Niki Scevak


Aussie VCs to standardise their legal documents to make it easier and cheaper for startups to access seed capital

5:47AM | Tuesday, 19 May

Several Australian venture capital funds have come together to standardise their legal documents and make them publicly available in order to make it easier and cheaper for startups to access early-stage funding.   The agreement is expected to allow Australian startups to complete their funding documents in less than an hour and save them thousands of dollars in legal fees.   AirTree Ventures investment manager Paul Bennetts, Niki Scevak from Blackbird Ventures and Sparke Helmore partner Dan Atkin have been working on the open source initiative for the past few months.   The Australian Private Equity & Venture Capital Association Limited will host the documents, which will be for rounds worth between $250,000 and $1 million.   Bennetts told StartupSmart the standardised documents will improve transparency and efficiency for Australian startups and investors consistent with the majority of angel rounds in the US.   “The biggest cost when launching a startup is legal,” he says.   “This can cost up to $25,000 to $30,000 regardless of the size of the investment. It makes no sense that five to 10% of a startup’s capital raising is going to legal fees when every startup is getting a very similar set of documents.”   Bennetts says any startup looking to complete a seed round will be able to access the documents.   “This means that angels can become familiar with the same set of docs across multiple deals rather than having to review from scratch 100 pages of documents each and every time they invest in a startup,” he says.   “This removes friction and costs for angels, which will result in more seed deals being done and faster capital raising processes for startups – getting them back to running their business quicker. For VC funds, we can know that the shareholder structure setup before we invest is sound.”   Atkin said in a statement the standardised documents are aimed at removing the “heavy lifting” from the financial process.   “Think of them as a great starting point that will save startups time and money,” he said.   Do you know more on this story or have a tip of your own? Raising capital or launching a startup? Let us know. Follow StartupSmart on Facebook, Twitter, and LinkedIn.

‘We’re not small businesses’ – Australian startups react to the budget

5:42AM | Thursday, 14 May

The latest federal government budget continues to confuse tech startups with small businesses.   Here’s a definition of a startup, from Startmate and Blackbird Ventures founder Niki Scevak.   “A startup to me is defined by its ambition to grow very, very quickly,” he says.   “And so a startup in the beginning looks like small business, but is something different in that it is aiming for a very large outcome. To grow a business very quickly you need to be aiming for a very, very large market. So you can’t be attacking something that is a small and trivial problem. So it’s a function of ambition.   “All of the high growth companies in the past decade have been technology companies. But even that, technology is an enabler of scale, but not necessarily tied to a definition of a high growth company. A high growth company can be many different things.   “These companies in the beginning look quite frankly like jokes. They’re started by people with barely a university degree, no commercial experience; they’re started in markets that are incredibly crowded.   “Atlassian was the 100th bug tracker, Bigcommerce the 100th shopping cart and Campaign Monitor the 100th email newsletter.   “These lighthouse companies grow to tens and hopefully hundreds of millions of dollars a year, employ hundreds or thousands of people; and I think if we produce more of these iconic companies, that’s the catalyst to see the ecosystem grow.”   It’s a point not missed by Australian startups. Here are some thoughts from a number of Australian startup founders and CEOs on the latest budget. MoneyPlace co-founder and CEO Stuart Stoyan Mr Hockey tells us that “this is a budget for small business people who want to innovate and grow”, unfortunately it is not a budget for startups. The government needs to distinguish between small businesses and startups, which are typically high growth technology businesses.   Startups need more than tax deductions we need to tackle the IT skills shortage and promote education in science, technology, engineering and mathematics (STEM), which are critical more broadly for productivity and innovation. We need to reduce compliance costs and red tape so that it is easier for startups to raise capital locally. Where4Events CEO Caroline Woodhouse The government must differentiate between startups and small business. To truly help the sector, and growing tech businesses like ours, we want to see more assistance for research and development in the technical space. I would use the funding for ongoing development, which means keeping the intelligence and innovation in Australia and not overseas. goCATCH co-founder Ned Moorfield The changes announced in relation to removing obstacles to crowdsourced equity funding will certainly help to provide an additional funding option for startups amongst the limited range of options that currently exist domestically.   There are some important additional steps that can be taken though to encourage much more material funding flows. This includes mandating an allocation to early stage venture funding under the Significant Investor Visa Programme and it's something I hope the government will take a closer look as part of the review they're currently undertaking. OneShift founder Gen George The 1.5% tax break is good for existing business, but from the perspective of increasing incentive to start a startup there’s not a lot out there which makes it easier or more cost effective.   It’s a step in the right direction, but we’d love to see better incentives for startups, things like payroll tax reform. (Employee Share Option) makes it easier for startups, that are high risk, high return, to incentivise high quality staff to stay here in Australia. Appster co-founder Mark McDonald This is good news for small businesses which are generating revenue; however, more investment in research and developing and early stage startups is required. Increased investment and belief from the government in the startup sector – for example, equity crowdfunding options – would enable the Australian startup scene to become more agile and enable us to build the Silicon Valley of the Asia Pacific. Expert360 co-founder and CEO Bridget Loudon Small businesses are the hearbeat of the nation. One fifth of our entire population works in a small business and that’s why it’s vital the government does everything possible to help this important sector where possible. I support the government’s tax breaks for small business. Small businesses want certainty, especially around cash flow and how they’re going to grow and hire. YourGrocer co-founder Morgan Ranieri We’re excited about the upcoming changes to the Employee Share Scheme laws. As a startup, we’d prefer that our team has equity in the company so that they think of the company as their own. Team members with equity think more like business owners than employees, which is exactly what we want. Fitness Calendar co-founder Deborah Laurence We’ll get a small benefit for the tax deduction on asset purchases; everything helps when running a lean business. The reduction in the company tax rate is also positive but will become more relevant to us in the next few years. Nitro founder Sam Chandler The Australian government seems to misunderstand the distinction between small business and startups. Startups are high growth entities with huge potential to scale internationally. Whereas, small businesses are more localised and have few employees. Both entities have different needs and to have one uniform policy is to do injustice to both.   While these proposed changes are great for small business, the package will have little impact on startups and little impact on job creation, economic growth and Australia’s position on the global stage.   Do you know more on this story or have a tip of your own? Raising capital or launching a startup? Let us know. Follow StartupSmart on Facebook, Twitter, and LinkedIn.

