How to raise money from VC funds
This episode is with Niki Scevak – co-founder and partner at Blackbird Ventures, one of Australia’s leading VC funds, turning $1.2B invested since 2013 into a portfolio valued at $10B with investments including Canva, SafetyCulture and Eucalyptus. In this episode we talk about how to raise money from a VC fund with discussions around the VC industry in Australia, Blackbird Ventures’ investment strategy, what they look for in a startup opportunity, how to pitch a VC, and what founders should focus on after they get funded.
You’re listening to The Growth Manifesto Podcast, a Zoom video series brought to you by Webprofits – a digital growth consultancy that helps global and national businesses attract, acquire, and retain customers through digital marketing.
Hosted by Alex Cleanthous.
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- 00:00:37 Niki Scevak’s introduction to the Growth Manifesto Podcast
- 00:01:57 How did you get the idea of Blackbird Ventures?
- 00:05:55 What was it like to launch back in 2012? What was the environment like?
- 00:07:43 How much has the game changed since 2012 to where it is today?
- 00:11:31 What’s your approach in choosing a company you invest in?
- 00:16:33 How detailed should your idea be?
- 00:21:47 What do you look for in a founding team?
- 00:24:31 What are your thoughts about previous experiences and successes of the founder of the founding team?
- 00:29:36 What were your reasons for investing in Canva?
- 00:35:34 What are the things that need to be considered before meeting up with your team?
- 00:42:26 How important is the presentation of their products to you?
- 00:47:53 What happens after making the investment?
- 00:51:35 What kind of support will happen after investing?
- 00:54:31 What are the exciting industries that you are looking at across the next 5-10 years?
- 00:57:21 How can a company get in touch with you?
The best predictor of success is often speed. And so you would be surprised the variates in even taking away hours worked, if people just work the same hours. You would be surprised at the variates between some teams and the speed of progress they make and other teams and the speed of progress they don’t make. So I think it’s paying attention, again, in the early days is like the speed and the rate of learning usually predicts the eventual success of the founder and the team as well.
This is Alex Cleanthous and today we’re talking with Niki Scevak, the co-founder and partner at Blackbird Ventures, which is Australia’s top VC fund. They turned $1.2 billion into over $10 billion in less than 10 years, with investments including companies like Canva, SafetyCulture, and a small company called Eucalyptus, which is basically everywhere these days. Today we’ll be talking about how to raise money from a VC fund. And just quickly before we get started, make sure to go ahead, hit that subscribe button so that you get the latest episodes as soon as they’re released. Let’s get into it. Hey, Niki and welcome.
Hey, and thank you for having me.
Yeah, fantastic. This is going to be a fantastic conversation, especially for all the companies out there that are considering how to raise money and what’s that process like, and then what happens afterwards? Because I think there’s a lot of questions and there’s not a lot of answers that are easy to find out there. So I think this is going to be fantastic for people that are looking to raise money, but also I think for companies that are trying to understand actually how they can operate better. And I think quite a lot of times the thinking that the VC funds actually can bring to the table is super valuable across all businesses. So, with that being said, let’s get into it and let’s start at the very, very beginning. How did you get the idea for Blackbird Ventures?
Yes. So it was literally a decade ago, I think it was. Last week was the exact 10 year anniversary. And back in 2012, I had, just prior to that, founded Startmate. So Startmate is an accelerator and many of the same concepts and is almost a precursor to Blackbird in that it’s based on this idea of the circle of life. People who build technology companies invest and help the next generation. And Startmate was, as I mentioned, almost an MVP version. We had 20 or so folks. We found a handful of startups and helped them build their first product, win their first customers, raise capital in Silicon Valley. And that journey in the first two cohorts of Startmate triggered within me that this is what I want to do with my life.
This is what I truly love. And I think, more than anything else, the people that I got to meet through that Startmate experience, you make a wave of friends at high school. You make a wave of friends at university and you don’t make any other waves. And Startmate was just this wave of friendships that I still count dearly today. And so I teamed up with Rick Baker and Bill Bartee, and we formed Blackbird. And the idea was to put this community of founders at the heart of what we do, and to really lead with this idea that Australia could create these world leading companies. I think entrepreneurship, particularly a decade ago, was very skewed to see some successful idea in the US and make some version of it in Australia. And Blackbird was for the opposite type of startup.
The startup that is trying to be the best in the world, not the best in Australia. Trying to do something that is original and ambitious and unlikely, and to support those companies and those founders right at the beginning. And so, back in 2012, I would say Venture capital was a dirty word in Australia. The last couple waves had largely failed. There’d been some exception to those rules but, essentially, hadn’t done very well. And then also the other embarrassing fact was that Australia had already produced these great, successful global technology businesses like Atlassian, Campaign Monitor, Redbubble, RetailMeNot, Halfbrick Studios. So the list goes on and not one Aussie VC was in those companies.
This time was like a paradox of this community of Australian founders had been rising up, but there was no real institutional venture capital focused on investing in them and focused on bringing them together. I think the other magic of Silicon Valley is this connectedness to the founders coming together, to helping the next generation where, even back then, you had successful founders, but they weren’t necessarily helping the next generation. They were very disparate and disconnected. And so the idea of Blackbird was to bring them together and see if we could create a lot more successful startups with some money and that community.
