Blog coverage

We have recently been covered on a couple of blogs:

VS Consulting Group – following Startups and Tech Trends

TechNation Australia – technology news and reviews

Thanks for the links guys.

Cheers,

Scott.

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Back from an extended blogging break…

As someone who has been a little slack at adding to his blog, let me briefly explain. In the last two months, the following has happened:

  • Launched beta 1.0 of Trickytix to two major clients (Mothers Day Classic and RSPCA)
  • Helped each client make more money for themselves than previous years
  • Engaged a consulting firm to assist us in our funding requirements
  • Pitched at two different investor breakfasts (Sydney and Melbourne)
  • Networked existing contacts, peers, friends, family and fellow entrepreneurs for investor contacts
  • Fielded business queries from a range of large and small companies, with two more live customers added to beta 1.0, and five waiting to be slotted into closed testing of Trickytix beta 1.1 (June).
  • Developed a marketing and positioning strategy which sees us aimed squarely at a large, under serviced market
  • Continued development of Trickytix
  • And oh yeah. My first child was born at the Mercy Hospital on Wednesday the 21st of May 2008. Welcome to the world Otis John Handsaker.

You know when Otis is old enough to ego surf, that entry should appear somewhere in the SERP as the first instance of the little fella on the web.

While right now I am on paternity leave, the second half of 2008 is shaping up to be a defining time in the life of Trickytix. I will be back and blogging again, and look forward to sharing my experiences in looking for private equity capital in Australia.

Until then, I have nappies to change. I can smell them from here.

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Practice makes perfect

The Mentre workshop finished last Monday, with a presentation of investment pitches to the judges on the final day. It felt a litle bit like Australian Idol, except no-one got a touchdown and none of the judges were as annoying as that boxhead Sandilands.

So ultimately, what did I get out of the workshop?

  • A presentation pitch really does improve with practice. While mine improved marginally, watching the degree of improvement in the other workshop participants was often a surprise. Practice really does help hone the pitch.
  • Getting out of the bubble of your own thoughts and receiving real world feedback from knowledgeable people is extremely worthwhile.
  • Not all business ideas are created equal, but people won’t always tell you what they really think. Complete honesty is rare.
  • There are Venture Capitalists in Australia who are really switched on when it comes to the web and technology. Who knew?
  • Raising money is hard

Parts of the workshop experience bordered on “Business planning for beginners”, but ultimately I got out of it exactly what I wanted, which was:

  1. Real world feedback from smart people on our business idea
  2. Access to investors

Overall, it was a well spent $500.

Some feedback on valuation which might be useful for those in Australia looking for funds. Without naming sources, I was told the following by people who should know what they are talking about.

Typical pre-money valuation for a start-up in Australia is between $2 and $4 million.

This doesn’t mean with just an idea you can go out and raise money on a $4 million valuation, but it at least gives you a line in the sand for your planning.

Raising $400,000 as an angel or seed investment, expect to give up around 30% in equity

To me this seems high (and I did argue against it), but then I’m not the one with the money am I.

Food for thought anyway.

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Seeking validation of our business ideas

My lawyer recently put me onto a great mentoring and coaching program, supported by VicStart. Yes it’s true – a good lawyer can do more than just take your money and bill in 60 second increments.

As the website states:

The Mentre program, supported by the Victorian Government’s VicStart initiative, offers business mentoring/coaching support and programs for SMEs as well as larger businesses.

They offer three different streams, and I commenced the Commercialization workshop yesterday. It involves two full day workshops spread across a fortnight, with a half day panel presentation two weeks after the final workshop. In between you receive up to six hours of one-on-one mentoring from someone with years of experience in your field.

What attracted me to it was:

  • The ability to have experts and peers validate (or reject) our ideas, including marketing plans and financial scenarios
  • The one on one mentoring, which I have considered in the past but have never actually got off my butt and asked for.

Monday was the first of the two full day workshops, and it found me sitting in a small training room with five other companies. With the exception of one company, pretty much everyone else there was:

  • In start up phase
  • IT based
  • Looking for funding

Some of them had great ideas, while others had concepts that sounded like they were going to be REALLY tough to execute. Shall reserve my judgment until I see their final presentation I guess.

