Parents measure a child’s development every step of the way – rolling over, sitting up, eating solids, baby steps, toilet training. All of these milestones are a stepping stone on the path to independence in physical, speech and emotional needs.
Similarly, an early-stage venture’s development is measured in achievements – minimum viable product, customer acceptance, securing intellectual property, funding and resource capabilities. These all serve to grow an idea into a sustainable business.
However, the unexpected strains and stresses along the way can create tipping points in immersive founder relationships that regress to discussions akin to putting the lid back on the toothpaste.
Startups often start out with shared ideas about the “breakthrough”– it can be a little like the romantic fantasy of a couple deciding to have a child and expecting them to sleep through the night – idealistic, if not unrealistic.
Similar to parenting, nurturing a startup is an emotional journey, one which no textbook or prenatal class can ever prepare you for. When you’re a founder it is important to be cognizant of conflicts, not only for your personal wellbeing but for your company’s growth potential.
Investors often have a sixth sense about founders with different “parenting” values and will feel uneasy about investing in businesses where there are fundamental differences in how to turn an early stage venture into a scalable, sustainable and globally competitive business.
Founders should invest time and money to understand each other’s personality traits before they take their idea to the next stage. This could mean doing personality modelling or spending time with a recognised human skills professional to ascertain how compatible you are as business partners.
Like parenting a small child, there will be good and bad experiences – the key element is to learn from them, not get overwhelmed, and to seek advice for those who have done it before you.
There is no easy road to raising a family or building a startup, and the early stage years have many rewarding milestones and challenges. If this uncertainty makes you feel uncomfortable, then taking on the relentless responsibility of a startup is probably not for you. For those who embrace it, nurture it, and encourage it, the rewards are immeasurable.
I love business, innovation and investment and I especially love startups where all these variables meet. I love them for their imperfection, their agility, energy and excitement and particularly their courage to achieve against the odds. A startup can be infectious, attracting raw talent and ideation which established and large enterprise can only dream of. However, I frequently get told that startups are not real businesses – just pipe dreams. I firmly believe that this perception amid naysayers is not directed at the business idea, but more at the immaturity of founders to recognise the needs of the people that will ultimately help make them a success – the investors.
When one of the richest men in the world offers free advice, it is wise to listen. Of course, acting on it is another thing but investors have been hearing Warren Buffett out for years in his role as chairman and CEO of Berkshire Hathaway.
Warren Buffett stays away from investing in companies that demonstrate any of the ABCs:
A = Arrogance
B = Bureaucracy
C = Complacency
Embracing the notion of storytelling by startups is not as simple as ABC.
My name is Stephen Crowe, and over the last three decades I have witnessed the startup evolution happening around the globe. When I began my tax consulting career at a Big 6 international accounting firm, the client meetings were bursting with enquiries around what the recent introduction of tax measures such as CGT, Foreign Tax Credits, R&D tax incentives and dividend imputation meant. Advice was provided in typed documents and often served accompanied by the inhouse tea/coffee trolley serving the floors. Today, a graduate beginning a career in tax consulting is faced with understanding the impact of artificial intelligence, machine learning and social media in delivering effective consulting outcomes for clients in cafe style environments. Few industries and investors have been spared the disruptive impact of technology and innovation.
I now help startups within the Early Stage Innovation Community to establish themselves for growth and investors to benefit from opportunities. This four-part article series is the first in an ongoing commentary on SmartCompany and StartupSmart called The Hub, seeking to debunk myths surrounding success in the startup world and also to encourage established SMEs to rethink, prepare for disruption and embrace the potential for collaboration with startups as part of their growth strategies.
If you have a particular topic you would like me to explore, please reach out to me here.
It’s a question you often hear from new parents – how should you celebrate your baby’s first birthday, especially when they won’t remember a thing about it? Yet, a first birthday is more a celebration of parenting than an event for the child. It’s a time to congratulate each other, to mark an occasion and say we survived the first tricky 365 days.
This time for celebration extends to our government, as they are the co-parents to numerous policies and initiatives. And 1 July 2017 marked the ESIC investment framework for the early stage innovation community in Australia, a first birthday.
So readers, Happy Birthday!
Much like the impact a newborn can have, there have been many distractions from the magnificent news of ESIC’s arrival. In a period that delivered us the 2016 Federal Election, Brexit, Trump and the like, one could easily be forgiven for not remembering this momentous occasion of a very important policy. While it won’t be relevant to everyone, it is an important milestone for those in the innovation and investment sectors.
