What it Takes to be a Technical Co-founder

Greetings from the startup accelerator, Blue Chilli, in Sydney, where Alan Jones talked on "What Does it Take to be a Technical Co-founder?". This is a meeting of the Australian Computer Society's Startups and Small-Business Special Internet Group. Alan stared by talking about the creation of Yahoo Australia and New Zealand. He explained that there was no substitute for the experience of being in a start-up and one of the band of brothers. Alan suggested that Australia is well positioned to export on-line products and services, without the talent to do it being drawn into Silicon Valley. One interesting piece of advice was to work in a start-up before launching your own bright idea. Advisers might bet 1% of the equity of a start-up in place of cash, but Alan suggested checking what it is worth. Interestingly Alan suggested not signing, or asking for, a non-disclosure agreement, as these are difficult to enforce and limit your ability to work for future start-ups. He suggested using Harvest, or similar, to track contributions to projects. I was also surprised that Alan recommended participating in competitions. He pointed out that family and friends are the major source of seed funding in Australia.

I am the instructor for the Australian Computer Society's "New Technology Alignment" (NTA) on-line postgraduate course, starts 19 June and designing an innovation course.

Building a Local Entrepreneurial Community

Apparently I asked one of the libraries I am a member of to get the book "Startup Communities: Building an Entrepreneurial Ecosystem in Your City by Brad Feld (2012). I don't recall asking for it, or where I heard about the book. It must have been months ago, when I was writing a course on Innovation for Canberra university students, particularly those participating in the Canberra Innovation Network. The book has just arrived, too late to use in the course, but is none the less useful.

As the name suggests, the book is for those building, a local startup community. As in Canberra, this can involve entrepreneurs (and those wanting to be), governments, universities, investors (be they angels or otherwise), mentors and service providers (in a gold rush those who provide shovels do well).

The book is 224 pages and based on the author's experience in Boulder USA, referred to as the "Boulder Thesis". Unfortunately the book is very USA-centric. As an example it is not explained until the second chapter what "Boulder" is (a city of 100,000 people in the state of Colorado, USA). The author suggests Boulder may have the highest  density of entrepreneurs per head of adult population of any city in the world. However, I suspect that some small university cities may have higher entrepreneurial density. As an example, Cambridge (UK) has a population of about 130,000 and significant start-up activity.

In Chapter two the author takes us through Boulder's pre-Internet start-up era, the Internet bubble and its intimidate aftermath. In Chapter three we learn some theory of what makes for a vibrant startup community and then it is straight into the "Boulder Thesis":

"1. Entrepreneurs must lead the startup community.
2. The leaders must have a long-term commitment.
3. The startup community must be inclusive of anyone who wants to participate in it.
4. The startup community must have continual activities that engage the entire entrepreneurial stack."

From:  Startup Communities: Building an Entrepreneurial Ecosystem in Your City, Brad Feld, 2012, Chapter 3.

This would seem to be a useful guide for any community: it should be lead by people from the community, by people with a long term commitment and be inclusive. However, I suggest it is unrealistic to expect everyone to commit to a twenty year plan. There has to be scope for people who have a year or two, a week or two, or an hour or two. If only those with total, long dedication are included, then most people and particularly those with family and other commitments, will be excluded.

In Chapter four Feld argues that the leaders in a start-up community must be the entrepreneurs, but "The best startup communities are loosely organized and consist of broad, evolving networks of people." He is skeptical of the value of government officials who are officially supposed to help with start-ups, such as economic development directors. He sees government programs as well intentioned but not long term enough to be of real value, with staff who do not understand entrepreneurship.

Feld sees government as not being good at investing in entrepreneurial activity. In general I would agree with this. One exception is the ACT Government's investment in the Canberra Innovation Network (CBRIN). The government provided office space and funding for some training and start-up competitions. CBRIN's office and its activities have the low cost, start-up feel to them, not like a glossy government development department. As well as inculcating people from the private sector and the universities with the entrepreneurial spirit, CBRIN also changed with teaching retiring public servants how to move to the private sector. This has the subtle effect of spreading the entrepreneurial approach throughout the public sector.

