Moved by the destruction of 2009’s Black Saturday bushfires, which claimed 173 lives and left thousands homeless, Wishbook founder Alex Kain decided to create a permanent website where folks could interact and help others in need.

“There was plenty of news coverage about how people had been impacted by this disaster,” Kain says.

“Yet the only way to reach out was to donate to the likes of the Red Cross.”

“Whilst they do a wonderful job, I still felt somewhat disconnected from the individuals that were affected.”

“I yearned for a way to… make a difference that I could also experience.”

“Perhaps it was just selfish but I wanted to help someone and see the results of that help first-hand.”

Two years later, Wishbook launched in November 2011

Soon the Wishbook concept expanded beyond disaster relief.

“Anyone can make a wish on the site, but it’s up to the Wishbook community as to whether it will be granted.”

According to Kain, response to the Wishbook concept has been positive from the get-go.

“Everyone wanted to get involved.”

“Businesses offered all sorts of goods and services so I decided to set up a section where anyone could donate something they no longer needed that might benefit someone else.”

“We have had donations for everything from adjustable beds to clothing and even large screen televisions.”

Wishbook: the go-to site for people in need

Although Wishbook’s still in its infancy, Kain hopes it will become *the* portal for peeps with the greater good in mind.

“Rather than just listing [an item] on eBay, why not consider giving it to someone needy?”

“Likewise I would like to see charities and community organisations begin to use Wishbook to source for their members.”

“Another big thing on my list is to establish a foundation with tax deductible status so we can raise greater amounts through donations… that can be dispensed to fulfil larger wishes.”

Wishbook wishes granted

While it’s still early doors, Wishbook already has its fair share of touching stories.

“One such case involves the best friend of a lady whose husband suffered several strokes,” Kain says.

“She posted a wish… to give her girlfriend some much-needed respite. To her surprise the wish of a day spa gift voucher was granted a couple of days later by a complete stranger.”

“These stories are what make it all worthwhile.”

It might be no exaggeration to say the world is split between those who back Facebook stock and those who don’t, quite similar to the divide between those who enthusiastically live life to the full on the social networking platform and those who shrink at its sight.

It is not a fundamentally sound investment, asserts Kenneth Wisnefski, an online marketing expert and founder-CEO of WebiMax, a search engine optimisation firm with a global footprint including Australia.

“In the first few days of trading, I expect the stock price will soar due to social-media hungry investors,” said Wisnefski, comparing it with the IPO of the professional networking firm LinkedIn. “However, once the market absorbs the emotions and begins to invest based on fundamentals, it is clear Facebook will not be a solid investment,” he added.

Wisnefski echoes the fears of many.

Facebook plans to sell shares worth $5 billion but has not said how many shares it will sell. Analysts value the company at between $75 billion and $100 billion.

Number-crunchers split

In 2011, Facebook raised $3.7 billion in revenue, a very healthy number for any startup. Even for a giant one like Facebook. But 85% of it comes from advertising — a matter of concern to Wisnefski.

“The company is not diversified enough to generate income from additional streams,” he pointed out. Besides, according to EMarketer, Facebook’s ad sales will slow down considerably — from 104% in 2011 to 58% in 2012 and 21% in 2013.

But there is another set of analysts wearing rose-tinted glasses that sees see nothing wrong with the set of numbers. To the contrary, these number-crunchers consider Facebook to be on par with tech giants such as Apple and Google when these companies went public.

Tristan Louis, the founder-CEO of Keepskot and an influential blogger, is one of them. He thinks it could be a steal.

“From a metrics standpoints, this company also appears to have a very strong business that compares favorably with other tech giants and the numbers bandied about in terms of valuation do not seem to be particularly outrageous when put in the greater context of the rest of the industry,” he concluded, after comparing Facebook with search giant Google, among others.

Facebook’s ad revenues are three times higher than Google’s at IPO and it is less dependent on ad revenue than Google — 85% versus 95%.  Louis, in fact, sets up a tantalising possibility that Facebook could have a market cap of up to $256 billion, if the market gives Mark Zuckerburg’s company the same valuations it gave to Google on the first day of trading. That, as you can tell, is more than double the currently estimated range of up to $100 billion for Facebook. You can read his analysis here.

At a valuation of about $100 billion, Facebook will be valued at a multiple of up to 27 times annual revenue, or up to 100 times earnings. That fares favorably with the valuations of Google or Apple at their IPOs. Google was valued at $23 billion at the time of its 2004 IPO, or 218 times earnings; and Apple was valued at $1.19 billion in 1980, at 102 times earnings.

Wisnefski, however, expresses doubt that Facebook will be able to match Google in terms of revenue growth. This is because he foresees increased competition coming from Google and Microsoft’s Bing in the social networking space and in the race for advertising dollars.

