Starting small for big impact

Starting small for big impact

Find the right niche and the rewards can be immense

The premise: Your business is a start-up in the ICT industry and you have an unlimited amount of money at your disposal. The questions: As the company’s leader, in which technologies would you invest? In what direction would you take your company? Which industries would be best to target, become a niche player in, or attempt to monopolise?

That’s a handful of tough asks. But start-ups are the focus of intense scrutiny within the industry as the both structure and opportunity change. And for the start-ups that find the right niche the rewards can be immense.

For instance, an increasing number of large vendors have recently gravitated towards innovative start-ups as they seek to acquire them and include the technologies in their portfolio umbrella. Some have even launched competitions to seek start-ups that stand out in their solutions space.

For instance, Rackspace Hosting introduced an Australian start-up pitching competition to find a small start-up that has the highest potential to change or disrupt an industry, and the greatest impact on the largest number of people or businesses.

Why? Rackspace Australia director and general manager, Angus Dorney, pointed to a PricewaterhouseCoopers (PwC) report, which found that start-ups alone could contribute $109 billion and 540,000 jobs to the Australian economy by 2033.

“With Sydney and Melbourne ranking 12th and 18th cities globally for start-up activity, and Adelaide, Brisbane, and other cities hot on their heels, we’re seeing a surge in activity in local entrepreneurship,” Dorney said. So let’s look at those initial questions and find some answers.

Market monopoly

Thomas Duryea Consulting CEO, Andrew Thomas, said start-ups should invest their finances into disruptive technologies that are not ‘me too’ in the market.

“I would look into the mobility, security, Big Data and Cloud spaces, then developing a niche solution that doesn’t have a huge barrier to entry. The goal is to catch existing players off guard,” he said.

Thomas claimed the massive increase in mobility and data storage means that the role of business intelligence (BI) is changing rapidly.

“There are a host of BI companies trading on what used to be relevant but, now, it is a very expensive way of doing analytics. To bring the new thinking to market, you need a different business model that is nimble.”

He said the rollout of the NBN would aid start-ups in some verticals, such as education and healthcare. “Having faster, cheaper access to the Internet continues to open up markets that didn’t exist in previous iterations of our bandwidth. New start-ups thinking about these fields can completely revolutionise certain verticals with a completely different offering.”

ASI Solutions executive director, Maree Lowe, highlighted a several key areas start-ups can move into. According to Lowe, the software space, especially around the development of applications, is very lucrative.

“That market is going to be driven by the move of applications to the Cloud and where there is room for subscription annuity payment. There is going to be opportunity in terms of its development as well,” she said.

Network infrastructure is another key market, Lowe said, as she expects massive demand for new network infrastructures to support all the changes in the industry. She added this would lead to an increase in business within the hosting and datacentre space.

The third technology Lowe said start-ups should take on is 3D printing which has the potential to deliver even more than the already considerable hype surrounding it at the moment.

“It is bringing in a whole new era to printing and it will be adopted across a range of verticals,” she mentioned.

Key focuses

Some of the industry experts said regardless of the technology involved, start-up businesses should follow some guiding principles.

InfoReady CEO, Tristan Sternson, said identifying complimentary alliances is a principle a start-up should look into. As start-ups don’t have much penetration in a market, he said they need to leverage their networks as much as possible by offering incentives with these companies.

“In the past, we had to spend time customising technology solutions to meet individual organisations’ needs but now, being able to complement the offerings of partners is useful. They have the marketing, intel and contacts and that helps us a lot,” he said.

Sternson also pointed out the importance of having an indirect go-to-market model with distributors that fit in well with the start-up’s plans. “A small local start-up will not have the best proofs of concepts, best ways to implement a technology, or market knowledge. Partnering with a distributor enables a start-up to access all that information,” he claimed.

ShoreTel A/NZ managing director, Jamie Romanin, said making an inroad with a flagship system integrator will help drive mutual sales opportunities and growth.

“Invest in a channel partner that will be your right hand man in the early days in helping you successfully deploy those first few customers. And make your product the flagship one of their company.”

Romanin also stressed the importance of investing in technology to make sure these start-ups have the tools and capabilities to capitalise on growth. “Establish your own IT infrastructure based on best of breed technology and streamline your business processes.”

According to Romanin, building on the brand – through marketing and lead generation – is also something start-ups have to do if they have the finances available.

His final piece of advice was pick a vertical where the products they created would work best. “Build yourself one, good vertical that you can then take and apply that same model to other verticals. The healthcare, finance and professional services, and government sectors are some viable spaces,” he said.

How to budget for start-up success

Newport Capital managing director, Lou Richard, advises start-ups to focus on revenue generation, instead of producing budgets in the early days of the business.

He claimed start-ups should have a clear definition of what their market is, work out their accessible market, and have discussions with people in determining revenue prospects. “When you have no idea of what your revenue horizon looks like, you should be spending all of your waking hours going out and promoting your opportunities to promote revenues from your technology,” he said.

According to Richard, they should also have a well-established criteria backing up predictions of the business before taking on investments from venture capital or high-net worth companies.

“Investors want to know your worth for the medium to longer term so you need to create a compelling story as to why you are going to increase in value over the next few years. That is dependent on revenue creation and earnings,” he said.

Government support for start-ups

The Federal Government announced, in June, that it will consult on crowd-sourced equity funding (CSEF) and review employee share schemes in supporting tech start-ups and driving digital innovation.

A review will also be conducted into employee share schemes (ESS) to help address the barriers faced by start-up companies in attracting and retaining staff.

In addition, the NSW Government labelled the state as ‘Australia’s innovation powerhouse’ after unveiling Innovate NSW, a $6.7 million scheme aimed at backing progressive start-ups.

Minister for competition, policy and consumer affairs, David Bradbury, said, the Government should look at the framework around employee share schemes with an eye to supporting the development of start-ups in Australia, particularly digital start-up.

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Tags NBNappsapplicationsTelecommunicationsnetwork infrastructureASI Solutionsthomas duryea consultingShoretelNewport Capitalstart-upsInnovate NSWRackspace HostingInfoReady


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