Home / Startups / Features / Digital shapeshifters Liquid State on raising capital in Queensland
The Liquid State team. Kit Kriewaldt, Cyril Doussin, Phil Haynes, Karen Andrews and Philip Andrews.
The Liquid State team. Kit Kriewaldt, Cyril Doussin, Phil Haynes, Karen Andrews and Philip Andrews.

Digital shapeshifters Liquid State on raising capital in Queensland

Most organisations generate a significant amount of content for their employees, customers, shareholders and other stakeholders to read. That content often ends up as a web page or downloadable PDF, or gets printed as hardcopy. While a few organisations have embraced mobile apps as a distribution medium for their content, most still rely solely on their websites and printed copy to reach their intended audience.

But consider this: according to data from Alexa, mobile analytics firms Flurry and others, readers spend an average nine minutes per session reading material from the web, whereas they spend an average of 32 minutes reading content delivered through an app (see the figure below).

Reading engagement. Mobile apps vs web. (Image courtesy Liquid State)

Reading engagement. Mobile apps vs web. (Image courtesy Liquid State)

Between 2010 and 2012, the number of minutes per day an average user spent consuming content through mobile apps increased from 66 minutes to 127 minutes. In the same period, the time users spent consuming content via the web each day did not grow at all, as the figures below show.

Web and mobile content consumption in 2010 very even (Image courtesy Liquid State).

Not much separating web and mobile content consumption in 2010  (Image courtesy Liquid State).

Growth in mobile content consumption.

Growth in mobile content consumption two years later (Image courtesy Liquid State).

These numbers motivate, in large part, the existence of Liquid State, a Brisbane company whose cloud-based system adapts digital content to multiple platforms, including iPads, iPhones and Android devices. Authors lay out their content once and Liquid State handles the translation to various screen sizes and orientations. In effect, they “liquify” the content, making it more easily adapted to a range of mobile devices.

Having recently raised $785,000 from Commercialisation Australia and angel investors, Liquid State is aiming to capture a slice of the $200 billion worldwide publishing market. In fact, businesses like Liquid State are not so much capturing a slice of the existing market as expanding it further. They’re making it possible for organisations to deliver content to readers through new channels while retaining the general style, design and brand elements of the master content.

Magazine publishers such as Condé Nast and Future PLC are the most obvious customers for Liquid State. However, the corporate communications market will also be an important part of the team’s game plan. Corporate communications — that’s everything from internal newsletters to glossy annual reports to PR and media releases — are worth €5 billion in Germany alone, and pushing this content out to mobile platforms in a repeatable, cost-effective way is still, believe it or not, virgin territory.

On the technical side, Liquid State makes heavy use of the latest web standards to ensure that the content remains “liquid” or easily adaptable to various device form factors. There’s nothing new about good responsive web design. But what is new is a solution that takes existing web content, PDFs or content prepared in Adobe InDesign and deploys it to multiple platforms and distribution channels.

Liquid State CEO, Philip Andrews, said that his team wanted to choose the most forward-looking and interoperable technology as a basis for its solution.

“HTML, CSS and Javascript is a no-brainer for that.”

However, the underlying technology was only one consideration. Just as important was the choice of the means to deliver content to their clients’ readers.

“How can we provide for our clients the best way to distribute and monetize that, if they wish, and create analytics around that which are meaningful?” said Andrews. “The best distribution systems around at the moment are the ones that are run by Apple, Google, Amazon and Microsoft.”

Each of these distribution channels relies on native mobile apps. Liquid State’s approach is to marry the flexibility and interoperability afforded by HTML5 with the proprietary distribution channels owned by the tech industry behemoths. Client content is laid out in standard HTML5, and then wrapped in a thin native app layer. While this approach might not be a winning one for certain kinds of applications, it’s a technique that makes perfect sense for books, magazines and similar material. Reducing the costs of producing content for different channels is a key value proposition for Liquid State, and their choice of HTML5 is central to achieving that.

“It’s not really rocket science, but no-one’s really doing that as much as we are,” said Andrews, who claims competitors, including Oomph, tend to target iOS to the exclusion of Android and Windows 8.

“If you then start to think about the interoperability of using web technology for layout, and the other things you can hook in to, some really interesting things come about.”

