In 1994, Steve Baxter put his life savings on the line to launch his first startup, a pioneering internet service provider. Now, the mogul is an investor in 26 businesses, one of the ‘sharks’ on television show Shark Tank, and is leading the next wave of entrepreneurs in Brisbane.

Back in the “old days” of dial-up modems and web browsers, 23-year-old Steve Baxter made his first investment – in himself. Withdrawing his whole life savings of $11,000, Steve launched his first startup, an internet service provider, from the spare room of his Adelaide home.

SE Net serviced more than 35,000 customers before it was acquired by Ozemail/UUNet under the stewardship of its founding director and now Australian Prime Minister, Malcolm Turnbull.

“At the time, it was the opportunity of the internet, this was back in the day of dial-up modems and web browsers, it looked nothing like it does today, but it was very easy to see where it could go,” Steve says.

“To me it was something I wanted to be a part of and I saw the opportunity in the technology to get into business and had a pretty firm belief it was going to be quite revolutionary, and thankfully there was a fair bit of truth to that.”

In 2001, Steve identified another lucrative opportunity and teamed with a schoolmate to launch his second startup, PIPE Networks. Eight years later they sold it to the TPG Group for $373 million.

Possessing a thirst for knowledge and opportunity, Steve spent a year working with Google in California in 2008, leading a project to deliver high-speed telecommunications systems across North America.

“Google is an amazing company, it’s obviously exceptionally successful, always has been and it’s hard to see anything in the near-term future that’s going to displace it,” he says.

“I spend a lot of my time telling staff it’s all well and good to want to be Google, however if you’re undertaking the practices now that Google has – ‘20 per cent time’ (allowing one day a week for employees to spend on side projects to benefit the business) and the very free and easy way they handle their staff, you’ll probably go broke, because those guys have $120 billion a year in revenue, they can do that. So when you get your $120 billion, you too can do that.

“I think it’s admirable that people want to have a company that’s transformational and big, it’s very much a force for good in most respects, but you do that from a position of strength, not a position of weakness. So a lot of the time I say it’s good to have it as something you aspire to, but in the meantime you’ve got to have a business, it’s got to generate revenue, it’s got to pay staff, it’s got to pay suppliers.”

Steve has become a major early-stage investor in Australian startups, with 26 businesses under his wing, and has helped launch a host of companies boasting a total valuation of more than $100 million.

So what does he look for when investing in startup businesses?

“It does come down to people, ultimately you have to deal with them face-to-face, week-to-week, month-to-month. You need to make sure they’re the people you want to deal with, on a variety of levels – they have a really healthy and honest approach to business and the skills to carry off what they claim they’re going to,” he says.

“When I say skills, it’s not always about computer and tech stuff, if you’re selling iced tea, which I have a share in an iced tea company, you need to be good at retail and selling iced tea and understanding flavours. You’ve got to have those relevant skills, that’s very important.”

Steve is also a game changer in the thriving entrepreneurial scene in Queensland, launching co-working community and startup hub, River City Labs in 2012. He says co-working spaces are about “engineering collisions”, and bringing business people together, who believe they compete with each other, and instead making them realise they can be allies.

“I’ve rarely met anyone in this town who competes with each other, they all think they do but when you spend a couple of minutes talking to them you realise they don’t, so get them talking to each other, sharing the experience, understanding if they can help out. Some have joined forces through that – a whole is far greater than some of the parts.”

SHARK TANK
Shark Tank has lead to me investing in more than I otherwise would have and then we’ve broadened the types of companies we invest in, so before I would have said we were targeting tech startup companies, now we’ve got businesses that are in other industries – indoor skydiving businesses, camping goods companies, iced tea companies.
Before Shark Tank I had no idea how hard inventory was, tech startups don’t have inventory, so that has been challenging; and understanding the retail strata of Australia, given the proliferation of the Coles and Woolworths franchises is what we’ve got to work with, there are all sorts of challenges getting things stocked and shelf space and orders and dealing with the various interesting terms the two big guys offer.

What is the best advice you ever received?

I had an accountant in Adelaide who was fantastic, he was our suburban accountant when we first started, because we started out of a house. He gave me three great pieces of advice:

“Never treat your business as a cash register”

Never stick your hand in the till to go and buy a pie and Coke at lunch time, you pay yourself like an employee, you take other money out of the business as a dividend, so run it as a professional business.

“Never spend a buck to save 50 cents”

That was specifically related to tax time savings, just because something is cheap and it’s nearly June 30, doesn’t mean you should buy it, if you don’t need it, you don’t need it. If you’re going to spend a buck to get a 50 per cent claim back on your tax it’s ridiculous.

“This business is too big, get another accountant”

He helped us grow by firing himself.

How do you start  a business?

Just start. So many people spend too much time planning to start. Once you’re into it and you cut yourself loose you’ve got no choice.

Make sure what you’re doing is something people want. A lot of people do market research; don’t get carried away, but do light-handed market research; asking your Mum and Dad whether they’d buy it is not market research Mum and Dad are always going to support you, you need to walk up to a total stranger, get them to put their hand in their pocket and give you money in return for something, that will prove people want it because the strongest most valid opinion you’ll get is a purchase.

Get help. There are lots of coworking spaces and entrepreneurial support networks, just get in there and talk, you rarely ever find a competitor, so I encourage you to talk lots and get out and do. You’re never going to know unless you do it.