And I do remember those days, because I remember all the stories about the fact that the Australian startup, it lacked funding, it lacked sophistication, that investors were a lot more, what was the word? Defensive in terms of their investments and not as, I guess, aggressive as some of the Silicon Valley firms. And so that’s a time when you launched, right? And so you launched at a very interesting time because the examples which you gave that was the first wave. The second wave are the companies like the Canvas of the world now that are just huge across the world. And so what was it like to launch back in 2012 and ’13, in that kind of environment?
It was so hard to get up and running. And so we had 522 meetings to get 97 people to say, yes. And that was our first fund of $29 million. So it was essentially this, if there’s founders in the audience, it’s essentially this mega angel round that we raised, and we didn’t even have the benefit of a vision. We were like, we’ll spot other people’s visions. And so it’s a tougher sell than a specific vision. And the people who did say yes, as I said, largely were technology founders who were investing their own personal capital. But their interest in helping that next generation, I think, is what brought everyone together.
So that was the hard part. The beautiful part was, once we had raised the fund, we were like a cup of water in the desert. There weren’t any other funds, and there weren’t any other people, even with this express interest to say, we love people who are ambitious enough to found a global company from day one, to who want to be the best in the world and who want to build these wonderful software companies from Australia. And so it was hard to get up and running. Once we were, it was obviously the best time to have a venture capital fund investing in global Australia, in software startups in 2012.
Yeah. And so we’re going to get to your investment strategy shortly, but it seems like you created the kind of business that you like to invest in, which is challenging the space. It’s something which has just not been actually tried before. And it has all those challenges, but then it has all those opportunities. And we’ll get to that shortly. How much has the game changed since 2012 and ’13, to where it is today in 2022?
Yes. It completely changed. I would say where the ecosystem was a decade ago, we could meet with 200 founders per year and still that would be the hundred percent of the universe of startups in Australia. We’d have plenty of free time on a calendar and you look back and it’s like, wow, that was a week in the calendar. Now I would say we need to meet thousands of founders across Australia and New Zealand per year. Pretty soon we’ll need to meet tens of thousands of founders per year. I would say that, from nothing, we now have a healthy local ecosystem of funds. And then I think the biggest thing that has changed is Silicon Valley moved out of Silicon Valley. I think the ideas of Silicon Valley and the approach to company building and the courage and the ambition, is now spread all across the world because of podcasts and because of blog articles and because of entrepreneurs just swapping stories, wherever they are in the world.
So I think the investor base in Silicon Valley has absolutely turned its sights outwards. It doesn’t specifically care about Australia or New Zealand, but it does care about where the best companies in the world get formed. And so that started off, I would say, a decade ago. They were happy to wait a really long time. I think Accel invested in Atlassian 12 years after it’s got started or something like that. And so now, with all of the success that all of the global firms have enjoyed in Australia, they are much more comfortable to invest earlier and earlier. I’d say still the series A round, the 10 or 15 million dollar round, that tends to be where they get most interested in starting to invest in the companies. And before then, it’s still relatively a local market of capital, but even that is changing.
So I think you have a healthy blend of investors, both local and global now. I think you have an ecosystem that is 10 times the size of what it was a decade ago. And then I also think there was a lot of hope a decade ago. I hope I could build a company that could get to a hundred million dollars a year in revenue. I could hope I could build a company over this long term horizon and cause the changes I want to. And now I just think people are very aware that these companies just keep on growing, keep on compounding, become the world’s largest companies, become… Google is still growing at 30% per year and it’s hundreds of billions of dollars in revenue.
And it’s just that I think people fully appreciate, particularly software companies, people fully appreciate SAS and what high quality companies they are, and just how humongous they can get. I think a hundred million dollars now would be viewed as a small outcome of success, versus now you can, I don’t know. Salesforce has 25 billion dollars of ARR, so you can grow into that. It doesn’t stop at a hundred mil. It doesn’t stop at the ITO. These are the best companies in the world.
Yeah. Great, great. And that sets up the context for the next questions I’m going to ask. Because it’s become a lot more competitive now for startups. There’s tens of thousands. That’s the competitive landscape for not an unlimited amount of funds. And so I think the challenge to raise capital now in Australia is going to be that much more challenging because of the options for VC funds, angel investors, and so on, to select. So let’s jump to your investment strategy, because you’ve made some pretty good investments since you launched the funds with specific companies like Canva and SafetyCulture. So what’s your approach to choosing companies to invest in?
We’d love to invest in companies right at the beginning. So in the beginning you don’t have a product and you don’t have revenue. And so it is about, I think, the vision of the founder, the sense that they are doing their life’s work, that they want to build not only a great product, but a great company that survives decades. And, again, have this grand ambition. I think ambition is this powerful force where both, obviously it’s a large change in the world that will happen in a large company, but it’s a honey pot for the best people to come and work for you. It’s a honey pot for the best investors to invest in the best valuation. It’s a honey pot for everyone who’s doing business with you to say yes to friendly terms and so on.
So if you have ambition, it’s almost like this network effect or this gravity effect where you’re more likely to succeed, the higher ambition that you have. Versus I think also back a decade ago, Australians suffered from this ambition problem where it was like, Australians are not like Americans and find it hard to declare ambition up front and find it hard to say, with a straight face, the success that they’re aiming for. And so the environment of other successes have brought those barriers down to expressing ambition. But I think in the beginning you’re looking for ambition, you’re looking for this special type of person that makes something happen. Again, there’s lots of smart people in the world. Most of those smart people talk about smart things versus do smart things. And so you’re looking for that rare combination of has that vision and that clarity of thought, but just goes and does it, doesn’t complain.