Netflix launches in Australia: are free trials a good strategy for your startup?

3:41AM | Tuesday, 24 March

Netflix has officially launched in Australia, offering users a one-month free trial to scoop up customers amongst fierce competition, including Australian rivals Presto and Stan, in the on-demand streaming space.   However, is giving away your product or service for free – even if it is only for a limited time – a good idea for Australian startups?   Niki Scevak, managing director and co-founder of Blackbird Ventures, told StartupSmart a free trial is “nearly a universally good idea” when dealing with content or an information-based product.   “People’s willingness to pay goes way up when they’ve experienced the product,” he said.   “People have a very hard time evaluating it from the outside … that’s why a free trial is a very good idea. Obviously informational goods have near-zero marginal cost – Netflix has some cost in content delivery fees and bandwidth – but where it is rather miniscule or minor you’re not going to go out of business for giving your product away for free in the first 30 days.”   Scevak says while different models will work best for different businesses, bundling different options together or having different pricing tiers is something founders should actively consider.   “When you bundle products together, the willingness to pay goes up because there’s probably a thing you want on Foxtel or the movie channels and you’re willing to pay a little bit of money for the other stuff,” he said.   “Looking at bundled products, Netflix is obviously a great example of that.”   However, Scevak also points out that the Netflix launch has another lesson for startups – how to scale rapidly while not losing control of the business.   “As Netflix gets bigger they become more vulnerable to the content owners upping their prices and throwing their weight around,” he said.   “Things like House of Cards and their own initiatives become more important. As you get bigger, if you’re distributing other people’s products, you probably need to build your own products as you scale – otherwise all the negotiating power goes to the people you are distributing.”   Adding Australia and New Zealand brings the number of countries and territories in Netflix’s stable to 50.   Follow StartupSmart on Facebook, Twitter, and LinkedIn.