Also in Chapter four Feld expresses skepticism over the idea that startups need to be near a major university. However, he does agree that human capital (students and university academics) are useful, particularly students. This would agree with the main thesis of the "Cambridge Phenomenon", that the students and staff were important to the development of start-ups around the University of Cambridge (UK).

Feld is less impressed with the usefulness of research facilities at universities or of the formal transfer of licensed research results for commercialization. When I visited the University of Cambridge om years ago to discuss that issue, I found an interesting form of creative ambiguity: no one seemed to agree as to who owned the IP from research. Rather than be a negative, this seemed to provide flexibility for start-ups.

Feld also seems ambivalent as to the role of venture capital investors, seeing them as essential, but often at cross purposes with the entrepreneurs. He is more positive about mentors, almost idealizing them. It has taken me years to be comfortable is the role of mentor to student start-up projects. I was never sure how firm I should be in what advice I gave the students. When I noticed that my students were winning start-up competitions, I stopped worrying so much and assumed I must be doing something right.

A group which Feld mentions only briefly are the service providers, who provide legal, accounting, marketing and staffing advice to start-ups. In events at CBRIN I have met quite a few people from these companies. They seem ready to provide some free advice, in the hope of getting paid work later.

Surprisingly Feld spends more time on the role of large companies, such as Google and Microsoft in helping start-ups. Google has an R&D office in Sydney and comes to Canberra a couple of times a year to recruit university graduates. Many of these people end up in Sydney. Google hosts IT related meetings in its Sydney office (such as the Sydney Linux User Group, lovingly known as SLUG).

The most fun part of Feld's book and the fun part of start-ups is chapter seven on "Activities and Events". He discusses the Young Entrepreneurs' Organization (now known as the Entrepreneurs' Organization) and the Boulder Denver New Tech Meetup,  Boulder Open coffee Club, Boulder Startup-weekend, CU New Venture Challenge, Boulder Startup Week, Entrepreneurs Foundation of Colorado (EFCO). The point here seemed to be about getting people together in person.

Curiously what is lacking from Feld's analysis, given that many start-ups are about the Internet, is the use of the Internet for collaboration. While I agree it does help for people to meet in person, at least once, many cannot spend time at face to face events. There seems to be a lack of discussion of on-line tools, as if this would undermine the start-up ethos.

One of the impediments to the entrepreneurial community is the jargon. For example, what is an "accelerators"? For startups, this is a short term program designed to provide the venture with advice, training. In chapter eight Feld gives the example of the Techstars accelerator program. He contrasts these accelerators with "Incubators" being set up to help businesses at any time, whereas an "accelerator" is a fixed term program the start-up is run through. There may be accelerators and incubators associated with each other, for example the KILN Incubator and the GRIFFIN Accelerator  are both run out of the Canberra Innovation Network office. As Feld pints out there can also be accelerators run out of universities, although I have seen one example where the accelerator office were very neat and tidy, not nothing seemed to be happening there.


In chapter 9 Feld addresses the role of universities, starting with something called the "Silicon Flatirons Center" at the University of Colorado Law School. The significance of "Flatiron" was lost on me, but this seems to be a center for technology policy research. The problems with limiting examples to Boulder is most apparent in this chapter of Feld's book. The University of Colorado Boulder no doubt shares problems of engagement with entrepreneurial engagement, limited entrepreneurial programs and siloing of programs with other institutions. But there are universities elsewhere in the world which have overcome these problems. Feld's solution is the students. In Canberra this is shown by the enthusiasm with which they have taken up the Innovation ACT program, where students (and other) can form teams and compete to produce a business plan for a startup and ANU TechLauncher, where students undertake a project course to produce a product or service (with the help of alumni as mentors).