Doesn’t complain because they don’t have much money. Doesn’t complain because they don’t have much structure. Doesn’t complain in general. And so I think it’s finding those unique characters and then venture capital’s a weird investing industry. And the first investment you make actually in a successful company, turns out to be a minuscule amount of your total investment. We first invested $250,000 in Canva before they had revenue, before they had product. But we’ve since invested $270 million just into Canva. And so, again, I think it’s having the courage to make that first investment, to begin a relationship with someone right at the beginning. I think investors, whether in Australia or even Silicon Valley, quite frankly as well, have this kind of like, oh, I’ll invest in you after you are successful or after I know everything or after there’s all of this uncertainty to be reduced.
And I think, again, the way in which we’ve built Blackbird, and hopefully the spirit in which we’ve built Blackbird, is with this courage and with this openness to push boundaries, to go on journeys, to not have all the answers at the beginning. And, again, just to try and, again, reraise ambition and to be part of these special stories that turn into generational companies. And so, at the beginning, I think it’s vision. It’s that sense of the founders doing their life’s work and looking to make a big difference. That at a high level. And then it’s always the specific case. It’s always the opportunity that they’re attacking. I’d say largely also that, if you invest right at the beginning of being afraid of themes, people say, oh, this theme is hot this year or this theme is something that we’re looking to go after.
Whereas I think, if you break down the word theme, theme happens after all the companies have started. So when Airbnb started their seed round, they weren’t saying they were an on-demand economy. The world waits for a few companies like Uber and Airbnb and so on to be successful. Then the world comes up with the term on-demand economy. And then the company that’s starting after they hear the theme on-demand economy says they’re an on-demand economy startup. So you’re investing in the hundredth company versus the first or second or third, or the original company. And I think that’s always a dangerous aspect of investing in themes is, if it has a theme, it means that success has already happened to a group of companies, which usually is quite dangerous.
So you like to invest at the idea stage, right? And I think oftentimes it depends on who you speak with, but some people say that, well, you should have something that’s actually started first, that has some insights, some revenue, some opportunity. But you are saying, no, what we want is we want the big ideas and the people who have the perseverance and just a relentless stubbornness that they’re going to do it anyway. And so that’s what you’re looking for. And so when someone has an idea, so obviously that idea has to be really thought out. And it has to be something that solves something that maybe hasn’t been solved before. And then you’re looking at the person themselves.
So, in terms of the idea side of things, how thought out or how complete does the thinking have to be, to be interesting to you? Because it’s like, hey, the car sharing thing that became Uber. Hey, we’re going to make an app, and the app’s going to be thing. And then we’re going to do all these… It seems so simple, but then the end result, it’s changed transportation. And so, just for the listeners, how thought out should the idea actually be?
Yeah, look, I say we invest in just ideas is to suggest that we are open to anything and there’s no minimum bar. I think that’s the key. Obviously having nothing is not a good thing. Having something is a good thing. So if you do have a product, if you do have revenue, and then you’re raising your first capital after those events, then that’s obviously better than doing it with nothing. So, to clarify on that specific…
That’s good to clarify by the way, because this is what I’m here for. It’s just to make sure that…
Yeah. The other thing I would say is that a lot of startups approach fundraising with this bank loan state of mind in terms of, if I just have these minimum requirements, will someone invest in me? I now qualify for a seed round and so on. And it’s not quite how it works. Is this the most successful version of this? Does it result in great change to transportation or to whatever the industry might be? And I think, in the beginning, if I just boiled it down, product and happy customers. I think if you have a small amount of really, really happy customers, that is the golden mix. If you have 10,000 people that don’t really use it, or you have a high number of low engaged, that’s actually practically nothing.
But if you have five or 10 people that are just crazy about the product, that is actually a lot. So if you do have something, it’s this small amount of really, really happy customers, and it’s clear that their lives have been changed, either at work or in their personal lives, whatever it might be. In terms of an idea, I think one good test of an idea is it’s crisply communicated, but as you go deeper, as you ask more questions, the answers almost get better and better. And one test we have when we’re getting to know a company is, was the second meeting better than the first meeting? Was the third meeting better… Do the meetings get better? Because usually bad ideas are like a facade.
Once you ask one question to say, oh, there’s actually no building behind the front. And then good ideas, the more you ask, the clearer it becomes that that founder has just thought through all different sorts of aspects, and has all different kinds of opinions, and has made all different kinds of trade offs. And almost becomes like, in the first meeting, they’re saying something at a general level. But the more you go down, the more it’s revealed, the more energised they become, the more revealed. It’s like they’ve got this inner chip on their shoulder. The more they’ve got this really passionate view about these small details. And I think that’s usually the test of whether someone has developed their thinking and developed a good idea. Is the second meeting’s better than the first meeting, the third… And if you can get to the fourth meeting and you’re still blown away by the depth of thinking and so on about the idea, then it’s not a facade. It’s not just a whatever, pet sitting for the Eastern suburbs, on-demand economy, buzzword, buzzword, buzzword. And you’re like, well, question, question, question falls away.
