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Start-ups often underestimate fundraising process: Starfish Ventures boss

Tuesday, 20 November 2012 | By Michelle Hammond

Start-ups often underestimate the time required to raise capital, says the co-founder of Starfish Ventures, following a $2 million investment in an email and web communication company.

 

Atmail, which has offices in Australia and the United States, develops fixed and mobile email messaging and collaboration solutions. It was founded in 1998.

 

The company has secured a $2 million investment from Starfish Ventures to drive product development, expand its technical team, and increase its US, Asian and European focus.

 

Starfish Ventures, established in 2001, has made investments in more than 60 companies including Bubble Gum Interactive, BugHerd, DesignCrowd, Scalify, ScriptRock and StyleTread.

 

Starfish Ventures co-founder John Dyson says while Atmail is an older company, it’s only been in the last few years that it has really taken off.

 

“What we’ve always said is we want to build a diverse portfolio across our two technology pillars, being information technology and life sciences,” he says.

 

“We think there’s a lot of great technology opportunities where we can put half a million dollars to work or five million dollars to work.”

 

“The biggest thing we look at is people. Businesses are really about good quality people.”

 

“You want to invest in technology with strong intellectual property and targeting high growing markets. But at the end of the day, it’s really the people who matter.”

 

“That’s why it takes three months or six months to make an investment. Our success is [based on] having that robust relationship with the management team.”

 

Dyson says start-ups in particular often underestimate the time-consuming nature of capital raising.

 

“I think sometimes entrepreneurs don’t appreciate how time-consuming, challenging and what a huge distraction fundraising is,” he says.

 

“This is one of the reasons why experienced and seasonal entrepreneurs are often more appealing to investors because they’ve already gone through these processes.”

 

Dyson also believes there’s a tendency among start-ups to head overseas too early, which can hinder a start-up’s chances of success in the long run.

 

“Looking back at our companies that have pursued opportunities in international markets, the ones who have been successful have… [already] built a strong foundation in Australia,” he says.

 

“The ones who go too early on – I think it’s pretty tough. For a start-up company to get funding in the US, I think it’s pretty challenging.”

 

“In my experience, it makes more sense to start in Australia, win those few domestic customers first and then use that foundation to expand.”