“Intense competition from Google and Bing pose serious threats to Facebook, as the infrastructure of Facebook is primarily focused on sharing images, checking status updates, and running apps,” he said. But “Google and Bing are well-diversified and are in a much stronger position to leverage ad-revenue in the long-term than Facebook,” he added.

Clearly, the final word hasn’t been said. As if to cash in on this debate, which will likely run all the way to the expected May IPO, an Irish bookmaker, Paddy Power, has begun taking bets on Facebook’s share price when it begins trading.

He is offering of odds of 7 to 2 that investors will pay between $25 and $34.99 to buy Facebook shares. To be sure. To be sure. Or not?

The app has been produced by Captiv8, a Bondi Beach broadcast and digital studio that has produced motion graphics for Tropfest for the past three years.

“We are always looking to provide our audience with new ways to interact with the Tropfest brand and our unique content. We share a great working relationship with the team at Captiv8 and we are thrilled with what they have achieved for our very first app,” said Tropfest Festival and Business Manager Paul Stuart.

Captiv8 Director Keir Maher said it was “great to be expanding our partnership with Tropfest.”

“Developing the mobile app is a natural extension, allowing people to access the fantastic short film content collected over the last 20 years as well as an interactive companion for event information,” he said.

The 20th anniversary festival, started by John Polson, will be held across a three-day weekend at The Domain in Sydney and other outdoor locations around Australia, with live satellite links to outdoor locations in major cities including Melbourne, Canberra, Perth, Brisbane, Hobart, Adelaide and Surfers Paradise. It also will be broadcast live on subscription television channel, Movie Extra, on 19 February. Up to one million subscriptions have been sold in previous years.

The Tropfest iPhone app includes the following features:

• 40 Tropfest films including an exclusive selection of never-before-seen Tropfest content
• Playlist – the ability for the user to create playlists of their favorite Tropfest films on the fly
• Live countdown to the festival
• Event information with detailed maps and location information, transport information and schedule for all live Movie Extra Tropfest sites — Sydney, Melbourne, Wollongong, Canberra, Adelaide, Perth, Brisbane, Surfers Paradise and New Zealand.
• Information on this year’s Movie Extra Tropfest Finalists.

The annual competition attracts hundreds of entries from across Australia and overseas, culminating in a live film event that draws about 150,000 people. Sixteen finalists are selected from an average 700 annual entries and compete for more than $100,000 in prizes. Films exhibited at the festival are no longer than seven minutes and have been specially made for Tropfest. Each year, the festival has a “Tropfest Signature Item,” a theme for all the films. This year, it is “Light Bulb.”

The festival draws a bevy of celebrity judges. Past judges have included Nicole Kidman, Russell Crowe, Samuel L. Jackson, Keanu Reeves and Salma Hayek.

Captiv8 said it would update the app for other Tropfest festivals around the world, including the one in New York in June. Tropfest also hosts the festivals in Las Vegas and Abu Dhabi in the Middle East.

That is the outlook for the cellphone industry, which has quickly grown from a nimble startup and, today, has nearly five billion users. Still, the industry resembles a frustrated teen in a hurry for further growth.

Ovum’s independent telecoms analyst Shiv Putcha says the next billion mobile connections will mainly come from “remote rural areas in emerging markets, with most users in these areas willing to invest in the right device and service combination.”

Device is key to further growth

However, the next base of users demands a “distinct hierarchy of expectations” that phonemakers and service providers may not be able to immediately meet.

Users want “durability, problem-solving features, versatility and connectivity,” says Putcha, lead author of the report titled, “Strategies for the Next Billion: Devices.”

“However, while connectivity is highly desirable, it is generally unaffordable, challenging to use and impractical for most users in rural and remote communities,” he adds.

The problem with the next billion derives from many factors. Potential users in remote areas and villages typically don’t have access to basic infrastructure or utilities. Consequently, even though they are aware of the transformative potential of mobile phones and are eager to invest in a convenient device.

It is almost clear that the wannabe users will primarily buy entry-level and feature phones. Yet they have high expectations of the device, especially when it comes to device charging solutions. This is because, even though mobile phone battery life has improved considerably in the last few years, access to electricity in remote and rural areas has not. So, users need to factor in the cost of recharging devices into their total cost of ownership or value.

“The business of charging devices is progressing, and several charging solutions are already available from device vendors, NGOs, and startups. These can be standalone accessories designed exclusively for mobile phones, or appliances that provide electricity for multiple functions such as lighting as well as charging a mobile phone,” says Putcha.

Ovum’s report also noted the sharply rising popularity of smartphones among existing cellphone, even in emerging markets. However, Ovum doesn’t expect average selling prices to fall quickly enough for smartphones to be a viable option for the majority of users in the next billion.

Before you flub your company’s finances, check out new Melbourne-based online marketplace Vumero.

Vumero – a mix of ‘numero’ and ‘value’ – pairs businesses and entrepreneurs with financial professionals, freelancers and other sum-savvy advisers.