What it seems like is that the first meeting there’s the high level idea, and that idea has to have something behind it, some interest. Then there’s going to be the natural questioning of all the assumptions, questioning of all the things. And that’s where that second meeting, the third meeting starts to become a bit more interesting, because it’s how they answer the questions. It’s how they answer the questions from people that have a lot of experience and that are questioning companies every single day. And to be thought out. And it’s almost like that process of to peel the onion, as they say. Say, wow, cool. And there are some conversations, and I’m sure that all the listeners can tell when they hear an idea and they’re like, oh yeah, what’s that idea? That sounds thing.
And then they get an answer like, ah. And then the more they get answers, the more they go, wow, this is something that’s super interesting. And so it sounds like that’s what’s required if you don’t have a business that’s already basically, it has a product, has customers, has some revenue. There has to be a solid, thought out plan, but not completely bombarded up front with all the tech. Just start with high level, simple idea that can change the world, and that hasn’t basically been done before. Let’s jump quickly to the people side of things. Because the other part is now the founders themselves. What do you look for in a founding team?
Well, I think it’s… So we talked about that vision. And I almost think of if you look at some graph of progress, that’s the top. That’s mapping out where you’d like to end up, what does ultimate success look like. And then I think the other aspect is this bottom left corner where, how will you determine progress over the next 18 months? How will you hold yourself to account? Have you chosen the right goals to focus on? Have you asked the hard questions up front and attacked the hard bits and proved that the hard bits can be overcome? Does that person set high standards for themself? And it’s almost like they’re their own worst critic and there’s this insatiable competitiveness to them.
There’s insatiable attention to detail, insatiable attention to quality in terms of, you have to… I know the founder is the hero in the journey, but it’s essentially a team that makes the company come true. And so you’re looking at do they have good taste in team? Do they have a good idea as to exactly who they need to hire in the next couple months, and are they making good decisions on that? And how would they go about the hiring and how they go about choosing? In the beginning, founders usually are doing it for the first time. Usually they’ve never hired anyone. Usually they’ve never managed anyone. Usually it’s not so much that management. It’s more like they just know exactly what’s in their head and they know exactly how they want to get it onto the blank canvas in front of them.
And they just need people to help them in that 12 or 18 month first unit of progress. So I think, again, it’s this almost self-critical sense of high quality, sense of uncompromising perfection. Just getting things done and setting the rhythm of the company as well. The best predictor of success is often speed. And so you would be surprised at the variates in even taking away hours worked, if people just worked the same hours. You would be surprised at the variates between some teams and the speed of progress they make and other teams and the speed of progress they don’t make. So I think it’s paying attention, again, in the early days is like the speed and the rate learning usually predicts the eventual success of the founder and the team as well.
And so what are your thoughts around the previous experiences and successes of the founder of the founding team? Because oftentimes, especially in business, you screw up your first startup, you screw up your second startup. And by the third one, you’ve figured out all the things which you shouldn’t do, which you didn’t think that they were issues in the beginning. And now that experience, that helps you to become a far more sophisticated entrepreneur. And so how important is experience? When can experience not be as important, I guess, as an indicator?
Well, if you were like, hey, how do you create a trillion dollar company? Oh, let’s look at all the trillion dollar companies out there. And let’s look at who started them and let’s look at their experience at that point in time when they started it. You get to, well, Microsoft and Facebook, they didn’t even finish university. Google had just finished university. Steve Jobs had worked, I think, part-time at Atari and that was it. And then he founded Apple. And so all of these companies are founded by unqualified people with literally, in most cases, zero business experience. Not even working in a job, just zero leadership, zero hiring, zero everything. And so I would say it’s not important from that point of view. One word that’s a very interesting word to me is naivety. People describe naivety with a hundred percent negativity, versus naivety leads people to do things and to change the way things work.
If you don’t have naivety, you’re more likely to say, oh, this is the way that things are done. Or you’re more likely to not even say it out loud. It’s subconscious. It’s subconscious so you don’t decide to do anything different because it’s just the way things are done. And so you need almost this fresh naivety to bring about change. You need the outsiders to bring about change rather than the insiders. So, on some industry product level, you need the naivety. On the flip side, experience can be useful. Again, if you’re a startup and just so you build a great product and you have really happy customers and growth takes off, because that market timing and growth and so on will happen independently of how good you are as a business person. So just say that starts to happen.
It is ugly to see a company go from zero to a hundred people, to 200 people, to 300 people in a couple of years. And the founders are going on this unlikely journey, from don’t have any business experience to becoming an expert on organisational design, and processes, and resolving people problems, and installing leadership layers, and building communication structures so that every team can get things done at a hundred people. Everything can get done at 200 people. And in most of those successful cases, I mean, nearly all of those successful cases, the founders did scale that vertical learning curve, scale that company building aspect. And, actually, it’s interesting because now you can look back at the archives of something like TechCrunch where, in 2006 or ’07, people were calling for the resignation or firing of Mark Zuckerberg. He’s inexperienced and get rid of him.
