Melbourne Startup Camp: the good, the bad and the VC

How do people working in the web industry get hands on experience in doing a startup from scratch? The traditional path is to actually do your own startup, but not everyone has the skill set needed to cover every aspect of a startup, and then, how do obtain this knowledge in a way that is anything more than academic in words. The idea of a hands on event offered by Startup Camp offers that bridge.

Startup Camp came to Melbourne this weekend, and I was happy to take part. A point of clarification on the name though: although the event was called Startup Camp, it wasn’t the same format as the excellent event of the same name held in San Francisco in May. Instead, the Melbourne Startup Camp was closer in format to Startup Weekend, an intense Friday + weekend event of developing a startup from idea to product and pitch.

The following is a mix of observations on the event as an idea, lessons learned, and actual startups and interactions from the event. There’s probably three separate posts I could write, but given according to the VC I talk to much, I’m owning the tag with a mega post instead 🙂

The Good

The Format

Two and a bit days to come up with an idea for a startup, then to deliver it, complete with prototype, business plan and pitch may be (and was) an intense experience, but it challenged every participant. For developers, it focused their attention on results, and took away the luxury of time. For those in marketing or the broader business side, it forced decision making and hard decisions without the luxury of broader testing. Everything from the logo, site design and the usability/ needs case, through to financials and final pitch. It worked, and in my case it forced me to think outside my comfort zones, to hone everything from brainstorming through to tangents in revenue streams. Working on a business plan, something I’ve never particularly been fond of, refreshed my skills in doing so, and gave me some hands on practice.

Best of show: Marketbeagle

The best startup to come out of the weekend was a SME focused marketing tool calls Marketbeagle. Aside from the best logo and reasonable site design (best from the weekend, but it was prototype), the idea stood out as having a real use case and strong business potential.

Here’s the official spiel

marketbeagle tracks success in your marketing campaigns through easy to use data capture and analysis tools. We’re committed to helping your business achieve its goals through giving you a better understanding of where your marketing budget is going and how hard it’s working for you.

Originating at the intensive environment of the first Melbourne Startup Camp in 2008, marketbeagle saw a need for a simple marketing campaign analysis and reporting tool for small to medium businesses who might not have the expert staff still need expert advice. We bring businesses together and provide industry-wide trends in market-effectiveness as well as customised and personalised results.

bitofpluck

bitofpluck was the product I ended up involved in, if not from the beginning of the camp (see below for more). It was an interesting, and unique idea, matching people for casual meetups in the real world. Not dating, but not social networking. The platform would be offered by web app, website and eventually SMS, so say you were in an airport with free time and nothing to do, you could meet a new person for a coffee or chat where you shared the same interests. This extended to broader travel and social settings, for example you’re at a music festival by yourself but would love to meet someone new.

It was a hard sell. It crossed lines into existing services, but in itself it was completely unique in what it offered. We could scale it, but the important factor was always going to be people: without enough users, it failed out of the gate, because you can’t match people without enough people in the system, and available for meetings. It did have other possibilities: a couple we came up with were white label version for events/ conferences, for example a conference organizer may want to match like minded people, and with SMS side had appeal in bridging the digital divide globally, and for encouraging phone use, something telcos in particular (presuming we could demonstrate the appeal) might want to offer as a value add to increase customer use of services such as mobile data and SMS.

The bad

Forcing a mix of people

After the Sydney Startup Camp, the organizers decided to intentionally mix skills sets up among the groups. They found that in Sydney, lumping developers together who programed in the same language only resulted in them replicating what many did in their day jobs. In Melbourne, we had developer teams that worked on different platforms, and in different languages, so getting a consensus on what to use to build the startup resulted in dispute, and at least in the bitofpluck, resulted in 6 hours wasted developing the service one way, to completely abandoning that work and starting again in another format. In a real world startup environment, the development team will nearly always been on the same page, and share similar skill sets and preferences.

iSportster

The original group I started the camp with came up with “iSportster,” a web based scoring and basic social application for indoor sports. The execution at the end of the event wasn’t overly bad: the prototype seemed solid enough (and it’s a credit to guys like Cam MacRae and Scott Goldie that it did), and you could see how people would use it. But where it failed was on the market test.

During the idea phase the group came down to two ideas. The CEO for lack of a better term (the reference to I and my team in the final presentation was telling) argued that indoor sports centers didn’t have any web based scoring and would use this based on an argument that centered around the fact that he played indoor sports, and he had never seen anything like this. I argued that I had seen services like this in 99 (I spent a number of years in sports management and marketing), that there was a range of companies today offering variations on this theme, including scoring, and that it failed on the market test because there was too many funded competitors. I was told that I didn’t play indoor sports, and had no idea about the market, and that indoor sports were different to sports in general. I said more than once that I would support the idea when they could convince me in facts that there was room in the market, and that indoor sports centers would use it (that they don’t use a service like this now isn’t justification of an unmet need, it only proves that they may not be interested in services like this at all).

After 10-15 minutes of this, biting my tongue while the CEO made the argument personal, including direct attacks, I’d had enough. I can’t repeat every word I said, but the polite version was me saying that he could have his idea, that if all he could do to argue his point was personal put downs it was telling of weakness of his argument. At that stage I found the organizer and said basically that I was here to learn and have a great time, but this was not acceptable, and that I’ll see them all later. I was asked to say and offered a place in another group, and not wanting to miss out, I took it.

