Cock-ups come in all sizes and come to all people.
Sebastien Eckersley-Maslin won the first Golden Cock award for the cock-up of the month at the offices of BlueChilli, the venture technology investment company, in Sydney’s CBD.
He’s the CEO.
“I won the first one when I wiped a production server,” he says. “I executed some code which wasn’t sanitised on a production server which you should never do and it’s impossible to do now because we have safeguards to stop it.”
Failure is accepted, embraced and not feared. Everyone is encouraged to learn from that and share with everyone else.
“When you strive for innovation, you have to accept failure,” Eckersley-Maslin says.
“Things will cock-up, things will fail, will break, get lost, forgotten. The point is that we’ll never berate.”
Whoever gets the trophy does a little talk on what happened and what was learned.
That’s one of the secrets of success for startups. There are another 156 steps which will be talked about later in this article.
The people who work at BlueChilli obviously like being there.
Consider these benefits: unlimited sick leave, an Awesome Day per year (take a day off when you feel like it) which is the opposite of a sick day and no-one works on their birthday. Then there’s flexible hours; rock up when you want, work from home when you want.
And for those with internal meeting fatigue, there is only one meeting a week plus stand-ups, a tiny five minutes at 11 am.
Staff turnover is zero.
BlueChilli has made 37 investments in 24 months, almost two per month, and that’s created a portfolio in excess of $67 million.
Five have been failures and BlueChilli has learnt from those.
There are two types of people in the offices at BlueChilli. Those who work there (28) and all the those who are called founders, those building their start-ups, another 32 or so.
“We just don’t take anyone,” says Eckersley-Maslin. “We take the top one per cent of ideas that are pitched to us. We’ve had over 4,000 pitches. We get 200 a month of which we take on two.”
Along the way, BlueChilli has grown. It recently acquired The New Agency and its two founders, Tony Burrett, founder of Carsguide.com.au, and Alan Jones, who lead the establishment of Yahoo in Australia, have joined the team.
And last month Sebastien Eckersley-Maslin was named EY Australian Entrepreneur of the Year in the Emerging category.
Meet the founder
Sebastien Eckersley-Maslin grew up in Hobart and was about to sign up for engineering at the University of Tasmania when he got a call from Defence recruiting.
He’d always mucked about as a kid with circuits and devices, building radio transmitters and other electronic bits and pieces.
Defence told the 17-year-old there was an open position training in weapons technology, starting in Canberra with a full scholarship for a degree.
“Do you want it,” they said.
That was a Friday. The following Monday, January 24, 2000, he was in Canberra.
“It seemed like a good idea at the time. So I stayed in for a full ten years.”
The Navy gave him discipline, structure and process which later became the foundations of BlueChilli.
He also experimented with management styles and saw first-hand how people react under pressure in arduous conditions.
“Everyone there is part of an organism and because you’re so well trained that, when you’re pushed to the limit, you have no question at all that other members of the team are able to fulfil their function.
“It’s an incredible experience where you’re part of this organism. You are literally a cog in a machine. It sounds awful but it’s actually an awesome, awesome experience. You are part of this unit and everything works.
“When stuff happens – when you would think everyone is shouting and panicking – there is quiet and calm.”
Still in the Navy, Eckersley-Maslin also began building entrepreneurial skills, first with an SMS service called 199QUERY which, for a fee, would answer just about any question.
A team of 35 researchers could answer a questions in three to four minutes. This was the days before Google searches on smartphones.
A popular question was: Tell me what you can find out about me. These were called, internally, Egotexts.
“We developed clever software to find out about people online, all open source stuff. It was all about linking bits of information together. You’d have a little sniff from four or five sources which together gave a good picture of someone.”
Eckersley-Maslin sold to competitor, Bongo. “I was about to be deployed to Iraq so I kind of needed to exit because I could see myself not spending much time on it at all.”
The last year of the navy he worked on a start-up, a digital signs business called Crystal, with a friend.
Again, this was sold.
