Echelon 2014 Report

Jun 12

Echelon 2014 Report

Warning: this is one of those “airline lounge” essays – a brain dump. I’ll get back to normal blogging later today with continuation of the  “How to understand who your users are” series.

I just spent a few days at Echelon 2014 conference in Singapore. Echelon is a conference specifically bringing together innovative tech companies with investors all based in the Asian region. Many companies are startups that are on their way and others are not much more than a deck of slides.

My TL;DR insights from the trip:

<TL;DR> 

  1. Any advantage Australia originally had in building startup ecosystems is evaporating. We are falling behind Asia’s innovators and ecosystem.
  2. Government involvement in innovation takes 2 forms:
    • active support (Grants, education/mentorship programs)
    • get out of the way (legislate so market forces can flourish. Capital Gains Tax breaks, Stock Options, Tax Rebates)
  3. The support from 2.1 is useful in nascent markets but also creates “Grantreprenuer” & Entitlement mindsets.
  4. Malcolm Turnbull is the problem for Australia because he positions himself as an open and understanding advocate of innovation but has neither argued for an innovation mandate nor implemented any of the well know changes required.
  5. Investors invest in companies domiciled in “friendly” countries.
  6. Its STILL mobile-first in Asia!

</TL;DR>

More on Echelon…..

E27 runs the event (check #echelon2014 for comments) and it seems agenda is to foster communities across the region and educate via events. Big shoutout to Mohan (@mohanbelani) and his team for an incredibly successful event.

There were comments from locals that many Echelon speakers were ‘the usual suspects’ – I’ve seen this in the Australian startup scene but generally there is now more depth in the Sydney community to get speakers with actual experience. That said: I don’t think it matters as the audience was from out-of-town and also there was some high quality speakers flown in. It was interesting that McClure was fairly taciturn and measured – I certainly noticed that the audience is fairly reserved so maybe last year he scared the locals 🙂

Energy

I’ve previously founded two successful global startups and so being on my 3rd is quite often a matter-of-fact affair – I love tracking to product-market-fit and the roller coaster that everything “startup” entails. But what I really love is working with a small team who are bloody fantastic; all pulling together to create a world-beating product. No politics or CYA, just everyone rowing in the same direction. Its easy to get out of bed to work with this team!

But as I said, the sheer mountain of work and relentless uncertainty sometimes means I don’t get screamingly super-pumped and do the monkey like Steve Ballmer (link). So attending Echelon was energising to mix with a lot of high energy people (youngsters and seasoned) and the huge sense of optimism that someone will break out and become a huge success.

Exits in Asiapac are still a rarity but Vixxi and Viber acquired by Rakutan show signs that there are big rewards for toil and great execution. There is a gold/oil rush mentality but something about the people in tech means the rush has commerarderie and never openly descends into kill or be killed like “There will be blood” – of course once your competition is known, its hand-to-hand combat on so many fronts that battles are won incrementally by sheer hustle.

Delusions

The reality is that most battles are with your own delusions. 80% of businesses at Echelon this year will not be around next year – some won’t be around next month – the attrition is largely due to shipping a product that no-one cares enough to pay for.

In the US angel and many VC-backed companies huge user traction so monetisation is deferred and the funding provides enough runway to “figure it out”. In Australia the dearth of investors who understand tech is small and so mostly companies get funded after repeatable revenue is found – thats not a bad thing but it guarantees you’ll never see a Twitter emerge from Australia.

What the Investors like

In contrast: the investors at Echelon seemed united in “traction trumps revenue” (at least in lip service) . This is much more like Silicon Valley thinking and probably fuelled by the ubiquitous penetration of WhatsApp in Asia. Everyone uses WhatsApp, Facebook is seen as a lumbering nuisance but WhatsApp’s lightweight utility is what is used for business and social. So when it exited for $19 Billion everyone takes notice.

This kind of attention hints of bias to B2C as an investment preference ahead of B2B/Enterprise startups. Most novice angels fund what they understand and selling B2B products usually emerges from deep understanding of an sector need that is often esoteric to the uninitiated. This is where Silicon Valley investors have an advantage. They (VCs mostly), see enough deal flow and portfolio company activites to know the problems and spot the emerging solutions.***

The Singapore scene

Closely coupled with the investment community is the various government support programs. There are $50K grants for bootstrapping startups and there are co-investment mechanisms as well. I don’t profess to know all the acronyms or programs but its clear the government want innovation at the centre of the new economy – this is where the “Grantreprenuer” phenomenon comes from but to me this is generosity fostering a long-game. Contrast this with the current Australian Government “Commission of Audit” who can’t see past a 24 hour news cycle to drive a mandate beyond their own electoral defensibility strategy.

My 3 goals for visiting Echelon were documented by Phil at Pollenizer. As you can tell I’m seriously investigating whether StreetHawk should remain an Australian company**. From Echelon its clear that investors don’t want to invest in Australian domiciled companies – Singapore provides a far more attractive Capital Gains tax regime in comparison to Australia’s punitive approach to success.

But Singapore is challenging in other ways:

a) Its an expensive town. The locals are toughing it out with increasing living costs especially if you have school age kids.

b) Skilled tech people are in short supply. New employment conditions are coming in August that make this more challenging. In recent years programmers from Vietnam or Thailand or Indonesia could make a great wage in a funky startup but still at a discount to a local’s rate. With the new conditions, I hear salaries will have to be ‘market rates’. Some commentary around this has to do with controlling the influx of hospitality staff but affects the tech sector too. Next door in Malaysia they have some pretty aggressive incentives that are worth considering.

So its ironic that many of the challenges of Silicon Valley are emerging in Singapore before the tech sector has had a chance to get the exits and create wealth. Its hard to tell if this will stifle innovation.

There is no doubt that Singapore is setting the lead for region through the combination of government support and vibrant investor ecosystem.

Mobile First

Another takeaway is a reiteration of earlier post about Singapore and Hong Kong. It is totally “Mobile First” in Asia – of the stands at Echelon, I would estimate that 50-60% were delivering Apps as part of their solution. Needless to say StreetHawk was very well received by the solutions that were launched and were aware of user retention problems.

Maturity

I had an amusing response from one startup that said they didn’t need anything like StreetHawk because “we’d be looking to grow our app in a native way.” and “We’re going for organic growth”. This is a recurrent theme with immature startups, they assume: “If we build it they will come” – but whats more true is “if you build it they will leave” – customer retention is not considered important or understood – as I mentioned earlier our delusions that users will love our product as much as we do is a major barrier to startup success.  Just by adding StreetHawk in our FREE monitoring mode this App owner would be able to understand what user segments he has and be able to understand where his users are losing interest.

Perhaps he thought StreetHawk was an advertising plugin…..


** I moved ThreatMetrix to the US because that was where the customers were. There was not enough (at the time):

    • e-Commerce in Asia
    • e-Commerce fraud in Australia.
        IOW – We needed to build the business where the actual need was.

** Its got a lot better in 2013/2014 for accepting international payments (not at the behest  of the banks but because of US and Australian startups doing the hard-yards) – which is a pre-condition to actually growing a SaaS business.

*** That said: the winners of the pitch competition were B2B.

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