Vumero is the brainchild of CEO John Persico, COO Johann Odou and CTO Sebastien Eckersley-Maslin. The trio developed the online marketplace to overcome some of the “pain” they themselves had experienced in the financial services industry.

According to Persico: “We often felt that the late night culture instilled in the financial services industry could be avoided if people learnt to work smarter as part of the Work 3.0 movement – including recycling knowledge, collaboratively learning and accessing an available network of resources on demand.”

Vumero also aims to address the barriers that exist between them what have financial know-how and those whose idea of tackling tough sums involves taking off their shoes and socks.

“In many ways we have created an ODesk-style business – dedicated to the finance industry.”

Vumero’s goals for the future

Having launched in December 2011, after just nine months’ planning, Vumero has two primary goals over the next 12 months: to build a quality library of Excel spreadsheets and financial model templates, and to educate businesses on the benefits of posting finance tasks to world-class finance professionals.

“Vumero truly believes that all global businesses can make great financial decisions if they have access to the great professional capability and resources.”

“Everything from reviewing a complex financial model, preparing a cashflow forecast, managing inventory levels to valuing your online startup,” Persico says.

“[Our] long-term vision is to become the world’s most trusted and value-adding global professional services marketplace.”

Which comes first, the chicken or the spreadsheet?

Just to keep things interesting, Vumero has effectively launched two marketplaces on the one website – a document repository and a freelancing community – “which introduces a few additional strategic and operational complexities,” Persico says.

“A major challenge with any marketplace is to understand ‘chicken and the egg’ interplay and responsiveness between buyers and sellers.”

“Building credibility and trust within the finance industry requires open feedback, transparency and authenticity. The Vumero team remains focused on maintaining the quality of spreadsheets and financial models and upholding a strong value-adding community of financial analyst and financial modelling professionals.”

“We also help ensure credibility by maintaining a quality rating system, independent verifications, secure Escrow processes, effective dispute resolution, transparent user profiles and strict confidentiality procedures.”

Although Vumero only launched a month ago, the company’s happy to share useful nuggets with other aspiring online marketplaces.

“Start simple. Understand the price and demand elasticity between buyers and sellers in your chosen marketplace. Never forget why you are creating a marketplace. Get your hands dirty. Focus on the ‘big trends’. Network widely and aggressively.”

And that’s not all.

“Mistakes are awesome if you learn from them. Demand excellence in everything you do. Measure everything. Even the things you can’t measure are super important. Always thank all your loved ones for all their encouragement and support.”

And finally…

“Have lots of fun.”

What is Vumero?

Besides its fundamental impact on the broader Australian economy, it has led to changes in consumer behavior as foreign goods became cheaper. It opened up the floodgates for imports, giving rise to specialised sites such as Online Shopping USA that help Australians navigate the tricky global online shopping market.

Last year, it was the weak American dollar that drove Australians to U.S. retail sites. This year, it is likely the mother country, Great Britain, as the pound weakens. With the Australian dollar hitting a 27-year-high against the British pound, online payments processor PayPal is predicting a surge in online shoppers who flock to British stores.

“Smart online shoppers are taking advantage of the global shopping mall and know where to shop for the best deals,” said Elena Wise, Acting Managing Director, PayPal Australia. “We regularly see changes in the spending patterns of our four million active customers in response to fluctuating global currencies and the most popular corridors from Australia continue to be the US, the UK and China.”

Ironing out shopping protocol

Just as domestic entrepreneurs have been quick to seize the advantages of a rising Australian dollar, overseas traders have been quick to sense the opportunity and create an enabling environment.

Over the past year, U.K. retailers, among others, have sharpened their focus on selling to Australian consumers, according to PayPal. Many offer reduced and free shipping, local pricing and simplified returns policies. These include some of the leading retailers: TopShop, eBay, ASOS, Oasis, Figleaves, and Book Depository.

PayPal, which enables online commerce for four million active account holders in Australia, still has issued an advisory to shoppers. Check shipping times, sizing, protect your digital footprint and avoid sharing personal information, it said.

On the flip side, the strong Australian dollar is seen posing significant challenges to domestic retailers throughout the year, even though consumers still prefer to shop from Australian brands.

“Australian retailers are being challenged to compete on a global stage and we are now seeing established Australian brands fighting back against international competition by offering a truly integrated approach to retail,” said Wise. This approach merges retailers on and offline presence, allowing them to use their established offline footprints as a competitive advantage to win back the consumer.”

My mother had discovered a wad of hundreds of dollars in cold hard cash in my top draw and had assumed what all mothers fear most: that I was developing an expensive heroin addiction in my spare time.

Of course, my mother didn’t believe my excuse – that I was providing financial backing for my friend’s start-up ebay business; because everyone knows 15-year-old high-school students could not possibly start their own business. Right?