While I am yet to hook up with my assigned mentor, I already learned quite a bit from the first day:

  • My 30 second “elevator pitch” sucks. Need to work on that.
  • My longer, more involved “product pitch” bites. As I spoke I could see eyes glaze over, as various people either didn’t get the concept or weren’t convinced it had legs.
  • People don’t immediately grasp what it is we do from the name of our company
  • Our working tag line of “Online ticketing made easy” may be better phrased as “Online event registration made easy”
  • Demonstrating prototype software during a pitch is not necessarily a good idea (although this goes against much of the advice you find on US based VC blogs).
  • Some people may find our logo tough to read (although to be fair the resolution of the laptop used to display it on the day was quite poor).

With respect to my pitch, it is not the idea that is the problem but my current method of communicating it.  If I get nothing else out of the workshops, I at least now know that I need to practice explaining what it is that Trickytix does about 300 more times.  Focus on the benefits…..why it rocks……why our competitors are nowhere near what we are doing….you know, all the good stuff.

Over the next week or so I will be meeting with my assigned mentor, which to me is going to be the fun and exciting bit of this whole process.  Can’t wait!

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Hire number 1

It’s a brand new year, and a new year surely deserves a brand new employee?

Meet Carlos “Tommy” Williams.

Tommy

Tommy is the guy on the far right, doing the great guitar face. Unfortunately he won’t be playing lead guitar for Trickytix (we don’t yet have a punk band started up).

Instead Tommy has been producing clean, well constructed code for the backend.

He has been madly coding away for the last month, as we put the finishing touches on a project for our first Trickytix client.  Due to launch in a few weeks time, our office has been a little frenetic as we race to make sure everything is perfect.

Early 2008 milestones:

  • Hired our first 100% Trickytix focused developer
  • Opened up the software to the very first paying client
  • One of the founders and his partner welcomed their first child (Hi Jett!)

It has been a good start to the year, and we have big plans for the months ahead.

BTW – for those of you doing a start up and looking for ideas as to how to fit out the office, you could do worse than copy the guys at Freshview.  I want to work there! 🙂

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A blogging break

I am on leave from today, back in the new year to continue the Trickytix build.  Hope you all have a great holiday season, and your business soars in 2008.

When next I blog in January, I hope to be able to share with you the news of two important milestones:

  1. The first customer
  2. The first full time hire of a developer for Trickytix

Both are close, but I wouldn’t want to sound off until contracts are signed!

Later,
Scott.

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We are hiring…

Ever wanted to work in a start-up environment? If so, we are in need of a full time php developer based out of our Melbourne office.

This could be your desk. Don’t worry, we will add a second monitor for you as soon as you start.

Trickytix Desk

This could be the view from our office that you see each day (sorry, can’t see the beach from here).

View from Trickytix office

Apologies for the lousy images. My phone makes a better talky box than it does a camera.

The full advert is at Seek, but the basic details are below:

Job Advert

We are a small web development company based in Melbourne, using predominantly open source products.

We are looking for a junior php developer to come on board and help us out with a variety of web development projects. You will be working on a combination of small and large projects, including helping us build a web application. The web app has lots of interesting bits of code for you to enhance and develop, under the tuition of our lead developer.

We need this person sooner rather than later, and are willing to offer a full time role to the right candidate.

Responsibilities:

More important than actual PHP experience is a solid understanding of OOP, good problem solving skills, the ability to be able to work independently and be a quick learner.

We will consider training someone with strong OOP skills in another language as long as they have a good theoretical knowledge of how to program.

Experience

Any experience in the following would be handy but not essential:

  • PHP 5
  • MySql 5
  • Linux (bash scripting extra handy)
  • Subversion
  • XHTML/ CSS / Javascript
  • Web api’s
  • Model / view / controller pattern

We are offering monthly RDO’s, a good starting salary with a guaranteed yearly increase and profit sharing. Our office is very casual and relaxed.

Apply online at Seek.

