Rick Baker and Niki Scevak of Blackbird Ventures visited River City Labs yesterday for a Q&A session with a roomful of folks from Brisbane’s startup community. So far Blackbird has invested in two companies, Canva and Ninja Blocks, having raised a $30 million fund back in March. Now they’re on the lookout for big thinking, fast moving tech startups across Australia.
— RiverCityLabs (@RiverCityLabs) June 11, 2013
Here are the main points they made:
Blackbird Ventures at a glance
- A founders’ fund – the limited partners are successful entrepreneurs from Australia and the US
- Filling the Series A gap for internet companies – $500k to $1 million rounds, with Blackbird doing 50% of the round. They noted that in Sydney angel rounds are becoming easier to raise, but follow-on Series A funding is harder to raise. (TSJ has not come by much evidence of easier access to angel funding in Brisbane, however)
- Invest in businesses with unique products and global outlook, not Australian clones of existing businesses
- Like other VCs, they’ll generally take 20-25% equity in the company. No science to arrive at this figure, but at that level the investors feel like real partners in the venture
- Two investments so far (Ninja Blocks and Canva)
- Another two terms sheets issued, and two deals in due diligence
- Roughly ten other companies being closely monitored
- Around 30 fundable companies per year, of which they’ll invest in 3-4 (in addition to several seed investments)
What companies qualify for investment consideration?
- Already raised a seed round
- Has a core of “happy customers”
- Can demonstrate that they have something their customers can’t do without
- Think global from day one. Focus on where the customer pain is greatest
- Australia vs Silicon Valley is a false choice; companies must be prepared to exploit both
- Blackbird are building deeps links into Silicon Valley to help portfolio companies get a foothold there
Attributes they like to see in entrepreneurs
- Learn by trial and error
- Not hung up on IP/NDAs
- “NDA thinking”: requests to sign NDAs are an indicator of closed thinking
- Cold calls and emails: find a way to get a warm introduction
- Small thinking: too many Australian entrepreneurs, even successful ones, don’t think big enough. They need to learn to think 100 times bigger
- Patents pending: this might be useful if you have a nanomaterials startup, but generally not worth much for internet companies
Other advice to founders
- Talk to potential customers and build product. If you’re doing anything else in the earliest stages of your startup, you’re doing it wrong
- Talk to founders who have recently been funded. They’ll have lots of lessons to teach, give introductions to investors, point out who to talk to and who to avoid
- Co-founders should write down on paper what happens if one or more of them leave the company
- Expose yourself to luck. Get out there and have discussions. Increase serendipity. Most encounters will come to nothing, but eventually something will lead to a great opportunity
- Get creative around customer acquisition strategies. Think of Dropbox referrals or Airbnb’s tactic of contacting (or should that be spamming?) Craigslist users who had recently listed a room for rent
- Don’t put artificial barriers of your own making in your way; for example, don’t think you need to raise money before you can accomplish something. Start to build traction with your product. Raising money will be easier after that
- Don’t lose heart after getting a “no” from a VC or angel. Entrepreneurs are defined by their response to rejection
Rick and Niki are predictably bullish on the future of the Australian startup scene. They note that growth in Startmate applications is a good proxy for growth in investable startups. Startmate’s first round attracted 85 applicants. The second round attracted nearly double that at 165. The most recent round saw 260 teams apply. Growth, indeed.
In stark contrast to some of the other early stage tech startup events your correspondent has attended in recent times, there was no mention of business plans or information memoranda. Niki and Rick conveyed a belief in tech founders and encouraged people to just get in and have a go.
Blackbird Ventures: you’re welcome to visit south-east Queensland whenever you want. Heck, open up a northern outpost. The weather’s (usually) great!