And now he’s like, oh, now he’s a leader and revered as a CEO and is probably going to write a book about how to build a company and so on and so forth. So it’s a terrifying journey. And I think also, in terms of venture capital or investors or advisors or outside help, I think the outside help rarely helps on the building of the product, but there’s two steps. There’s building a great product and then there’s building a great company. And I think there’s more horizontal or universal lessons in that second building a great company that, again, it’s those prior founders who’ve succeeded. It’s people, advisors, investors, other people around the company. I think that’s where a lot of the help happens. And a lot of the help, not in a direct sense, but in an empowering sense of helping that founder go on the journey from founder to CEO and beyond.
So that is hopeful for all the startup founders out there who think that they have to have experience or they have to have an existing company, existing product and stuff like that, that you actually don’t. But if you don’t, you need to bring something pretty strong to the game. Because it’s the balance. It’s naivety, but there’s a cost to that. Or it’s the product, but there’s a cost to that. So that’s really, really interesting. Just because you spoke about it before, you invested $250,000 into Canva and that was pre… Was that pre-product?
Pre-revenue obviously because it’s a product. And so, because this is kind of like a hopeful conversation, lots of startup founders that have all this, what’s it called, the self doubt. There’s so much internal dialogue. So what was it about them, which you said, that’s a good idea?
I think the idea was so fresh and unique and Mel had taught graphic design at university and usually, to be a graphic designer, you had to go to university. Then you were a graphic designer in a company and then you bought $10,000 a year worth of Adobe products. And this 1% audience that was the professional designers and they were the only people to do design. And the idea of Canva being a hundred percent of the people who should be able to do great design. And her and Cliff had founded Fusion Books, which is a high school yearbook business. That was almost a microcosm of Canva. It was a specific use case of students and teachers and parents compiling and publishing a yearbook that led to then the foundational insights and the formation of Canva.
So it was very clear that that was their life’s work. And then I think Canva is also a great example of a good idea, such that the idea for Canva was actually so well thought through. It was a 10 year idea. I think even Mel had a slide of here’s what we want to do in 10 years. And it’s still, amazingly, relatively the same 10 years later, as to what they actually did. And so I think that was the case where, to me, when I think good ideas in the sense of how well thought through it was, how opinionated, how many trade offs were weighed and viewpoints formed, Canva was really one of the great examples of a good idea. And then, in terms of just the type of business that we love to invest in at Blackbird, were people all around the world going to use Canva from day one?
Yes. In terms of the monetization was very unclear in the beginning and very unclear even once the product had launched, and then they settled on the Canva Pro subscription. But they were always, it’s almost this guiding principle within Canva to lead with building up the free product. Almost like build so much value into the free product that then some small portion of that audience will choose to pay them. But the choosing to pay sales decision is actually so low friction, people just enter their credit card and so on. It’s just spend all your time thinking about how to create a great free product experience for people, and allow design to be done by a hundred percent of the world, not 1% of the world. And I think we love those kinds of bottom up, low friction sales model or that product-led growth or whatever you want to term it, is the kind of business that we do love at Blackbird.
Yeah. And that’s a really good summary of everything that we just spoke about, in terms of the things which you actually look for. And we touched on all the parts which you spoke about. It seems like there were trade offs between all the parts. Because she was super focused, ambitious and all that, but also it was pre-product, pre-revenue so then there were other considerations, but it was extremely thought out. Probably the 400th meeting is even better than the first meeting. So that part is all fantastic. And it also seems that there was a timing thing, because I remember the first time I heard about Canva was when Facebook ads started to become quite big. Everyone’s trying to create some ads scalable and it just seemed to fit pretty perfectly to the wave that was about to happen.
And so they had the vision and they had the need, but then there was also a timing thing that accelerated the whole thing. So it’s obviously a great investment because it basically hit on all the parts which you just explained. And I think it’s such a good example just for people to understand. But at the time it hadn’t been done before. At the time the social media world was just opening up here and across the world. And all of the sizes and the platforms and all the things, and it just shows you that it’s hard to tell the thing that is actually the thing that’s going to make a difference. But it’s the vision, the thirst, the hunger, and the follow through.
Yes, absolutely. And I would even say, even though the social media was just in its early years, it was still very person-centric versus it was still quite foreign to think that business would have a social media presence. And it was still an unanswered question as to whether a company should have a blog or not. And so I think that was the environment. And then that was the first wave of inbound marketing, content marketing, businesses communicating with their customers through social platforms, that the company rose. And then I think in more recent times, it’s almost transitioned into this Canva personality or graphical design personality bringing to presentations, has been a great success of Canva and Canva has infused its own personality into how people create presentations now, such that it’s right up there with PowerPoint in terms of the most used presentation software in the world. And presentations are using that once or twice a week or once or twice a day, versus maybe you’re updating your YouTube cover picture or your social presence once a month or something like that.
So I think that going from a single person use case to a team use case, going from infrequent graphical tasks to everyday graphical tasks, is also part of the almost second chapter of Canva.
Now let’s jump to the founders side of things. Cool. So the founders or the founding teams, or the people who are looking to now say, for example, come to Blackbird. So what are some of the considerations they need to have in their mind before they come to that first meeting? It’d be great just to share some advice on cool, so here are all the things that we’ve seen that are not good. Here are the things that are good.
