Emu Bob

The stateless micro-multinational

Last week's Economist had an article praising the stateless multinational. The article's perspective on the new breed of global company was worth noting.

The conventional wisdom is that a global business is a bad thing as it pursues a race to the bottom for lower taxes and costs. Clearly a rational business does this but the Economist points out the alternative is no better:

The real threat comes from overly chummy links between a state and its multinationals. Although politicians may have been more comfortable in a world where what was good for General Motors was good for America, that tended to lead to protectionism and antiquated working practices. Firms in which loyalty to the state goes beyond the economic value it offers usually expect something in return—soft contracts and subsidies, perhaps, or standards conveniently set in their interest. In fact the sorry story of GM itself highlights the dangers of being a national champion. Rather than fear the stateless corporation, people would be wise to do all they can to make them feel at home in their country.

At Ephox I perceive us as a small example of a "stateless multinational." We have our engineering team in Australia, our HQ in the US (including VP Sales & Marketing, COO) and now a growing operation in Europe (including CEO and CTO).

The challenges for a global company are clearly present. Communicating ever changing priorities takes work. Our US and European team have a sales-driven perspective and our Brisbane team tends to have a more engineering-driven perspective. Getting them on the same page is, well, not easy at times. Time zones and frequent long haul travel drives us crazy.

Despite all of this the opportunities for a global company are also evident. These opportunities are also one which our Australian heritage seem reasonably well equipped for.

Australians, on the whole, tend to be tolerant and welcoming of different cultures ("I am, you are, we are, Australian"). We work hard at not wasting time and energy on conflict as conflict is 'bullshit'. Empire building and being 'too big for ones boots' is frowned upon. Australian prime minister Bob Hawke probably summed up this spirit when, on a trip to Japan, he said that we weren't going to "play funny buggers" (apparently that didn't translate well.)

Embracing a global culture whilst retaining key elements of our heritage is an ongoing project at Ephox. I guess the ultimate is to take the best elements from all of our locations and people. As the Economist article says, a "globally integrated company needs a single culture, and that the best way to foster this is to make the highest ethics anywhere in the firm the norm for everyone, wherever they are working. Anything less tends to corrode the culture."

In my experience bringing out the best, and discouraging the worst, of our cultural tendencies has to be a cornerstone of any company with operations all over the world.

(For more reading The Economist has a whole series on the topic.)

Recessions are the Brick Walls We Need to Climb Over

This weekend we were busily packing up our house for an impending move to London. I am moving over for 12 months to help grow Ephox in Europe.

At first glance this may seem like a stupid thing to do given that Britain is facing its worst slump in 60 years. Why on earth is this a good time invest time and money in developing the market there?

The main reason was that brick walls present a challenge that is highly motivating*. I have also had an unshakable belief that great companies are built in difficult times. Warren Buffett has it right when he says to be greedy when others are fearful and fearful when others are greedy.

My wife and I moved to Silicon Valley in August 2002. In the week of October 8, 2002, the NASDAQ composite touched its lowest point of 1,114 and completed its ride down - way down - from its all-time high of 5,132. Over $5 trillion in market value of technology companies had been wiped out.

Was coming to the US at that time a good idea? In hindsight yes it was. The tech market wasn't any easier in Australia at the time and getting a foothold in the Valley was much easier on a shoestring in 2002. We were able to hire staff, rent premises, rent accommodation and much more without resorting to the ridiculous premiums of the dotcom era. My wife was also very lucky to get a job with Qualcomm and had stock options priced at the lowest their stock had been in 10 years. Talk about timing!!

Building a company in a recession can be a good thing for a range of reasons. Many great companies have had their formative years in tough times. I have often said that if we had arrived in the Valley a few years earlier we could easily have raised a ton of VC and long since flamed out. Getting going in the recession really focused our energies on the important things and instilled a profitable growth mentality that most start-ups never get.

Will increasing our investment in Europe - and in the US and Australia - pay off during this recession? Time will tell :)

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*Yes, I have been reading Randy Pausch in The Last Lecture.

Aussie Get Together in Palo Alto

The Aussie expat organisation, Advance, is hosting a shindig for Australians in Silicon Valley next Wednesday August 27th at Bistro 412 in Palo Alto.

Register and get the details on the Advance web site. It is about two blocks from home so I will be there!

Obama Spells Baa

Apparently, Microsoft Word now knows the difference between Obama and Osama.

This got me thinking - what does EditLive's spell checker think? Not a lot better than Word used to... the suggestions for Obama were

• Baa
• Bam
• Badman
• Bagman
• Barman

Can we please add Obama to the dictionary for the upcoming EditLive! 6.5 release?

Oh, and is it too early to add Obama as a suggested synonym in the thesaurus for the word President?

Good Buzz, Expensive Healthcare

I stumbled upon the web site for Oregon health insurance company Regence and I was immediately impressed by its clean almost Web 2.0 design. Remember this is a big, boring corporate collecting over $8 billion in premiums per year. Then I noticed their section 'The Buzz' and I was even more impressed.

Regence have done an outstanding job with a very plain English description of the challenges facing the health care industry in the United States and what we can all do about it include:

1. Treat your doctor like a partner
2. Double your motivation (to improve your own health)
3. Make wellness a daily to-do
4. Know your health risks
5. Safeguard your good health
6. Watch your wallet

Their solutions are clearly only part of the answer as healthcare in the US is a hornet's nest of problems. Nevertheless, it is refreshing to see a 'big corporate' use such simple, authentic communication.

