Jessica Gardner Reporter

Jessica covers Australia's technology start-up scene, writing on breaking news and trends in entrepreneurialism, media and marketing. She was previously named Australia's best New IT Journalist for 2011.

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Five tips for collaborative consumption start-ups

Published 02 October 2012 03:58, Updated 03 October 2012 05:31

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Five tips for collaborative consumption start-ups

US holiday rental venture Airbnb broke ground in the collaborative consumption space. Now it’s opened an office in Australia.

With little fanfare, one of the most fancied start-ups in the collaborative consumption sector has begun quietly scoping out the market in Australia. Airbnb, which matches holiday homes and spare rooms with global travellers, has “a small team based in Australia who are focused on supporting our hosts and helping them have positive experiences on Airbnb,” communications manager Jakob Kerr confirmed to BRW. Kerr emphasised it was not an “official operation” but rather an opportunity to “research and engage with customers in the market”. The start-up is one of the biggest success stories of Silicon Valley accelerator Y Combinator. Last year it raised $112 million from a number of venture capital funds.

Airbnb staff were present at an event for collaborative consumption start-ups in Sydney last week where author of What’s Mine Is Yours: The Rise of Collaborative Consumption Rachel Botsman said the arrival of more overseas competitors was a very likely scenario. One consequence of this could be acquisition of smaller players, as was the case for the English start-up Crashpadder, which was acquired when Airbnb entered England, but it could just as likely mean smaller ventures are made redundant by the power of their larger rivals.

Botsman answered many burning questions from collaborative consumption start-up founders. Here are her top tips for building a successful venture and preparing for the onslaught of competitors.

1. DON’T BE SCARED OF PROFIT

Some collaborative consumption founders believe the sector is best suited to non-profit organisations but Botsman calls herself a “big believer” in for-profit. “I actually have seen a lot of really talented entrepreneurs try and start collaborative consumption ventures where there is no money involved and it’s a hurdle in itself. Sharing is quite complicated. If you try to introduce points or invent your own currency it’s another behaviour that you often have to teach people and sometimes actually having a currency that people understand is the easiest entry point. Being driven by profit isn’t a bad thing in this space in terms of user adoption.”

2. THINK MORE CRITICALLY ABOUT WHAT’S IN IT FOR THE USERS OFFERING THEIR ASSETS TO BE SHARED. INVESTORS ARE DEMANDING CLARITY ON THIS POINT

The financial benefit of hiring out your holiday house for $2000 may be obvious but how many times does a person have to lend their hammer for $2 a pop before it’s worth it? “It’s definitely a user friction point that I think [start-up founders] don’t ask enough is ‘what’s the value of this’,” Botsman says. “We call it the idling capacity of that asset ... Can the user make a lot of money on a one off transaction that gets their behaviour really sticky or are they going to be able to be successful frequently so that its worthwhile ... Investors tell me that’s what they’re looking for: what’s the value of the idling capacity unlocked in this market and if it’s not high per transaction, can [users] have a high volume of transactions.”

3. THE MEDIA LOVES A CASE STUDY

“Showing the potential of what you can earn is a really important message to send to the community, but it’s hugely important for the media,” Botsman says. “Most media stories on collaborative consumption, one of the first questions you will be asked is, “How much money can people make or save?” One of the things I really want to encourage you to do is get your users’ stories. Find stories where it’s about people thinking about their wealth and assets in a different way.”

4. WORK OUT YOUR MODEL OF REGULATION

Let’s face it, things can go wrong when strangers share privately owned assets. The solution is not to worry about this but to work out how your company will deal with the fallout.

Botsman says there are “three degrees of trust”. First is where the company owns and controls the assets that are shared – for example, the GoGet car share network – if there is a problem, the company handles it and there is minimum community policing. Second, there’s a hybrid model where “the company brand is very important for establishing trust but the community plays an equally important role”. Botsman says in the case of Airbnb or errand network TaskRabbit users would probably approach the company if something went wrong. At the furthest end of the spectrum is a network such as Craigslist or CouchSurfing where the system is “entirely peer-policed”.

5. BE MORE ORIGINAL

Many of the early, local collaborative consumption start-ups have just imitated what they’ve seen work overseas, Botsman says. Now that their objects of imitation are expanding, they’re faced with bigger, more powerful versions of their own businesses. “I’d like to see more original examples of collaborative consumption originate from Australia and be adapted overseas. I don’t think we’re putting enough effort and focus on being the pioneers in this space.”

Do you know of any other overseas competitors coming to Australia? jgardner@afr.com.au

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