Both are still going in one form or another.
“The greatest legacy for an entrepreneur is to leave and for the business to keep going. Even better if there’s growth.”
Then came BlueChilli, initially with Eckersley-Maslin as a consultant building startups.
“Then we did equity as well as fees so we can share in the upside, basically a joint venture. Part of our blood, our DNA, is to do that.”
Eckersley-Maslin positions BlueChilli this way: “It is the only group purpose-built from the beginning to make investments in digital start-ups. We look at talking an idea taking it all the way through to Series A funding.”
And his experience in the Navy comes in here. Blue Chilli has identified 156 tasks, actions or ‘things’ as Eckersley-Maslin calls them, which need to be completed to take a start-up to a working business.
“That includes things like registering an ABN (Australian Business Number). It takes five minutes when you know exactly what you’re looking for but if you’ve never done it before it’s hours of research. What is an ABN? Why do I need an ABN and an ACN (Australian Company Number)?”
The 156 tasks are divided into three streams:
The first phase is development, building the business and what BlueChilli calls the MVP (Minimum Viable Product) plus branding, graphics, marketing. The emphasis is on a rich user experience. “People these days are used to a high standard of quality. “We put a lot of effort into that.”
The second is growth. The businesses is put under financial pressure. “They don’t have much money to spend and we force them to look outside the box for novel and unique ways to get those customers on board. The founders are out on the street selling to get the early customers on board.” Once some cash coming in, some customers, BlueChilli does an Angel event to raise investment money. That’s between $300,000 and $500,000.
The third and final phase is using the new cash to hire talent so that within another 12 months the business is independent when it can operate without help. Then BlueChilli goes for Series A investment which is between $2 million and $5 million.
“We measure everything,” Eckersley-Maslin says. “We track everything, absolutely everything.”
He laughs when he talks about the internal productivity rate. “It’s actually 74.95 per cent for the 2012 financial year. It went up by half a percentage point from the previous year.”
BlueChilli only invests in non-technical founders, people with a good idea but who can’t write code.
“These are people from marketing, sales, management backgrounds which in my view creates a strong type of founder because they are more likely to be able to sell and that’s what businesses are about.”
The BlueChilli model
BlueChilli charges a fee of between $50,000 and $75,000 and takes 20% to 30% of equity in a start-up. In return, Blue Chilli provides a team of experts experienced in building start-ups. That’s what they do.
“You get an entire enterprise framework called ChilliSource(TM), a source code which we build all our start-ups. You get the right people at the right time be it investor branding or the best public relations.
“We will then launch that business as quick as we can because we make no money on our fees and we have equity in the business. They money just covers our debt line. We want to keep the cost down, we want to increase the value of our investment.
“And when you get to Angel, we have a $10 million venture capital fund which, once it’s closed, will co-invest and match any Angel dollar you raise, assuming you have completed the first 86 of the 156 tasks.”
The processes, and the 156 tasks, at BlueChilli make it easier, less time consuming, for Angels to invest.
“We actually give the Angels a certificate saying they’ve gone through the steps. The BlueChilli brands starts to mean something, it’s very powerful. We won’t push a company out for investment if we don’t think it’s ready.
“Most people who have a net wealth which enables them to make one or two Angel investments don’t have the time to invest in understanding the space which means the chances are they are going to fail.
“They’ll plod along for a year and fail and be part of the 95 per cent failure rate. And that’s it they’ll be burnt and they’ll never make a similar investment again.”
The difference between success and failure for a start-up is founder commitment.
When a founder spends 100 per cent of their time living and breathing the business the chances of success are higher rather.
“The deliminator between success and failure is the founder themselves. Do they have what it takes to drive this and make it a success? We can give them as much support as they need but at the end of the day it comes down to them.”
BlueChilli hasn’t yet exited any of the start-ups. There’s no pressure because BlueChilli in profitable on its fees and other business lines.
“Our model doesn’t drive us to an early exit so we’re happy to hold on,” he says.