Even with a fantastic idea, getting good projects off the ground is often difficult without the right knowledge, the right connections and ready access to capital.
But the path for many innovative Australian ICT companies has been made a lot smoother, thanks to the efforts of Digital Harbour-based Business Strategies International.
BSI, formed in 2001, actively assists ICT companies with raising capital, accessing government grants and business advisory – effectively opening doors that most start-up ventures would not even know about.
Every three months, BSI holds investor forums in Sydney, Melbourne and Brisbane, where it showcases innovative companies to around 200 high net worth individuals and funds. These companies have great technologies and the potential for exponential growth to export markets.
“Our whole purpose is to help companies to grow,” says BSI director Ivan Kaye, who co-founded BSI with business partner Alan Milwidsky. “Over the last three years, BSI has showcased 110 companies and, of those, 50 have raised finance in one form or another. In total, more than $30 million has been raised.”
BSI is sponsored by the Victorian Government through its VicStart Program, and by the Federal Government, which supports BSI’s Australian Distributed Incubator (ADI) fund. ADI is a $7 million fund that invests in ICT companies and has a joint venture to invest with another fund, Information City. Both ADI and Information City have invested in 35 companies since the program started.
Leads also come through from the Federal Government’s COMET Program, which provides finance to help companies get investor ready and validate their products for export markets.
“COMET rates BSI as a leading player in the industry and they refer a lot of companies to us to help them in the quest for raising capital and getting investor ready,” Mr Kaye says.
BSI is also a leading player in accessing the Government’s R&D tax concession and tax offset. “If you have tax losses and spend less than $1 million on R&D and turn over less than $5 million, you can actually cash in those losses as opposed to increasing the size of your tax loss,” Mr Kaye adds. “We help companies maximise that rebate and work on a success fee.”
Among the many interesting companies that BSI has supported is the automated document delivery group ConnXion, which is now listed on the Australian Stock Exchange. BSI has also incubated a company called EMStream, which streams music and video content to more than 200 pubs and clubs around Australia.
“We have supported many very interesting companies,” Mr Kaye says. “I love every one of those companies. They all have potential for exponential growth. They are all in various forms of incubation – not large companies but hopefully one day they will become large companies. It’s great that we’re supporting their foray in Digital Harbour.”
BSI has also invested significantly in assisting companies on a recruitment level, particularly given the specialist expertise required in the ICT sector.
“Over the years, as our clients have increased in value, and have increased their staffing levels and turnover, a major constraint that they’ve had is to recruit the right people,” Mr Kaye says. “We acquired a recruitment business (BSI People) in 2001 that has grown from three people to 30 people thanks to the skills and leadership of William Maudlin.” BSI People have acquired focussed recruiting companies, including Livingstones (recruitment of office and administration personnel) and Learned Friends (Legal Recruitment).This year, BSI People won the prestigious SARA award of “best executive recruiter of the year.”
BSI has also ventured into the Training Space, and together with Graham Raspass heading BSI Learning, they have developed a training business that provides strategies consulting and training in the areas of change management and leadership skills. As that business has grown, it has acquired other registered training organisations including Southern Edge Training and Hume Learning.
BSI holds regular events for the innovation community and has an entrepreneurial Masters Class Series involving high-profile speaker presenters. Last month Martin Hosking, a co-founder of Looksmart, presented to 80 people at Digital Harbour.
BSI is on a strong growth path, and in the last four years it has grown from a turnover of $1 million to $15 million. The company was voted the third-fastest upstart company by BRW magazine.
“We work strongly with alliances and view alliance partners as a major part of our business,” Mr Kaye says. “We’re very proud and look forward to the next stage of our journey, which hopefully will include setting up BSI internationally into marketplaces such as the US, Israel, Europe and South Africa.”
A small telecommunications company has reassessed its operations and structures to stay alive in a cutthroat industry.
A determined start-up company will reinvent itself if that is what it takes to improve sales and expansion prospects. VRoam Global changed its market positioning when its co-founders, Danny Nathanson and Ian Basckin, realised they were on the wrong track.
The company uses an advanced call-diversion technology to provide international SIM cards which allow travellers to receive calls to their Australian telephone number. By tapping into local networks overseas, VRoam says the cost of international mobile calls is dramatically lower than regular roaming services.
Between 2002 and 2005, Nathanson and Basckin pitched VRoam as a telecommunications provider to the telecommunications divisions of big companies by promising to reduce the communication costs of staf travelling overseas. The company rolled along, notching up sales of $1 million in 2004-05.
But when external investors, including venture capital firm Business Strategies International, took a stake and joined the board, Nathanson and Basckin realised VRoam was putting its clients in a difficult situation. In it s pitch for business, the company was effectively asking them to undermine relationships with bigger telecommunications suppliers that also offered roaming services.
