Podcast Series with Leigh O’Neill: Building better small businesses

Transcript

Leigh O'Neill: Hello. I'm Leigh O'Neill. Executive general manager of business direct and small business for NAB. Welcome to my podcast series, building better small businesses. Mentors and business coaches are some of the most valuable resources an entrepreneur can tap into. At least, that's what I hear from our customers and the sector when we are asking about what really makes a difference in growing your business. However, finding the right mentor can sometimes be a challenge. Someone who can be encouraging, but also provide constructive criticism when you need it. And this is where our entrepreneur Heidi Holmes comes into the picture. Looking for her own mentor led my guest Heidi and her close friend Lucy Lloyd to dream up their start-up Mentorloop. Welcome, Heidi.

Heidi Holmes: Thank you, Leigh.

Leigh O'Neill: Thank you very much for joining me here today. As a first step, before we get into the mechanics of being an entrepreneur, I wonder whether you can talk me through how you and Lucy came up with the idea of Mentorloop.

Heidi Holmes: Sure. So, Mentorloop really started from us both experiencing, I guess, challenges in finding our own mentors. With my previous start-up, Adage, which was a job board for mature age workers, when I went into that business by myself, I had left a corporate job, having worked at KPMG. And I guess start-up land was a pretty lonely place five years ago. So I was looking to connect with other entrepreneurs, other start-up founders, but found I didn't have those type of individuals within my own personal network. So that sort of let us to uncovering, I guess, this initial problem around how do you create a meaningful connection with people outside your personal network.

Leigh O'Neill: And in terms of evolving that idea into a business, how did you go about doing that?

Heidi Holmes: So, that led us into doing a little bit further research into the space of mentoring and we went and met with organisations and universities. People who were already currently running mentor programs, to kind of uncover what was best practice in this space. And what we found is that actually a lot of organisations were lagging in terms of how they were implementing their mentor programs and that they were often using spreadsheets and emails in terms of the management of it and also only offering it to a select few people within their organisation. And at this point, my co-founder Lucy and I saw that we could potentially solve this problem through a digital application in terms of not only reducing the admin burden for organisations, but enabling mentoring to scale across organisations and so that mentoring is something that should be offered to all, rather than just a select few individuals.

Leigh O'Neill: And you found what seems like a problem that needed solving. Did you scan the market to see whether other people were out there and how crowded the space was before you started the business?

Heidi Holmes: Yeah. We actually see competition as a good thing in that it is an early sign of market validation, but maybe you can look at your competitors to see that there may be a different and a better way of doing something they've previously done. So, yes, there were sort of incumbents in this space, but we saw them as sort of an outdated approach to mentoring and that we could have our own take on what we saw as the, you know… As the space that was involving, evolving.

Leigh O'Neill: And so you saw a business idea. You decided to start a business. You've got a close friend that you are going to do it with. How do you go about evolving that and deciding who's going to do what as you grow your business?

Heidi Holmes: Well, with any great business idea, it starts with designing a logo. (LAUGHS) We got that out of the way and a name. But in all seriousness, it actually was important to us to give our business a name because then it became a real living thing to us. So in coming up with the idea of Mentorloop, we then moved into, I guess, acknowledging our different roles in the business. So we treated it like a business from day one. And it was very important that we had, I guess, clear, defined roles in what were our responsibilities, and that ensured that we were able to, I guess, keep the business ticking along and moving towards achieving some early milestones. One of which was getting some early traction with potential customers in trialling our prototype. And also, you know, that development piece, which is definitely my co-founder Lucy's experience and expertise in terms of product development. So engaging developers, briefing in, you know, our prototype products and then ensuring that customer feedback was coming back into the design of the product going forward.

Leigh O'Neill: So, it sounds like you've got quite different skill sets in what you brought to the business. Was that by design?

Heidi Holmes: No. I think… Lucy and I actually went to school together, so the relationship, I guess, is based on a lot of trust and knowing each other for a long time. But in terms of our skill sets, it just was a nice coincidence that we had, I guess, a clear delineation in that I'm sort of defined as front of house, so business development, marketing, sales, that side of things, and Lucy is sort of back of house, so managing product development roadmap, managing dealing with developers, which can sometimes be challenging. And also taking on customer feedback, so, you know, ensuring that the design of our product is fitting in with what our customers want and need.