One example is a challenge that Axel Springer, the massive Berlin-based publisher, has in delivering content and advertisements. Axel Springer has its own mobile ad network, which uses standard web technology. It also has its own tablet publishing platform. However, the ad network doesn’t connect to the tablet publishing platform, because Axel Springer uses a proprietary system for tablet publishing.

“This is crazy stuff!” said Andrews. “If you own your own ad network that’s web technology, you should be able to push it out to another digital format. So closed systems, or systems that use technology that is particularly locked in, we should ignore that stuff. We should be looking at stuff that allows easier connectedness.”

Interoperability is not a new concept in the digital publishing industry. For a long time, XML-first workflows have been the gold standard.

Kit Kriewaldt, Liquid State Chief Marketing Officer, explained: “I think part of it is that in publishing, particularly book publishing, the best way to do digital was XML-first publishing. That was such a fad! That started in ’09 and it’s still going now. There are a lot of big publishers that are only just turning onto it even though it’s already been shown to be a bit of a waste of time, because the way that you’ve marked up your XML at Random House is probably pretty different to how Simon and Schuster do it, and so there’s still no interoperability, it’s not really cross-platform. Or you’ve got to build everything yourself to fit your particular XML style. Whereas HTML is already built. There are all kinds of tools that you can use to work with it.”

“As long as you’re using the subset of webkit that everybody agrees will probably work across mobile devices!” Andrews chimed in. “And in a way that, within the native wrapper, doesn’t cause too many conflicts. That’s why it’s taken us fifteen months to get to release.”

The emergence of apps and the app economy have tempted many publishers to experiment with glitzy, media rich versions of their publications. These experiments often end in failure due to the cost and effort of maintaining different versions of the content.

“Sustainable models are about balancing what we can do with what we should do and what the customer expects,” said Andrews. “Right at the beginning we were too engaged with what we could do. It took us six weeks to convert our first magazine to tablet format. There’s no way we could get ROI on that. I think we sold 10,000 copies in the App Store. Even at 10,000 copies we couldn’t get ROI on that. And if you’re turning out a magazine once a month, you can’t even get your schedules to line up. So that’s a big mistake.”

There’s much to like about the Liquid State team, not least the team’s approach to startup accelerators. Most startups apply to an accelerator to take their idea from a concept through to an initial product, in an attempt to find product/market fit. Liquid State, on the other hand, already had a prototype, and had validated the underlying idea in a small market in Brisbane. They wanted to find an accelerator with links to investors, mentors and potential customers in the publishing space. The team applied to Startupbootcamp Berlin, which they chose because they felt energised by its vibrant culture and atmosphere, and because of the range of mentors. Out of the 300 companies that applied to SBC Berlin in that round, Liquid State was accepted as first choice in a group of ten selected teams.

Said Andrews: “We were there for three months. We took four people over: Kit was one of them, Karen (Andrews), our COO, and Cyril (Doussin), our CTO. We lived in the same house together, killed each other every day.”

SBC Berlin provides teams with €15,000 seed funding, six months of office space, low cost housing, 900 minutes of car2Go credit, a bicycle, free public transport, immigration/relocation assistance and free breakfast every Friday, among a host of other life essentials. Clearly, Berlin is a city that is serious about its startups, and it’s no wonder Liquid State had no hesitation in applying to SBC Berlin.

But it was the connections that really mattered to Andrews and his team. Through the SBC Berlin mentors, Liquid State gained access to executives who run some of the world’s biggest and best known publishing companies.

“We got in to see the CEO of Axel Springer. We got in to see Bertelsmann, which owns Penguin Random House. We also got in to see the director of tablet publishing at Condé Nast, who happens to be an investor now, in the company. We got in to see Future PLC, which is, for the third year running, the Digital Publisher of the Year worldwide.”

Towards the end of the SBC Berlin program, the team had to decide which geographical market they would focus on in terms of investment and customers.

“We had to make a decision about where was the most likely place for us to raise? And we went backwards and forwards a couple of times, doing meetings there, doing meetings here. Looking at government options there, looking at government options here. The Berlin government’s got an incredible grant program. The UK government’s got very attractive investment programs; that’s another option for us as well. We looked at all that stuff, and we basically played the numbers game.”

Interestingly, the team chose to return to Brisbane, and the business is still structured as an Australian proprietary limited company.