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On evaluating market size – Part 2

Last post I discussed a number of methods we had used to try and discover market size, some more successful than others. While our attempts seemed logical enough, there didn’t seem to be a lot of information on the web to steer an aspiring entrepreneur in the right direction.

What is the lesson here?

“The lesson is, never try”.
Homer Simpson

Well, not quite. A better lesson is probably:

“When in doubt, ask someone who has already solved the problem”.
Wise man with white hair and long goatee

So that is what I did, emailing a range of experts, entrepreneurs and C-level executives with the question:

“When you started your company, how did you estimate market size prior to commencing trading?”

Eight emails sent, with three great replies received. I have shared them below, because each answer has a few gems in it that will assist people out there looking to start a business.

Martin Wells, CEO and Founder of Tangler

Tangler Logo

Sizing a market is a tough one, and sometimes how you get to the result is dependent on what you’re trying to achieve. I guess since you mentioned VCs then you’re likely doing it for investment.

The two ways I use to estimate markets are:

  1. Hire a marketing consultant
  2. Guess (and plug in as many facts as I can) – You’ve listed a bunch of good ways to accumulate facts in your article. I think the only one you missed was to track down analysts in your sector and talk to them. Sometimes you can swap knowledge with them, but you want to build a relationship early.

Since you’re a startup you can’t really be expected to have detailed market knowledge, so at this point investors are really looking for market size to evaluate the high level potential of the business. Who cares about making a better blade for lawnmowers if it’s a $1m market?

Sizing a market is done by making a series of high level assumptions based on known values. For example, you could get to online ticket spending by doing:

  • Number of people in market (20 million for Aus)
  • % people attending events
  • Total $’s they spend
  • % people online
  • % people who buy tickets online
  • Total $’s spent in online ticketing

Then you plug in whatever facts you have now, and then whatever you discover along the way. I know this seems like a bunch of guesses, but that’s ok, investors will look at your assumptions to see if they are reasonable; they won’t expect exact numbers.

The other thing to look for in your market evaluation is the trends that are changing that market – trends are the core of your market assumption; what’s changing in the market that makes your product an opportunity – internet usage, acceptance of online purchasing, new web technology. I find investors like to hear about those more.

Andrew Pearce, CEO of New Water

New Water logoI think it very much depends on the nature of what you are attempting to put into the market, but I would suggest the following practical approach.

This is in part what we have done.

Define who you think your target customer group(s) are

In our case it is people who fall into the “Do-it-for-me” category of home owners – ie people who are the opposite to DIY. We are obviously a business to consumer type of company. In a business to business type of operation it might be an industry segment or a functional segment or a size segment or a combination of all three (eg medium sized companies in the telco. sector)

Validation of your target group

This is the hard part – especially if you have a new product or service which people/organisations do not understand (we have this challenge with our grey water treatment system as people do not readily understand what it is). You need to basically be able to go and speak to a representative sample of what you think are your target customers, explain what you do and ask them if they see a need for it.

Also try to find out how they value it (this will enable you to determine if your price points are correct). Market research firms will set this up for you (via focus groups) if you have the money to pay for it. The alternative is to arrange one to one interviews yourself or ask people at networking functions – this is much more cost effective. The good thing about this approach is it also helps you develop your sales pitch for use later – ie what are the customers “hot-buttons” etc. and how do you appeal to them?

Quantify

Assuming you have validated the above, then basically you need to quantify how many people/organisations (or whatever measure is appropriate) are in your target customer group? If it is people then the ABS (and equivalent in other countries) provides heaps of statistics. If it is businesses then you can use business directories – there are various ones, some from the ASX and others from organisations like Dun and Bradstreet. Again by way of example we know there are approximately 766,000 homes in our target market so if we can achieve a penetration of only 5% that is 38,300 sales.

For international sizing, you will find the US distorts any analysis you do because it is so large but with VC’s they look for rigour in one market and then extrapolation for others.

Ben Richardson, Co-Founder of Freshview

Freshview Logo

When we were looking at the potential market size for our first product, Campaign Monitor, we had 2 key areas to look at. Firstly, we had to make sure there we a need for the service our product offered – email marketing.