Since the dawn of time, high school has strived to beat the innovation and creativity out of young people, under the guise of preparing students ‘for the real world’. But these days, that ‘real world’ moves a lot faster than it used to, the age people are required to become real-world players is getting younger and younger.

Hanging around the higher education system long enough to get a PhD is no longer a recipe for guaranteed success and seems to me more likely to generate over-qualified socially-isolated, single people, living at home with their parents at the age of 27. (Or maybe I just hang in the wrong circles.)

The really successful entrepreneurs I know now in adulthood were the ones who were selling illicit homebrew from their backpacks when they were in high school; honing their practical business sense, developing their pitch, and building a pool of buyers – all in their lunchtime.

Finally, it seems the education system is catching up with reality. Young entrepreneurs are now being encouraged, rather than punished, for doing what comes to kids naturally.

In 2010, the Victorian Government set up a new body to facilitate school-to-business interactions, called the “Business Working with Education Foundation”. The aim of the Foundation is to help develop pathways for young people to become skilled in business practices whilst still in high school.

Just last month, Victorian Minister for Education Martin Dixon released an extensive plan for schools to move away from confined book learning, and allowing students to pursue non-traditional learning pathways. The idea is to give students a “competitive edge” by encouraging them to pursue whatever they are passionate about, rather than what they are forced to learn.

This new policy of freedom in education has allowed individual students in individual schools to pursue and develop their own interests.

Just one example of this is Templestowe College in Victoria’s north-east, where students are allowed to choose their own ‘Learning Mentors’ to help them set goals, and can develop their own business projects as a part of their personalised curriculum.

Principle Peter Hutton explains that, “the most successful employees and entrepreneurs in the future will be those who have both academic and practical skills”. Much more encouraging words than my own school principle, whose motto was “You! Go to the library.”

As with all new policies, only time will tell if this new era of education will actually work. Personally, I’m looking forward to a bright future of Australian entrepreneurship, where all students are free to run businesses out of their backpacks at lunchtime. Homebrew anyone?

Jayde Lovell is the director of the Melbourne Institute of Language Studies, and was once a regular contributor to Anthill Magazine. (We’re hoping that she’ll become a regular contributor again, with a bit of encouragement. So, please leave a comment below.)

Photo by Fernando de Sousa

One of the most common causes of business failures is a failure to understand all there is to know about the market and the potential customer. Entrepreneurs need to gain this knowledge even before developing a product or service.

Here are three marketing questions you should ask yourself and answer to succeed in business:

#1. Do you target people who really need your product/service now?

If you sell headache medication, do healthy people need it? Maybe when they have migraine, but not now. If you are trying to sell handguns to young females, do they really need one? Maybe when someone tries to rob them but it may not be a priority. They may well prefer to spend that money to shop at Myer.

The key to selling is whether or not your target consumers need the product now. Ideally, you need to target a group that absolutely needs your product/service now. In this situation, consumers also would be more willing to pay a higher price.

The lesson I learned from selling CRM (customer relationship management) software is this: Most companies simply didn’t feel a compelling need to buy the software now.  The businesses I targeted could easily delay purchase of the software or choose cheaper low-tech alternatives such as Excel, Outlook, or Google Docs.

On the other hand, if I had targeted businesses that hire many sales consultants, track their complete sales process from lead generation to post-selling activities, or have a massive customer database, I may have enjoyed better success.

The lesson: It is simply not enough to say everyone is a potential customer. You need to identify the customer who will buy now.

#2. Is your market big enough to fulfill your dreams?

If you want to log revenues of $10 million in, say, five years and you seek a 5% market share, that means the market must be worth at least $200 million. Now, where does the $200 million come from?

Every entrepreneur must research his market before even developing a product or service, especially if he seeks to raise capital. Christopher Golis, in his book, “Enterprise & Venture Capital,” says venture capitalists would pass up any opportunity if the potential market of the business is lower than $100 million. Thus, it is important to have a clear understanding of the market — its size, geography, competitors and pricing, among others.

You can get reliable data about your market from local libraries or the Australian Bureau of Statistics, and could even consider buying vital data from a market research company like IBIS World (http://www.ibisworld.com.au/).

#3. Do you know how to stay ahead?

If yours is one of 10 sushi bars next to each other on a street, why should people buy from your store, rather than the nine others?

It could be taste, price, special packages or a long-established branding or reputation. Regardless, it is important to have a distinguishing competitive edge by way of one or the other feature. It doesn’t work to say my USP is “good customer service.”

In today’s business environment, good service is a necessary requirement to run a business, but not a sufficient one to run a successful business.

Consequently, the key to business success is to acquire a competitive advantage that your customers appreciate and to retain that edge over a period of time. Can competitors easily copy your product or service? Do you own and leverage patents, design rights, copyrights or trademarks? Even if you do, can your protect your brand through costly litigations?

If you have honest answers to the three questions, you are well on way to building a successful business.

