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Should we thank the GFC for making Australians more entrepreneurial? Ex-bankers say, ‘Yes!’


Is it possible to attribute Australia’s next generation of successful entrepreneurs to the GFC?

Look around and it’s not too hard to discover a slew of entrepreneurial startups rising from the ashes of the hard-hit banking and finance sector. TopGuest, Greenstride Funds Management, SeeMedia Group, Kaggle and now Paws for Life – were all founded, indirectly, by way of our top banks.

Perhaps there’s a silver lining to the economic cloud?

The GFC appears to have worked in a subtle and probably unconventional way to boost entrepreneurship in Australia.

Two years before the crisis, top banks were on a hiring binge and may well have signed up a disproportionate number of bright talent, many of whom were inclined toward entrepreneurship.

In fact, those with a memory of more than six years will recall how hard it was to find talent among the much-maligned, seemingly ‘fickle’ ranks of Gen Y.

However, when the global financial crisis kicked in, the exceptional young talent remained locked inside these banks. For many, the same characteristics that created furrows in the brows of frustrated managers — cocky self-assurance, self-determined work-practices and a perceived disrespect for authority — were re-channeled in ways us older cynics could never have expected.

Three years on, it seems that these corporate environments may have become a new model of business incubator – one on steroids — teaching wannabe entrepreneurs real lessons in real business contexts.

So, did the banking brain drain combined with the GFC create a perfect storm for kick-starting Australian entrepreneurship?

It is not an easy question to answer, even anecdotally. Just ask Paws for Life co-founder and ex-Macquarie Bank employee Michael Frizell.

“Did the boom and bust of the professional services world just delay a wave of entrepreneurs from starting the next wave of companies?” asks Frizell. Or did the financial crisis simply “equip these people with critical skills and experience to create great lasting companies that they would otherwise not have developed”?

Invaluable lessons from Macquarie

But Frizell is unambiguous about one thing.

“We’re in a great position to solve some very real problems in the pet food industry with Paws for Life,”  says Frizell, while describing the period at Macquarie “an incredibly tough but hugely rewarding period” of his life.

“There are not many other places you can learn so much about business in such a short time. So far, the experience gained in the finance industry has proved invaluable to Paws for Life,” he adds.

Frizell, along with Kim Miller, turned entrepreneurs late last year after being colleagues at investment bank Macquarie Capital. Frizell also did a stint at Greenhill Caliburn and GEM Consulting, a boutique consulting firm started by former McKinsey executives, after graduating from the University of Western Australia with degrees in engineering and finance.

Miller has also worked at Morgan Stanley and the consulting firm Momentum Partners. He previously founded a private label health and wellness online retail business that he exited in 2005. Miller has a commerce degree from the University of Western Australia, specialising in econometrics.

While a recap of his past screams ‘Banker’, his ambitions for the future begin with a capital ‘E’.

Building a real business (by learning from the past)

For a generation of dotcommers, Paws for Life triggers memories of Pets.com – a highly trumpeted startup that eventually bit the dust in the first dotcom bust at the turn of the last century. Frizell’s partner Miller says their startup is in no danger of making the mistakes that cost Pets.com dearly.

“I have read thousands of reports on dotcom era failures, especially from the point of view of the management, and they come down to liquidity. There was an idea that if they just had more capital to reach the next revenue target, everything would be okay,” says Miller.

“Every delivery will make a profit – you can be assured of that. From day one we have taken a very considered approach to this issue as it is key for scalability – if you screw it up at 100 orders, or 1,000 orders, imagine what the hole is going to look like at 25,000,” Miller said.

Pets.com was felled by a gross blunder: it set out to sell a relatively cheap product that was bulky and cost the earth to ship.

Paws for Life is well on its way not only to avoid that mistake but also solve the scalability issue. Its first hire is a top number-cruncher – James Edwards, who recently submitted his PhD in applied maths at University of Sydney. James and his team have developed a custom-built fulfillment and warehousing system that automates the entire process, something Miller considers crucial for the firm’s “high value, high volume business.”

No sock puppet here (the wisdom of youth)

Employee No. 2 at the company is Tim Woodward, another ex-Macquarie colleague and marketing whiz.

The brief for Woodward, who has spent the last three years at Downstream Marketing, a premier digital agency, is this: Tap social media and digital marketing to give the startup the ability to reach a large audience in an effective manner without resorting to Superbowl commercials.

The co-founders of Paws for Life have bootstrapped their startup, in recognition of the hazards of accepting outside investment at this stage. Besides, they want to stay for the long haul and have “skin in the game,” as Miller terms it.

Paws for Life has its share of seemingly insurmountable problems. But its founders are using experience from their corporate lives and the ‘wisdom’ of youth to tackle them.

“If we had to identify one lesson or trait that has helped us develop the business thus far and continues to help us grow each day it would be that every problem is solvable – just break it down and tackle it in bite-sized pieces,” said Frizell.

Among other things, Frizell says the banks taught him to focus on the fundamentals, never lose sight of financial performance and self-belief but “no sock puppets ever.”

So, three years after this century’s worst downturn, should we be thanking the GFC for making Australians more entrepreneurial? This rise of startups with a common fount, as it were, is no coincidence. It’s probably no coincidence either that they are emerging after global capitalism’s characteristic bust from an industry that is all about the numbers.