Today the news is aghast that consumer prices are up 5.6 percent. This is bad news clearly. But the news yesterday was a sense of relief that healthcare costs are up only 10.6 percent.

If a 5.6 percent increase in the CPI is viewed as shocking and 10.6 percent increase in healthcare is viewed as a relief there has to be something wrong with healthcare costs in the US!

Aussie Dollar Plummets

The Australian dollar is down more than 8% since the beginning of July.

This is excellent news for export-oriented companies such as Ephox who have a lot of expenses in Aussie dollars yet most earnings in US dollars. In fact, our worldwide price list is in US dollars so even when we sell in Australia we sell in US dollars. A weaker US dollar has made our software more affordable to a huge range of markets but on the balance I think it has hurt our business.

Before we all start celebrating and break open the champagne I am hoping that we can see the Aussie fall by significantly more ... even accounting for the recent drop the Aussie is up about 70% since the beginning of 2002. This seriously means that we would have 70% more staff in Australia than we do today if the currency had stayed where it was. We had our cost crisis long before it was popular for small business to be worrying about the cost of gasoline!

The other interesting thing to note from the graphs above is how closely the Aussie tracks the Euro. Most of the movement in the Aussie dollar has clearly been from US dollar weakness... not from any inherent attributes of the Australian economy despite what Australians might like to think ("We have mines! The Chinese love our coal!").

The relentless fall in the US dollar actually elicited some good laughs from a largely European audience at an SDForum event I spoke at during which I quipped "Thank you for traveling from Europe to evaluate Silicon Valley as a place to outsource your software development."

Homegrown US software companies are generally well funded, operate in a huge market and are thus often highly successful and difficult to compete with. The falling US dollar was the elephant in the room for any software companies with significant staff outside the US.

The US dollar's further rise is hardly guaranteed given how far it has come in just a week but I am certainly hoping it keeps 'going and going'!

ECM Acquisitions I Didn't Notice

These two acquisitions happened so quietly during the festive season last year that I didn't notice until today.

Firstly Australian ECM vendor Harvest Road hit the chopping block on December 21st 2007. They appeared to completely melt down last year and sold their assets to Italian vendor Giunti Labs. Founded in 1841, Guinti has to be one of the oldest content management companies around so hopefully their product has found a stable home. CMSWire has some more info.

Then Blackboard closed their acquisition of San Francisco-based Xythos on New Year's Eve 2007 for $25.5 million. This is appears to be a solid valuation of 4.5 time sales - their sales for 2007 were around $5.7 million. The valuation seems more appropriate for a software as a service company and they were mainly a licenses company but then again this is still a reasonable deal for Blackboard shareholders as BBBB is trading at 4.8 times revenues. The much larger, well funded Blackboard is a nice home for their products. Xythos' solid WebDAV-compliant repository has always seemed impressive, at least technically.

Xythos was founded in 1999 and raised a Series A of $6.3 million in 2001, a Series B that there is no info on and then a $4 million Series C in 2003. In 2001 Red Herring mentioned that their Series A had a post-money valuation of $20.2 million so a $25.5 million sale over 6 years later isn't exactly a home run but a whole lot better than nothing.

Top 10 Tips of Digital Entrepreneurs

Brad Howarth spent some time talking to a variety of entrepreneurs, including me, on what it takes to be successful for an article in SmartCompany. The collection of secrets are:

1. Make every dollar count
2. Become a global economist
3. Don't lose focus
4. Listen, adapt and change
5. Cultivate free advice
6. Learn to sell
7. Become a name dropper
8. Keep your team informed
9. Be wary of consultants and advisers
10. Be talked about

My original three 'tips' I sent to Brad for the story were:

1. Focus
Initially Ephox targeted the broadest possible market we could. As a start-up in Australia this meant the small business market before trying the education market. Both of these efforts resulted in some great media coverage but few sales. When we started to focus on partnering with larger software companies such as IBM, Oracle and Vignette we were able to access much larger opportunities, build alliances and tailor our product development. Large customers do see value in the ‘next big thing’ but more often than not their concerns are around more mundane issues such as integration costs, reference sites and quality.

2. Sales Execution
Despite being a highly technology-oriented founder I always had a great appreciation of the importance of sales and marketing. However, appreciating the need for sales and marketing and translating that through to significant sales was another thing. We wasted a lot of business development and marketing activities on opportunities that were difficult or impossible to translate into sales. It is critical for a startup to have a professional discipline around the sales process and the day-to-day execution of sales.

3. Think Long Term
Continuous improvement of product, sales, marketing, engineering and operations takes time to add up and take hold. Ephox took three years to get its first $1m in sales, 18 months to get the next million, 12 months for the third million, 10 months for the fourth, 8 months for the fifth, 6 months for the sixth, 4 months for the seventh and is now on course for its first $1m month. I have always had an unshakable belief that if we improve every part of the business every day of every year our efforts will translate into superb results over time. In my experience, the cliché that starting a business is a marathon and not a sprint is completely true. A smart, committed and passionate team who share a view of the long term is essential.

Australians Fatter

In a high steaks competition Australians are now apparently out-eating Americans at the Obesity Games.

Bloody hell, lighten up!

Apple Design Awards

Apple announced the winners of their design awards last week of which their were two notable winners.

The first is Screenflow. It looks like superb screen recording software that I am downloading as we speak.

The second is Aussie start-up Remember The Milk. I use RTM quite a bit and highly recommend it. Their iPhone app is great. Well done!