For the last word on how to build a successful high-technology company, I have thrown it over to a group of exceptional people to share their advice and to help you on your journey.
Some have failed, but gotten up and tried again and succeeded a second time. Many got it right first time. All have something to offer and I am grateful they took the time to share their experiences and now leave you in their hands:
Dream incredible outcomes and then attract the right people into your business to realise them.
If a potential investor spends time talking about their honesty, integrity, faith and family, get up and walk to the door and keep walking.
Every business venture, like every battle, should be entered into with full commitment to success, but as time progresses and defeat becomes the most likely outcome you should withdraw before you have wasted all your resources.
Your board is not the enemy even when they tell you things that you don’t like, maybe, just maybe they are right.
As a CEO your key job is to lead, this is especially so in times of trouble or conflict. You can’t do this if you are tired, stressed and lacking perspective. So look after yourself, any fool can have a breakdown.
Make the simplest product possible that is an expression of your idea and get it in the market, if it makes money then you can start working towards your dream product.
— Joe Morrison
Understand that the motivation for external investors is the money they can both personally earn and additionally gain for their employer. They don’t care about the business, only what it can deliver to them. They don’t have to like you or vice versa. Also, never try to persuade an institutional investor they are wrong. They truly believe they know everything about your market. Work around them.
Be explicit as to what the financial returns your investors are seeking, be it earnings or cash growth. Always remember that in a small business, sales are vanity whereas cash is sanity.
Truly understand customers’ needs, as having the best mouse trap doesn’t guarantee success, whereas truly understanding where your offering meets a customers needs and has a definable value proposition is critical.
Talk and talk to prospects and competitors and more importantly shut up and employ active listening.
— Michael Chick
In my experience most New Zealand companies do not appreciate how big the market is out there. To stay alive in New Zealand you will probably have to grow your business across a broad range of activities. However, when you look offshore you must narrow down the focus to the area you are strongest in and make sure that you are the best in that space.
— John Waugh
Just get on and do it: get the product out there and see if it will sell, or at least get market feedback on what the product should be. Don’t theorise too long about what the market wants – go and find out.
1. What is truly unique or compelling about what you offer, and how easy is it for others to replicate? 2. Is it mainstream, or has the potential to be mainstream? 3. In a world where all your target customers/partners have a thousand things competing for their attention, how can you quickly communicate a compelling proposition that they will hear?
If the answer to question one is that there isn’t anything truly unique, or it is easy to replicate, then question how much investment you want to put into the opportunity.
If the answer to question two is that it is, or has the potential to be mainstream, then think about what your sustainable competitive advantage will be once the “heavy hitters” of your industry segment decide to fill the gap.
Will you compete, try and complement their moves, or try and provide them with the starting platform (for example, sell your IP to them)? Any of these outcomes may be okay, but don’t assume that any of them will be easy! If the answer to question 3 is “that it isn’t that easy – it is a complex/clever solution that needs time to be understood” then forget it!
— Scott Green
“Think big” – just because you’re a small venture doesn’t mean you can’t act like a “grown-up” company. This doesn’t mean big marketing budgets, but we always found that doing the basics – like dressing in an appropriate manner for prospect meetings, taking the time to prepare presentations and proposals that looked professional – separated us from many competitors. It is more about attitude than money in this regard.
Accept that sometimes luck happens – serendipity played a role in the development of our company, and sometimes you need to stop questioning whether or not an opportunity really is too good to be true and grab it with both hands. But stay cynical and realistic too – while occasionally good luck happens, Murphy is more often correct and “sh*t happens”!
— Mark McGeachen
Learn to sit on the customer’s side of the table! Imagine you are your customer and you have just sat down to make your pitch. You (as the customer) have never met this person from the other side of the world, have not heard of their company and know nothing of their product. What would this person (you) have to do to convince you (as your customer) to buy? Then approach the sales process as just that – a process in human relationships and not a one-off visit expected to result in an opened order book.
— Garry Reynolds
My advice is to get someone experienced in business on board as a non-exec and mentor – someone you can bounce ideas off and get advice or pointers in the right direction when needed – with the incentive that if the venture is successful there will be a financial payback for their investment.
In addition, having financial input and guidance is key – a good business idea is one thing – financial stability and the ability to secure funding if needed is essential. Cash flow is key for small businesses and potential investors want 100 percent solid financials and forecasts. A friendly retired accountant for example is a “cheaper” option to get this advice – someone who wants to stay active and can provide the necessary guidance in the early stages.
Pretend to be five years older! Ensure branding, marketing collateral, website, product documentation, exhibition booth and other customer-facing material are of a standard that one would expect from a company five years older. This image will portray a successful operation and makes potential customers/partners feel more comfortable in doing business – which is to say it removes another roadblock.