The point at which I started to disagree with Feld was chapter ten "The Difference Between Entrepreneurs and Government". He says "Great entrepreneurs are intensely self-aware... Entrepreneurs fail often and own it; government leaders rationalize why something didn’t go their way." However, this criticism of government could be applied to an established organization, public or private. No one running an organization is going to want to admit they do not know what they are doing or have made a mistake. It is very easy for an Entrepreneur who has no customers to say something went wrong, it is much harder for someone running a service lived depend on.

Feld says "Entrepreneurs work bottom up and government works top down". As he says Government has hierarchy, infrastructure, staff and rules. However, there is innovation in the public sector and it does happen bottom up. This innovation usually happens despite the organization structure and rules, not because of it. As an example in the mid 1990s a group of public servants set out to introduce the Internet to the Australian Government. This was not done as a result of any central mandate, quite the opposite (it was done in contravention of central mandate). Part of the process was to change the minds of the senior management and lastly to allow the political level to take credit, retrospectively.  That might sound subversive, but it is how change happens in government and large private sector organizations. This is not usually acknowledged but is not secret. As an example I gave a talk about it in Canberra in 1995: "Internet in Government" and this was reported in the media as  "The cabal that connected Canberra" (1995) and detailed in Peter Chen's 2000 ANU PHD thesis. An interesting experiment is currently being conducted by the Australian Government, with the creation of the Digital Transformation Office. The DTO aims to create "Simpler, clearer, faster public services". The immense challenge is to do this while keeping government reliable and equitable. DTO might benefit from running internal entrepreneur programs and training, or joining in those provided for  students and the public.

Working in and around bureaucracies is an area which is perhaps neglected in the education of entrepreneurs. Many revolutionary business ideas depend on having laws changed. An example are share applications such as Uber and AirBnB, where individuals provide a service to others. Building an IT system to make this possible is the easy part, the difficulties come in getting around the many of laws covering the existing commercial providers of such services. Entrepreneurs might be able to learn from the way public servants effect change.

In chapter twelve Feld.

Reference

Feld, B. (2012). Startup communities: Building an entrepreneurial ecosystem in your city. John Wiley & Sons.

Random Hacks of Kindness Sydney Summer Hackerthon

Greetings from the Random Hacks of Kindness - Summer Hackathon at the Blue Chilli start-up incubator in Sydney. There are five not-for-profit projects which have been worked on over the weekend and now being pitched. There is a judging process (I am one of the judges) but there are no large cash prizes, just some t-shirts and your name on a perpetual trophy. The projects are, in alphabetical order:

• Egg Donation Australia
• Responsible Cafes
• Thirty-three Cooks
• Youth Health
• Watch Me Grow
• BenJam

There will be RHoK Parramatta, and RHoK Melbourne, next Saturday, 5 December 2015. Go along and join in.

Random Hacks of Kindness - Info Night

Greetings from the Random Hacks of Kindness - Info Night at the Blue Chilli in Sydney. There are five not-for-profit projects being pitched to hackers, for the Random Hacks of Kindness - Summer Hackathon, being held 28 November. The idea is that volunteers form teams to work on projects which have a social, rather than financial, outcome. There are two phases: those who want something built first have to pitch to the hackers  and then the hackers work on the projects. There is a judging process (I am one of the judges) but there are no large cash prizes, just some t-shirts and your name on a perpetual trophy. Also, unlike other such competitions, some projects are on-going, building on what teams built previously. In the past I have seen some interesting mixes of team members from marketing, user interface design and coding. There is no fee for taking part and no prior experience is required.

Blue Chilli is a start-up incubator, with a six stage process:

1. Getting Started
2. Validate Idea
3. Build Tech
4. Get Sales
5. Raise Capital
6. Scale Globally 

BlueChilli came to national attention when it hosted a Policy Hack, with Wyatt Roy MP, Assistant Minister for Innovation. It is located behind the Queen Victoria Building in the Sydney CBD in an old brick building (as start-up incubators usually are).