Edwin Lucas is a co-owner and Business Development Director of Digital Office Builder, an online business development company in Melbourne. He has a passion to help small business owners, and aspiring Gen Y and Gen Z entrepreneurs, leverage online technology and raise capital in order to grow their business smarter and faster.

Not Australia, however, which late last year earned AAA ratings from all three major international ratings agencies for the first time in its history.

Australia is one of only three countries — the United States and South Korea being the others — among the Top 10 wealthiest that has reduced its overall debt since the GFC, according to a study by the McKinsey Global Institute, the eponymous consulting firm’s research group.

Australia’s total debt-to-GDP ratio fell to 277% in Q2 of 2011. The figure includes private and government debt, which accounts for only 8% of the total. Household debt is the largest component, constituting nearly 38% of Australia’s total debt.

Australia’s experience contrasts with what has occurred in other leading economies that lag in the process economists called “deleveraging.”

In the period since the 2008-09 financial crisis, total debt has grown across the world’s 10 largest mature economies, mainly due to rising government debt. While financial institutions and nonfinancial corporations have reduced leverage by 18 and 12 percentage points of GDP respectively, households have failed to reduce their debt burden and government debt has risen 11 percentage points because of rising social expenditures and falling tax receipts.

“There are no quick fixes – and there may be more bumps in the road ahead. Understanding the interplay between deleveraging and growth can help policy makers and business leaders steer the proper course as their national economies continue to recover from the financial crisis,” said Charles Roxburgh, London-based director of the McKinsey Global Institute.

The Gillard government has received kudos for its fiscal discipline but the World Bank warning on global growth this year suggests Australia might need to do even more to ward off any potential crisis.

The World Bank slashed global growth forecasts to 2.5% this year, down from the 3.6% projected earlier. However, China will continue to grow at over 8%, perhaps shoring up Australia’s growth. But the forecast that prices of commodities will fall by at least 9% should raise concerns.

Regardless, the Gillard government has its task cut out.

According to Dr. Kiki Tanousis, a director of Interface innovation, the new online service aims to drop the prices of filing patents overseas, which is one of the most costly processes in the patenting process.

“Australian innovators are paying between 40 and 60% more for their patents overseas than their American and European competitors. This places Australia in a very anti-competitive position globally,” he said.

The new platform will allow innovators to file patents directly overseas and in a smaller time frame, and it is available to anyone wishing to use the service, including patent attorney firms.

Dr. Tanousis believes that the new inovia.com platform can change the landscape of the Australian patent industry.

“Like the non-bank lenders who turned the Australian banking industry  on its head twenty years ago, forcing down the cost of buying a house, we plan to do the same for Australian innovators,” he said.

“We are now calling on Australian patent firms to step up and provide the same kind of competitive service to Australian innovators,” Dr. Tanousis added.

Photo by [F]oxymoron

Plenty, says Soup, an advocacy marketing agency distinguished by its extraordinary faith in word-of-mouth campaigns.

The Sydney firm’s experimental Soup Lab has developed what it claims is a “world-first” Facebook app of its kind and embarked on a research project with Dr. Lars Groeger, a marketing lecturer at the Macquarie Graduate School of Management, to measure the reach and value of “branded conversations.”

Shorn of the jargon, what Soup’s app — developed by Soup Lab’s Fred Wang — does is find how people carry on their offline conversations on Facebook, and vice versa, in the modern networked world. It analyses friendship networks on the world’s most popular social networking site and compares them with real-world conversation tracks.

“Much like the exploration into reach and frequency, this application and research project aims to uncover the nature of conversation overlap in the marketplace and how it affects purchase intent and behavior,” Soup’s Head of Insights Scott Taylor said.

Mining Facebook networks

“The methodology of the research delves into a largely untapped Facebook environment and allows us to visualise how offline conversations play out across friendship networks, ultimately understanding the impact of conversations and the return-on-investment of people talking about your brand,” he added.

Soup ran the campaign for the first time for an alcohol brand launch for which it did a word-of-mouth campaign. Participants were asked to complete a short survey on Facebook that Soup analysed maintaining anonymity.

What the agency discovered is this: “Combined, the 360 friendship networks received represents a network of more than 77,000 friends with over 600,000 friendship ties between them.”

The campaign uncovered some strong ties between offline conversations (word-of-mouth) and online conversations as seen on Facebook. Two key findings establish their importance in the world of communication, marketing and branding.

One, people physically spoke to 60% of all their total groups on their Facebook networks; and two, 50% of the surveyed people said most or all of their offline friends are part of their Facebook networks.

In the specific campaign, Soup found that 19% of all “conversations” — offline and online — were repeated by multiple persons, demonstrating how offline and online reinforce one another in ways that reinforce the brand.

“Ultimately the key outcomes of this research are the ability to put a context and story behind WOM results and better understand the how and why of social structures and conversation pass-on, proving impact and visualising conversations and reach,” said Taylor. “Ongoing, we can look at the impact of multiple word-of-mouth messages on purchase intent and lasting advocacy.”