— Ray Duncan
Strategy, then structure, then people — never in any other order. Make products for markets, not markets for products If you have to spell out your URL to others, change it.
— John Wood
While there is always a lot of advice as to how to break into offshore markets, the best advice is always from New Zealand companies that have recently done it. The CEOs who have hired the wrong local sales guys when they should have stuck with New Zealanders, the ones that have spent 18 months wrestling with local tax regimes and company formation bureaucracy, those who have figured out how to employ someone in the Middle East and so on.
Learning from their experiences will save you making the same mistakes again and New Zealanders always seem to be very generous with the time and help they give to someone starting out.
— Ian McCrae
Teams: IT businesses are more often than not established by individuals that have an idea that they think, once commercialised, people all over the world will rush to buy. Apart from the fact that rarely is this view supported by any sound market analysis, there is almost no chance such a dream will be realised unless the entrepreneur with the idea surrounds himself/herself with a team of people with complementary skills and, very importantly, relevant experience.
There is an abundance of good ideas, but unless the entrepreneur takes early steps to add people with sales, marketing, commercial and financial skills and experience to the team, and reward them appropriately, the idea will remain just that and never become the foundation for a successful business.
Building shareholder value: Businesses are not hobbies. You have started your company to create value for yourself and your fellow shareholders, and the fastest way to do this is to focus on the revenue line. Getting customers buying your products is validation your offering is meeting a market need and the faster you acquire customers based on a strong and clearly articulated value proposition, the stronger your sales performance will be.
Value proposition: Most IT businesses that I see fail to recognise the importance of having a succinct value proposition that clearly sets out what their product or service is, its primary point of competitive differentiation and the key benefit it delivers for customers.
Prospects don’t want to hear a technical ramble, they want to know why they should buy your product and what it is going to do for them. Your value proposition should, therefore, be developed from a customer perspective and it is worth investing real time and energy in getting it right.
To be successful offshore requires absolute focus on one market where there is an identified need for your product. This can be a geographical market or an industry niche, but do not make the mistake of entering multiple markets at the same time. Doing so will almost certainly end in failure.
— Phil Norman
The biggest pitfall to avoid is trying to solve tomorrow’s problems. That is, thinking you are real smart in being ahead of the so-called curve, but finding out real quick that the commercial need isn’t there yet apart from a few early adopter mavericks who like to play with technology with a little spare budget.
— Frank van der Velden
Value alignment. Although most business advice focuses on things like strategy, capital structure, marketing skills, governance and so on, I’ve found that there is another vital aspect to commercial success for a high-tech start-up. Simply put, you need to ensure that you have an alignment of values and objectives between your founders, shareholders, staff – and even spouses.
Why are you starting this company, and what do you hope to achieve? If this is stated clearly and openly, then it can be a huge help in how you’ll handle the outcomes of your endeavours.
I’ve seen many a good business fail, not through bad products or poor marketing, but because the owners and managers of the company fell out.
Often the disagreement at a surface level is about things like strategy, but underneath there are issues about values and objectives, human emotions such as pride and ego, and even moral concerns.
There should be a broader goal, something that is larger than a person’s financial well-being. A Kiwi exemplar is Mark Thomas, who has been building Right Hemisphere for more than 15 years towards the goal of being a globally successful innovator in the 3D market.
— Scott Gilmour
The legal problems that start-ups have tend to get bigger the more they ignore or delay dealing with them. By this I mean not setting up the right IP structure, especially where new technology has been developed by more than one individual before a company is set up to commercialise the technology.
A general lack of willingness to let go can result in the founder having 100 percent of nothing, as opposed to a smaller percentage of something a lot bigger.
This issue comes up a lot when investors come sniffing – and remember that the only difference between an “investor” and an “inventor” is one letter.
— Wayne Hudson
The Ten Commandments I live by and teach all my employees are: Commanders lead from the front. Always know your numbers before accounting… remember they are scorekeepers. Cash is king. Invest, don’t spend. Always hire the best. Don’t steer by looking at the wake. If you don’t know, ask! Get better every year. CAST: Consistent Application of Solid Technique. Have fun.
— Mike Greenough
Ninety-nine percent of us need to get out more. In our obsessing around technology and products or, as we get our act together – markets and business models – we often miss the key ingredient ... people and relationships.
As a generalisation, software people are logical and somewhat introverted and we don’t always do the people bit easily and hide behind internet/email and so on; forms of communication that are unlikely to provide the input or feedback that will make the most difference.