To overcome the conflict, VRoam reinvented itself through marketing as a travel services company, pitching to the procurement divisions of companies and travel agents. Nathanson says that procurement departments, with their focus on reducing travel costs rather than meddling in telecoummunications contracts, feel less conflict and are more interested in the service. The pair engaged a public-relations company that specialised in the travel industry and focused publicity in travel publications rather than telecommunications media.
Nathanson says the overhauled sales and marketing strategy required a shift in thinking for him and Basckin (who both came from the telecommunications industry) in the way they perceived the business. The strategy appears to have worked: sales doubled in 2005-06.
Nathanson balances relationships with clients and suppliers carefully, and liaises with his suppliers which are also competitors (many of the carriers have their own roaming services). He says it is simple: he creates a 'win-win' situation. International carriers have a fair chance of picking up the signal for overseas mobile-phone users who do not use VRoam; for example, if a region has three mobile carriers, each has a 30 per cent chance of gaining that business. But when VRoam sells the carrier's SIM card, Nathanson says, it is guaranteed to receive all of that business.
A good track record also helps. Nathanson and Basckin are great believers of in the 'foot in the door' strategy, using pre-existing relationships with carriers in the United States, the United Kingdom and South Africa to gain referrals to other carriers. Being a minnow dealing with large conglomerates can be daunting, Nathanson admits, but he says:'We were too gung-ho for it to be daunting. We were also a bit aggressive and brash. Because of that we had some good early successes."
The company is in its final stages of launching the service with local carriers (its competitors) for overseas visitors to Australia. It has also introduced a pre-paid product and a service focusing on leisure travellers, which Nathanson says will counter the customary December-January sales dip when business people travel less.
Tips for reinventing:
Ask clients for testimonials.
Create relationships with industry associations.
Attend conferences and expos in the sectors you want to sell to.
Engage a public-relations company to sell your story and advise on communications.
Ivan Kaye is a rare breed in Australia. The former accountant runs advisory company BSI and two venture capital firms, ADI and Information City. He chooses to invest small amounts of money in high-risk start-ups in hot new industries, a space ignored by most venture capitalists in Australia. He tells SmartCompany how … and why he invests in emerging technologies. “I am into innovation. All the fun is investing in early-stage companies because after that it becomes different – full of managers, accountants and lawyers. I am also an entrepreneur. And you can’t invest in start-ups with five people unless you are an entrepreneur and have run a start-up with five people. “At present we invest between $50,000 and $300,000 in a start-up. We specialise in web 2.0, wireless, software, ASPs, new media and mobile applications. Very few people invest in Australia at such an early stage so many people come to me and ask for money. “Often they’ll say, ‘I have this great technology and I need $3 million’. But they don’t need $3 million. They need relationships, grants, programs to help them commercialise and get to the next step like COMET (the Federal Government’s Commercialising Emerging Technologies program) and Export Market Development Grants. We get the companies ready for a fee (usually between $1000 and $100,000.) “If the guy is right and the chemistry is right, we invest. Initially it might be $50,000 but if the company needs more – like $700,000 – we will get co-investors. Of the $3 million we have invested since we started in 2000, we have raised $35 million in co-investment. “Often entrepreneurs just need ideas. I just had a great session with Rex Hunt. He asked me, ‘How do I take my brand worldwide? Why not go fishing with a star like John Travolta and get him to tell you his life story and put that on primetime TV?’ “My biggest tip to entrepreneurs? Avoid indecision. If you can’t make a decision you are in limbo. So it’s better to make a decision even if it’s the wrong one. At least you learn by that.
Don’t sack the entrepreneur When the business is so small, it will not survive without the entrepreneur. Once the business starts making decent sales, of $5–7 million, that’s when you start to think about replacing the entrepreneur with a management team because the business needs new skills at that stage. “If we invest in 15 companies, we’ll get seven to the stage of needing $1–3 million and then four of those to the stage of needing $3–6 million. When they need $12 million we’ve made our money. “Our biggest success was investing in digital company Quickcut, which was worth about $750,000 10 years ago and recently sold for $50 million.
Is it a world-first innovation? “When someone comes to see us with technology they often claim it is a world-first. What do I know? I am an accountant. But I know all the experts. If it’s wireless, I ring Walter and I say what do you think? There is always something similar being developed somewhere so being first to market isn’t everything. It’s usually innovations that are second or third to market that make all the money. “So many venture capitalists take the attitude in Australia that they love the technology but to take the company forward, they want to sack the entrepreneur. But if the entrepreneur is committed to making it work, mostly it will work. And I have rarely seen a business work where they have sacked the entrepreneur. “The biggest danger is the entrepreneur saying, ‘I am off to do something else’. The big question is: will the entrepreneur stick around until the business is sold? But there is no way to be certain about this before you invest; it is just one of the risks you take.