Taylor presented results of the research at the WOMMA conference in Las Vegas in November. He and Groeger are due to co-present the research at the ESOMAR conference in Asia in April.

Since its founding in 2006, Soup has delivered word-of-mouth campaigns for clients such as Coca-Cola, Nestle, Huggies and Sony. Last year, its army of 100,000 ‘soupers’ carried the agency to the Blackberry People’s Choice Award at the regional Telstra Business Awards for New South Wales. It also was named one of BRW magazine’s Fast Starters and last year won an award from Anthill magazine.

Soup is led by founder-CEO Sharyn Smith.

Crowd funding, as it is dubbed, is the funding of a company through an online community, with small investments by individuals. Several crowd funding firms dot the Internet but they can’t really sell shares to raise capital. But it is an option that could soon turn real at least in the U.S.

The United States — that progressive land and global fount of innovation — has already moved on what is a paradigm change in the way companies can raise capital. Lawmakers there have responded quickly to entrepreneurs’ calls to tap modern technology to raise capital and give startups a big boost.

In November, the country’s House of Representatives passed the Entrepreneur Access to Capital Bill that will enable startups to raise capital in novel, and informal, ways. But the legislation has got stalled in the Senate. Also, several changes, or rather restrictions, are being contemplated. Still, the bill’s passing seems assured this year.

Aussie entrepreneurs excited

How cool would it be if Australian entrepreneurs could have similar access to funding?

To get a sense of excitement, and enthusiasm, for crowd funding, Pennam Partners — a diversified investment advisor — jumped the gun and surveyed entrepreneurs, advisors/service providers, investors and others. What emerged was far from surprising.

A high 80% wholeheartedly backed the new fund-raising model, agreeing that crowd funding is a worthwhile alternative avenue for Australian startups to seek seed capital or early stage capital.

The respondents also strongly urged strong regulatory and monitoring measures to protect “crowd funders” and prevent sham funding offers.

A majority of respondents agreed that at least $1 million in capital could be raised while without compromising the integrity and effectiveness of the process, and also keeping compliance costs down.

Crowd funding is in vogue in Australia but it cannot be used by companies to raise capital or sell securities.

Aussie startups are governed by the so-called 20/12/2 rule — entrepreneurs can raise a maximum of $2 million from a maximum of 20 “retail” investors in a rolling 12-month period without the need to meet the arguably burdensome disclosure regime. However, a strict “no general solicitation” rule still applies.

The proposed U.S. bills, broadly speaking, will allow entrepreneurs to raise up to $2 million via crowd funding subject to disclosure of audited annual financials. The law also will put curbs on the amount an individual investor can make in a given year in a give company, the tentative suggestion being the lower of USD10,000 or 10% of annual income.

The U.S. Senate is still working on a final form of the bill but a wider debate on procedures and necessary safeguards is ongoing among global entrepreneurs, investors and the financial community. Still, the new model will likely need to evolve over a period of time as the entire community of stakeholders assesses the many consequences. But one thing is clear — almost everybody wants it and wants it soon.

Will Australian authorities act soon?

The Hudson Report’s New Year card reveals Australia to be still positive despite rising negative international sentiment. Over a third of surveyed hiring managers said they intended to increase permanent headcount over the coming three months. Still, over the past quarter some amount of optimism has faded – precisely by 2.2 percentage points to an overall 25.7% level.

The Hudson Report, based on in-depth and nationwide research, is released quarterly.

In this quarter, it surveyed 4,338 employers across 19 core industry groups in Australia, revealing hiring expectations of Australian employers over the forthcoming quarter and provides insights into a range of human resource issues currently impacting business and the broader Australian economy.

Resources sectors leads the way

“Despite the current international uncertainty, and changing conditions at home, employment expectations in Australia on the whole remain positive, particularly in the resources, transport and construction and engineering sectors,” said Mark Leigh, CFO of Hudson Asia Pacific.

A strong 35.9% of surveyed employers across Australia are reporting intentions to increase the number of permanent employees in the first three months of 2012 and 54%, or more than half, are planning to keep headcount steady over the same period. The number of employers planning to decrease permanent staff in the first quarter remained unchanged over the quarter at 10.1%.

“Despite the current international uncertainty, and changing conditions at home, employment expectations in Australia on the whole remain positive, particularly in the resources, transport and construction and engineering sectors,” said Leigh. “Furthermore, we expect high demand in certain roles, such as engineering, geology, HSE and operational roles as well as for customer facing IT specialists.”

“Now more than ever, in a turbulent economic climate, the cost of a bad hire is crippling. It is essential that employers have a robust process in place to rigorously assess and secure the best people for their businesses,” added Leigh.

Some other findings in the report:

• Sentiment in the resource rich states of Western Australia and Queensland remained strong at net 45.1% and 35.4% respectively.

