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Startup incubators

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Cameron Rambert, store founder of Geniaus.

Incubators are usually associated with raising chickens or growing moulds in a dusty laboratory. When it comes to startups, the idea is the same – helping things to grow in a controlled environment – but the aim isn’t to replace a hen or to grow a new strain of penicillin.

Startup incubators combine the magical ingredients of mentorship, training, support, perks and a limited amount of funding. These are things that are usually in short supply when someone is starting up their own business, or a few years in and planning a big growth phase.

Some of the most famous include Y-Combinator and Techstars in the United States, but they have so many applicants that only 1% of those that sign up actually make it in. What isn’t quite so well known is that there are a bunch of incubators – or seed accelerators as they are also known – here in Australia and they are thriving.

One of the most common misconceptions about incubator programs is that they are only for startups, or only for techies looking to code the next Facebook – they are actually open to just about all types of business.

Take Belinda Jennings for example. She founded BabyBargains.com.au a couple of years ago in Adelaide because she was fed up with how much of a nuisance it was to sell old baby clothes that her kids had grown out of.  

Belinda started off listing her own items for sale on a Facebook page, and found that other mums quickly became interested in the idea – the page became a hub for the pre-loved infant clothing trade in South Australia. After that took off, she decided to move the operation to a full-blown auction site and now has thousands of listings and over 23,000 followers on Facebook.

Back in 2010, Belinda was looking to take her site national – the business was known as Adelaide Baby Bargains before she dropped the Adelaide and took the idea to the rest of Australia – and it was a chance meeting over coffee that steered her towards a startup incubator.

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Belinda Jennings, founder of Baby Bargains, and her son James.

“I met with one of the directors from Innovyz – to talk about another client of his – thinking we could work together to promote them,” she recalls. “Then I got to talking about what our business does and who the people behind it were, and he started telling me about the program – I was like ‘oh my god, this is for me’.”

The application process was a series of forms filled out online, asking questions about the vision for the business and how the day-to-day operations worked. There were also questions about how Belinda planned to grow it. Innovyz also makes applicants send across two videos – one talking about the business and another showing off the team.

“It was 1:00 AM in the morning by the time I finished that video,” Belinda says. “It took a little while to get three minutes in one take without fumbling what you are saying.”

Belinda’s persistence paid off, as Baby Bargains was chosen as one of 15 finalists for a spot in Innovyz’s April intake. She explains that there were 130 applications from 17 different countries all vying for a spot. The next step was a Skype call with the directors from Innovyz, who asked a bunch of questions to try and put Belinda and her team on the spot.
It wasn’t long after that things started to happen quickly. One of the requirements of the Innovyz program is that participants move into the group’s offices in Adelaide for 12 weeks.

“Once we were settled in, we met with around 30 mentors that flew in from around the world,” Belinda says. “They were all CEOs who had built successful companies. We looked at every aspect of the business from marketing and financials to planning and we would go over it together.”

Deep diving

“If they liked what they saw, and saw an opportunity to further mentor us, we would do a ‘deep dive’ with them – which is a 2.5 hour session,” she adds. “Each week these waves of mentors would come through, and it was a really valuable opportunity to get inside the head of these successful people and see how they can contribute ideas and opportunities for us.”

In addition to the mentoring, Baby Bargains was given $18,000 and Innovyz took a minor stake in the business. This is commonplace for incubator programs, and ensures that all parties benefit from the arrangement. Belinda explains that there were also a bunch of perks – such as free accounting software, $10,000 in PayPal credits, web hosting and free office space for 12 weeks.

“At the end of the 12 weeks, we had our demo day,” Belinda says. “The aim of it was to get us investor-ready and then go out and pitch. All the way through, I was quite nervous about pitch day, and I was really hoping I didn’t stuff it up.

“To get up on stage and just pitch for six minutes with no notes and just knowing your story and  what your vision is – it’s so powerful,” she adds. “We got overwhelmed with interest from investors, so it was much better than I expected.”

Walking away

Kris Bondin decided to walk away from his job at a financial planning firm and go into business for himself helping families to budget. He started BillsToPay.com.au which is all about cash flow management – you have Kris and his team manage your funds, pay your bills, and save your money for you so it’s all managed properly.

Much like everyone else, Kris receives a lot of email advertising in his inbox, but one such program struck a chord with him. It was for The Entourage, a mentorship program that was setup by Andrew Morello who won the television show The Apprentice.

The ad was for a one-day event, with around 400 people showing up to listen to a panel of experts talking about how to sell yourself, how to increase your market share, and general planning skills. That one cost $47 for the day.

“After that they sell you a two-day program which is about 20 people in the room and it costs $1,000,” Kris explains. “At that one they spoke about sales, public relations, capital raising and getting your mind in the right place if you want to grow beyond a small business and think large scale.”

The next level

“Then I signed up for the next level program which is $1,000 a month, and you get one day a month allocated to you for the next 12 months,” he adds. “One day a month you sit in a room with about 20 people and you get access to all the advisors. Every month it’s a different topic – one month they might talk about marketing, next month sales, etc.”