Best time to invest “At present we have a $7 million fund and we are raising money for a $40 million fund. I feel this is our time. We started after the dotcom crash and have done the hard yards. “This is also the time to invest in Australian companies. You can get in at very low prices and if you take them to the US, you get 20 times the return. We are approaching another bubble and people should come along for the ride! “There is lots of money available and it is so much easier to get three or four rounds of funding than it used to be so you don’t need to take companies to IPO. “The biggest change we will see in the next few years is the superannuation funds investing their money in start-up emerging technologies. New growth businesses around the internet will be hot. Everyone is communicating by VoIP, on their mobiles, by internet. That all has to be monetised. And so there are going to be people who are going to make a lot of money. “At the moment superannuation funds are all focused on buyouts but soon there will not be the deal flow for all that money. Once a few investors make millions investing in early stage, they will follow and then we’ll really have a bubble.”
The venture capital path can be a rewarding one, but very few have what it takes to attract the funding, writes Tony Kaye - The Australian Feb 23 2007
WHEN Susan Jersky launched her innovative music and video streaming business EMStream six years ago, she knew straight away that it had huge market potential. After 18 months of exhaustive software testing, gaining regulatory approvals and piloting her multimedia system with various pubs and hotels around Sydney, Jersky was ready to rock 'n' roll. "I'd sort of done all the groundwork and basically I was ready to start rolling things out, and at that stage I realised I needed more cash," Jersky says. "I realised I needed to bring on additional people and start setting up the business." To make that happen, Jersky made an approach to integrated business services provider Business Services International, which offered guidance and support -- as well as providing access to venture capital. BSI is a power player in the Australian marketplace, matching up promising technologies with investors and even providing incubation support to ensure start-ups receive management expertise and guidance. Every three months, BSI holds investor forums in Sydney, Melbourne and Brisbane where it showcases innovative companies to 200 rich individuals and funds. These companies have great technologies and the potential for exponential growth to export markets. "Our whole purpose is to help companies to grow," says BSI director Ivan Kaye, who co-founded BSI with business partner Alan Milwidsky. "Over the last three years, BSI has showcased 110 companies and, of those, 50 have raised finance in one form or another. More than $30 million has been raised." BSI is sponsored by the Victorian Government through its VicStart Program and by the federal Government, which supports BSI's Australian Distributed Incubator (ADI) fund. ADI is a $7 million fund that invests in ICT companies and has a joint venture to invest with another fund, Information City. Both ADI and Information City have invested in 35 companies since the program started. Leads also come through from the federal Government's COMET Program, which provides finance to help companies get investor-ready and validate their products for export markets. "We work best with entrepreneurs who welcome our involvement as well as our venture capital funding," says Kaye. He adds that key characteristics that BSI looks for are "possessing unusual intelligence, energy, vision, talent, persistence and drive to get their ideas into tomorrow's leading technology companies. We value entrepreneurs who identify impressive market opportunities and are not afraid to go after them." EMStream is one of the success stories, with its system now being used in more than 200 pubs and clubs around Australia. And Jersky has aggressive plans to expand. But Michael Quinn, manager partner of venture capital firm Innovation Capital, says very few companies have what it takes to get their foot in the venture capital door. Most, he says, come with their cap in hand but are totally unprepared when they come to present their case. "We probably see three deals a day and there's probably only one in 20 where the people have done some homework, and put a package together and presented it in a way that's going to get our attention," Quinn says. Of that one in 20, he adds, only 5-10 per cent will make it to a venture financing. A common mistake, Quinn says, is looking for funding with only basic business plans, which fail to provide vital financial details or explain the opportunities to deliver a profitable return to their investors. Jersky says that accessing venture capital through BSI was definitely a big advantage, but so was the management support she was given. After initially meeting BSI, Jersky was given the opportunity to locate her business there, so its team could better understand EMStream and assess the potential business opportunity. "It was very helpful, as it was basically like an incubator situation. They gave me free space in their offices and they got to understand our business, and about six months later we got a deal going," she says. "I would never be where I am today without BSI -- there's absolutely no doubt about it in my mind."
