Article published by Queensland Business Acumen, August 2006
BUSINESS STRATEGIES INTERNATIONAL (BSI) is making a name for itself as an effective pathfinder for start-up companies Australia-wide.
BSI’s mantra is that it looks for and evaluates companies “that have real prospects” according to BSI Services associate director in Queensland, Paul Johnston.
Then BSI accelerates their progress by bringing in whatever elements are vital to that specific company’s success. That can range from key strategists to capital to technology.
“It’s the go-to strategy,” said Mr Johnston, who opened the Brisbane arm of BSI in February. “Right from the get-go, we look at where and how technology can be placed. For example, is it radical and innovative, or should it go with an OEM (original equipment manufacturer)?”
In the case of BSI’s Queensland thrust, which is led by Mr Johnston and Greg Beaver who is also the founder of the allied and well-regarded ‘pooled development fund’ the Pioneer Development Fund, it is all about adding ‘smarts’ and resources.
“It’s hard for start-up companies that usually have no sales and no real business plan,” Mr Johnston said.
BSI’s speciality is engineering and auto product technologies, although there is an increasing focus on information communication technology and clean technologies.
BSI Services is well equipped to bring engineering innovations and automotive products through – and they have experience in doing so with the US Army, Ford and General Motors in the US. One project BSI is working with right now is an ethanol fuel technology in alliance with the US.
“BSI is one of the few one-stop shops,” Mr Johnston said. “We often arrange grants such as COMET and QIDS and the raising of capital and R&D tax concession work.” BSI also has access to angel investors and business specialists to help guide start-up companies.
BSI Services ‘bets’ on these companies in many ways, taking a success fee rather than impacting on a company’s cashflow in the critical early stages. BSI organises collaborative arrangements and assistance from groups like AusIndustry and it packages the client company at its own cost.
VARIETY CHALLENGE The variety of activity BSI gets involved with, to help start-up companies through to success, is astounding. The national BSI operation keeps a resource of grants and deals for start-ups and the regional offices can utilise this data. There is also a regular series of showcases such as ‘Gateways’ to the US, India and China.
“BSI has a central resource we can tap into,” said Mr Johnston. “But in the main we find we are doing most of it ourselves and passing on what we have learned for others in the BSI network to utilise.”
Mr Beaver said, “You’ve got to pull all these things together. I can’t believe how many companiesare not aware of R&D and EMDG grants.
“Every company is different,” said Mr Beaver. “They might be great technically, but not commercially, for example.”
BSI evaluates if companies are ready for market and is brutally honest with the clients they work with.
“It’s a treacherous road,” said Mr Beaver, “and it’s hard to find your way through it. There are really very few people who know the space. For instance, how to raise the capital – it’s a game. It’s different for everybody. But there is money out there. It’s a matter of marrying up the opportunity with what investors want.”
Angel investors are interested in a wide variety of possibilities, said Mr Johnston. “There is such an innovation boom going on in Queensland.”
A great example at the moment is a company BSI is working with that has created a form of liquid fibreglass and they are doing precommercial trials in alliance with luxury boat company, Riviera. That company has been able to lower its development costs dramatically by working on a collaborative basis with a company that will become a key client once the technology is proven.
For another company, mobile commerce developer Startcorp, BSI helped raise $1million then $5million and then earned a Commercial Ready grant to drive progress.
In choosing to work with companies, Mr Johnston explained that a lot of the decision making came down to the personalities involved and the relationships built, as much as the technology being developed.
“A lot of it comes down to the entrepreneur. They need to have a blend of confidence, but not arrogance,” said Mr Johnston.
When they take on a client, BSI analyses the business and they analyse the management.
“We give them governance or whatever they need,” Mr Johnston said. “Between us all, we’vegot a terrific skill set.
“We have to bring in resources and we have to have a leap of faith. A lot of people get burned and there can be a lot of ill feeling as a result. That’s what we aim to avoid.”
Possessive inventors are a problem. “You have got to excite the market and create demand for it,” he said. “The company cannot be shy.
“You put the processes in place and try to lessen the risk and failure rate. Remove what you know doesn’t work.”
Mr Beaver’s Pioneer Development Fund has proved a saviour to some great ideas that would have otherwise faltered. He raised the first $5million from ‘mum and dad’ investors. Now the ‘big end of town’ is taking an interest in subsequent funds.
“I really get angry about it, when companies go down,” Mr Beaver said. “Drip feeding through companies in Australia is a mistake.”
Insufficient funding supplied too slowly can be a disaster in itself, he said, especially when technology needs to be timely, such as in the auto area.
“The guys in Detroit are searching for auto technologies – and they really take Australian companies seriously in this area.” He said Australia had a long line of successful technologies adopted by the US auto industry.
BSI organises Investor Forums for potential investors and new products, featuring their clients and potential investors.
Soon they will do a US mission which they call the US Auto Gateway. BSI Services’ approach is entirely practical for, even though they have good inroads to the major manufacturers, that may not prove to be the best path. For some Australian auto technology companies it is best to find a company that supplies the big manufacturers, Mr Beaver said.
“Tier ones or OEMs are not excited until they find customers,” he said.
There were strong emerging opportunities in clean technology out of Australia. “Even if you can’t raise the money, you can get to market by JVs etc,” said Mr Beaver.
“But venture capital companies are coming to us now and saying we want cleantech,” Mr Johnston said.
“The rule is, there are no rules. Even raising too much money can often be a burden on your exit strategy.”
BSI in Queensland has put on two staff since its February start-up and is looking at researchers for its own next phase.