• Employer confidence in New South Wales rose 2.4 percentage points over the quarter to net 23.5%, pushing the state to third most confident state or territory, from fifth in the previous quarter.

• South Australia was the only state or territory to record a rise in sentiment year-on-year, rising 1.7 percentage points from the same time last year. However, hiring intentions in the state dropped 2.1 percentage points over the quarter to net 20.5%.

• Victoria remained the nation’s least confident state or territory, dropping 12.7 percentage points year-on-year to net 17.8%.

• The resources sector is once again the nation’s most confident at net 57.7% — a strong 32 percentage points above the net national average.

• Employer confidence in construction/property and engineering is strong, with net 38.7% of hiring managers intending to increase permanent headcount over the coming three months.

• Confidence in the professional services sector and information technology dropped this quarter.

• The transport sector recorded the highest growth in sentiment, rising a strong 7 percentage points over the quarter to net 33.3%. Sentiment in the FMCH sector rose 4.4 percentage points to net 11.4%.

• Manufacturing experienced the largest year-on-year drop, plummeting 28.4 percentage points to net 10.7%, becoming the nation’s least confident sector. Confidence in the tourism and hospitality industry dropped significantly, down 24.5 percentage points from to net 19.2% on the back of a strong Australian dollar increased international competition.

Hudson is a Nasdaq-listed provider of permanent recruitment, contract professionals and talent management services worldwide.

Meanwhile, most experienced, early-stage investors eyeballing a pre-revenue company start with a valuation of zero.

These two starting points are obviously far apart. What’s more, neither is right

Valuation should be determined on two primary factors – future value growth and equity position – and ultimately should be agreed upon in discussion.

Any existing cash investment is certainly an important datum and sacrifices made by the founders are worthy of note, but adding all those up doesn’t create a defensible valuation. Investors and founders are both betting their money on the future, not the past.

An entrepreneur should prepare a valuation position and a rationale to support it prior to engaging with investors. By setting the number in the right range the entrepreneur is sending a strong signal to the investor that the opportunity is worthwhile and that the founders know their onions.

An entrepreneur who sets the valuation too high with the intention of making substantial concessions in negotiations may put would-be partners off. Setting the valuation too low may make investors cautious about the business acumen of the founders, but, it’s better than too high.

What is too high and too low?

The honest answer is it depends. However, the range is fairly standard.

Assuming a minority position, the pre-money valuation should always be slightly larger than the investment being sought. For a pre-revenue or early-revenue business that’s seeking up to $1m in investment capital, the range of pre-money valuation is from $200,000 – $1,200,000. Or, to put it another way, 20%-45% of post-money equity.

It’s all relative

Equity position is relative to the amount being invested and will always be particular to the philosophies of the founders and the investors.

As a general observation, the first external investor in a venture (typical role of an Angel investor) will want a substantial minority position. At the same time, the founders need to balance their concerns about control with a respect for the investors’ money. Together, the founders and investors will need to consider future demand on equity and make sure that the valuation underpins that forward strategy.

Future equity demands

A key consideration in the above strategy is demand on equity to support future funding rounds.

If early investors are unlikely to participate in later rounds, there’s a much closer alignment of interests between them and the company’s founders who will both suffer dilution.

If the investors are likely to be substantial participants in later rounds, the valuation strategy may reflect that in the terms of the investment (shareholders agreement).

Angel investors K.I.S.S.

Investment terms can effectively alter the valuation through the use of preferences, options and conversion ratios in the case of convertible notes.

Traditionally, Australian angel investors have used ordinary shares to keep things simple and easy for the founders.

The emerging trend is for early-stage investors to use preference shares that better reflect the financial risk of the investor. In these circumstances the preference delivers a return of capital before converting the preferences into ordinary shares that then participate prorate with all other shares in any distribution.

Founders should be wary of investors seeking more onerous preferences and be confident of the value those investors will deliver.

Absolute measurement of performance

Future value growth is about the external, absolute measurement of performance.

Most early-stage companies pursuing rapid growth are seeking to double their valuation at least every 12-18 months for the first three or four years. That level of performance encourages investors and acquirers to buy in at a premium which assumes the growth will continue at that rate for some time.

Achieving that performance for a pre-revenue company valued at $5m or $50m is much, much harder than for a company valued at $1m.

Good investors love value growth

Many founders suffer from the false assumption that competent early-stage investors will fight value growth because it will result in dilution of their investing power in later rounds.

Good investors love value growth because it’s their original investment that’s growing and the risk of any subsequent investment is greatly reduced.

Of course, for some investors that’s why they don’t make subsequent investments; they’re pursuing the high-value growth of the early investment and choose to diversify their portfolio.

Who wears the pants?

Founders, particularly first time entrepreneurs, tend to worry about control and fear that ceding a large equity position to investors may threaten the future of their venture.

