What to do? ... starting a business can be confusing.Illustration: Louie Douvis
It's sexy. It's seductive. And it could make you a billion dollars. I'm talking about the world of tech start-ups. Let's face it. Ever since Facebook's Mark Zuckerberg proved that you can become a billionaire (and be the subject of an Oscar-winning movie) by wearing sandals and a hoodie, the tech start-up world has evolved from being the domain of geeks to a space where every entrepreneur wants a piece of the action.
OK, I'll admit, there were several sweeping generalisations in that last paragraph. But the reality is that the start-up space is hot. While the start-up space may seem sexy to some, the reality is that it's also full of long hours, high stress, and a lot of money at stake. Kind of like high-stakes poker. Except you're not just playing on your own, you often have a whole team behind you who rise and fall depending on your start-up's success.
Batchelor suggests that many hands make light work. "My preference would be to build a team of co-founders around you with clear complementary skills. Startups aren't easy, try to spread the load around."
Thinking of taking the plunge?
Whether you're a recent university student or a midlife corporate type who is being seduced by the lure of start-up life, the key to remember is that life isn't like the movies. You don't just feed a bunch of people beer and pizza to write some code then screw your business partner out of the deal, then brace yourself for a lawsuit and end up the world's youngest billionaire.
So how DOES it work?
Riley Batchelor, 33, is a serial start-up entrepreneur who has recognised the need for "start-up education" in Australia. As regional director for Australia of General Assembly, he's passionate about demystifying the world of start-ups through courses. Batchelor describes General Assembly as "an education company committed to teaching students different skills that are relevant to technology businesses in three different areas: tech, design and entrepreneurship."
General Assembly opened its doors in Sydney in May and is based on a concept that started in New York 18 months ago. Batchelor also plans to open in Melbourne and will be soft-launching there with a few trial courses in September.
For those who want to dip their toes in the often confusing waters of start-ups, he offers courses such as "Introduction to the start-up community" and "Fundamentals of entrepreneurial finance" to more technical courses such as "Programming using Ruby on Rails".
For newbies in the start-up space, Batchelor says there are various options to consider. However, he is quick to point out that these options are by no means exhaustive.
1. Going solo
This is possibly the hardest route of all. And there are few people who have the skills to successfully market their business, raise finance, project-manage developers, be creative, get customers and garner publicity. Even if you think this is possible, you'll probably kill yourself from stress and overwork if everything rests on your shoulders.
2. Co-founder or team
Batchelor suggests that many hands make light work. "My preference would be to build a team of co-founders around you with clear complementary skills. Start-ups aren't easy, try to spread the load around."
If you have an idea but have no clue how to turn it into reality, then an incubator may be an option. "They are typically for people who haven't started building their product," says Batchelor. "They are more suited to non-technical founders who can't build the product themselves."
He adds that they may take less then 50 per cent equity but you may be required to contribute funds to build the technology. These incubators usually have connections to Silicon Valley and experience in raising capital both in Australia and overseas. An example of a successful incubator is Pollenizer, which is headquartered in Sydney but which has just opened an office in Singapore.
As the name suggests, these organisations help "accelerate" your business growth. Batchelor says these organisations provide advice, access to funding and connections. They typically take less than 10 per cent equity and provide less than $30,000 funding. However, they also provide mentors, education and, in some cases, co-working environments.
"Accelerators are more suited to early stage start-ups that have been going for a little while – perhaps three to 12 months," he says. Examples include leading Melbourne-based accelerator AngelCube; or the Sydney-based Startmate.
4. Going to the US
If the idea of having meetings in Starbucks with venture capitalists from Silicon Valley appeals, then you might simply pack your bags and go to the US. The reality is that you'll be closer to the action and networking suddenly becomes a whole lot easier when you are in people's faces and you don't have to factor in a time difference or a smooth Skype connection in order to talk to someone. Of course, this option isn't available to everyone especially if you have an entire family to relocate. Nevertheless, it's one being taken by some keen Aussies who want to make it big.
5. Raising money
Unless you have a hefty inheritance you're happy to spend, chances are you're going to need money at some point. After all, the costs of building innovative technology can add up. After dipping into your life savings or mortgaging your home to the hilt, you might hit up family and friends.
Once you've exhausted your immediate network, it may be time to consider an angel investor(s). "These people typically invest anything from $50,000 to $500,000. These are funds used to help the business in it's first stage of growth," says Batchelor.
When you're looking at bigger bucks, that's when you start pitching to venture capitalists (VCs) and investment funds. "The funds may invest around $500,000 to $2 million, while VCs may invest $2 million to $10 million." Batchelor points out that this is just a guideline and that every situation is different.
"The challenge is purely getting access to that capital and getting in front of the right people to present your ideas."
6. Other options
There are also government grants and corporate programs designed to help start-ups. In addition, Batchelor encourages start-ups to consider becoming involved in co-working spaces, such as Fishburners in Sydney.
As the name suggests, this is where a number of start-ups work together in the same physical space, so they can not only share resources but also foster a spirit of collaboration. "Being in a room with other people who are doing the same thing as you is a great way to meet people who might help you with the business," says Batchelor, who operates General Assembly out of the same space as Fishburners in Sydney. "They might end up being mentors or advisers. Or you might simply find yourself sitting next to a graphic designer who ends up building your website."
Batchelor believes that the start-up community in Australia is set to boom. Hence, his involvement with General Assembly. He believes that demand for start-up education will continue to grow. "I think the hardest thing for people is just getting started on their start-up," he says. "Then you have to raise money, grow your business - and so on. Every business has its challenges and if it was easy then everyone would be doing it."