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5 tips for startup success in Australia

The Network
Wednesday, October 16, 2013

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Creating Australian made companies is challenging, but not impossible, argues Mike Frizell, founder and CEO of pawsforlife.com.au.



If you’re a regular reader of Australian tech press, you’d be forgiven for thinking that launching a startup here is dead easy.

“Australia now leads the world in terms of the pace of online business start-ups,” BRW breathlessly claimed, and “Australia named among best five countries to be an entrepreneur,” another article stated.

Ask any entrepreneur building a business in Australia, and they’ll likely tell you the opposite. Rigid tax laws (such as the controversial ESPO regulations), a less evolved infrastructure and a more challenging funding environment make it tough to build a successful business in Australia.

Gaining traction in a smaller market place can be an obstacle too. Case in point: One of our largest and best funded local e-commerce businesses – The Iconic – is on the brink of blowing up, with a $45 million loss in around 17 months of operation.

So recognise that it is hard … but realise it is not impossible.

Success in Australia looks different to that of our international peers, and the key is in understanding our country’s unique landscape.

Here are five tips for creating a successful company in Australia:

Learn first:

The desire to do something better is embedded in the culture of tech startups. It’s admirable no doubt; but don’t jump in without the experience and knowledge to succeed.

I spent many years working as a consultant and in finance because I knew I had to develop my knowledge of how the best companies run and what makes them successful. With a habit of plucking the brightest minds straight out of university, large consultancies and banks create some of the best training grounds for supercharged learning.

My time in industry taught me the importance of a solid and scalable infrastructure backbone, the criticality of dependable systems and just how important efficient business processes can be in long term success.  This knowledge enabled me to create Paws for Life’s highly scalable operations platform. My experience working with some of the leading business minds in the world prepared me for the process of raising capital and understanding what investors look for in a business.

Acknowledge the gaps:

At some point, you have to dive in and start creating the business you’ve envisioned. Recognise that you won’t have the time or knowledge to do everything. Investing in a solid team is the best thing any founder can do. My co-founder, James, has a PhD in applied maths and 15 years experience in software development, so I know we’re in good hands. I acknowledge that I don’t have the marketing expertise needed to grow our business to the next level, so I invest in people that do.

Think Australia-specific:

It’s tempting to take an overseas business and try to replicate it here, but there are many factors to take into account. Why should the business live locally instead of overseas? What’s to stop an international company dominating the local market? Why should your company be based in Australia? If you can’t answer these questions then you need to reconsider.

Take our example of The Iconic: UK company Asos is bigger, has greater benefits of scale across sourcing and manufacturing, and can deliver from overseas for less than it costs to deliver within Australia – not to mention the 10% pricing advantage given to international firms due to our GST regulations. These are huge barriers to success.

While the idea for a pet supplies delivery service came from witnessing my father struggle to carry home big bags of food for our family golden retriever, I diligently researched the market before making any moves on one big idea.

I recognised early on that not only is the pet food industry in Australia growing year after year; it is counter-cyclical. It grew throughout the GFC, it hasn’t had a declining year, and average spend per pet is increasing. Quarantine and shipping restrictions mean that Paws for Life should live in Australia, and not overseas.

Know your core competencies

Our customers want a seamless experience: easy online ordering, efficient delivery on time every time, and good customer service. These are items we will not compromise on, and it’s crucial to our business that we own the process in-house.

Overseas investors look at Australia and often say: “You can’t create an e-commerce business in a country so big with such a small population.”

In fact you can – 85% of our population lives in three major cities on the Eastern seaboard – but you’ll have to manage the entire operation end-to-end.

Many US and European businesses will outsource their logistics and warehousing to other companies to make things more efficient. It’s not possible here. We simply don’t have the sophisticated, well-evolved logistics infrastructure of overseas markets.

At Paws for Life we manage everything ourselves, from developing our technology, to warehousing and logistics, to distribution and customer service. It is the only way we are able to ensure our customers get the level of service they expect and deserve.

Prove your model to potential investors:

First and foremost, you need to be able to survive without funding. A self-sustaining business is more attractive to investors and gives you the choice to take on investor capital or not. It’s a better position for everyone involved.

The limitations of the Australian market can make e-commerce capital intensive, and funding can be helpful. If you do decide to go down the capital raising route, know that venture capitalists are looking for proof of model.

We have significantly outperformed similar pet businesses in overseas markets on key metrics.  If we were in their markets, we’d be the number one player. The fact is: Australian VCs call for a stronger case and most Australian businesses are too small to attract American money, particularly if they don’t plan to expand internationally. Recognising that challenge is a key factor in your game plan.

Overseas startups provide inspirational fodder for Australian entrepreneurs, but they should not be considered good models for business. The entrepreneur that recognises our unique conditions and innovates accordingly, will have the best success.

Published: Wednesday, October 16, 2013


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