“It’s certainly a roller-coaster”: Adam Theobald on the wild ride of a startup
The Australian entrepreneur talks about the highs and lows of running a startup.
Charles Dickens' seminal A Christmas Carol is unlikely to top the reading lists of most budding entrepreneurs, but for Beat the Q founder Adam Theobald, the story of Tiny Tim ended up as something of an analogue for his own career.
Having founded the order-ahead app Beat the Q, Theobald was struggling to secure funding. Like Tiny Tim, the sickly child saved by the reformed Ebenezer Scrooge, he found himself wishing for a Christmas miracle.
"I was in the middle of an acquisition, we were buying E-Coffee Card at the time, and I had a bunch of commitments from some investors. My wife was in hospital and no one would talk to us about capital. It was one of those moments where I had no idea how I was going to get through it," he told Finder.
In this case, it was renowned Australian investor James Spenceley who came to his rescue. "He stood there on Christmas Eve saying, 'Adam, I'm with you, this is going to be great.'
"I've been so lucky throughout my career that I've had a couple of guardian angels, and in that moment James Spenceley was one of them."
Having successfully negotiated the purchase of E-Coffee Card, the fledgling Beat the Q then went on to merge with Posse to form Hey You, the now-popular order-ahead app that lets customers order from their favourite cafes directly through their phone.
While making it through these moments may be too much for some, for Theobald, it's simply par for the course: a necessary trade-off for working in the fast-paced, unpredictable world of startups.
"You're going to have to take the hits every day and you're going to have to be the type of person that jumps back up, dusts yourself off and moves on with a positive learning out of every negative experience."
Learning to enjoy the ride
As the co-founder of Hey You and now founder of b2b order-management system Ordermentum, Theobald has had his fair share of successes and setbacks. "Through the test of time, one thing I've learned is to moderate the highs and lows a little bit. The analogy I use is that it's probably never as good or as bad as it seems in the startup world. Everything appears like it's the next thing that's going to make your business or the thing that's going to destroy your business. And the truth is always somewhere between the two."
Theobald appreciates the initial thrill that comes with founding a startup. "You're just filled with so much optimism and excitement, and the euphoria of having made the decision to go do something by yourself." Even though he enjoys the thrill, he understands that a reality check is always around the corner.
"There's a lot of hard work, there's a lot of knock backs. You're in your darkest moments when you get your 150th knock back saying you're a dreamer or that you've got no chance, or that you're wrong on everything you've proposed."
"When we spoke about Beat the Q as a potential product, everyone got it. There wasn't anyone who didn't think it would be successful based on the idea of buying coffee on your phone. They were two pretty hot topics at the time. But then we went into delivery: building a team and starting to actually deliver on the promises you made in that initial round. That's where you start to see this moment of inertia in terms of how you can deliver.
"I think that first moment of reality: when you get out there and have to sell the product, you start to get a lens for just how much inertia exists when you're trying to change a market. I think that's probably the first friction point where reality seeps in a little bit and you need to pivot and you need to understand how you can impact some change in that inertia."
Having initially run a family and friends funding round, Theobald then looked to high net worth investors to give Beat the Q the financial backing it needed. "We were having really sophisticated, deep conversations with VCs that were considering investing large amounts of money in our business. That was a long process and it was a very difficult, challenging time because you're being asked to speak about the business in many different ways."
While investors understood the app's potential, convincing them to back it financially proved a harder task. "It's always darkest before the dawn when it comes to raising capital. One of the big learnings is that you can never have just one option. No matter how certain it feels, no matter how confident someone is, if they're not the decision-maker and they're not actually writing the cheques, you have to really discount the confidence on that."
"When I started Beat the Q, there was absolutely no venture capital. I think there was $20 million worth of capital in Australia at one point. And that's changed enormously. I've heard numbers of up to $2 billion of venture capital in Australia now. So the industry has emerged and matured, and there's a lot more money coming in to the sector now. The changing funding requirements and the increasing capital means it's a great place to be hanging out if you're a startup
"But the thing that's changed now is that capital requirements have gone down a lot. I think we moved out of this technical economy into the attention economy. What this mean is that instead of having to prove how you're going to do something, we're a lot more confident in how we build things. You still need great people, great technology and great solutions, but we're starting to learn that the issue here isn't 'can you build a website, app or experience?' The issue is 'can you get people's attention?' And that's shifting the capital requirements for the average startup."
While that may remove some of the barriers of entry confronting new entrepreneurs, the reserve currency of the startup world is no longer money, but attention, says Theobald.
"Imagine ten years ago, mobile apps are emerging for the first time, there are only a few people that know how to build them and the cost to do so is through the roof. It's very hard to predict with certainty what the app is, what it needs to do, let alone how to build it and how much it will cost. Through that immaturity comes a lot of volatility where there's huge technical uncertainty and no one knows where the industry is going.
"Fast forward to today and you can build an app for $1,000. So now the question is not, 'Can you build an app?' The question is not, 'Is there a user that has a mobile phone or do users know how to use an app?' That's all gone. The question you have now is, 'Can you get people's attention?'
"I think the number one thing is grounding it in the user's need. Ultimately, Hey You tapped into a huge unmet need: we had a growing need for immediacy in society and everyone was becoming more impatient. You had mobile phones rolling out rapidly and you had a trendy cafe appearing on every corner.
"Don't overestimate the technology and everything else if you don't fully consider how you're going to get people's attention. The best products in the world don't sell if you can't get them in front of the right people."
Staying on track
When developing a business, Theobald says focusing on the user's needs is the best way to plot your course. "The time you tend to get in trouble is when you make the business about your own needs rather than the user. Ultimately the success of any of these businesses is about product market fit. And that's about how much your customer needs the product, how easily they can come to know about it and how quickly they can take it up. If you can focus it all around your search for product market fit, rather than bending behaviour, you've a much better chance of getting traction."
Ordermentum itself grew out of an organic realisation that the Hey You model could also meet the needs of businesses. "I was out there selling Beat the Q door-to-door and the customers kept saying to me, 'This is great, I love that our customers can order coffee through you, but what about me? Why do I have to be a second-class citizen as a small business? Why can't I order through this great new app with my suppliers?' It was a real light-bulb moment for me. So we built up a minimum viable product to prove if the suppliers in the space wanted to use it.
"From a retailer's perspective, there's this enormous noise around managing all of their suppliers. An average cafe might have 10 to 20 suppliers that they use on any given day. Keeping their receipts, managing their payments, predicting and forecasting what goods they're going to need: these are huge items when it comes to them being a profitable enterprise.
"Ordermentum gives them control to look at their trading history, it gives them the ability to manage multiple suppliers all in one place, it lets them share the load of ordering among multiple people and lets then find new products that are important to them. These are the ways that Ordermentum helps them get back time. Our catch cry is 'be less busy, do more business'.
"On the supplier side, they're dealing with the noise, not the exception. They're making phone calls to a bunch of customers, they're chasing payments. There's all this manual work that goes into a supplier business that really takes them away from the two most important factors, which are looking after the customer and delivering great products. And we want to help them get back to the product and back to the customer."