Yes. We used to say back a decade ago, this is less common now, but entrepreneurs used to have an exit slide, which is our most hated turnoff of it used to be people, they would think that investors would like to have an exit slide where in seven years, or five years or whatever, they would sell to some big company. They’d name the company, Google or whatever. And then they’d name some price to three decimal places, and pretend to have some idea about the exit versus, again, as I said, we’re looking for people doing their life’s work. We’re actually looking for people who would say no to those acquisition offers. So, again, you’re not going to get acquisition offers if you don’t do something successfully, usually. But if you are doing something successfully, you will get many acquisition offers. And so to become a hundred billion dollar company, you actually need to say no to the hundred million dollar acquisition offer, the $1 billion acquisition offer and so on.
So I think we’re looking for someone doing their life’s work, both from a positive case and a negative case. So the positive case, it goes really well. We want that person to build an independent public company over many decades. In the negative case, and usually it’s guaranteed the negative case in the beginning when things aren’t going well, that life’s work gives that founding team the energy or the petrol to get through the hard, early stages where it’s not quite happening. And it’s more of a up and down period rather than a straight up until the right period. And so I think, again, that sense of the path of the founder to the company and to the idea, and why are they doing their life’s work?
I think the other misconception in founders is you have to look like other startups. It’s almost like this camouflage instinct where you’re like, oh, let’s search for a seed round template or let’s every slide you’re making yourself appear like another startup that you think is what investors want. Whereas I would say investors want something to be unique. They want something to be weird and fresh. And, again, they want you to be you. If it’s camouflaged into all the other templates and buzzwords, then I would say, at least for us, at least for me personally, that’s actually like, you have Nelly no chance. If you are yourself, if you are unique and strange and fresh, and then you have a super high chance, particularly with Blackbird and myself personally. If it is unique, that is the… And also, as I said, the more you dive in, the more energy you get, the more you learn. That’s actually where we are the student, rather than the teacher. As soon as I think I’m the teacher, I’m like, well, actually, stop.
That’s a really negative signal if I’m an expert and particularly on a market or a product. And if it’s just fresh learning mode of, oh my God, I hadn’t thought about that. Or that’s a unique way of doing it, or that’s a unique approach to customer acquisition. If it’s student, if I feel like a student, that’s a less super adrenaline rush moment for me as well. So I think don’t be afraid to be yourself. Again, you’ll only regret your startup journey. Again, unfortunately, most startups are failures, but you’ll only regret it, not because it’s a failure. You’ll regret it because you didn’t do it to your own personality or you didn’t do it your way. And so I would say the other observation of lots of universal misconception is people try to camouflage themselves versus be yourself. If you are weird and unique, you have more chance, not less chance.
And that’s really, really a great point. Because, and let me just jump on that quickly as well, because the thing that comes through is that you are looking for something different that hasn’t been done before. And is that very specific to Blackbird? Because there’s certain funds that specialise at certain stages. And so that’s for Blackbird. And so for Blackbird it’s like that, but for other funds, it could be that they are part of the next round. And so is that a consideration for startups as well, saying, of course I’m at this stage. So know about the VC, their philosophy, their approach, their preference. And that’s how you approach it. Is that important? Just quickly.
Yeah. Well, yes. You’ve struck on an important point. Each different investor has their own approach to investing. So I think the other thing people can do is to say, oh, VCs are bad because they said this. Just categorise all VCs as VCs and, even if you took it to its logical extreme, you could say, oh, there’s a bad person therefore all people are bad. Or, oh, I hired an employee and they didn’t work out so I’m never going to hire an employee again, because of all employees are bad. And so, again, it’s just the same as everything in life, there are good people and there are bad people. And every person has their own approach to life. Even for all of the successful people, they’ve all tended to have success in their own unique ways. And so that’s going to skew them to certain ways of doing things or certain things that they appreciate.
So, again, I would, in terms of when raising from venture capital firms, there are different firms with different strategies. There are different people with different philosophies. We talked about when we first started in 2012, the Australian VC firms were unimaginative, they were uncourageous. And so the important thing is to know, again, or get to know. When you’re raising capital, it’s like a sales process. You have to know the customer, you have to know the audience, you have to target the message, you have to understand how they make a decision, if you want to give yourself an extra chance of making a sale.
Thank you for that answer, because that’s something which I just want to just to give some context to. Now, for Blackbird specifically, you like people that are individual and that are unique and their own sense of weird, let’s call it. They don’t fit into standard kind of-
Not from central casting.
…Preconceptions of things, which can provide people some confidence. But then you said that it’s a sales process. And I just want to just talk about that quickly, because oftentimes there are founders that are fantastic at product. How important is their presentation in the first meeting? Because that’s when it’s literally important. But I just want to ask just the importance of that.
Yeah. I mean, look, certainly people who are clear communicators, who have that clarity of thought, who have that ability to articulate a vision, that is a great thing. However, I would say many of the best companies at the beginning did not have that ability. And, particularly in Australia and New Zealand, there’s more likely to be a lost in translation, sort of oh, that person’s not ambitious or that vision isn’t exciting. So it is a sales process, but I also think about it as it’s like people showing you baby photos. If you ask them to turn up and say, okay, here’s 10 different babies and you need to go out and talk to other people about these 10 different babies and you be a good evangelizer for how cute these 10 different babies are. You’re like, oh, I can’t do that.