A quick Google search showed a bunch of stats produced by companies such as Jupiter Research showing that “email marketing spending will reach $1.1 billion in 2010” etc etc.

Is it just me or does it seem like there are stats just like this by one research company or another for pretty much every industry? For me the best validation that there was a decent market for email marketing was the amount of competition out there, and the fact that quite a few of them were reporting very impressive profits.

The second market of interest to us was Web Designers, since our product is built specifically for this market. We were a web design company before we moved into product development, and after watching the industry grow over the 5 years we’d been in business, we had a good feel for the number of web designers worldwide. We didn’t bother looking for exact numbers of how many designers there were, but we knew there would be more than enough to make our product worth developing. And since we bootstrapped our product, we didn’t need to come up with a figure to satisfy a VC’s checklist.

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On evaluating market size – Part 1

How do you work out the size of the market that you are about to enter?

Market in Cambodia

Answering this question is proving hard, despite having exhausted a number of avenues to source the information. It is made all the harder when none of our competitors are publicly listed.

As we move from “bootstrapping” the prototype to seeking funding for expansion, it becomes a critical question.

If all we planned to do was use our existing money to slowly grow the business over the next 10 years, it wouldn’t matter. We know (gut feel, anecdotally, the fact we have numerous competitors, plus any number of other ways) that our proposed market is big. Online registration and ticketing is growing in size (we think!), and there is enormous potential for the right company to build a killer product. We think we have it.

Now try that same justification, but imagine your in a boardroom pitching to a table full of venture capitalists.

Trickytix: “Yes that is correct, we want a few million dollars for not much equity”.

VC: “How big is the marketplace you are going after” (what they are really saying is, “how much money can you make us?“)

Trickytix: “Absolutely no idea, now hand over that cheque”.

Doesn’t quite fly does it. So what exactly have we done so far to research the size of our prospective marketplace?

1. Google the phrase

Is there anything Google can’t tell you? Apparently there is. Always my first step in any research project, typing in the phrase “how to evaluate the size of a market” returned only results telling me what a great idea evaluating market size is, with none actually telling me the best way to go about it.

The MIT Entrepreneurship Competition was good for the quality of the comments by Omar Khudari, but didn’t offer much past that.

Google searches for “evaluating market size”, “size of online registration market” and “size of ticketing market” all returned results of little or minimal value.

I at least found out that:

  • Lawson Ticket Inc did 6 and a half billion in sales in Japan alone (different market to us though)
  • The German based Get-Go did 6.2 million Euro in sales for the first 2 quarters of 2002, just two years after launching (probably mostly David Hasselhoff tours).

It is a start, but nothing I can really put in the business plan. Much more success with “online ticketing growth” and “online registration growth”, which told me that:

  • Ticketmaster did more than 4 billion in sales in 2002 (although this includes their retail outlets and call centres)
  • For all sales channels, the events tickets market reaped over $30 billion in 2005
  • The market for all tickets sold online was expected to be in excess of $5 billion in 2006

2. AsktheVC.com

If you have a startup question, there is a good chance it has already been asked and answered at www.askthevc.com. A search returned nothing of of any real value (although I did spend a pleasant hour reading through the archives).

3. Australian Bureau of Statistics

If you want to know the average household income of DINK’s living in Sydney, the ABS is your honey pot. If instead you want some global market size statistics for the online event registration business, welllllllll……not so good.

ABS

4. Post in a forum and hope someone heeds your call

Australian Anthill have a new forum up and running, so back in September I posted a question about market size. It got just the one reply after 30 days (my own!). I may have had more luck posting in a larger number of forums.

5. Ask another entrepreneur

I emailed a fellow entrepreneur, as people who have been through the same trials as you are often more than willing to give advice. He recognised the problem well, and steered me towards point number 6. For his particular market he was fortunate enough to get the information he required from the Aus-US free trade agreement documents! No such luck for me.

6. Purchase a report.

Both IBIS world and www.researchandmarkets.com provide paid reports on any number of companies and industries. If your target market is travel or the gambling industry, you need look no further. Slim pickings for online ticketing though.