Why should you be celebrating? Well, it could very well be the difference between success or failure.
The concept of offering tax and financial incentives to encourage investors to direct appropriate flows of capital into the innovation startup community was conceived in December 2015, under the Turnbull Government’s National Innovation and Science Agenda). A first and important step in this conception phase was reaching out to the Australian investment community for help. Their challenge? How to best open up new capital flows to stem the 4500 startups failing each year due to lack of access to early-stage capital.
Using the power of Australian culture to “save” tax was the carrot, a new investment called an Early Stage Innovation Company has been created as the delivery vehicle for the carrots.
As most people within the startup community recognise, the Australian investment community is relatively small and tight-knit, with limited focus on providing seed capital to ideas and more focused on turnarounds, opportunities and M&As of established businesses. Thereforea paradigm shift occurred when the government took an egalitarian and inclusive approach by opening up the investment possibilities to allow retail, SMSFs and investors not just from the big end of town to participate.
Whilst the projected $1Billion of new investment over the first 3 years of the ESIC program sounds like a big number, in the scheme of Australia’s saving pool it won’t register a mention. However, the taste sensation is often reserved for the sweet surprises of little packages.
The enabling ESIC legislation received bipartisan support in the Federal Parliament, delivering a swift piece of tax legislation in record time. Lengthy delays in the preparation and birthing stages were avoided. Delivered by way of Royal Assent in mid-May 2016, the legislation commenced on 1 July 2016 and provides unparalleled benefits for the early-stage community of entrepreneurs and investors.
So, this 1 July, raise a glass to both sides of politics for their foresight and boldness to create the framework for Australia’s prosperity through innovation and investment in the 21st century. We are excited by the opportunities in 2018, for new industries to be seeded, early stage ventures to be accelerated and investors to gently shake their portfolio.
There are many parallels between starting an early-stage venture and becoming a parent.
Every day I am exposed to different early stage businesses and families. Like those starting a family, some have lots of support, and some have none. Some have uprooted and left their comfort zone, and some have chosen to stay in familiar environments. Some have planned their situation, and some have not.
No matter if your early stage venture takes the shape of a business or a baby, your life will be changed forever once you embark down this path. As rewarding as it is, it will be the hardest thing you ever do and will require you to learn and develop so many different skills it is unimaginable. You will have dependents who will dig way deeper than Maslow’s hierarchy of needs, you will be exposed to many new things – you will scarcely recognise yourself from when you began your journey.
Plan for the future
Appropriate planning in the gestational phase will certainly help you in the sleep-deprived times that lay ahead, though be prepared for an element of unexpected randomness that will upset your status quo – this often occurs when you least expect it.
Comfort can be found in friends and trusted professionals who have experienced many of these events previously. Much like how parents can be a sounding board for issues you encounter with your children, professionals who have experienced the early startup phase can provide you with the insights and guidance you need to get through this difficult period. Your own professional experience is another asset. Draw on this, and the insights you have gathered from mentors of the past. You may have underestimated the depth of those insights when first you encountered them, but now they can hold you in good stead.
The birth of your startup will be recognised by the emergence of your idea beyond a concept and into a physical being.
Listen to experts
Just as you rely upon expert medical and other professional advice during your gestational phase, so too should you rely upon expert professional tax and advisory advice in planning and structuring your startup. Professionals have earned their experience through years of real-life learnings – respect their knowledge and be open to the possibilities. In choosing your advisers, be careful to test their appropriateness to give you independent advice in an empathetic manner, in parenting terms this can often be “tough love” and measured as giving you what you need rather than what you want. It is great if the two outcomes align, but be prepared for situations where they don’t and understand how you will react to that.
In the conception phase, focus on adopting the correct corporate structure for your early stage business and be ESIC Ready to prevent adverse outcomes when your bundle of joy arrives. Too often we see startup businesses using structures that are inappropriate and could have benefited from better planning during the pre-birth phase.
An African proverb says it takes a village to raise a child. We suggest it takes a village to develop a startup.
By Stephen Crowe
Stephen is passionate about innovation and investment. He is the pre-eminent authority on the ESIC investment framework in Australia. Having spent the last 20 years focussed on a broad range of senior investment, tax and innovation roles, including at Macquarie Bank, Citigroup and in his own boutique consultancy since 2000.