You say, talk about your own kid. And they’re like, oh yeah. Here’s where we went to the zoo. Here’s this beautiful moment we had. And it’s so natural to talk about their own baby that, even if it’s not cosmetically a great presentation or cosmetically this laser level of detail, it’s still obvious the passion, the love that comes out when they talk about what they’re doing and why they’re doing it. And that’s also, I think, again, the cosmetic storytelling works at the first line of defence, but that’s why it’s so important to go to the second, third, fourth. Because, again, the bad presenter is unlikely to do well in the first meeting. But if there’s enough glimmer, there’s enough spark, by the third or fourth meeting, it’s like, again, the shackles are off in the way in which… And the more detailed and the more low level in terms of the questions, the more comfortable they are, the more passionate they are, the more articulate they are. So I would say you do figure it out. It may not be pretty in the first 30 minutes, but it does become apparent over time.
Yeah. And I think, just piece of advice I’d give is, practise the presentation in front of the co-founders, in front of your family. Practise it a hundred times so that that first meeting, that is important. So practise it. And it’s not perfect, but it’s better to practise it and fail than to not practise and fail, because at least it’s a higher chance, just in terms of practising . And so just especially for people that have all the product knowledge, but they maybe are not comfortable presenting, they’re going to be impressive on the second and third and fourth meeting. And so practise the first one, because that’s the one where you’re the weakest, let’s call it. So just try your hardest. [crosstalk 00:45:24].
Yeah. And the other piece of advice I would say is don’t go to investors first, in terms of presenting. If you are raising a seed round, just say, I don’t know, you’re raising a $1 million seed round or a $2 million seed round, whatever it might be. First go to those companies, again, that have nothing to do with whatever market you’re going after, that have raised a one or 2 million dollar seed round from, I don’t know, similar situation. They’re in Australia or they’re in some other connected sense. Ask them out for coffee. Normally, no one asks a person who’s a five person company that’s raised a million dollars. No one ask those founders. Everyone asks Mel from Canva or Scott and Mike from Atlassian, but no one asked the 1 million seed round founder. And then say, we’re about to raise a seed round.
I’d love to get your advice as to your own experiences in raising around and who was good to speak to, who wasn’t. And, if you’d be open to it, can you rip my presentation to shreds and give me some negative feedback? Always invite negative feedback. And so you go to the coffee and, if you get along, you’re not going to get along every time, but you probably get along 50% of the time. And if you do get along, usually that person will go, oh, let me introduce you to my own investors. Or let me introduce you to some people I met in my own fundraising. And so you get feedback on the pitch, you get to warm up on your pitch. You get introduced to some promising leads for your seed round. And if you do that, if you do five coffees or 10 coffees, it really sets you up in that, after you’ve done those, you’re in a good rhythm, you’ve got a bunch of introductions alongside your own meetings, and you’re ready to launch into the processor.
And it would seem also that the founders who raised a couple million dollars, let’s say, and it’s at the beginning, they’ve just gone through that process. And so they know how hard that was. So they’re more likely to give at that stage. And a person like Mel from Canva or Scott from Atlassian, their schedule will be out of control. They’re not going to just be spending time with you just because. But there’s a much higher chance of just getting the people that have just started, who have just gone through it, who understand what you’re going through and just to reach out. Because I’m sure there’s something around the giving back as well. It’s like, hey, I know that was hard and I’ve just started, but I’m happy to help. So I think that’s a fantastic point.
So now they’ve succeeded in their raise. And now there’s the first investment. What happens after that? Because I think everyone’s like, cool. Now I’ve got my money. Now I’ve got to start. Just because I’m sure there’s a lot. Because it’s a whole company after that. So the first six of 12 months, what are the expectations are from the investors on that first six to 12 months?
I would say once you have raised money, the temptation is to do things that don’t really matter. They’re positive things, but they don’t really matter. The only two things that matter are building your product and talking to customers. And, as much as you can concentrate your time into those two activities, the better. Sometimes you’ll be tempted in, and there are other things like PR or partnerships, or I don’t know, whatever else that might be positive down the line, but certainly aren’t going to be positive in the next 12 or 18 months, that people can fall in love with. People can fall in love with the theatrics of startups, like under 30 lists and going to conferences and winning awards. And, again, those are all great for mom and dad to feel like you haven’t thrown your life away, and your own ego, but that is doing nothing for your startup.
And so I would say that just build product, just talk to customers. And anything under those two headings, building up the product team or whatever it might be, getting advice on how to get introduced or how to determine who’s a good customer, who’s a bad one, how to get advice as to how you should measure your sales outreach and sales cycle, and set up the CRM with different events and different stages in the funnel. And all of these, if it’s to do with talking to customers, if it’s to do with building product, do those. And I think, again, the people that are just focused on the customers, it’s just so clear. And those are the people… That’s the forward predictor of success. And in the early days you talked about if you’ve raised a couple million dollars, you’re still building a product stage. But once you reach probably 20 or 50 people, you have to build a great company.
You build a great product then you’ve got a great company. And when you’re building a great company, again, you’re thinking at a meta level. You’re almost building the product that builds the product. So you’re building this environment that attracts the best people, gets them to do their best work, and builds a great culture and so on and so forth. And so usually people who are thinking in that sort of building a great company mindset at the early stages, that’s always a good… Whereas I think, if you’re operating in this window closing mindset of, hey, I’m doing a… I don’t know, Groupon succeeds in the US, I’m going to do a daily deal site in Australia and shit, I just need to hire 40 sales people. And yeah, that person will do. And versus the people that run them through three technical interviews, define their cultural values.
