The Melbourne Cup has once again come and gone, but for those less interested in the fascinators and furlongs, here are three lessons startups can take away from race day.
The favourite doesn’t have all the advantages
If there’s one thing this year’s Melbourne Cup illustrated better than anything else, it’s that it isn’t always good to be the favourite. This year’s winner, Prince of Penzance, was listed at $100 to win when the race began. Meanwhile, the odds-on favourite finished 13th. Talk about a sign of bad luck. As a handicap race, the faster horses are given extra weight to carry, so it’s often better to enter the Cup on a horse with lower expectations and less baggage. The same is true in business.
I’ve written before about the benefits of the last mover advantage. Part of the reason that advantage exists is that, as they become dominant in a market, incumbent companies inevitably become more unwieldy. They must support legacy offerings, deal with more shareholders, hire more people, and so on. As they succeed, companies typically attract baggage which slows them down, making it harder to compete with new startups.
The competition isn’t all local
Only one of the first four horses to finish in this year’s Cup was Australian-bred. The other three were from Great Britain, New Zealand, and France. Rounding out the rest of the field were Japanese, Irish, American, and German horses, just to name a few. Although the race is Australian, it has undeniably become an international contest. From a startup’s perspective, that sounds just like the Australian market.
Not only are more overseas powerhouses like Uber and Airbnb opening offices here, it’s now easier than ever for local startups to break into overseas markets. And selling overseas is something Australian startups should be thinking about from day one. Mick Liubinskas puts it best:
Part of the problem with Australia is our home market isn’t big enough to build a massive company, but it’s not small enough to make start-ups realise they have to be selling globally from the beginning.
Don’t be so dazzled by a local competitor that you lose sight of the global picture.
Australians will take risks
We’ve all seen the statistic comparing Australia’s spend on the Melbourne Cup ($9 per capita) with our VC investment in startups ($4.55 per capita). On the one hand, it paints a stark picture of our institutional investment sector. But seen from another angle, the Australian zeal for having a punt can be good news for startups.
It takes a mixture of hubris and hope to put your money on a horse which you’d probably never heard of until someone assured you it was the one to back. That may sound crazy to some, but then so does starting your own tech business. The same optimistic, confident – perhaps even naive – outlook is the mentality you need when founding a company, and Melbourne Cup punters have it in spades. It’s a great reminder of how well equipped we are, in some ways, to take advantage of the global entrepreneurial economy.
The race day excitement also says something about Australians as consumers. A large number of people in this country are willing to spend small-to-medium amounts of money on something which is overtly risky. They know there’s a good chance their gamble won’t pay off, but they have a go nonetheless. Anyone who’s tried to sell a new product into an existing market knows how hard it is to convince potential customers to take that same adventurous attitude.
Buying a product or service from a small company you’ve never heard of is overtly risky. And yet, Australians are noted early adopters of new technology. Clearly, at the right price point, we are willing to take risks and back new ventures. This is especially true on Melbourne Cup day, because taking a financial risk is seen as part of the culture of the day. If startups want to convince people to buy their product, or back their Pozible campaign, they’d do well to tap into the idea that it’s very Australian to have a go, even in the face of obvious risk.
With Malcolm Turnbull’s innovation-friendly approach to the economy and possible changes to equity crowdfunding on the horizon, let’s try to harness that Melbourne Cup mindset and create a culture of individuals supporting startups.
Kit Kriewaldt is an entrepreneur and strategic communications specialist. He loves to talk James Bond, cocktails, and psychology – focusing particularly on decision making and consumer behaviour. He is also Chief Marketing Officer of digital communications platform Liquid State. Image credit: Chris Phutully/Flickr