Justin Simpson: Trust your instincts and don’t over-plan

Justin Simpson, Inovia
Justin Simpson had too good an idea to waste

Justin Simpson’s first attempt at entrepreneurship ended in a spectacular fashion. While working as a patent attorney at an Australian law firm, he came up with an idea for automating the process of applying for patents.

As he saw it, allowing entrepreneurs to file patents online would slash costs. He then launched Ozpatents.com, intending to keep the site a secret from his employers while he built it up.

However, barely a week later, a senior partner at the firm confronted him about his new venture, “suggesting that it might be good for my career to shut it down immediately”.

After a fruitless attempt to get his employers to invest in his idea, Simpson decided that the concept was too good to waste. He therefore took a part-time, in-house counsel job with a former client, Silverbrook Research.

This ensured that he would get enough money to pay the bills, while giving him enough time to launch a new website, Inovia.com, in 2002. A year later he secured AU$400,000 in funding from venture capitalists and a New Zealand law firm.

Yet, even once funding was secured, it took time for orders to start coming in. The problem was that law firms already had established networks for receiving patent requests from foreign associates.

It was only in spring 2003 that Inovia got its first contract, from a businessman in Canada. But from then on the firm started to receive more business, enabling Simpson to hire additional staff by the end of the year. Not all these new appointments worked out.

Indeed, it was only after he let an expensive US salesman go, and replaced him with a postcard-based marketing campaign, that quarterly revenue moved into seven figures.

Despite this growth, Inovia’s problems were still not over. As Simpson explains, marketing costs ate up most of the profits. As a result, “we’d have a brief moment of profitability and then we’d grow again, which pushed us back into the red”. This meant that new funds were needed, which proved hard to raise.

Worse, in 2008 a firm developing a similar idea persuaded Simpson to abandon talks with angel investors in favour of a promised cash injection, only to renege on thedeal. Inovia only survived by shedding a third of its staff.

The breakthrough to consistent profitability came when Simpson had a brainwave. While his original model was based on having a small network of partner firms around the world, most potential clients already had their own firm they worked with.

He therefore switched to a model that allowed clients to select the law firm for a particular territory. This made Inovia more attractive to large firms, dramatically boosting revenue. In 2013, Simpson sold Inovia to RWS Group for US$29m.

Now 40, Simpson has four pieces of advice for budding entrepreneurs. He thinks that you should “stick to what you know”. While planning is very important, he thinks that “plans don’t always work out, so you need to improvise”.

Hiring good people is also key, “because the wrong person can run your firm into the ground”. Finally, he urges people to “trust their instincts”, as “there have been many times when I’ve regretted letting people dissuade me from something”.

66% off newsstand price

12 issues (and much more) for just £12

That’s right. We’ll give you 12 issues of MoneyWeek magazine, complete access to our exclusive web articles, our latest wealth building reports and videos as well as our subscriber-only email… for just £12.

That’s just £1 per week for Britain’s best-selling financial magazine.

Click here to take advantage of our offer

Britain is leaving the European Union. Donald Trump is reducing America’s role in global markets. Both will have profound consequences for you as an investor.

MoneyWeek analyses the critical issues facing British investors on a weekly basis. And, unlike other publications, we provide you with the solutions to help you turn a situation to your financial advantage.

Take up our offer today, and we’ll send you three of our most important investment reports:

All three of these reports are yours when you take up our 12 issues for £12 offer today.

MoneyWeek has been advising private British investors on what to do with their money since 2000. Our calls over that period have enabled our readers to both make and save a great deal of money – hence our position as the UK’s most-trusted investment publication.

Click here to subscribe for just £12