Leigh O'Neill: And have you maintained a delineation between being business partners and being friends?

Heidi Holmes: It's something we haven't had to be too prescriptive about, which has been nice. You know, we've got a clear set of values within our business, even though you know it's only a start-up at this stage. But we see that as important as we hire people and build out our team that how Lucy and I define what we want to achieve as a business, but how we want to run it and how we want to interact with people internally is very important to the future of Mentorloop, so when Lucy and I come to work, it is very much about business. But we still catch up, you know, socially with a group of girlfriends on the weekend as well and we don't talk business at that point in time.

Leigh O'Neill: Do you make a very specific point not to talk business outside of the business, as it were?

Heidi Holmes: It just happens that way, I think. So I don't… I don't think we've had to make a conscious effort. I think we both sort of acknowledged that when the weekend comes around or in that sort of environment, neither of us really want to… (LAUGHS)

Leigh O'Neill: So I understand that Mentorloop has just recently attracted some investments, and I'd love to talk about that later, but before we talk about that, I wonder if you could share with me some of the experiences… The real foundations of setting up a business. I learnt on the way in here that you used our co-working space, The Village, as your home office. How important was it to you to be around other entrepreneurs and how did you build out your business model?

Heidi Holmes: I think I sort of alluded this to… To this before when I spoke about, you know, from day one we treated this as a business, and I think The Village was also key to that. It got us out of our home offices, it made us come into work every day, and it elevated us to really thinking about Mentorloop, not as a start-up, but as a proper functioning business. And I think then being around other people, sharing ideas, you know, Lucy and I have always said that for us, personally, some of the best mentors we've had are start-ups that have been six months or even 12 months just ahead of us, because it still real in their minds in terms of what they've just gone through. And that's been a great source of, I guess, inspiration, but also advice in terms of how to navigate the start-up journey in terms of raising capital, you know, expanding your customer reach et cetera.

Leigh O'Neill: What you think the most common difficulties for start-ups are in those early months? When you get to that six-month mark what are you really facing into?

Heidi Holmes: Yeah, I think for us it really was around bringing on more customers. So we were able to get a few early pilot customers with Mentorloop, but then it's moving beyond that initial traction and moving your business into showing that you can, you know, you can really increase monthly recurring revenue for us it was, so it was really looking at how to be ramp up sales? How do we tap into new customer channels that we haven't previously sort of accessed? And always looking at a way to continue to grow the business. And that inevitably makes you more attractive to funding and it also makes you, you know, what we personally had desired to build, and that was, you know, a profitable, sustainable business.

Leigh O'Neill: How did you go about getting feedback from your customers? So, putting people on a pilot is one thing. How do you then feed that into the development of the model and the product?

Heidi Holmes: Yeah, early on, when you've only got a couple of customers, it's very easy to manage that process. But inevitably, as you grow, what you find is that, you know, you are getting more feedback from your customers and, you know, the old saying we generally like to apply is that the customer is always right. But not necessarily as well. So you can find yourself, um… Having to become, you know, a negotiator and also you need to be very good at communicating expectations to your clients in terms of, you know, that not all feedback is necessarily going to be incorporated into the product development roadmap. But we very much, you know, set expectations at the start that this is a journey that we are taking with them because there are, with any start-up, that are going to be - particularly in an online sense - bugs that people have to work through. There's going to be potentially frustrations for early customers. And so we've managed to maintain 100% retention with our early customers and I think that comes down to having, um, an open line of communication and dialogue with them throughout the process.

Leigh O'Neill: And how has that been… You've retained 100% of your customers. Has retaining those customers been the key to growth? Is it word of mouth that you grow through?

Heidi Holmes: Yes. I think definitely some of our customers have referred us on to…other customers. Particularly in the education space. And word of mouth is always, you know, a great form of marketing, but it doesn't necessarily get you to scale, so we have had to look at other, you know, marketing and sales techniques, one of which is a recent media and PR campaign. As well, as some, I guess, you know, good old-fashioned sales tactics of direct marketing, improving SEO and SEM, so now starting to look, I guess, more strategically at how can we tap other online networks such as LinkedIn as well.

Leigh O'Neill: And you're doing that yourselves? Or have you had to outsource to get scale?

