Failure is the key to a startup's success, not venture capital: Avoka CEO

Philip Copeland, CEO of Sydney-based Avoka, believes access to too much funding can be detrimental to the success of a startup and that knowing the market and 'giving it a go' is the key to success.
Written by Asha Barbaschow, Contributor

Philip Copeland, CEO of cloud based digital platform provider Avoka, believes that funding should come after a business has determined the problem that it wants to solve and that where a startup falls short is getting fixated on a business model rather than exploring an idea and "giving it a go".

"All this talk of people starting businesses and going out and getting reams and reams of venture capital money, in some ways is almost the worst mistake you can make," he said. "Some of the biggest failures I've seen in the technology and startup industry have been companies that have had too much money."

"There's a great saying in Silicon Valley... and I think it is one of the most important principles behind creating a successful business and that is: 'Anyone can put a plate of food in front of dogs, but the question is if a dog is going to eat it'."

Copeland believes that saying gets to the heart of the matter which is focusing on an idea rather than its marketability and company growth. He said that instead of gaining market and peer feedback and attempting to sell the product, he has witnessed startups with too much money that were not under pressure to make sales and generate income.

"In the early 2000s Intel and other large blue chip organisations backed a particular company in which the guys went off and built a product and a solution. What they built became so grandiose and so complicated that at the end of the day it became unsellable, even though their original idea was a good one," he said.

Speaking of his time abroad, Copeland said that one of the best ideas he learnt out of Silicon Valley, and one that has not necessarily been understood in Australia, is embracing failure.

"One of the greatest things you learn in Silicon Valley is: 'Don't be afraid of failure'," he said. "It's all about trying something and failing quickly and I think that's a lesson that needs to be learnt in Australia -- give it a go and be prepared to move on if it doesn't work out."

This is a concept shared by 25-year-old Assistant Minister for Innovation Wyatt Roy, who recently visited Tel Aviv to see what Australia could learn from the Israelis, and in turn, what we can gain from a cooperative relationship with the nation regarding innovation and entrepreneurship.

"There are amazing opportunities for our two countries," Roy said. "They have more startups per capita than any other country on earth, they have more investment in research and development per capita than any other country on earth, and more venture capital invested per capita than any other country on earth."

Roy believes Israel is the global golden standard when it comes to innovation.

"There's such a tremendous layer of support in infrastructure in Silicon Valley and Israel and a lot of other places these days that wasn't previously available in Australia," Copeland said. "I have to say though, things have changed a lot in the last six or seven years."

Copeland believes that the biggest problem Australia previously had in the startup space was the lack of support at a government level for things like employee incentives for options and shares, and to encourage angel investors to take the plunge.

"What's happened in the last six months has been tremendous for the industry," he said.

Copeland said Malcolm Turnbull's AU$1.1 billion National Innovation and Science Agenda that was unveiled in December will definitely be beneficial for the startup space in Australia. He said that as a software provider in Australia, some of the ideas coming through are great and so is having the support of the government.

"The biggest issue we still face in Australia is being able to hire skilled people and while there's a lot of work to be done in that space to make the technology industry more aspirational for students and so forth, that's one area of concern I have," he said.

"The tech industry is such a big proportion of the US economy and we've got an awfully long way to go in Australia."

Additionally, Copeland said that the Federal Department of Industry and Innovation in Canberra has been one of Avoka's biggest clients.

"I must say that as a vendor, dealing with government in Australia is in fact quite refreshing after some of the experiences we have had in the US and the UK," he said. "We found that many of the Australian government departments are actually efficient and quite good to deal with."

Avoka -- Copeland's third startup venture -- began in the early 2000s after he returned from San Francisco during the heart of the dotcom boom.

"We were very keen to start a business in Australia because Australian organisations are great adopters of technology and it's a great spot to actually begin a technology business," he said.

Copeland had one caveat, however, and that was that he wanted his next business project to be self-funded as he had seen multiple venture capital companies pull out of funding in San Francisco, leaving startups high and dry.

"Our goal in the longer term was always to develop our own product and build our own IP, turn it into a technology company, but we were reasonably patient with how we went about doing that," he said. "For the first six or seven years we did a lot of consultation work and implementation and services work both with the government and financial services clients in Australia."

Between 2005 and 2010, Avoka worked closely with the ACT government to bring their services online via Canberra Connect, the self-service portal for the public.

Then in 2010, the launch of the Apple iPad changed how businesses, governments, and citizens wanted to connect.

"That changed dramatically the way in which we were helping our customers do stuff because all of a sudden there was a huge demand for people, for consumers to be able to access their banks, their government agencies, various things through a variety of devices, not just PCs or laptops," Copeland said. "That was really the background to how Avoka started building out our own products to help large organisations fulfil that requirement.

Copeland said the market has drastically changed over the last couple of years as consumers have more of a reliance on their iPads and smartphones to instantly access everything.

"The problem has been that a lot of traditional industries like banking, financial services, and government have really struggled to keep up with that," he said.

"The environment in Australia is great because Australian companies tend to be very early adopters of new technology and we've always seen a lot of success as a company often led by fairly innovative Australian customers -- and that's what you want."

Avoka's product development and global headquarters are in the Sydney suburb of Manly; however, with a two-third share of financial institutions in the US and in Europe, a lot of sales and marketing staff for Avoka are in North America as Copeland believes they need to be geographically close to their clients.

"Just today we've done three presentations to three of the largest banks in North America, all of whom are really seeking out exactly what we're doing -- and we're just a little old Australian company that's had a bit of experience in doing this."

Copeland said that historically if an Australian company gained success, it needed to change the structure of the organisation and pack up and head overseas; he said that is no longer a mandatory step and it is quite feasible to keep the headquarters in Australia.

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