Andrew Birt

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Investment in Australia limited but improving: Tips on raising capital

8:15AM | Tuesday, 13 August

Australian start-up successes need to be celebrated to attract more funding to the sector, a discussion panel at the recent Startup Victoria conference has heard.   The challenges and opportunities facing start-ups seeking funding were addressed in a panel discussion made up of Scale angel investment network founder Laura McKenize, App.io (previously Kickfolio) founder Ed Dowling and LIFX founder Andrew Birt.   Australian investment scene limited but improving   Event coordinator and entrepreneur Scott Handsaker kicked off the discussion by sharing his theory that Australian investors were “a little bit sh*t”, and asked the panel for their thoughts.   Birt, who coordinated the $1.3 million Kickstarter campaign that launched the LIFX light bulb product and capital raising process, says the Australian investment space is evolving as successful entrepreneurs begin to invest in the next wave of start-ups.   “More and more we’re getting a wave of successful entrepreneurs who are coming through,” Birt says, adding that some of his own and his peers’ experiences with institutional investors would lead him to agree with Handsaker.   McKenzie agrees the Australian investment scene is growing and improving, and would continue to as Australian start-ups performed well.   “There have been relatively few success stories that have been celebrated publicly,” McKenzie says. “We need to celebrate success more to attract more money to the sector.”   Dowling, who recently raised just over $1 million in seed capital in Silicon Valley, says Australian investors can “appear to suck” as there were fewer deals because of fewer available investors. He added raising funds is never easy.   “You have to work really hard to raise money everywhere,” Dowling says. “There are so few Australian investors so they see every deal and have a really tough job choosing what to develop.”   Dowling added that companies looking to raise seed funding in Australia need a valuation of around $1 million, compared to companies seeking the same amount in the US which need a valuation of $3 million to $7 million.   McKenzie disagreed. “We hang onto the numbers that are double or triple the average,” McKenzie says, adding the most recent research into American seed capital found the average company valuation was $2.3 million.   Getting the investment relationship right is key   The panel agreed start-ups need to recognise that investment is the beginning of a relationship, and it’s important to get that right.   “Work with someone who has the experience, not just the money. If you take money from someone who hasn’t been there and done that, your expectations will be unaligned,” Birt says. “The last thing you want is dumb money.”   Birt added that investments are negotiations and if the relationship is strong you don’t need to get hung up on reaching a $1 million valuation.   Dowling shared that App.io’s funding process saw them pitch to 100 investors, follow up with 54 and eventually work with 19. He explains the process here:     Dowling agreed the relationships and advice that come with investment funds need to be worth the equity given up receiving it.   “Equity is so valuable. You can’t get it back once you’ve given it away,” Dowling says. “It’s about having investors you can have a beer with when things are going really, really badly.”   Dowling said App.io’s biggest capital raising mistake was to only chase big deals, but the most valuable investment they received was a $5,000 cheque.   “Don’t hang out for the big numbers. Hang out for the right numbers, and hang onto the smart money,” Dowling says. “The fact this guy was interested led instantly to $200,000 in other investments. It was the right person, with the right networks.”   Keep the conversations focused on vision and raise enough capital for 12 months   Dowling says he continually steered their funding negotiations away from discussing their existing revenue directly.   “If you’re making money, it’s less vision focused. The conversations need to be kept as close to the vision as possible,” he says. “Investors will jump on revenue, so we never people a firm figure.”   Birt, who co-founded Melbourne’s first accelerator AngelCube, agrees vision is the make-or-break factor for fundraising, but also pitching to an accelerator or incubator.   “Swing to the fences and you’ll excite the people behind the incubators who’ll think you might just be crazy enough it pull it off,” Birt says, adding you needed to get your ducks in a row too. “You need some kind of product, not just a good idea. You need a team around you as well. If it’s just you it’s hard to justify choosing you.”   McKenzie added that investors assess a start-up’s direct competitors when scoping out a business, and that founders should raise funds for at least 12 months.   “I’d encourage you to raise for a minimum of 12 months because it takes time. Don’t close around and need to head back into the market with no tangible change in your business,” McKenzie says. “It’s really hard to execute on your objectives when you’re raising money.”

How Australia’s top start-up incubators performed in 2012

12:59PM | Wednesday, 19 December

It’s fair to say 2012 was a mammoth year, not only for the various incubators and co-working spaces, but for the Australian start-up scene in general.

IT Invention Test returns with $50,000 prize pot

9:36AM | Friday, 14 September

An impressive lineup of speakers will take to the stage at the 2012 Technology Entrepreneurship Forum, including Jerry Engel and Leni Mayo, while start-ups will vie for $50,000 in prizes.

12 key things investors look for in web start-ups

7:50AM | Friday, 6 July

The fall of online retail business Shooii into administration this week is a further sobering reminder to entrepreneurs of the importance of cashflow.

Gender balance important for tech start-ups, AngelCube founder claims

4:49PM | Thursday, 19 April

The co-founder of Melbourne-based incubator AngelCube says he makes a conscious effort to recruit female mentors, but believes more can be done to entice women into the industry.

Is Australia’s tech start-up scene a self-satisfied boys’ club?

5:24AM | Wednesday, 2 May

It is a rather grim irony that the York Butter Factory – a venture designed to unearth the most innovative, modern tech businesses in Australia – could fall foul to the kind of needless Twitter gaffe that other, less web-savvy, companies have blundered into.

Magic start-up wins Startup Weekend Adelaide

4:04AM | Wednesday, 4 April

An online start-up that aims to help people improve their magic tricks has won first prize at Startup Weekend Adelaide 2012, receiving in-kind prizes worth more than $13,000.

Making waves in mature Melbourne

4:39AM | Monday, 2 April

Melbourne   Population: 4.07 million   Start-up survival rate: 74.3% (2007 to 2009)

AngelCube applications close this Friday

3:04AM | Wednesday, 21 March

AngelCube co-founder Andrew Birt says he’s impressed by the quality of applicants for the incubator’s next start-up round, saying it reflects Melbourne’s maturing start-up ecosystem.

AngelCube incubator to double intake for next start-up round

2:55AM | Thursday, 23 February

AngelCube, the Melbourne-based incubator, will open applications for its second round of start-ups tomorrow, increasing its intake to eight teams, with a special interest in marketplace concepts and software-as-a-service.

Angel Cube offers funding tips ahead of demo day

10:08AM | Friday, 28 October

Tech start-ups need to build up their brand and achieve market traction before they can secure funding, according to the co-founder of Melbourne-based tech incubator Angel Cube.

Top 10 qualities to look for in a start-up mentor

5:10AM | Wednesday, 2 May

Start-ups of Melbourne rejoice! As we reported yesterday, start-up incubator PushStart revealed that it is to hold its first mentor speed dating event, Mentor Live, in the city next week.

10 milestones to hit in your first year

5:49AM | Wednesday, 2 May

StartupSmart may be heading unscathed towards its first birthday on Thursday, but it’s clear that many start-ups don’t manage to make it that far or merely limp to their first anniversary.

12 ways to make your web start-up investable

5:47AM | Wednesday, 2 May

2012 is shaping up to be the best year yet for Australian tech start-ups.

New tech incubator AngelCube looks to take flight

7:58AM | Tuesday, 19 July

Serial entrepreneur Andrew Birt is looking for Melbourne-based start-ups to become the first group of participants for his latest venture AngelCube, an early stage incubator for web-based businesses.

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