Proposals for Encouraging Young Entrepreneurs

The new  not-­for-­profit organisation "StartupAUS" has released the report "Crossroads: An Action Plan to Develop a Vibrant tech startup ecosystem in Australia" (15 August 2014). The report makes some useful recommendations, such as Young Entrepreneur Scholarships and a national network of student start-up incubators, national learn to  code promotion program, tertiary  scholarships program to drive participation in CS, and a national network  of entrepreneurship centres.

The report is deficient for not proposing formal education programs for entrepreneurs. Australian universities have a number of schemes to encourage students and researchers to apply their skills to setting up new businesses. However, these tend to be extra-curricular activities, not part of formal courses. I suggest this should be a core part of courses, acknowledged as a respectable subject for academic analysis.

The report focuses too much on on the import of staff from the USA, rather than training Australians and working with growth areas in Asia. The the report does not make clear who funded it (presumably Google Australia), or who wrote it.

Also it would help if the report was provided as a well formatted web document, not badly formatted PDF. Here is an extract from the report's action plan summary, reformatted by hand to HTML:

Action plan summary

Australia does not currently have all of the required conditions for a successful startup ecosystem. Their establishment has been hampered to varying degrees by market failures spanning education, culture, expertise, access to capital and regulatory environments. Below is a summary of the actions proposed to address those market failures. The majority of the actions are not new. They have been implemented in other countries in which similar market failures have been identified, and in many cases have been effective to the point that government intervention can be scaled back or withdrawn. The impacts from some of the actions will be seen in the near term, although most will take several years to have a positive effect and will require a long term bipartisan commitment. StartupAUS does not believe that the government should be required to make an open-­‐ended commitment to supporting the startup sector, but rather it should develop an exit plan for scaling back and ending its support of each aspect of the sector. This will require the development of suitable metrics against which progress can be measured. This paper does not prescribe a division of responsibility between federal, state and local governments, although clearly the best outcomes will be achieved if high-­‐growth startups and entrepreneurship become a national priority, and if there is close alignment between efforts at each level of government, and between states.

Actions with near-­‐term impact (1-­‐2 years)

Create an Entrepreneur Visa

Australia’s startup sector needs diversity and new skills. An entrepreneur visa, like those in place in many other countries, would help to attract entrepreneurs and accelerate the growth of our startup ecosystem.

Relax restrictions on 457 Visa

Australian tech startups are unable to recruit enough skilled visas for startups Australian ICT workers. Relaxing restrictions to the 457 visa would enable Australian startups to employ sufficient skilled overseas ICT workers to meet the current shortfall.

Ensure foreign workers in Australian startups can access the Living Away From Home Allowance

Australia has a relatively high cost of living that is acting as a disincentive for foreign ICT professionals to join Australian startups. Making the LAFHA program available to startups would help to ensure Australian startups are able to attract the highest calibre workers.

Implement a national Visiting Entrepreneurs Program

Australia has a relatively shallow pool of experienced entrepreneurs. Introducing this expertise from startup hot-­‐spots around the world would short-­‐circuit the learning curve and accelerate the maturation of the startup ecosystem.

Change the tax treatment of ESOPs

Currently a bizarre situation exists in Australia in which options are taxed in the hands of startup employees at the time of issue, rather than at the time they received the proceeds, despite the fact that those options are illiquid and may never have any realizable value. Bringing the tax treatment of ESOPs in line with the rest of the world would greatly improve Australia’s ability to attract and retain the best workers.

Extend the Advance Innovation Program

Each year the Advance Innovation Program provides 25 promising Australian tech startups with investor-­‐readiness training and mentoring, and takes them to Silicon Valley for a two week trade mission. Extending the program would enable more entrepreneurs to gain exposure to Silicon Valley and other startup hot-­‐spots, and to bring those learnings back to Australia.

Establish a Silicon Valley Landing Pad for startups

Australian An increasing number of Australian startups are moving to Silicon Valley in search of talent and capital. An Australian landing pad would greatly assist these companies in getting established in the Valley and improve their chances of success. It would also equip more Australian entrepreneurs with an international perspective and enable them to contribute positively to the Australian startup ecosystem when they return home.

