Pollenizer takes a further $1.1m, rejigs model



news Australian startup incubator Pollenizer has raised a further $1.1 million to continue to develop its operations, and has substantially reformed its model on building startups to place a higher emphasis on its staff acting as co-founders of the startup companies it helps to foster.

The company, formed by local technology startup luminaries Mick Liubinskas (pictured, top-left) and Phil Morle (pictured, top-right) in 2008, focuses on working with budding technology startup entrepreneurs to help them develop new business models. It has historically provided its own staff and some startup capital in a co-investment model to aid local entrepreneurs, as well as connecting startup builders with angel investors and venture capital funds and conducting networking and educational events to support the local IT startup sector.

Not all of the company’s ventures have succeeded, however; the company’s Friendorse startup shut down in mid-July after its model of supplying community recommendations for businesses and services failed despite the involvement of major media group APN News & Media; and Mumbrella reported this week that even Pollenizer’s most high-profile success, group-buying site Spreets, which was sold to Yahoo7! in January 2011 for $40 million, had exited the group buying market and would effectively become an email mailing list broker.

In a post on the company’s blog last week building on an earlier thoughtful post about Pollenizer and the nature of startups, Morle said one of Pollenizer’s recent learnings had been that “agencies can’t build startups”. Building a startup required “the fires of fear, passion and obsession”, he wrote, and “this takes a founder and not an employee”.

Consequently, Morle noted that Pollenizer teams will now work directly for the startup companies it supports as co-founders and not Pollenizer employees. “They will be supported by our infrastructure, training, tools and support services,” he added. “They will be real owners of the business with real control. There will be enough capital for a 9 month, real run at traction for a team including sales, product management and engineering functions + shared resources from Pollenizer such as design and startup operations support.”

Pollenizer will allocate 50 percent of the equity in these startup companies to the founders, and 50 percent to the founding investment capital.

“On first glance, investors look at this and think “Half of the company in an [employee stock ownership plan/ESOP] pool? That’s crazy!” but remember that there is nothing there except potential at this moment,” wrote Morle. “Not one line of code and a business model that is not validated. The people that will make this a reality need to be aligned with the capital investors need for this to succeed. And it’s not ESOP (Employee Share Option Plan) because these are not employees. These are founders. They get founders equity. Founders look at this and say “I need to GIVE AWAY 50% of the company?!” but there are investors and support networks backing them to the tune of hundreds of thousands of dollars and the team hasn’t started yet. There are people backing them with the riskiest money they will ever invest.”

Morle said the new model had been received well by investors and co-founders and Pollenizer had already started a new business using it. “As always, we provide a way for investors to partner with us to co-found disruptive new businesses and now we also have a model which allows a new generation of entrepreneur to participate. Everyone is aligned to make the business work over the long haul,” he wrote. “And it is – always – a long haul.”

News of the new model comes as Pollenizer also this week disclosed that it had taken a further $1.1 million in investment capital to keep its own operations afloat. According to a statement issued by the company, the capital raising came from a diverse group of investors in Australia, Singapore and the USA. These included Brook Adcock, founder of Pandora Australia, Neil Miller, veteran technology investor and early investor in Seek as well as Greg Roebuck, CEO of Carsales.com.au.

“This latest round of capital shows Australian investors are beginning to realise what global investors have known for some time, that Australian technology startups offer high investment value,” said Morle, currently Pollenizer’s chief executive.

The investment capital will be used to launch further startups technology companies, fund the growth of existing portfolio of companies and to support the expansion of Pollenizer’s activities in South East Asia. “The Pollenizer team are veterans with world class experience in startups. The Australian startup technology industry is going from strength to strength and Pollenizer is leading the way,” said Roebuck. Pollenizer said it has been operating for five years, has launched 20 startups, raised $12 million and created successful businesses like Spreets, Mogeneration, Dealised, Wooboard and Pygg.

It’s not the first time Pollenizer has gone through a similar capital raising process. In November 2011, for example, the company raised another $1.1 million, and it also raised $500,000 in December 2010.

I’ve only got two things to say about the Pollenizer goings-on chronicled in this article.

Firstly, Morle’s right — it was time for a shake-up of the Pollenizer model. The incubator/consultancy (the precise definition of what exactly Pollenizer can be classified as is an going matter of debate) hasn’t had a square ‘hit’ for a while after the Spreets deal, and it’s had enough failures now for it to be worth taking another look at it’s model. In fact, I’m pretty sure Pollenizer’s team debates its model pretty much every day; but still, it’s nice to see some formality around this kind of change.

This is a very good thing. The team at Pollenizer has always been one of the most innovative and forward-thinking in Australia’s technology sector, and its influence is felt far beyond its own walls and portfolio companies. Where Pollenizer leads, other groups will follow, and I really like seeing the company evolve in this way. I also like the new model on its own merits; it smacks of aligning the company’s staff further with the businesses they work on, which is always a very good thing.

Secondly, and this is a minor note, I do wonder what the equity break-up of Pollenizer itself at this point. I suspect it would have to be getting quite diluted; the company has now gone through several capital-raising rounds, each time with a decent list of local investors. Some of that may have been for its seed funding activities, which may not technically be a part of its own financial operations; but the fact remains that there are now quite a few people (perhaps most of the key angel investors in early stage tech companies in Australia?) who have a direct stake in the success of Pollenizer and its portfolio companies.

With this in mind, I would be fascinated to know how Morle and Liubinskas are making out personally, this far down the track (five years after Pollenizer was founded). Both have been around the block quite a few times now with the startup train and are probably getting a little bit drained at this point; it’ll be interesting to see what their ongoing role in the company will be going forward and just how much financial benefit they have gotten from it. They’re so much more engaged in the portfolio companies they assist than your typical seed, angel or VC investors would be; one hope they are reaping just compensation for contributing so much of their energy to so many people’s startup journeys.