“At the same time, what’s very interesting, is that the ecosystem in Brisbane started to actually catch alight. We’ve seen, in two years, a massive change in terms of the activity in Brisbane, the Lord Mayor’s announcement of the support for entrepreneurs, the support of Minister Ian Walker, who was at the Angels meeting last night and talking up the startup community. And just things like the Australian Microsoft Innovation Centre is in Brisbane. These sorts of things are small but significant. At the same time we found a founding investor here, who currently has contributed 25 per cent of our total investment.”

TSJ can’t disclose the details of this investor, other than to say he’s a real estate businessman who has previously invested in one other tech startup.

On the back of that investment, the team raised some further funds from a syndicate of angel investors, most of whom are members of Brisbane Angels. At the end of 2011, Commercialisation Australia changed the structure of its Early Stage Commercialisation assistance from being a repayable loan to a grant, which the Liquid State team found very attractive.

“We’d already gone through the process once, and had accelerated our development past the milestones that we were applying for, so we kind of understood the process a bit better and the length of time it took. And so we were a bit smarter about that, and we applied for milestones we knew we were going to achieve in a bit longer timeframe.”

Their Commercialisation Australia application, said Andrews, was much stronger for having been through the SBC Berlin program.

“By that time the Germans had nailed us on our business plan, nailed us on our financials. We had a better understanding about our direction because of the accelerator program. The Germans are fantastic at seeing a company as a machine.”

“Everything’s spreadsheets,” added Kriewaldt.

“So we came back being a vastly different company to what we left,” Andrews said. “Honestly, we didn’t really fully understand what we were doing. After three months, or probably five months, we went back again. We were far more mature, far more realistic in terms of our outlook. And that showed when we started pitching here.”

“We polished our pitch a lot,” said Kriewaldt. “At Bootcamp, part of the deal was that mentors would come in pretty much every day to give advice. The first thing you had to do was that everyone had to stand up and pitch their business and get feedback. So trying to get other people to understand your business every day, and people coming at it from different angles, is the best way to get to understand it yourself.”

Andrews suggests that all startups should do a stint at a good accelerator overseas.

“We would totally recommend going somewhere else to get validity, to check the veracity of your technology, to pull your business apart and put it back together with an international focus.”

“Coming back to Brisbane, whereas we felt before we were a little limited in terms of being able to access the skills base, the knowledge base, the money, all of that kind of stuff, having had that international experience, having grown our international connections, having an international focus now, we don’t feel that anymore.”

And they’re not kidding about being international. They’ve hired a business development and sales manager for the UK and another for New York, and they’re always in touch with their international mentors and contacts.

Kriewaldt, though, is waiting for the day when the calibre of advice and intensity of mentorship they received in Berlin is available in Brisbane.

“We had to go to Berlin to get that level of international advice,” said Kriewaldt, “but there is no reason in principle why those international advisors couldn’t come here and give that same advice, and that’s kind of where we see we can give back, by building a link between SBC and Brisbane.”

“One of the problems with building a company in Australia is the level of wages here. Fundamentally, the same level of developer in Berlin would be 35 per cent of the price we pay here,” said Andrews.

Kriewaldt added: “One of the reasons Berlin has become a big startup hub, and this is their dirty little secret, is that Berlin is broke. They’ve got double-digit unemployment, so it’s easy to employ people for cheap or free. And even though German law states that you can’t have an intern for free, you can have someone on a probationary internship or whatever you want to call it and get them to work for free on the promise of money eventually. It’s easy to build startups that way, but it’s also a little bit of a sweat shop environment for some of the people there.”

Sweat shops aside, Berlin seems to be doing lots of things right.

So, too, does Liquid State, who are finalists in the Lord Mayor’s Business Awards for 2013 in the “ANZ Made in Brisbane Award for High-Growth Business Start-Up” category. These guys are the real deal. If you’re trying to get your startup off the ground in south-east Queensland, you could do a lot worse than seek out Andrews or Kriewaldt for a chat.

About Ricky Robinson

When he's not writing for The Tech Street Journal, Ricky's working at NICTA, Australia’s ICT Centre of Excellence, where he performs a mix of industry engagement, research and, of course, software engineering. Ricky holds a Ph.D. in computer science from the University of Queensland and spent some time in Mountain View, California, at Sun Microsystems Research Labs. Ricky's the prime instigator of TSJ.