Actions with medium-­‐term impact (2-­‐5 years)

Support a Young Entrepreneur Scholarships program

Offering scholarships to 100 final year university students per annum would encourage more young people to launch startups. This could also be an effective way of addressing the current gender imbalance in the startup sector.

Support entrepreneurial behaviour by university researchers

Most Australian universities have limited engagement in the startup sector, and the academic culture does not embrace entrepreneurship and risk-­‐taking. Supporting entrepreneurship in universities would increase the rate of startup formation and improve the economic contribution made by universities.

Support a national network of student startup incubators

Very few university students in Australia are exposed to the notion of doing a startup. A network of student startup incubators would raise the profile of entrepreneurship and boost the number and success rate of technology entrepreneurs among university students and graduates.

Launch a national learn to code promotion program

Australia is facing a significant skills shortage in the ICT sector. A promotional program would increase interest in studying ICT and help to address the gender imbalance in the sector.

Implement a tertiary scholarships program to drive participation in CS

A prestigious scholarship program would attract the brightest high school students to tertiary computer science education, and the best undergraduates to advanced postgraduate studies in education computer science.

Remove disincentives for experienced Australian entrepreneurs to repatriate

A growing cohort of Australians are acquiring valuable experience in building a global technology companies in the US and elsewhere. There are significant tax disincentives for successful Australians to repatriate. Removing these disincentives would encourage Australian entrepreneurs to return and use their international expertise to benefit the Australian startup ecosystem.

Create a national network of entrepreneurship centres

Unlike many countries, Australia has no centrally supported system of startup incubators. Creating a network of entrepreneurship centres would provide an important piece of soft infrastructure around which startup communities can be built.

Continue the Innovation Investment Fund program

Australia has one of the lowest rates of venture capital investment in the world. Continuing the IIF program, with targeted changes, will ensure it is effective in supporting the growth of a healthy VC industry in Australia.

Establish a seed co-­investment fund

Australia has one of the lowest rates of angel investment in the world. Establishing a co-‐investment fund would stimulate greater levels of angel investment and improve the chances of startups raising capital in Australia rather than moving to the US or elsewhere at the outset.

Create a capital gains exemption and/or tax deduction for angel investments

A tax incentive for angel investors would boost the level of investment in startups and bring Australia into line with many other knowledge-­‐intensive economies.

Enhance Commercialisation Australia to improve support for entrepreneurs

Commercialisation Australia is a valuable program that is currently constrained in its ability to effectively support startups. Making targeted changes to the program would allow it to more effectively accelerate the growth of Australian startups.

Establish a young entrepreneurs startup loans scheme

A startup loans scheme would provide financial support to first-time entrepreneurs under the age of thirty. It would help young entrepreneurs to bridge the funding gap for early stage ideas that are not yet ready to raise capital from angel investors or VC funds.

Implement legislative changes to enable crowd- sourced equity funding

By 2020, crowdfunding is projected to reach $500 billion per-annum, generating $3.2 trillion a year in economic impact and creating more than 2 million jobs. If Australian startups are to tap into this source of funding the regulatory environment will need to be changed to enable crowd-­‐sourced equity funding in Australia.

Actions with long-­‐term impact (5-­‐15 years)

Support a national program to raise awareness of startups in Australia

Australians are good at starting “small businesses” but we have a relatively low rate of “tech startup” formation. A national awareness program would increase the number of people engaging in startups and help to establish a vibrant culture of entrepreneurship in Australia.

Implement a national program of entrepreneurship education

Currently the Australian education system is geared toward preparing students for the workforce. Introducing entrepreneurship education across the primary, secondary and tertiary education system would equip young people to start businesses and spur economic growth.

Implement and extend the Digital Technologies Curriculum

Ensuring that computer science is taught in every primary and high school will bring Australia in line with other countries and allow us to compete with the growing talent pool in other countries. ... 

From Crossroads: An Action Plan to Develop a Vibrant tech startup ecosystem in Australia, StartupAUS, 15 August 2014