The Resolution

What I've learned about being a director from being a tech entrepreneur and investor

But beyond just helping entrepreneurs, investing in startups has made me a better director. Here’s three things that I’ve brought to my NED work from investing in startups:

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Five years ago I attended a meeting for female corporate directors in New York and it sparked an epiphany that has changed the course of my career as a non-executive director. Almost every conversation I had during that meeting included the question: “Are you an investor?”

It became very evident that in NY at that time it was commonplace and pretty well expected for people in senior corporate life to be angel and/or seed capital investors. As a result, they understood the startup sector and were clear about how they could help that sector thrive. That’s not a conversation we have traditionally had in Australia, and I believe that’s been to our detriment.

One of the actions I took on the back of this realisation was to co-found Scale Investors with Annette Kimmitt and Carol Schwartz. Scale is a female focused angel investor network inspired by the US based organisation Golden Seeds. We focus on supporting women entrepreneurs in early stage businesses, because women in Australia are very poorly represented in the startup sector as a whole. At a recent Fortune Most Powerful Women conference in London, a speaker gave the statistic that in the UK about 2.5% of funds invested in the start-up, seed and VC sector is going to women founders. I think it is likely to be a smaller number in Australia.

Through Scale Investors I’ve personally invested in a number of companies -  TrademarkVision, which utilises image recognition technology to process trademarks and recently won an award in the US for best AI start-up,  SwitchAutomation, which applies Internet of Things capabilities to create smart precincts and villages and an alzheimers treatment approach and this company subsequently did their human trials in Australia.

But beyond just helping entrepreneurs, investing in startups has made me a better director. Here’s three things that I’ve brought to my NED work from investing in startups:

1. Australian corporates are not natural early adopters

There is no shortage of great ideas. At Scale Investors, we regularly hear pitches from young women who have fascinating ideas with global opportunity. But it's very tough for startups in Australia to find an early marketplace here. My work with early stage businesses has shown me just how reluctant larger Australian businesses are to be a customer, particularly the first customer.

In corporate Australia we talk a big innovation game. But the reality is it’s usually much easier to find early adopters in the US than in Australia. All of the innovation PR rarely translates into frontline buyers who are willing to take the risk on a promising but unproven technology or disruptive business approach.

2. The power of experimentation in your core business

Large corporates are struggling with how to be innovative. They're really struggling to build a culture of innovation.

Often, these efforts end up in an ‘innovation lab’. The company puts a few smart people in a lab to experiment with new technologies. Sometimes the best way to describe these efforts is ‘innovation theatre’. It gives the surface impression of innovation, but has zero impact on the core business. This is of course not always the case and sincere investments are made, however the thinking is flawed, because it is not a cultural change if the innovators are separated from the traditional business.

My experience has been that the only way to really drive a culture of innovation is to make experimentation a core part of your everyday business. We see this every day in the startup world. The whole business is iterating and experimenting so rapidly, that there’s huge knowledge gain about what works and what doesn’t.

The challenge for corporates is iterating and experimenting sound exciting, but can actually be very painful. There’s a lot more failure than success in true experimentation. This is hard for the culture of large organisations to deal with (which is why innovation often gets stuck inside a lab).

But the real challenge is that if innovation is put inside a standalone lab, the pace of learning slows down dramatically. There’s not the feedback of failure to prove or disprove ideas. Intellectual but impractical ideas tend to fester for years. If you want a culture of widespread innovation, it must be propagated inside your core business.

3. The power of looking at an industry with new eyes

One of the biggest realisations when you start interacting with startups is just how differently they see the world. You don’t appreciate just how many assumptions shape the way a business sees an industry until you work with someone without those blinkers.

Many of the founders I work with have never been employed by a large corporation. People who have never had a grounding in corporate life haven’t developed the habits and cultural attitudes that go along with it. Sometimes that means unrealistic expectations about the way the world works. But other times that can lead to some really profound insights that you’d never see coming from a corporate approach.

These attitudes are giving rise to disruptors because people are willing to challenge, sometimes without being aware of how big the challenge is, every assumption that has gone into building an industry.

As a director, this is another reminder on the power of diversity in bringing new perspectives and views. It’s simply not possible to build competitive advantage by doing exactly what your competitors are. More than ever before, it’s so important to find different ideas and views.

Overall, engaging with the startup sector as an investor has given me a much deeper understanding of how each sector can benefit from engagement with the other. More directors in Australia need to get involved in the startup sector, learn from them, invest in them and let them benefit from their experience. If we can achieve this level of engagement it can only benefit Australian businesses and the economy as a whole.