For Kris, the investment has been more than worth it, as he took a lot of risks in his first year in business and the mentorship he received at the program has helped him to realise where he had wasted money.

“I think of it now and I could have used that money on something that would get a better return,” Kris says. “You just throw $10,000 at some type of marketing and you think it’ll generate that kind of return and it doesn’t – I’ve wasted a lot of money like that.

“Now I have taken the foot off the pedal and gone ‘lets absorb it – let’s do this properly and take our time’,” he explains. “You can bounce your ideas off people that are in the room and the senior advisors that are experienced in business can tell you to change this, or don’t do this, or go ahead and go for it.”

As part of the Entourage program, Kris was encouraged to enter the group’s Entrepreneur of the Year award. The award wasn’t just for Entourage members, it was open to the public, and the judging panel featured people like Ruslan Kogan, founder of Kogan Technologies, Jack Delosa, founder of MBE Education and Andrew Morello.

The application process was an online form, from which the judges thinned the list down and invited finalists – of which Kris was one – to a pitching night at the Melbourne Convention Centre in a room of over 500 people.

“You’re not only pitching to the investors, you’re also pitching to the audience in front of you,” Kris says. “I had eight minutes to talk about the business and tell them why they should throw money in and then you get six minutes of questions from the panel. The questions were like ‘why is this going to work’ and ‘this won’t work – explain how it will’.”

Kris went on to win the competition, and notched himself a bunch of prizes such as three months worth of serviced office space, six months of search engine optimisation help and a couple of business education courses.

“To pitch your business, most people are embarrassed – they’re speaking about themselves in front of an audience,” he says. “Public speaking isn’t going to be for everyone, but I figured I would just jump in and give it a real go.”

Cameron Rambert doesn’t run a traditional incubator – rather he heads up Geniaus, a shared office space in Melbourne that runs programs for its members. Rather than front the overhead of getting your own office, entrepreneurs can share office space
for a monthly fee. Cameron also puts on a number of pitch nights and mentor programs for members.

“We’ve set up a couple of relationships – both formal and informal – with investors across Melbourne and we’ve invited them to a couple of showcases for some of the innovations that are coming out of Geniaus,” he says. “Two ventures got funded, one by a Norwegian venture capital firm of all things, and another by an angel investor.”

Geniaus actually started out as a way for Cameron and a few other entrepreneurs to get together and save money on office space. They ended up working on each other’s projects as a way of sharing resources and skills and then formalised it into a program.
There are, of course, other options out there if you don’t want to go the incubator route. The Federal Government runs the New  Enterprise Incentive Scheme (NEIS) which is run by Centrelink and helps businesses out with a stipend and the ability to apply for a low-interest loan.

“NEIS is OK – you’re essentially paid to write a business plan,” Cameron says. “It’s the best one out there, but they need to implement better ones sooner or later. If you are looking at starting a company or a business and you want some formal education, perhaps consider going to your local university and see if they have an entrepreneurship program – like RMIT does, which is where I came from.”

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Alison Hardacre, cofounder of Healthkit.

Alison Hardacre is the cofounder of Healthkit, a company that sells management software for medical practitioners, and she has been through numerous pitch competitions.
“The first one we did, we heard about through our friends who had startups,” she recalls. “This is going back three years ago, and we thought ‘oh well, we’ll just apply’.”

That first pitch didn’t go so well, but it was great experience, and Alison decided to stick with it. A couple of years ago Healthkit was a runner-up in a pitch competition with a $100,000 first prize – unfortunately runners-up only received a six-month subscription to New Scientist magazine.

“Two months ago we won the ICT industry award for e-health (the I Award), which is the major award for health,” Alison says. “We beat out the likes of CSIRO, NEC, Medicare and several major hospitals.”

The various pitch competitions Alison and the team from Healthkit has entered has helped with cash and a host of freebies. All up, she estimates they have won upwards of $20,000 in cash and another $40,000 worth of prizes.

“Tech 23 is a good example,” Alison says. “It’s a really good pitch competition we were in this time last year. We pitched there and were one of the 23 finalists. In the audience was the cream of the ICT investors and professionals in Australia, including the founders of Angel Cube.”

It was that event that put the Healthkit team in touch with a number of investors – even though they didn’t win – and Alison and her cofounders are now mentors with the Angel Cube startup incubator in Melbourne and have made even more contacts because of that.

Pitching tips

We asked Alison to come up with some advice for first timers looking to get their feet wet.

“I think often there is a set formula for how you actually do a pitch,” she says. “When the panel ask you questions is when you can really go into the depth about your venture. Often, you will have a really short amount of time, so leave the detail to the question period – that’s when you can really shine.

“Keep in mind that during the questions you will be asked something that you have never thought of and it’s a good opportunity to think through your business,” Alison says.

“When you approach these things in a state of panic and fear it never goes well. But when you approach it as an opportunity to talk about all the things that you have achieved and to learn from the judges as mentors – that’s when you really get the most out of these competitions.

“The startup scene is a lot more evolved and organised now. There are meet-up forums every month and lots of technology blogs that you can use to find out about events.”

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