How many really meaningful conversations did you have today with someone who really uses your product, or may sell your product/idea, or may buy your product/idea, or may have some real world input to your thinking?
— Peter Dickinson
Agree what the initial offering will be – that is what we will take to the market. Agree the launch date – that is the launch date.
— Paul Fyfe
Entrepreneurs are often associated with ambition and extreme risk-taking, but these are not necessarily true characteristics of successful start-ups. Studies have shown that a tolerance for ambiguity and uncertainty are more important – being able to identify what you know and what you don’t.
While you’re busy with your product, don’t forget to understand and define the methods that are critical to the success of your business. This provides the basis for service management and delivery, and measurement and improvement, while putting in place a key building block for scalability. Business value is increased when you pay attention to process (as well as product) and make the intellectual property in methods tangible.
— Chris O’Brien
Focus is critical – the narrower and tighter a start up defines its market and target customer list the greater it chances of succeeding. Being all things to all people in New Zealand will not help when you go to enter a large complex market like the US.
— Greg Cross
The extent of exclusivity to the first client and the post-contract restraints is an issue that seemed benign to us in 2005, but is a headache now. Is it worth expanding on that or have you already covered it in your material?
— Denis O’Shea
The role of the CEO is to network. Get out there, get known and pass leads and opportunities around. In a small market like New Zealand paying it forward will always deliver a return. Even globally the technology world is small and you’ll be surprised by what opportunities come from something seemingly unrelated just a short time ago.
— Rod Drury
At the outset of a new venture, the founding shareholders should be concerned with maximising their value position over the life of the project and avoiding excessive dilution. The way to do this is to focus up front on designing the economic model to be as efficient as possible.
Design of the model should focus on early profitability; finding ways of minimising capital expenditure, focus on productive sales targets first, and minimising overhead growth. Let your customers finance your growth if you can and if you have to, raise capital at high valuations by exhibiting consistent growth and clear path to profitability.
— Stefan Preston
For me it’s all about the business model and cashflow – if the story is right and you have sufficient funds then really good things can happen. I’m just waiting to have this as a personal experience!
— Ross Peat
Great friends make you lucky! Never underestimate the insights, experience and inspiration that you get from your friends. They are the ones you naturally talk to about the challenges you face as a start-up – commercial and emotional. It doesn’t hurt to have many types of friends – conservative accountants through to risk taking entrepreneurs. All of this for the price of a round of drinks.
— David Inggs
In terms of my experience with start-ups it is in the area of developing a realistic business plan and then to have it reviewed/challenged by wise heads – ideally an advisory board. The objective being for these wise heads to challenge the operational, commercial and technical assumptions contained in the plan and, of course, to assess whether there is enough capital to execute the plan until breakeven can be achieved. As well, whether they have the right people involved to execute on the plan.
— Paul Stoddart
One thing that may not be obvious or even open to personal interpretation is that of assistance. More specifically taking advantage of it. There are some excellent sources of assistance out there in New Zealand that can be cost effective and require mostly input from the entrepreneur in time and thinking rather than cash.
Our political system and the tax funded assistance it provides can seem at first complex and to the uninitiated at least, of low real value to the entrepreneur. The apparent complexity can discourage an entrepreneur who feels the need to be “doing something” with their time to generate sales or create a business platform. It is also easy to find critics of government-funded trade development activities.
The reality however, is that we have some excellent systems, coupled with talented people that can provide real assistance to companies in their first years, especially as those companies show promise.
— Richard McLean
Whenever you have some doubt say “Why not!” (Note it is an exclamation mark not a question mark.) There may be times when saying it, will produce some good reasons why “no” is the right option – but more often the self-belief of “Why not!”, with an exclamation mark, is powerful. To avoid plagiarism accusations I acknowledge that Jon Mayson used this in a presentation I attended several years ago. It resonated with me, as I realised that it was the approach I had applied often without articulating it to myself.
— Robin Falconer
So there you have it, I thank you for your patience in following this series of articles and hope you have found something you can take from them to help you build your business.
I would like to close with a final thought and that is to urge you to be as professional as you can in your endeavours.
I urge you that if you say you will do something to simply do it, be it arrive at a meeting on time and prepared to delivering a proposal, product or installation. To under promise and over deliver.
If you do these simple things well and follow the advice given in this series you will have lifted your self into the top 10 percent without having had to write a single line of code.
If you take the time to also read Crossing the Chasm by Geoffrey Moore, you can’t lose!
O’Hara is Chairman of Clarity Commerce, a publicly listed software company based in England. He is also an independent director of Tait Electronics in Christchurch, Futix Limited and Tekron International in Wellington as well as a council member for AUT University in Auckland. Contact him at www.johnohara.co.nz