It’s generally understood that up to 90 per cent of all startups fail.
That’s concerning news for anyone with a dream to make The Big Exit either as an investor in an early stage company or as an entrepreneur.
But according to Doron Peleg, the CEO of startup RiskWise Property Research, there are ways to mitigate this failure rate.
“The idea is the riskiest stage. And the idea is only an idea. Then you have to build the prototype, launch version one, then version two. The risk in the beginning is huge and 90 per cent of companies can’t move from the idea to the exit,” Mr Peleg said.
RiskWise was formed in 2016 to analyse the opportunities or pitfalls available in the property market and uses an innovative and unique algorithm that turns the tables on risk assessment.
It has gone from strength-to-strength in a relatively short period of time making national headlines around the country. The founders developed market leading tools to provide residential property risk assessment services and among its clients are leading lenders, developers and property professionals. Its research is published regularly on leading media outlets, including the Australian Financial Review, and it recently drew the attention of federal policy-makers for its report, co-authored with Wargent Advisory, on Labor’s proposed reforms, if elected, to negative gearing and capital gains tax.
Mr Peleg believes having a good idea is not enough for a start-up and says it is just as important to have finely-honed skills to make the dream happen. The journey between an idea, no matter how good it sounds, to the actual execution is difficult, full of obstacles, uncertainties and many unpleasant surprises.
“To me, the Top 3 things an entrepreneur needs are good ideas, the ability to deal with and adapt to constant changes and uncertainties and, obviously, strong execution skills,” he said.
“When you come from a big corporation, it’s very easy to understand the strategic objectives of the business, its priorities and major deliverables.
“It is by far easier not only to set a proper plan but also to execute and deal with any challenges and surprises that may arise.”
Mr Peleg has more than 20 years’ experience in risk management including co-founder and managing partner of Peleg, Kessel & Co, an assurance and advisory accounting firm in Tel-Aviv, Israel, and executive manager at Westpac Banking Corporation in Sydney.
He has significant experience in building businesses including strategy, management, finance and marketing, and has an MBA with a corporate finance major, BSc Economics, and is a certified accountant. He also co-developed the property risk-rating algorithm used by RiskWise.
“In today’s corporate Australia there are lots of structural changes, cost cutting, outsourcing, off-shore activities and multi-million dollar projects that change from end to end,” Mr Peleg said.
“People with experience working in senior positions in that type of environment are excellent at dealing with changes, obstacles and surprises.
“That’s because they have seen it all before. Also, people who have worked for major corporations in senior roles have a lot of experience not only in their own data field but also in related fields. They are experienced in working with multi-disciplinary teams like technology, products, sales and risk management and these are so essential when you work in a startup company.
“Anything you have to do in a startup is so much easier if you have a strong corporate background whether it is ensuring the quality of the product, testing that product or targeting businesses, particularly institutions as it helps to firstly put your foot in the door and secondly to have a strategy and then carry it out.”
1) Strategic objectives, priority setting and reviewing. This is the most important thing to apply as changes to the business environment, customer feedback and other unexpected developments require the experience and ability to set and update these objectives and priorities.
2) A strong and experienced team. The efficiency, quality of work, the ability to make smart decisions, the speed of execution and the cooperation with people and teams from different areas of the business and different backgrounds is crucial. This is another element which comes naturally to people with strong corporate experience.
3) Strong project management skills. Managing a complex project in the corporate environment is a good starting point to manage the deliverables of a startup. You need good balance between flexible thinking and strong control over the deliverables in a constantly changing environment with strong budget constraints.
4) Resilience and ability to deal with major changes. These are also mandatory requirements for entrepreneurs. Since the Global Financial Crisis and later the end of the mining boom, we have lived in an era of structural changes, cost-cutting, redundancies and frequent changes to the operating model in many corporations. Those who experience that in the corporate environment are more able to deal with the changes and uncertainties in the startup environment. Resilience is also important to overcome issues and to deal properly with all the mistakes that the founding team will make.
5) Demonstrate proven capability to institutional clients. If you target corporations and particularly institutional clients, a team with previous experience in the corporate environment could be ‘make or break’ for some clients, particularly for a FinTech or PropTech.