ideas by supplying great development, design, marketing and strategy at start-up friendly pricing.”
It’s a great sign that Australia’s culture of entrepreneurialism is continuing to flourish, but it’s also a warning to SMEs – there’s a new breed of business owners who want to eat your lunch.
Meet the top five
Founder(s): Peter Xie, Mike Xie, Richard Liu
Revenue: $14.1 million
Head Office: New South Wales
Industry: Retail trade
It was while they were running a wholesale business that the trio who launched Target Media Australia realised the sheer potential of online shopping.
While supplying the likes of JB Hi-Fi with electronic brands such as Canon and Samsung, the founders realised that their margins were shrinking.
“A lot of retailers were going overseas directly and we saw this as a threat,” says Peter Xie. “Our margins were being squashed while, at the same time, we saw the growing potential of online retail.”
“We were ordering tens of products for customers and then, suddenly, it became 20s and 30s. We felt we could do something different in this market ourselves.”
That point of difference was TopBuy.com.au’s vast range of products and engaged customer service team – the business’ Chinese call centre is fully run and managed by the company, so training and product knowledge is better than most third-party arrangements.
Eventually, the wholesale business dropped off as TopBuy.com.au grew. It now sells in more than 30 niches, including electronics, homeware, toys and cosmetics and has 400,000 Australian customers.
“There is much more competition than when we started, but we moved quickly to have the range and brand names that people want,” says Xie.
“In online retail, if you’re not growing rapidly, someone else will be. You need to be the category leader or you will be gobbled up.”
The growth that Xie refers to is impressive – the business expects to grow revenue to more than $20 million by the end of the year and forecasts growth of 50% each year for the next three years.
“We want to develop new niche areas and we are looking at overseas markets such as the US and UK,” says Xie. “We also want to raise funding to grow the business at a faster pace over the next year.”
“We have grown from zero to a sizeable and profitable business within a short period of time. Our business now has good scale, and plenty room for further growth.”