(1) VC market in Australia is maturing - But is lagging a few years behind the US - Biggest constraint to growth is credibility of very early stage funding (Series A+ funding has never been an issue). - Market needs to see more successful investments (i.e. exits) to encourage more investment. However these are in the pipeline and now starting to come through. Once this happens it should give investors (especially fund managers) confidence to start investing. - Government is pumping in money to help develop this sector. $200m over 5 years to be matched with private equity (IIF3 programme)
(2) Between 2001 and 2005 there has been a dearth of funding available to make investments between $200K - $5m by venture capital, and Angel Funding in Australia is in its infancy - Funding mainly provided by HNW investors, but there has been a lack of structure with these investments. - The BSI Investor Forum has been addressing this gap in the market place, having held 25 Investor Forums over the past 4 years, showcasing 8 companies every 3 months to an Audience of +150 Early Stage Investors in Sydney, Melbourne and Brisbane. - The early stage VC Industry is in a Catch 22. Because the Venture Capital industry is in its infancy, there has not been many exits in the early stage VC space, which has in turn not attracted Funds from Institutions. Once fund managers show exits and strong returns of these funds, fund managers should start to loosen the purse strings.
(3) Australian VC’s are increasingly partnering with overseas VCs - Australia has same issues as Singapore and Israel…. Strong education, strong R&D Science , Strong Innovation, but lack of population. Good for a testing ground. Australian companies usually have to move to US, Europe, China or India to get scale of operations. - As a result US VC market is very important to Australia - As a result, early Stage Companies will get their biggest Exits via trade sales in the US - This doesn’t cause a problem with money flowing back into Australia however as a virtuous cycle is in place as successful entrepreneurs who have exited in the USA turn into investors who invest back in Australian Companies.
(4) Australia is well placed to make the most of a bubble in 3-5 yrs - Money is not a constraint - Deal flow is good here – even compared to the US. - Good quality technological, scientific development & innovation is definitely here. - There is plenty of government support. - Hot sectors are the Internet, and Biotechnology.
Lisa Donath, Brad Klibansky and Candida Dacosta of BSI - organising the events
Alan Milwidsky and the Sydney Forum
BSI held the Summer 2007 BSI Investor Forum, at the Grand Hyatt in Melbourne and Hilton Hotels in Sydney and Brisbane. 6 innovative companies presented their opportunities to 150 potential Investors. The Companies presenting have three things in common: They have innovative technology, are leaders in their area and are in need of funding to take the next big step. For pictures of the event click here
Ivan Kaye (BSI) WIlliam Maudlin (BSI People) and Paul Bassat (Seek)
On Thursday, 22nd Feb 07 Digital Harbour was buzzing with young entrepreneurs who had the chance to gain insight into how to run a successful business from one of the best Master Entrepreneurs: Paul Bassat, CEO and Co-Founder of SEEK.com.au Paul talked about how SEEK was born and developed and went through its different stages from setting up the business to its current state. He explained what competition they were against initially and issues they had to solve along the way: from getting new clients to receiving enough funding.
Women In Charge Of Everything) is proud to announce the opening of its EVENING CLASSES FOR MEN!
OPEN TO MEN ONLYALL ARE WELCOME Note: due to the complexity and level of difficulty, each course will accept a maximum of eight participants.
The course covers two days, and topics covered in this course include:
HOW TO FILL ICE CUBE TRAYS
Step by step guide with slide presentation
TOILET ROLLS- DO THEY GROW ON THE HOLDERS?
DIFFERENCES BETWEEN LAUNDRY BASKET & FLOOR
Practicing with hamper (Pictures and graphics)
DISHES & SILVERWARE; DO THEY LEVITATE/FLY TO KITCHEN SINK OR DISHWASHER BY THEMSELVES?
Debate among a panel of experts.
Losing the remote control - Help line and support groups
LEARNING HOW TO FIND THINGS
Starting with looking in the right place instead of turning the house upside down while screaming - Open forum DAY TWO
EMPTY MILK CARTONS; DO THEY BELONG IN THE FRIDGE OR THE BIN?
Group discussion and role play
HEALTH WATCH; BRINGING HER FLOWERS IS NOT HARMFUL TO YOUR HEALTH
REAL MEN ASK FOR DIRECTIONS WHEN LOST
Real life testimonial from the one man who did
IS IT GENETICALLY IMPOSSIBLE TO SIT QUIETLY AS SHE PARALLEL PARKS?
LIVING WITH ADULTS; BASIC DIFFERENCES BETWEEN YOUR MOTHER AND YOUR PARTNER
Online class and role playing
HOW TO BE THE IDEAL SHOPPING COMPANION
Relaxation exercises, meditation and breathing techniques
REMEMBERING IMPORTANT DATES & CALLING WHEN YOU'RE GOING TO BE LATE
Bring your calendar or PDA to class
GETTING OVER IT; LEARNING HOW TO LIVE WITH BEING WRONG ALL THE TIME
Individual counselors available