This article was written in partnership with Pragma Legal
Small, nimble, data-driven and ambitious, these new firms are reshaping traditional sectors, as they challenge everything from supply chains, to long-established processes, to poor customer service.
But while a young start-up can gain a toehold in a legacy industry, it takes significantly more than a bright idea and entrepreneurial skills to develop into a sustainable disruptive business.
And for a start-up to scale up as a profitable, viable enterprise, its leaders will need a combination of expert advice, professional support and managerial expertise.
So what does the right start-up to scale-up team like?
1. A wise legal guide
Australia has some highly regulated sectors and while tech suffix firms can find a niche, they often struggle to make sense of the regulatory landscape.
FinTech is a case in point. Australia’s highly regulated financial system has a number of barriers to entry, which can be good for local players, who can operate without having to watch over their shoulders for international entrants. At the same time, it is crucial to know the rules, so it is vital to have a strong legal team that can provide just-in-time advice and an understanding of regulatory limits . The payoff for firms is access to one of the world’s best economies, while consumers become the ultimate beneficiaries of more flexible, targeted financial services.
2. A connected industry mentor
When tech start-ups enter traditional sectors they are often driven by the goal of improving inefficiency. It might be a poor customer service option that is crying out to be addressed, or a supply chain breakdown where productivity is being lost. Finding these challenges — and providing the right solutions — means understanding just how the sector in question works. The mining sector is a good example here, with a huge number of challenges that could be addressed but few start-ups sufficiently knowledgeable and well-connected to be able to build a business providing the right solutions. Having an industry mentor who knows the field and who can connect the start-up with buyers is critical.
3. An excellent accountant
From day one, the structure of a start-up business can mean failure or success. Choosing the right structure to manage taxes, ensuring shareholders and directors are clear about their responsibilities, and knowing from the first dollar spent what needs to be accounted for are all vital to managing risk. An excellent accountant will be able to direct the business in its early stages and help it scale as it grows. This includes helping the business access concessions such as the research and development tax incentive and export market development grant, as well as preparing for any capital that needs to be raised.
4. A savvy advisor
However strong the business owner’s ambitions, and however talented their leadership team, outside advice can be the secret sauce for success. A good advisor will help the business step back from the day-to-day challenges and see the bigger picture, help them plan for expansion, review internal systems and protocols and provide general guidance. There are plenty of unethical advisors out there, however, so ensure the advice is sound and from a trusted source.
5. An angel
Just like good advice, cash for a growing business is jet fuel. But many start-ups fail to scale simply because they can’t source capital. It is also the cause of many local businesses heading offshore, unable to access venture capital or angel investor supporters. This has a flow-on impact: it damages the local tech ecosystem, reduces opportunities for investment and ultimately costs Australia jobs, taxes and wealth.
The answer is to find a conduit to investors, whether onshore or offshore, and to take advice on how best to position the business when seeking an injection of funds.
Pitcher Partners and Pragma Legal have joined forces in Perth to provide fixed-price services for start-ups and scale-ups. For more information, see Pragma Legal.