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Naomi Simson on the uncertain world of startup investing

Shark Tank’s Naomi Simson on the uncertain world of startup investing

Originally published on Smart Company, 17 May 2018

With the new season of Shark Tank on air, it brings with it the same old questions about investing in business. How many deals actually come off?

Shark Tank is a global franchise owned by Sony, produced in 28 countries. Interestingly, every show experiences the same level of success when it comes to investing. Across the board, more than 30% of deals made on air will simply not happen. For various reasons, a third will turn into ongoing mentoring and assistance, and a third will involve a financial outcome.

Each entrepreneur is different and comes on Shark Tank for different reasons. Mark Cuban on the US version often ‘attacks’ entrepreneurs when it is clear they are only there for publicity. This is all taken into account as we get to know them after the show.

Here’s the thing: a lot of people lose a lot of money in the startup world. I’ve lost plenty myself over the years. So while we’re choosing to invest after a five-minute spiel on a prime-time TV show, we simply cannot forget the fundamentals of business.

We have an hour with the entrepreneurs at the most on the day. Then the real work starts in getting to know them. I’ve made offers on the show where the entrepreneur never ever gets back to me after emails and phone calls … let alone go through a thorough due diligence process. I’ve had several say, “if we don’t go ahead with your deal do we still get to go on air?”, and this is absolutely okay. Investment is long. I’d rather know straight up if they don’t think there is a fit either.

Due diligence is a considered process that is much more than just looking at financial performance and projections. Business is hard work — sometimes we win and other times we lose. Owning your own business is even harder. And when we make an offer to invest in a business, our ability to work with the founder and create a shared vision for the future are paramount.

I feel a bit like a broken record on screen sometimes, always going on about the basics. Has the product got traction yet? Are your customers happy? The single best way to get investment in your business is to have your customers invest in the growth of that business. That’s why in the due diligence process after each ‘deal’, I make a point to speak to customers and employees of the businesses I have agreed to work with.

Investing in something without doing the proper leg work and asking the hard questions is, quite frankly, irresponsible. Good investors don’t go blindly into a deal thinking everything is going to be the next Facebook. Even if a business is part of a startup ecosystem, such as those at muru-D, BlueChilli, Fishburners or River City Labs, there is no guarantee of a successful outcome for founders, or investors alike. That’s because the startup reality is hard, despite all the help in the world.

Ultimately, customers and the ability to find and keep them, determine the success of any enterprise. It is not the ability of the founders to raise capital which determines success.

I have people email me their pitch decks on a weekly basis. Decks, including full financial records, on businesses I have no idea about, often not even operating in an industry I know about, and without even so much as a non-disclosure agreement. A founder must be responsible when asking for money. And investors must be equally responsible when handing money over. It’s a two-way street.

It doesn’t always add up. Sometimes, with entrepreneurs under the pressure of pitching his or her passion to a panel of intimidating “sharks”, figures are inflated and details are lost. There’s only so much detail that can be given, and trust established, within the setting of a TV studio under hot lights and time limits. And as we know, in business as in life, detail is where the devil lives.

As Janine Allis commented in a recent interview, “I’ve absolutely invested money and lost all of it, and I have invested money and making quite a good return. At the moment, we’re about even”.

Going on Shark Tank as an investor is not about getting rich and it’s not a license to print money — for the investors or those pitching. However, access to our networks, our time and experience can set a business on a trajectory that they just could not get anywhere else.

Some of the businesses I have worked with took more than a year before the equity deal was made — I worked with them on the business model, cleaning up their balance sheet, and their systems and processes to allow them to scale. And that (while it’s hard work and takes effort) is the true joy in being on the show — seeing my experience and networks support the growth of an Australian business.

The due diligence process can be expensive in both time and money. Some startups do prepare vendor due diligence documents as part of the capital raise process to help speed things up. No matter what, some level of professional accountant, lawyer or advisor is usually engaged (and paid for) by the startup to ensure the business is presented accurately to the investor.

As entrepreneurs, we know that owning a business is a long road; overnight success stories are rare. (I wrote Ready To Soar to assist would-be entrepreneurs determine if this is the life that would suit them). But as I like to say, anything worthwhile is going to take effort; if it was easy, everybody would be doing it.

We have now seen 400 pitches on Shark Tank Australia — how wonderful it is to support the dreams of these founders, in so many different ways.

The ACCC’s digital platform review: An advertiser’s perspective

The ACCC’s digital platform review: An advertiser’s perspective

Originally published on Smart Company, 14 May 2018.

Monopolies, duopolies, oligopolies are all words that mean the customer is unlikely to be receiving optimal value. These are words that we are well used to in Australia with our small population base across a vast country. Four banks, two supermarkets, two airlines … the list goes on.