How do they live up to them? Just think in this long term. It’s almost like they’re thinking, how is this person going to succeed over five or 10 years at the company? And you’re like, but you’re a handful of people, you just need to see if you are building. But those long term, built with care versus the hire it, yeah, that person is good enough and we’ll do that. It’s this one year mindset, not this 10 year mindset.
So how does the choice of the VC firm that they go to actually affect the support that happens after the first investment round, let’s call it?
Well, I would say, no one’s going to have magic dust to make you magically successful. So if you don’t have a product that people care about, or the market timing is not quite right, that there is nothing, that is just mother nature. Where I think a VC firm can help predominantly is in team building. So whether they run programmes, or have pools of talent, or communities that are looking to join startups and be able to offer them introductions to people that don’t read LinkedIn or seek ads, and are comfortable with joining early stage startups and so on. Whether it is building your team, going on that journey from a founder to a CEO, I think surrounding the founders with other founders and getting folks to swap war stories and walk through decisions.
And I think also just the people that tend to learn the quickest are the people most comfortable sharing their bad news. Again, usually in an investor update is like, hey, this thing happened and that’s great. And great, great, great. And then you can’t really do anything with great news. You’re like, hey, that’s well done and congratulations. But if you share bad news, if you share problems, if you share things that aren’t working, those are the things that people can help you with. And I think investors can help themselves, but investors can help also connect you to other, whether it’s portfolio founders or other founders they know that encountered a similar decision at a similar point in time. And I think the VC as the network switch to other founders, is a really valuable role to play.
On the growth itself, on the product itself, again, I would say it has to be that unique personality, that unique viewpoint, that unique take on how the world should work. That, to me, should be the province of the founders and the company. And VCs can share stories and frameworks and so on, but I don’t think you’re going to get too much help in the building the product part. You are going to get help in the building the company part, I think.
Yeah. That’s awesome. And just on the problem side of things, because I had this conversation last night. Cool, so everything’s going well, then are you doing enough then? Because there should be problems with growth. Because that’s the faster you grow, the more problems you have and the bigger the problems. And what you want are the biggest problems because that’s where there can be support. If everything is going well, what are you actually doing? How can it go well, because it’s not a hundred million dollars yet? So it’s just a fantastic [crosstalk 00:54:20].
If the wheels aren’t falling off, you’re not going fast enough.
Not going fast enough. That’s like Mario Andretti or something like that. He’s got this fantastic quote. Final question, what are the most exciting industries that you are looking at across the next three, five to 10 years?
It is a tough one. As I said with the themes it’s really tough to predict. I would say that machine vision and AI, again, these are these big words that I’m almost like a little piece of vomit comes in my mouth as I say that. Our genuine breakthroughs and genuine leaps forward in technology. It’s not at that level. It’s at the level of how can those trends reimagine products in surgical robotics, or healthcare AI, or robo taxis, or industrial robotics, or whatever it might be. I think the just machine vision getting so good and so cheap has opened up all of these problems in all of these markets to be reimagined. So that’s quite exciting. I think another, again, generic force, but foundational force, is biology becoming more like computing.
So our understanding of biology is increasing with the assistance of software. But almost the understanding of biology to have it, you can tell it something and it will come back with some result in a predictable fashion. mRNA, genetic sequencing, synthetic biology, these sorts of breakthroughs are going to have, obviously, a huge impact in drugs and therapeutics, but they’re going to have breakthroughs in that’s how clean meat is going to come about and cultured meat, and that’s biology that will potentially allow people to eat meat at a reasonable cost. The price of beef is out of control. Not ruin our planet with all of the land and the food and the water and the methane.
And so that being one example, but I think just the almost computational understanding of biology, I think will set us off in new different directions and new different products in new different markets. So those will be two. But, again, it’s the weird and wonderful, it’s the cultural change, it’s the ideas can come from anywhere. Again, we didn’t hear about graphic design for five years after we first invested in Canva. So these lonely ideas tend to be the best ideas.
Thank you so much for sharing the journey of a startup founder, just from idea to presenting, to raising, to post funding and so on. How can a company or a startup founder or a person who’s interested in speaking with Blackbird, actually start a conversation with you guys?
Yeah. Just email me. Niki, N-I-K-I at Blackbird.vc. I would say, this is my job. I’m here to invest in companies. It’s not embarrassing, it’s not strange. And so I think the best emails are ones that have this clarity of thought, directness. Here’s what I want to do. Here’s why this unique point of view and communicate that in a couple of sentences. Sometimes it comes across in the buzzword, buzzword, buzzword, three pages. It’s hard to describe. And so you didn’t have time to write a short letter, so you wrote a long one. Or it’s like some other abstract approach of, hey, I would like to pick your brain or… To me, at least, my personality is like, just share the dream and share the unique point of view. And this is what we hope for every day, is that person to have that ambition and to go on that mission. So, just email.
That advice that you just gave is pretty much how you should email any successful person who’s busy, because they get lots and lots of emails every day. And so I think that’s just a fantastic protocol to have in general. But listen, thank you so much, Niki, for coming on the podcast. This has been such a great conversation and thank you for sharing the journey, and we’ll talk soon.
My pleasure. And thank you.
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