Image credit: Pollenizer/Delimiter


  1. Hey Renai, thank you for your on-going interest and thought around our model. I’m feeling really good about our new model because it makes stuff possible for a community of entrepreneurs who can now be co-founders of companies where this has historically not been economically possible. The right people need to be up for taking a risk and going hard. We bring a lot to help them along. We’ve now started our first business under this model and we will watch closely how it plays out. We know we will be judged, in the end, by how many successful companies we create. Give us some time. Spreets wasn’t that long ago! :) We take nothing for granted. Mick and I love what we are doing and this drives us every day. We have certainly diluted, but we have more than enough skin in the game to keep on pushing. Phil

  2. Good question about the compensation Renai.

    @phil do the founders and perhaps yourselves take market rate salaries?

    And what’s the monthly burn rate for each startup? You guys practice lean methodologies but it looks like its far from bootstrapping. I met one if your ex co founders recently who quoted $50k a month in burn! Sorry but that ain’t lean.

    How much does the pollenizer entity earn along the way as they burn through startups? It’s easy for you to switch to the next one, but not so easy for the founders who brought in the idea.

    Renai it’s my guess that Mick and Phil are doing quiet ok.

  3. John – No one is on market salaries because we are all investing in the opportunity of building successful companies. I think a great many people actually know my salary and I am not ashamed of it and do not hide it. Pollenizer does not profit from its portfolio companies. Our old model was indeed $12K per week for a large team (which I agree was not bootstrapped, nor was it designed to be) which we did not profit from. In many cases most of that money was invested by us in the first place. So, no one was ripping off founders and we had LOTS at stake if the business didn’t make it.

    Today our model is different.

    Teams coming into Pollenizer get $200K for a 9 month runway to build a business. They are employed (on a low salary) by the portfolio company and get material equity in the company. A tiny amount goes to Pollenizer for services that the company needs such as design.

  4. Thanks Phil. So teams used to get 468k for 9 months and now it’s 200k. A lot leaner yes, but will they be able to do less now or is that gap coming from somewhere else?

    How much money do in coming founders (people with no idea about start ups who come to you for help with an idea- not your employees) have to put in and how much equity do they get?

    Everyone in the industry who really wants to see it grow , needs to be supporting the best possible pathways for first time founders. I hope your new model is really doing that.

  5. Thanks for your questions John. Our new model has two specific goals.

    1) build a company around ‘co-founders’ (rather than employees) who are all motivated for the right reasons. On this point we are specifically focused on the deal still feeling good and fair in month 8 where everything is normally feeling very hard and the team needs to push through 2) have at least a 9 month runway so that we can fund it to get the next point our experience has shown that angel money is possible.

    Pollenizer’s program is designed is designed for two very special kinds of co-founders/entrepreneurs.

    1) People that want to co-found a business but have limited financial reserves (most people that live in Sydney). Want to start something. Want to have impact, but have no capital and don’t have an idea of their own currently. These co-founders can join a brand new company on Day 0, have good equity and enough money to get by. 2) Investors that want to start something new and not wait until someone else does so. In some cases 1) and 2) combine if the investor can work fulltime on the business.

    I should also add the frequently we initiate the idea also and bring people together to make a company around it. Pollenizer is not designed for the same entrepreneurs who take an early prototype of an idea to Startmate etc. Another key difference is that we are at the very start of an idea. There is not even a business plan or wireframe when we invest in people to build a new company.

    A co-founder who commits no capital will get a negotiated 5-15% of the business. A co-founder who works on a business and invests all the capital could have around 65%. The rest is spread across the rest of the co-founders, one of who is Pollenizer. All co-founders get paid some money. The deal is done fairly and transparently.

    Finally, this may change again. For Pollenizer to succeed, we need to get good at this because great companies are built by correctly motivated extraordinary people. We will try things, learn and tweak are model as we need to.

  6. Hi Phil, great to see the numbers published here. 5 to 15% is not a co-founder, that’s a job with some bonus equity. Perhaps you could re name that role. If it was named as such and came with a market salary less a small salary sacrifice to earn the equity it could work well.

    Am I right to take from your comment that you are now not looking for people to bring ideas to pollenizer? Rather people to join your teams/ideas. Why not just do this internally then? Or is the idea to get people commited over the long term with skin in the game and a co- founder title? In which case don’t they deserve AT LEAST 30 or 50% equity?

    It’s of no real argument that the idea is worth nothing at the start when it’s just a business plan. Of course it’s worth nothing, but that’s missing the point. Good start ups take years to be successful (unless its a US clone) and a co- founder needs a large share of the pie ( that will dilute if they are lucky to do an A or B round) to keep committed over the long term. Its a long race. That’s clearly what works, not models designed to churn through ideas with all the equity going to investors and incubators.

    You guys have a good team, great connections but still not the right deal to attract GREAT founders. It seems like this will just attract more of the same non technical ex corporates with no idea how to build an MVP. These guys should be borrowing 50k from friends and family, doing lean properly, reading some books and learning to code themselves. It’s not hard to validate an idea and even raise 200k if its validated and the alternative is certainly not worth 85 to 95% equity.

  7. Thanks John – we’ll need to leave it there and agree to disagree. We have some great founders that I am proud to know. Let’s leave time to judge how we do. If you would ever like to reveal your true identity and come and see what we do, I would have happy to show you around and spend some time with you.

Comments are closed.