Heidi Holmes: At this point in time, it is largely driven by us, and that's just because as a start-up, you don't have the luxury of, you know, a team of resources at your disposal. So you get good at, you know, faking it until you make it, pretty much. (LAUGHS)

Leigh O'Neill: So how do you decide when the next taking on of resources you're…

Heidi Holmes: So, definitely the funding is validation, I guess, for now that we can go out and, I guess, be able to take on additional resources, and that was what we pitched to investors - that funding would be for the next growth phase. So around bringing development in-house, as well as sales and marketing to grow the business. So we saw that that investment that we were taking on was directly aligned to growing the business further. So what it's enabled us to do is really fast track couple of key hires which will be taking place in the next 3 to 6 months.

Leigh O'Neill: And in terms of attracting investment - so, congratulations, because attracting the first round of investment is a real achievement.

Heidi Holmes: Thank you.

Leigh O'Neill: Talking about what you were going to do with that money sounded like it was a very important part of that process. How did you make yourselves attractive to investors? What did you feel was a real…?

Heidi Holmes: I think the feedback we had from investors was that at such an early stage, what they're really investing in is you, as the founders. Because yes, we've got some initial customers, but it's really not enough to sort of go off in terms of… There's not a five-year track record there. They're sort of going off 12 months of, you know, historical data. So what they're investing in is the founders. And I think what appealed to a lot of our investors is the fact that we'd bootstrapped the application to-date. So, Lucy and I have both got skin in the game. We've invested our own money and time in getting the business to this, you know, point. And I think our investors sort of valued that contribution. For them, going forward, a lot of our investors actually just really like the idea as well. They could… They bought into the vision that we sort of have for Mentorloop as well because again, there's not much to go on at such an early stage. They're really looking at the team and where you're going to take this thing and if you're capable of being able to do that, and I think that's what we were able to really sell to them.

Leigh O'Neill: I think the concept of investors investing in the person rather than purely the business idea is something that we hear time and again from the entrepreneurial community, particularly as I'm guessing your business vision has changed since you first sat in The Village and started out.

Heidi Holmes: Yes. It's gone through sort of different iterations, both from a product developments sense, but also just in terms of the vision. But we feel like we're starting to get, you know, really a clear picture of what that is now, going forward. And the key thing for us was sort of really defining that we are a B2B platform as opposed to, I guess, more broadly, trying to solve the problem at an individual level of connecting, you know, an entrepreneur, say, with another entrepreneur. For us, it really is about now focusing on selling Mentorloop into organisations to help them make mentoring more effective and then helping them make mentoring more effective for their people.

Leigh O'Neill: So, am I right in saying that you yourself left a corporate job to come and be involved and run a start-up?

Heidi Holmes: Yes. So, I am ex-KPMG. So I've got an accounting and marketing background. But essentially going into KPMG, I always saw one day that I wanted to run my own business and for me, you know, KPMG was a great place to start my career and, you know, build out a professional network as well. But it always was the goal for me to one day run my own business.

Leigh O'Neill: And how would you compare running your own business now with what you had in your head as that goal at the time?

Heidi Holmes: Uh… Yeah. I think it's lived up to expectations. I worry about… Mentorloop has to be a success because I don't think I could go back and work for a corporate again. I would be a terrible employee. Um, but it has… It has lived up to my expectations and I love it.

Leigh O'Neill: What do you love about it? I can hear in your voice.

Heidi Holmes: I think… It's being able to be across all facets of the business. So, it's not necessarily… You know, I've become passionate about mentoring, but when I started out, I was passionate about finding a problem and a solution. And I think… The difference that I see in working within your own business to a corporate is that you don't necessarily get that diversification in your role. Whereas with a start-up, you know, you are working across accounts, customer service, sales, everything. Which I love. Yeah.

Leigh O'Neill: And it sounds like being well-connected within the entrepreneurial network in Australia is important. Getting ideas and sharing experiences. I wonder if you could describe the sector and how innovative and entrepreneurial you feel Australia is currently.

Heidi Holmes: Yes. So, I had my first start-up, Adage, which was five years ago. So, 2011. And I think back, you know, to that time, the start-up space was quite an immature and lonely space, whereas now there is a thriving community. There's, you know, in terms of media, there is StartupSmart, Startup Daily. There's lots of online publications where you can gain access to information. And I think as well through, you know, meet ups and community groups, there's lots of events people can go to and network face-to-face with people as well. So I think definitely Australia, but in particular Melbourne has come a long way in the last five years. I still think where there's potentially a disconnect is, um, you know, between corporates and start-ups as well. So I think there is… There's an opportunity for greater collaboration between corporates and start-ups. I think that's starting to happen. It's just both are sort of feeling their way through that.