However, when Scott Morrison asked the Australian Competition and Consumer Commission (ACCC) to look at the impact that global digital platforms are having on consumers (and consumers are at the heart of this debate), it was in the context of understanding if in fact these social platforms are defined as media and as such should be treated differently — namely to operate under the media laws of the land. Apparently this is a world-first for reviewing the anti-competitive behaviour of primarily Facebook and Google.

Are they media businesses? Absolutely.

That is without question. By definition, their reach and ability to influence consumers means Google and Facebook are media. But whether they are demonstrating anti-competitive behaviour is another, and much more complex, question.

As I read the recent press reports of the other media company submissions to the ACCC (Foxtel, Ten, Seven, News Corp etc), I think there is a much greater conversation to have about the quality and accessibility of Australian media. For half a century the Murdochs, Packers and Fairfaxes controlled the vast majority of print media. Have the tables merely turned, or was this disruption in media inevitable?


“All value chains will be disrupted: defence, education, financial services, government services, media, healthcare, manufacturing, oil and gas, retail, telecommunications, and more” — McKinsey.

Why digital transformation is now on the chief executive’s shoulders

The point is the traditional media businesses did not and have not reinvented themselves to provide real value to customers and consumers. They are two-sided marketplaces, needing both advertising dollars and engaged consumers to make the business model work.

I think of the classic marketer’s excuse: “50 percent of our media spend worked — we just don’t know which half”. In an age of disruption this just simply isn’t good enough.

Watching ‘catch up’ TV the other night was simply an excruciating experience. In an ad break one advertiser had the same ad run four times; embarrassing for the network, and the advertiser. In my opinion it damaged the advertiser’s brand (as the ad was not entertaining anyway) and to have it repeated 16 times in 47 minutes did more harm than good.

This is a technology investment issue. The media platforms — whether it be radio, TV or newspapers and magazines — simply have not kept up with the level of sophistication advertisers are seeking. I want to know who is viewing my ad, how long they are viewing it for, what level of engagement they have with my brand and where they go afterward. All these things are provided by digital platforms.

RedBalloon was founded before Google Adwords was launched; many know my story of how hard it was to attract audiences — and how as a fledgling advertiser I simply could not afford mass media (and we’d seen many dotcoms fail in the early part of the century as they tried to do this). I finally found a partner in ninemsn, still using old media rate cards as their financial model then. But at least I could identify who was visiting my site.

When Google Adwords launched I could not believe how much data I now had at my fingertips — and combined with Google analytics, I had insights into the customer journey that I had never experienced in my career as a marketer. That is now 15 years ago and I still do not have the same sophistication when it comes to the major media players.

However, utopia did not last. In those early days I could attract a customer for around five cents. Fast forward to 2016 and that had gone up to $48 — not sustainable for any business. I had to find a better way.

Disruption is about looking at what customers value — and it is primarily relationships (engaging with a brand the way they want to, where and when), and letting technology provide the systems and processes to support those relationships.

So we chose an artificial intelligence digital marketing tool out of Tel Aviv called Albert. Albert connected to all our first party data and learned from it. It then served those ads on the attached platforms. It looked at our product data, customer data, and connected to our Facebook, Adwords and Double Click accounts. It learns and serves holistically across all the channels, delivering 6500 new keywords on the day it was turned on.

Albert also worked with a greater than usual quantity of creative elements; it tested them and discarded some. In the first couple of months it reduced the acquisition cost to find a customer by half — and it has since dropped to as low as $7. It only operates to KPIs and wont serve ads if it can’t achieve it. This now means that our return on advertising spend (ROAS) delivers $15 for every dollar spent. And it can serve ads and content at any place in the marketing funnel. (Look mum no hands!)*

What this has meant is that our people spend most of their time on creative, strategy, customer content and looking at the data to identify valuable insights. Artificial intelligence supports the human element that is paramount in creating real experience.

When our media agency came with our media schedule for Christmas last year, I asked them how could I connect the proposed media to Albert AI, so he could continue to learn across the full media spectrum. What about beacon technology for out-of-home (billboards) or in cinemas; what about digital radio being connected; or catch-up TV? All giving me a view of the total customer journey. Alas, the technology from the big media players just was not there.

As the media companies bleat, “It’s not fair … those global platforms are uncompetitive”, it is also the customers voting with their eyeballs, and advertisers voting with their wallets. Because there is no boardroom in the country that is not demanding that ‘marketing’ be more accountable in demonstrating value.

I agree that the restrictions on media (and even the media licensing fees) do not make for a level playing field. However, if this inquiry recommends a shift in the regulation, any and every saving should be invested in our traditional media’s digital platforms to make sure they move into this century and deliver what both customer groups want most: an intimate, and accountable relationship. Amazon spends $15 billion a year on innovation, while most other businesses are spending 75% of their tech spend just maintaining legacy systems. There is a massive leap to be made.

