How BPAY Group helps its start-ups to flourish without stifling them

- By Collaborative Media & Publishing
Start-ups are known for the agility and freedom of thinking that comes from starting with a clean slate.
 
Established businesses, by contrast, have resources and expertise, but can also become bureaucratic, which can stand in the way of nimbleness and innovation.
 
How to bring the best of these two worlds together was a question BPAY Group faced as it launched its own start-ups.
 
BPAY Group had engaged BCG Digital Ventures (BCG DV) – an arm of the Boston Consulting Group – to help it identify opportunities. BPAY Group made sure that its own staff were on the new venture's board to ensure the opportunities that came up would align with the Group strategy and could leverage the organisation’s strengths.
 
Yet the question remained. How could the opportunities they identified – initially AI document intelligence company Sypht and property management application Lodge (with more to come in the future) – be independent from BPAY Group yet still benefit from being part of it?
 
“It was really about trying to give those companies an advantage in establishing themselves,” says Hugh Frames, Chief Operating Officer at BPAY Group.
 
“Start-ups obviously need the agility and ability to move quickly - something you typically don't have the larger a company gets. We really didn't want to burden these start-up companies with the bureaucracy that goes with a big company,” he adds.
 
To maintain their independence, the start-ups were established as separate legal entities, with their own boards and operating semi-independently.
 
Initially, the start-ups found their own backend service providers for accounting, payroll, legal support, marketing and so on. But that strategy quickly changed.
 
“It became evident, as they were establishing, that we could really give the start-ups an advantage by giving them better services than they were getting in their current environment from external providers,” Frames says.
 
Separate legal entities plotting their own courses
 
They started drawing on BPAY Group’s accounting and payroll function, its legal team and marketing team. It means the start-ups don’t have to explain what they’re doing every time they ring their accountant, for instance, because the BPAY Group accounting team already knows what’s going on.

Importantly, they’re not “on the clock” for every service like they would be with external providers, enabling them to seek advice when they otherwise may think twice.
 
“Everyone in BPAY Group was so passionate about these entities that we were establishing. We knew about them. We knew what they were about. We knew the people that were involved,” says Frames.
 
“We just felt we could offer them better service, but we really wanted to do that in a way that wasn't going to encumber them with bureaucracy,” adds Frames.
 
Thus, the start-ups maintain their own premises, their own boards and – most importantly – their own way of doing things.
 
“It's really about having the agility and freedom of thinking to be able to plot their own course. And as a start-up develops, they often need to pivot as information becomes available to them, and to move quickly and respond to opportunities in a way that a larger company probably can't,” Frames says.
 
The businesses were established as separate legal entities for two reasons. Firstly, to legally separate them from BPAY Group to ensure they couldn’t put BPAY and its core business and operations at risk in any way.
 
Secondly, the start-ups had been established without a preconceived idea of how they might develop in the future – whether BPAY Group would invest further or if they would need to bring in new strategic partners. As separate legal entities, their options were wide open.
 
“By existing as standalone entities the start-ups have the freedom to be able to move and adapt if that's what they need to be successful,” Frames says.
 
Taking away the funding headache
 
BPAY Group start-ups also have an advantage when it comes to funding.
 
A major headache for start-ups is securing ongoing funding, to the point where the effort needed to court investors can detract the founders’ focus from building the business. To a large extent, BPAY Group start-ups don’t need to worry about this.
 
“Although the subsidiaries still need to come to us, put their case forward and ask for funding, I think it's a lot more friendly and easy environment than if they were trying to go out and get that funding from the market,” says Frames.
 
There’s one final benefit that comes from having BPAY Group and BCG DV as a parent company. These well-regarded brands can open doors to opportunities that might otherwise be unavailable to a start-up.
 
So far the strategy has proved successful with Sypht, which is preparing for a push into the US market and expanding its range of services, and less so with Lodge, which was folded last year. But as Frames points out, between 70 and 90% of start-ups will fail. Knowing when to exit is as important as knowing when to continue investing.
 
And with BPAY Group backing, these start-ups are well positioned to succeed.
 
“All these components enable the start-ups to flourish. Our support provides them with services, expertise, funding and access to contacts that enable them to focus on their business and really grow it quicker than they would otherwise,” Frames says.

Published by BPAY Pty Ltd (ABN 69 079 137 518) email: marketing@bpay.com.au. The BPAY Scheme is managed by BPAY Pty Limited.  When you use BPAY payment products, the BPAY Scheme is paid fees relating to processing costs and BPAY Scheme membership.  Contact your financial institution to see if it offers BPAY payment products and to get the Product Disclosure Statement.  Any financial product advice provided by BPAY Pty Limited in relation to BPAY payment products is general advice only and has been prepared without taking into account your objectives, financial situation or needs.  Before acting on such advice, you should review the Product Disclosure
 

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