The finer points in the story maybe too much information, but painting the picture is important when considering the lessons in interaction, ego, and the need to understand a market before starting a startup.

Passion for what you are doing is vital if you’re doing a startup, and this chap had that by the bucketload. But being passionate and thinking you know everything are two very different things. The first rule of a startup should always be that you don’t know everything, and you should be willing to take on board other opinions. Second, market analysis and research is vital for any new startup, or even a blog: you must know the market you’re going into. There were time restraints at Startup Camp, and the business model, market and SWOT analysis came AFTER the seed idea, but in the real world, they should, at least in some degree, come before you commit to build a startup. Then there’s ego and working in groups: if you have to put down others inside your group to justify your argument, you shouldn’t be in a people management role or a leadership position. Leaders inspire with their knowledge, and through empathy, they don’t bully in bloody mindedness. That people clash and have differences of opinion are a given in every office and workspace on the planet, but leadership requires something better.

The VC

I’ve previously been harsh on Australian VC’s. As a rule, Australian VC’s want to give startups a quarter or a fifth of what an American VC would give a startup, for two, three and often four times the amount of equity. Australian VC’s tend to be highly risk adverse compared to their American cousins, hate early stage investments and very few have any deep understanding of Web 2.0. To be fair, that’s not always the case, and in the recent years I’ve been impressed with some of the VCs I’ve met, and there external factors that contribute to Australia’s current VC problem, the main being unfavorable treatment by Government.

In this environment, getting a VC to attend an event on a Sunday afternoon was always going to be hard, so I make no judgment on the organizers of the event. The Angel investor they found, Jordan Green of Greenson, didn’t disappoint in reinforcing every thing that is wrong with the Australia web scene and venture capital.

His role on the day was two fold: he was meant to be providing a briefing prior to the pitch, and then listening/ providing judgment on the pitches. We’d presumed that his role prior was to give us advice, but it worked out quite differently. Our group was the last to spend time with him, and the first to pitch. He asked us about the business briefly, then started trying to label it with one word. “So it’s dating” was one thing he said. Shallow perhaps, but understandable, you want to get a rough idea of what the site was aiming to do. We explained the business model, and this is where it got fun. He told us that we didn’t have a business model, and (having focused on the SMS provision side) said that our business model should be to spam people in shopping centers and surrounding areas with discount codes to get them into shops. Not only as they walk past the store (a service I’d note was tried in Sydney a couple of years ago, and may still be going), but to everyone around the center, say in a 1km radius. Shopping centers and stores would pay for this he said, and it will rake in the cash.

So with minutes to go before the pitch, everything we’d worked for all weekend, was baseless, because we should go into the business of SMS spam.

I’d note aside from the obvious moral issues around spamming people, that it’s also nearly impossible to do. Governments in Australia can’t get access to send out bulk SMS messages based on geolocation in emergency situations (I have that confirmed directly from a source), a private enterprise would have no hope what so ever.

The group dynamics changed. Many were tired, but the enthusiasm to this point for everything we’d done was gone. People sat quietly, few said anything. Then we pitched. The pitch was went too long, made worse by having to basically make up large slabs of the business model as we went along because everything had been focused on the original model. It wasn’t my finest hour, but I also didn’t think it was terrible either, even if I overcompensated for the business model vacuum by going off in every tangent that popped into my head, trying to find something Green might actually think worked.

All Green said at the end was (and directly to me, in front of the audience) was that I talk too much, and I should never be allowed to pitch to VC’s.

And you know what, if I never pitch to a guy like Green again as long as a live, I’ll die out my days as a extremely happy man.

The other groups presented, and he was harsh on MarketBeagle, saying that its a Saleforce clone (it isn’t) and there was nothing there. Perhaps the clarity in the pitch was wrong, and I don’t recall them talking about competitors in the space, but hey, if they had, perhaps it would have been too long.

His wrap up advice was words along the following lines:

every pitch should start and end in an exit strategy, that’s all investors care about, how much they’re going to make, and when. If you have a business that will be worth $3-5 million in 3 years, don’t bother pitching it, no one is going to fund that, no one cares. No one cares about the social aspects of the business. Lifestyle isnt’ important. You need to say that your business is worth $200 million, even if its a stretch, because that’s all the VC’s care about.

The short version: bullshit and lie, and it’s only about the money.

There is one good side out of Green attending: everyone in the room who had never met an Australian VC before knows that they are anything other than nice people, and any rumors they’d heard about VC’s were true.

For extra bonus points, Green pitched his angel group before he left, telling the audience that they shouldn’t pitch to others because they won’t listen (nice little attack for someone who is suppose to be investment community leader), and that you’ll need to send a check for $150 with your pitch so they’ll read it. It really says everything: only in Australia would you pay to get screwed over by VCs.

Conclusion

For the highs and the lows, the positives from the weekend made it a worth while exercise. New contacts were made, networks established, and besides the lack of sleep, many found strength within themselves to create some new and unique, and to challenge themselves in the spotlight. There may not be a successful startup of the three created at the event, but if only a handful of participants use their experience to start their own, it’s a win/ win for the idea, and for the broader Australian web 2.0 industry.

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