Lightning Lab II grows up – will its offspring make it to adolescence?


 

Anyone that’s been around young children will appreciate there’s a heck of a difference between a one year old and a two year old.

A similar comparison is valid with Lightning Lab II, which last week had nine of its 10 starters from three months ago pitch to about 250 would-be investors, and a number of others who mostly filled Te Papa’s main theatre last Wednesday.

As LL itself says, it is modeling the way it works off TechStars and other USA originated accelerator initiatives.

But there’s a New Zealandness to how it is done.

So, as well as the added degree of presentation polish, one of the more notable aspects was, apart from three business asking for just under $500k each, the other six businesses were relatively low in how much money they were asking for.

This partly reflects there’s still more market validation and proof required, and also the New Zealand environment.

Often overseas startup accelerator businesses have already obtained some money (from friends, family and fools) before they begin the three month intensive mentoring and ‘is there a business here’ questioning process.

New Zealand accelerator startups at this LL tend to be less mature, and the degree of realism in the money pitch in bringing new investors onboard was one of the features this time round.

Naturally, since many of the pitches are as much about selling the sizzle as the sausage, there is a touch of scepticism required in the growth projections put forward.

But, without any due diligence, all the pitches sounded like they could – with the right combination of expertise, clear direction and luck – gear themselves up to grow.

And, rather than attempting to break down each businesses’ prospects myself, I’ll repeat Nicolai Thomson’s speculation. Nicolai, (Twitter handle, @nicolaithomson) is the founder of Lendyour.co.nz. Here are some of his, and some of his colleagues’ thoughts about the business propositions put forward at LL Demo Day.

He raises some interesting points, that investors too will no doubt explore as they look under the hood of these potential part-purchases.

In Nicolai’s words:

I don’t rate Twingl’s business model though I would totally use their product. They need to look at alternative monetisation and in the last 18 months I’ve heard their CEO twice and don’t rate his ability to spot a future trend, change and win fast enough when established companies jump on their un-patented mapping.

MishGuru, too reliant on Snapchat being a fad today, and limited audience using it. Snapchat will pass and be dead in 3 years. Their subscription plan is also fundamentally wrong as their target market is enterprise paying $10 a month. Every company will start on that level with little incentive to move to more expensive plans which would assure MishGuru can pay their bills.

Floc has a great concept but little future. Using Telco data is not going to be given to a brand new team with no reputation, and would be revoked the moment a controversial CEO or diplomat was tracked leaving their building after someone eyeballed then and identified their dot after hacking in to Floc systems. Never-mind the fact restaurants have legal obligations when it comes to employment and cancelling shifts before or on the day won’t fly for long in the name of saving the owner some dollars. Staff would likely leave and cause unnecessary headaches.

Coach Seek will be a safe bet, no spectacular exit so ideal for the risk averse of those investing. I like the product though maybe a touch too expensive starting at $49USD a month.

Cloud Cannon were my top pick, followed by CommonLedger.

CommonLedger will have a competition issue and will probably be best to position themselves to be bought out quickly. They will be overtaken by deeper pockets if their concept starts to take off. Their CEO gave the impression they are going to build a global giant and may miss a good return which some investors could be spooked by.

Cloud Cannon though probably have the closest disruptive product but I spoke to a designer friend last night and there are major concerns with SEO ability if you get quite messy code that it would deliver the site through. There is no comparison to original source code being indexed. This service cuts out the core web developers who provide the framework/CMS which is why WordPress has been so popular. If they can get SEO to be great, then it’s a winner. Again, won’t take long for others with resources to reverse engineer. Great business model though.

What I didn’t see from any of the teams though is a disruptive produce that carves out a niche which cannot simply be reversed engineered, or copied by teams with deeper pockets, more experience and crucially an existing customer base to test, and get faster feedback from. There were a couple of self-proclaimed engineers and maths geeks, however no one stated their competitive advantage was an algorithm that is one of the few things not easily replicated.

 

 

 

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About sticknz

sticK is by Peter Kerr, a writer for hire. I have a broad science and technology background and interest, with an original degree in agricultural science. My writing speciality is making the complex understandable. I am available for outside consultancy work, and for general discussions of converting a good idea into something positive
This entry was posted in Angel investment, cloud computing, contract writer, Development, Entrepreneur, Innovation, IT, Market validation, private equity, SciBlogs, start-up, writer for hire and tagged , , , . Bookmark the permalink.

3 Responses to Lightning Lab II grows up – will its offspring make it to adolescence?

  1. From the comments that Nicolai made, what was the benefit of doing Lightning Labs II? Surely the purpose of the programme is to address just these shortcomings? I’m sure LL made a difference, but the investability at the end of the day must be their measure of success. It is the second time around, so LL should be better at what it aims to do (unless “contracting-to-expand” is the new black).

    • One of the notable challenges LL is going to have for the next 2-3 years is lack of experienced founders who have failed or succeeded at a start up – note It doesn’t need to be their own idea/baby. Ideas are great, but like you said investability is totally different.

      Like Peter said, each could work but only if an experienced team came alongside to nurture our founders. Finding people with the right experience in NZ has been hard, so a few of these companies may need to get funded anyway, and if they fail you get experienced people on deck here in NZ.

  2. drllau says:

    The lack of sustainable competitive advantage (like proprietary google algorithms) is a major concern but not a deal killer one. I deal in IP licensing and if you look at microsoft, they licensed in another OS which they in turn improved upon to deliver MSDOS to IBM. Drucker said the 2 important traits of a firm are innovation and to satisfy a (paying) customer. If you’ve got traction, then sooner or later you have to reinvest in R&D to avoid being crushed by deep-pockets. The problem is NZ doesn’t have a deep tech base (see Oracle using US military tech like dynamic sail surfaces) so it suffers when facing off against the market gorillas.

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