Leigh O'Neill: What do you think is the… Is that about corporate investing in start-ups or is that about solving customer problems together?

Heidi Holmes: I think it's about solving customer problems together. I don't view corporates as necessarily, you know, an investment partner. I don't see that necessarily as their role. But I think definitely in bringing through real customer problems and using start-ups as a way that they could potentially solve them is, you know, that's interesting. I also think, you know, taking on that role of piloting, you know, innovation that's coming out of start-ups. I also see an opportunity there for, I guess, closer industry collaboration as well.

Leigh O'Neill: Challenging our thinking in another way, I read that you've become a B Corp. For our listeners, can you describe to me what a B Corp is and why you chose that for Mentorloop.

HEIDI HOLMES
Yeah, so B Corp is a global movement and it is trying to encourage businesses to look at triple bottom line reporting. So really looking at your social and environmental impact as a business. For us, as a start-up, it made sense that, you know, from day dot we've got… We're not a mature business. We've also got the luxury that we can mould our business without having sort of any, I guess, hangovers at this point in time. So for us, it was really a nice framework that we could apply to our business that, you know, we saw their values and mission really aligning to what we wanted to build as a business.

Leigh O'Neill: Yeah, no. I would agree. And I have the fortune of interacting with a number of customers who are B Corps and talk about that network and the value of that. How often do you find the need to go and find a mentor yourself? Do you have somebody that you use regularly?

Heidi Holmes: Yes, we do. Glenn Smith, who is an investor and also chairman of Mentorloop now, but that was not how the relationship started. It started much more informally in that he is a director of StartupAUS and I think going back to my original problem of trying to find a mentor, Glenn was someone I came about that was willing to give me advice, both with my existing… My first start-up, Adage, and then moving into Mentorloop and, inevitably, through building that relationship, became an investor within Mentorloop and also now our chairman, who we regularly go to for advice.

Leigh O'Neill: And so, as you go to think about the next stage of Mentorloop, how are you using your mentor and what is the next stage? What's in the future for you?

Heidi Holmes: So, for us, it really is about global expansion now. So, we've got some traction in Australia and also outside of Australia. Now, but it really is about expanding our footprint into other markets. And also building out our product to align with customers' expectations. And also to challenge their expectations going forward as well. So we've got some exciting things that we think are happening in terms of the product which we haven't really seen in this space before. So we're excited about putting that out there, but not just for Australian customers but for global customers.

Leigh O'Neill: What's your biggest challenge in developing that? So, you talk about exciting ideas. How do you bring those to fruition?

Heidi Holmes: Yeah, so, you know, talent is definitely a challenge. So it's about finding the right people to bring that all together. And it's about funding it. So you've got to… Even though we've just raised, you know, a seed round, it is about managing, you know, your burn rate over the next 12 to 18 months and managing, you know, what's coming in and what's going out. You know, it's no different to a bricks and mortar business. You've still got to manage cash flow. So we've got to get the balance right between making sure we're putting features in the marketplace that people are prepared to pay for and that they value, and also, you know, that communications piece around bringing people on the journey with us, getting them to try and adapt to new things and that's the ever-evolving challenge of being a start-up.

Leigh O'Neill: And does this keep you energised or keep you awake at night?

Heidi Holmes: Both. (LAUGH)

Leigh O'Neill: And so, when you're not working on Mentorloop, how do you get some mental relief for yourself? What is time out for you, Heidi?

Heidi Holmes: Oh, time out is just really family time. I've got a small child and a husband who's also like a small child, so… (LAUGHS) That's sort of time out on the weekends. I used to sail. I don't really do that anymore. No. It's kind of just family time on weekends, which is nice.

Leigh O'Neill: Heidi, thank you very much for taking the time to come and teach us about Mentorloop and being a B Corp and the value of having a network of entrepreneurs to take your own guidance and mentorship from, and wishing you lots of luck in your global expansion of this really exciting proposition.

Heidi Holmes: Thank you very much for your time today, Leigh. Appreciate it.