I will watch with interest as this ACCC inquiry unfolds. I’d like to see a succinct list of exactly how much media companies are paying the government each year in licensing fees versus the global players. To be able to invest such amounts in their own digital platforms would be transformational. We will wait and see.

Big Red Group Secures Exclusive Rights as Reseller of Artificial Intelligence Marketing Platform Albert in Australia and New Zealand

Big Red Group Secures Exclusive Rights as Reseller of Artificial Intelligence Marketing Platform Albert in Australia and New Zealand

Albert™ to revolutionise digital marketing for countless businesses across Australia

The newly formed Big Red Group (BRG) has secured the exclusive rights to bring the world’s first Artificial Intelligence (AI) digital marketing platform, Albert, to Australia and New Zealand.

Group co-founder Naomi Simson announced the exclusive agreement, alongside a major shake up of online experience retailer RedBalloon and associated businesses*.

Albert is a fully autonomous, enterprise-level artificial intelligence marketing platform that drives digital marketing campaigns from start to finish for some of the world’s leading brands. Created by Albert Technologies Ltd. (AIM: ALB.L) (formerly Adgorithms) in 2010, Albert’s success transforming major brands’ cross-channel digital marketing efforts with its self-driven technology has been well documented in the U.S. The AI platform has been publicly credited with driving 40 per cent of Harley-Davidson’s New York City sales, influencing lingerie brand Cosabella’s decision to replace its digital agencies with AI, and creating so much demand for Dole Asia’s canned goods that its suppliers initially ran out of stock before ultimately reaching an 87 per cent increase in sales across the board.

According to Albert CRO Geoff Farris, “Albert wades through massive amounts of data, converting it into insights, and autonomously acting on these insights, across channels, devices, and formats, in real time. This eliminates the manual and time-consuming tasks that currently limit the effectiveness and results of modern digital advertising and marketing. But more importantly, it lets businesses execute and scale their efforts at a pace that simply isn’t possible by human teams.”

The agreement entitles the Big Red Group to distribute Albert to third-party media companies, across entire supplier chains, as well as to direct-to-consumer retailers, under the registered business Big Albert AI Pty Ltd. Albert will drive down customer acquisition costs and increase positive commercial outcomes for thousands of Australian businesses.

RedBalloon launched the technology on 1 June this year, and within 24 hours of deploying Albert, the technology was able to identify and execute over 6,400 keywords to improve performance across the RedBalloon business. By way of comparison, this would take a human SEM expert up to a year to achieve.
Albert was also able to reduce the cost of acquiring a customer to RedBalloon by more than 25 per cent in less than 30 days, demonstrating its capacity to reduce overall costs by north of 40 per cent.

Big Red Group co-founders David Anderson and Naomi Simson with Geoff Farris and Oren Langberg of Albert

“We have trialed this amazing technology across RedBalloon and Wrapped and it has proven its effectiveness beyond doubt,” Simson said.

“Now we want our business community to share in the upside that comes with more efficient marketing spend. We’re not reducing our marketing budgets in any way, we’re simply ensuring that our dollars – and the dollars our partners pay us to do what we do – are working harder and harder day after day.

Simson is aware of the tensions that surround artificial intelligence technology, recently bought to the fore by Tesla’s Elon Musk, who claimed AI poses an “existential threat” to human civilization.

However Albert’s track record alone refutes this sentiment. In the U.S., Albert is at the core of a number of new hybrid man-machine digital marketing departments at companies like Harley-Davidson, Cosabella and Dole Asia, where artificial intelligence handles everything data and tech-related, while Albert’s human counterparts handle all things strategy, creative, intuition and emotion. These use cases reveal that such hybrid teams produce exponentially better outcomes than either man or machine would produce on their own and that the nature of their work together is collaborative rather than combative.

“When I started RedBalloon in 2001 it cost roughly five cents to find a new customer – now across the board in the businesses I deal with I see it costing upwards of $20 to find that same customer. This is completely unsustainable for any business,” Simson said.

“We have seen Albert drive down the cost of customer acquisition by a quarter in a matter of weeks. Imagine the difference this sort of technology could make to businesses across the country.

“Ten years ago business was all about offshoring to the cheapest operator those tasks that were not core to your business. But those roles associated with manual and process-driven tasks have largely been replaced by technology now. The next generation of that is a rising tide of technology that is beginning to replace higher functioning process driven roles.

“But we should not be fearful of this, as it frees our people up to focus on the higher value tasks like collaboration, strategy, and creativity – human and higher functioning skills that at this point cannot be replicated, and certainly not replaced, by AI,” Simson said.

* BRG provides management and services to its subsidiaries RedBalloon, Big Albert AI, Redii, Wrapped and The Huddle, and was co-founded by Simson and Group CEO David Anderson, who acquired 50 per cent of the RedBalloon business in June.