Podcast: Two Cents' Worth

Two Cents’ Worth: How to pick a winner

So you'd have to say Bill Gates did pretty well with his PC startup, Microsoft.

But here is something you maybe didn't know, Microsoft was not his first bash at a business.

Gates and business partner Paul Allen took raw traffic data, numbers that are usually crunched by a large computer and invented a microprocessor to do the same job.

Traf-o-Data they called it and don't worry if you've never heard of it, most haven't.

By the founders' own admission the business was an underwhelming failure because people were less than keen to pay for information many US states would hand out for free.

Success would of course come for the duo, but it got me wondering if a genius like Bill Gates couldn't get a business off the ground, just how hard was it?

Surely an idea, some cash and bit of luck is all you need. Right?

Every month sees 850 new businesses start up in New Zealand, but maybe 10 or so go into liquidation each day.

While a small number of bigger companies do most of the employing in New Zealand, small businesses, with fewer than 20 employees, make up 97 percent of our enterprises.

To find out what separates the success from the failures, I headed to the Flux Accelerator Demo Day in Auckland, an event for start up companies.

That's where I met Brent Grove, the founder of a company called Beer Jerk. Grove told me it was a love of beer that prompted he and his friend Luke to start Beer Jerk.

"Essentially we'll be sending each other pictures the whole time, 'look what beer I'm drinking, look what beer I'm drinking' and nothing like that really existed on a bigger scale. So we wanted to build basically a club that we could belong to. And that's what we got."

It started out as a subscription service for beer and quickly evolved from there into a way to research, order and review an extensive range of craft beers.

"Beer jerk is all about bringing people and connecting them with the best craft beer around New Zealand and around the world" he said.

Well he certainly had the sales pitch down pat.

The Demo Day was run by business incubator The Icehouse, and beforehand start ups would get a helping hand on what they need to be successful.

Like most of the companies there, Beer Jerk was after one thing. Money.

"We are looking to raise $300,000 tonight essentially to try to boost and accelerate our growth."

"I've seen some of the other businesses out here tonight and man they're pretty cool, a lot of really great tech companies, asking for big money in some big markets, and there's a bit of me that feels like we don't fit in. But beer is cool. So, let's see how we go" Grove said.

What about businesses outside of the tech space, ones who haven't had the safe surrounds of a business incubator to help them get off the ground?

Maybe they've instead done the hard yards in their garage.

That was literally the case for Sara Quilter, who started her natural skincare brand Tailor in 2012 in her father's shed in Taranaki.

"I had a face mask that I was making at the time and I loved it so I started sharing it with my friends and they were like oh my god Sara this is great you should sell this."

Five years later she found herself supplying to big players Farmers and Life Pharmacy and upgraded offices to ones with spectacular views of Wellington's Lyall Bay, where we caught up for a chat.

"In the beginning I was like yes I know that I have a good product, my friends and family have told me that I've got a good product.

And I've sold it to them, and now they have the product. So then, who are my next customers who are customers because they genuinely like the product, as opposed to the fact that they want to support me because they my friends and family."

Quilter quit her 9 to 5 job only to find months later that she couldn't afford to do the business full time and so returned to her regular job to make ends meet while she kept plodding away to make Tailor a success. 

"It took me two years of working pretty much what was a 40 hour week then it was a challenge for two years to then go home and spend another however many hours on the business and then on the weekend and then wake up and repeat that every day.

But yeah..  You've just got to do it, I guess."

There is no doubt launching a business requires a huge effort and a few sacrifices along the way, not to mention, money to back the idea.

Known for being one of the co-founders of Trade Me, Rowan Simpson followed that up with investments in a whole host of tech businesses, some successful, some less so.

He told me he gets pitched ideas on the regular and the most important thing he wants to know about is the company founder is why they care.

"It's kind of cool to be a founder, it's kind of exciting to start your own business, but it's also really hard like doing one of these ventures is brutal, and so unless you have a real kind of passion for the thing that you're working on, and really want that product exists in the world. That's probably not going to be successful in our experience."

And owning your own business is deeply personal, according to business mentor Bob Weir.

"Being successful in business translates to being successful in your day to day living and life, your family, your kids, your mortgage."

Interested to know what makes or breaks a company, he researched and wrote the book "Why Businesses Fail".

"What I found out was the common factor in all business failures is it comes down to people, people making decisions or not making decisions, and making the right decisions or the best decisions."

Weir said hubris and arrogance was what got a lot of the businesses he looked at into trouble.

"Not accepting that they might be wrong, and having the courage to say what if I'm wrong. What if I do this and it doesn't turn out the way I thought it might cannot recover from that."

I thought personality had to be another factor in getting an idea off the ground, with many of the company founders I have met seeming so confident, with an incredible flair for sales.

Weir thinks anyone can do it, to a point as long as people ask themselves the right questions and get the right advice when they need it.

However investor Rowan Simpson believes it takes a special someone.

"Like I often make the comparison to high performance sport, like, you know, it's definitely true that any of us can be active in, and participate in sport, but most of us are not going to go to the Olympics.

"And I think there's an element of that too with these kind of things like there's nothing to stop you starting your business the constraints and the barriers to that now really low and and reducing, but in order to really create a great business to be really excellent at it, that does require an X Factor and I don't think that everybody has that in them necessarily."

Simpson does not intend to leave anyone disheartened, and he knows not every venture will be a success and said he had learned more from his mistakes than his wins.

Bob Weir said the fate of small businesses was important to the economy as a whole.

"It affects everything so if these businesses are not succeeding, confidence is low people don't spend, then in turn affects their customers and their suppliers and it goes through the whole food chain, so that's why things like business confidence and the strength of the economy is a critical, critical part to small business as much as it is to big business."

At the Flux Accelerator event, Brent Grove wrapped up his Beer Jerk sales pitch to prospective investors, to a round of applause.

At last check the company was still in talks to get what it needs to go to the next level but you never know, Beer Jerk could end up being the next big thing.

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