This isn’t entirely unfounded, but it’s usually blown out of proportion.

Experienced early-stage investors rarely want a simple majority of equity, especially in Australia where it comes with certain legal and taxation implications. However, an investor that intends to fill an executive role or become a substantial contributor to the execution of the business may seek a majority position.

It’s up to the entrepreneur to judge the expected value added by the investor to determine if the proposed equity position is reasonable.

For investors who intend to be proactive through a non-executive director or similar role, it’s reasonable that they achieve the 20%-45% equity stake discussed above.

Even those investors, if they’re experienced, are likely to seek some extra control rights in their terms of investment. These are usually called ‘negative control rights’, which give the investor the ability to stop the company from doing something substantially different from the proposition the investors initially agreed too.

These rights usually cover new debt and equity, executive team hire and fire, business strategy and objectives, capital expenditure and changes to the governance and shareholder structures and procedures.

It’s a truism that a shareholder with only a small equity position – say 5% – can have complete control of a company through the terms of that investment. So, founders need to think more holistically about the issue of control and not focus on the equity position alone.

Experienced early-stage investors usually want the founders to retain a larger proportion of equity to ensure they’re motivated to succeed and sell the company. This is a core presumption in the alignment of interests.

Valuation is a complex topic and interdependent on terms of investment, investor involvement, future rounds of funding, projected revenues and profits, founder capability to execute, capital intensity of the venture and other concerns. Don’t rely on an accountant, lawyer, or corporate adviser to set the valuation without your input, involvement and, ultimately, your approval.

Jordan Green is an internationally sought after thought leader, speaker and educator on early-stage investing. Leading Australian Angel investor, founder of Melbourne Angels and co-founder of the Australian Association of Angel Investors.

Is there anywhere he can turn to in order to protect his investments?

Yes, there is. NOW.

DearCEO is an online forum with a difference. Unlike typical investor relations firms, its loyalty is to the investor, not the companies. It lets investors in any of the thousands of ASX-listed companies pose questions to CEOs, and then forwards them to the respective companies for their responses.

Founder Philip Tan, a surgical trainee and serial entrepreneur, believes DearCEO is the future of investor relations.

“Clinical governance is very similar to corporate governance – both need to be open feedback loops between participants that are aimed at improving the system,” said Tan, whose Melbourne startup claims growing resonance since the Euro Zone crisis intensified.

“It decentralises how investors seek and receive information, and personalises mass communication and corporate governance. There is no doubt that this is the gold standard and future of investor relations.”

Got the right question, will get right answer

Another reason why DearCEO is necessary, says Tan, is the need to ask the right question to get the right answer.

“I was inspired to launch DearCEO because as a proactive retail investor (often with my negligible $2-3k parcel of shares in a company), CEOs would ring back personally to answer my queries — and the information received was often not clearly communicated in the announcements,” he says. “I realised, to get the right information you must first ask the right question.”

DearCEO has 9,930 members who have posed scores of questions and comments on 9,491 companies listed on the Australian Stock Exchange.

After filtering the questions, and eliminating duplicates, the company identified 195 unique questions it then sent out to CEOs for responses.

Tan says more than 95% of the questions were answered, reflecting perhaps the “highest standards of corporate governance and participation as more than 95% of questions are answered. Companies ducked the rest citing sensitive issues or regulations.

“Most companies that promote the use of our site as an effective and time sensitive communication tool have been, and continue to be, prepared to take on questions in a candid manner as long as it does not breach the corporate disclosure regulations,” said Tan.

From an individual investor’s point of view, DearCEO provides a level of access to companies that he almost never gets at shareholders’ meetings or via other existing channels of communication. Currently, retail investors need to call in or email in what is at best a disorganised, inefficient and time-consuming method.

Also, Tan points out, it gives rise to a “he says, she says” on a variety of stock market forums and much of the information is subject to abuse and may even be illegal.

In contrast, DearCEO acts as a proxy for its members and provides a live repository of questions and answers between listed entities and investors, bringing authority and credibility to the entire process.

Even a professional share trader such as Mark Bolton, who uses DearCEO as a tool for research, says he “was impressed to receive a concise response from senior management at Campbell Brothers – I didn’t have to hunt for contact details to get in touch with them.”

Tan says that nearly every time the market declines, or scandals such as MF Global and Olympus spook investors, DearCEO witnesses a surge of investors signing up. It simply reaffirms our pre-launch thesis that the public are hungry for information to protect their investments, he said.

From the companies’ point of view, DearCEO is a great forum to manage investor sentiment and expectations. So much so, companies actually pay DearCEO for the service.

“For the first time, CEOs can now reach grassroot investors from their smart phones from airport lounges, taxis, and hotels,” said Tan, emphasising the value to listed companies.

Tan, who previously founded Medworks and UrologyonCall, claims DearCEO is unique in the Australian market. He now seeks to take this service to U.S. and U.K.