I did find one report on a major competitor, so gleefully shelled out $A150 for an electronic copy. I would have been better served hanging onto my money, as it contained no financial information whatsoever. Jibbed!

7. Ask the accountant and the lawyer

While I have a great accountant and a great lawyer, neither has sufficient exposure to the global markets that we are targeting. I could be wrong about my lawyer, but the thought of paying a few hundred an hour for a quick phone call makes me quiver. There has got to be a way of getting this info for free.

8. Professional Organisations

They exist for things like the secondary ticket market place, but nothing specific enough for my needs.

9. Analyse your competition

Possible the best way of evaluating market size and potential. Ridiculously easy if your competitors are publicly listed, but tough if they are privately held. Unfortunately all our main competitors are privately held, so the best we can do is make educated guesses.

Competitor 1:
Claimed to have done single digit millions in ticket sales in its first year, and will be doing double digit millions in 2007. If we assume a figure of 20 million, this would give them revenue of $500,000 (they take 2.5% of all tickets sold).

Competitor 2:
Invested $10 million in setting up their business, and have since processed over a million transactions. No idea of pricing model.

Competitor 3:
Processed close to 5 million transactions, and has over 40 staff. If we assume an average salary of $US50,000, and if wages make up 40% of revenues, this would give them annual revenues in excess of 5 million.

10. Ask people who have been there and done it before

I have decided to expand the scope of my network and ask a much larger range of people the question:

“When you started your company, how did you estimate market size prior to commencing trading?”

I have emailed a range of Australian, US and UK business folk in the hope that a few will have some pearls of wisdom. I won’t list them here now, but if I get any replies I will include them in a follow up post next week.

I guess no-one said doing a startup would be easy. If you have any experience in estimating market share, please share your thoughts in the comments below.

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Managing your time is hard.

It is hard with everything else that is going on to make time for blogging, hence why my posts here have been somewhat infrequent. Time management has never been a great strength of mine, but two things have happened in the last few weeks which give me cause for optimism.

By themselves they are small, but together they can have a massive impact upon your ability to get things done.

1. Inbox zero

The basic tenant is that the most effective way of dealing with an overflowing inbox is to process to zero. An inbox is not a to-do list and should not be treated like one. Every single email is either replied to, deleted, archived or moved to a “to-do” list. Be ruthless.

I won’t go into great detail about the why and how, for Merlin does a much better job of explaining it than I would.

www.inboxzero.com – links through to the original series of posts on 43folders.

You can also catch Merlin discussing the concept at a Google tech talk. Watch it through while preparing dinner one night as I did, and you will find it worthwhile investing the 60 minutes it takes to watch.

Take your inbox zero methodology and combine it with concept number two.

2. Schedule EVERYTHING

A to-do list of 10 items that doesn’t have a schedule is a waste of time. Trust me, this is 10 years of corporate life talking here. Over the years I have created a myriad of to-do items, and then wondered why at the end of the day I only achieved 3 of my 10 tasks.

3 out of 10. Am I inefficient or just plain lazy?

As it turns out, it’s neither (although my girlfriend may disagree about the laziness call).

The problem is that it was never possible in the first place to achieve all ten tasks in one day. It looks so easy on paper…ten little things to do….should have this all wrapped up by lunchtime…duck out to the noodle house for dumplings….come back and spend the last 5 hours working on fun stuff. Too easy.

It doesn’t work. It sounds so simple, but the answer is simply to schedule everything in your day. Take your ten tasks, work out how long each is going to take and then plot them into your favoured calendar tool.

To show you what I mean, here is my actual calendar for today.

Thursday Calendar

Everything I want to achieve today is slotted into a time. Even lunch. I am only writing this blog post because I was scheduled to do so!

I know..I know. You are thinking “This is so obvious, what are you going to teach us next…the multiplication tables?”

My only response is, yes it is mind blowingly obvious. But do you do it?

The upshot of all that is that I am now scheduling regular blog posts. Proper detail, to really fill you in on what it is like to go through the process of starting your own company. The first is being written this weekend, so come back Monday for some more.

Scheduled blog posts means they get done. Inbox zero means I have the time to do them.

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