Employee share scheme reform necessary, but current amendments not perfect

3:04AM | Tuesday, 10 March

The federal government’s proposed changes to employee share schemes is a step in the right direction but the reforms are far from perfect, according to two Australian entrepreneurs.   The reforms – which were announced in October last year – will see the changes made by the Labor government in 2009 rolled back to encourage employee share ownership and innovation.   So far Treasury has released an exposure draft of the legislation, which aims to introduce further tax concessions for startup employees and streamline the employee share scheme process for businesses.   However, Didier Elzinga, co-founder and chief executive of Culture Amp, told StartupSmart there were “a few technical problems” with the proposed legislation as it stands.   “We’re certainly keen to run our company the way you would run a company in the US and equity is a big part of that,” he says.   “Honestly the share option reforms are somewhat flawed. So we’ve gone through with our own lawyers and actually you can’t use them as a startup. There are a few technical problems with the way they’ve been drafted that make them essentially useless.”   Elzinga says while the intention behind the current employee share scheme reforms is fantastic they are also “not quite there yet”.   “My understanding is that for example they’ve targeted it at startups but one of the things they’ve said is you can’t be forced to sell your shares within X years,” he says.   “Whenever you raise money you get a drag along provision which essentially can force somebody to sell shares if we were to be bought by a large company or whatever. So we instantly fall out. So little things, points of technical law but still affect as a startup whether we can use those provisions.”   Niki Scevak, founder of the Startmate accelerator program, told StartupSmart a major problem with the proposed changes is they “haven’t been locked in just yet”.   “It’s really befuddling to me that one simple concept – which is you pay tax when you sell the shares – is such a hard concept for the government to get their head around,” he says.   “Nothing financial in the early stages shows a company is worth X dollars, so who knows what the real valuation of the company is. Why not just tax the person when they make the money? If you do that, a lot more people would give away equity.”   Scevak says if everyone gave away a lot more equity, then there would be a lot more successful companies and “a lot more tax for the tax office”.   “But it’s stuck in this micro-optimisation of trying to get the most tax in the beginning, which is self-defeating because they won’t get more tax in the longer term,” he says.   “The legislation is definitely a step forward, though. It fixes probably 95% of what was wrong – at least for early stage startups. It can be nothing but a good thing that these changes are being brought in but there are obviously ways things can be improved and made better.”   Follow StartupSmart on Facebook, Twitter, and LinkedIn.

Lack of diversity and ambition still big problems: Startup Muster survey

1:35PM | Tuesday, 20 January

The results from the latest Startup Muster survey indicate Australia still needs work when it comes to diversity in tech, as well the ambition of founders, according to a number of investors.   BlueChilli chief growth hacker Alan Jones says it’s “maddening” to see 27% of startup founders estimating their market size is less than $10 million. The figure is so startling that it makes Jones wonder whether or not respondents understood the question and thought they were estimating the current valuation of their startup.   “Because if you aim to steal 5% of a $10 million market, even if your net margin is huge, that’s never going to be worth the risk of doing a startup – you’d be better off opening a café or a plumbing business,” Jones says.   “Startups should be shooting for the Moon, but it sounds like we’re still guilty of shooting for Moonee Ponds.”   That number also had Colin Kinner, the author of the Crossroads report and director of Spike Innovation, wondering whether the survey had picked up a lot of non-startups that are lifestyle businesses. Startup Muster organiser Murray Hurps says in addition to the validation steps, he manually reviewed the companies to ensure they were leveraging technology to create something scalable, the correct definition of a startup, and there didn’t seem to be any misunderstanding of the term.   It’s a concerning figure, given startup academic Steve Blank’s advice that startups are either born global or die local and certainly could be a factor contributing to another survey finding – 18% of startups had tried and failed to raise capital. As Jones points out, few investors are going to take on investments with such limited upside.   Blackbird Ventures managing director and founder of the Startmate accelerator program Niki Scevak agrees a lack of ambition was the most striking of the survey’s findings.   “What sadly stands out is the lack of ambitious founders creating global startups and chasing huge markets,” Scevak says of the survey results.   “We created Blackbird and Startmate to provide capital and a network of likeminded founders to help those who dare to make a big impact but there is a long journey ahead. It’s easier in my opinion to build a large ambitious company than a small unambitious one.   “It’s harder to get great employees, investors and partners when you are doing something uninspiring. So hopefully in five years’ time the numbers will be flipped. Come on Australia!”   AirTree Ventures partner Craig Blair says the figure leads him to believe that this survey is a sample of early stage startups.   “The opportunity for the Australian startup ecosystem is to convert these into Series A funded business. This will require addressable markets of more than $10 million, product market fit achieved and distribution starting to work,” he says.   Blair was surprised that just 6% of startup founders were under 25, and encouraged that the number of female founders had increased from 16% in 2011 to 19% in 2013. Jones was frustrated at the slow pace of progress.   “It’s frustrating to see we’ve made so little progress in changing the gender balance in the Australian startup industry but that might be because we need more girls studying STEM and entrepreneurialism to create more female startup founders, which would mean we won’t see the fruits of those efforts for another 5-10 years,” Jones says.   “I’d like to see if the percentage of women in senior exec roles in Australian startups has changed in the near term, and the proportion of women holding equity or options in Australian startups.”   Follow StartupSmart on Facebook, Twitter, and LinkedIn.

Australian startup Ninja Blocks raises $US700,000 to launch the Ninja Sphere

10:24PM | Monday, 27 October

Ninja Blocks, makers of the home automation product of the same name, today announced a $US700,000 investment from local and international investors including SingTel Innov8, Blackbird Ventures and 500 Startups.   Ninja Blocks started in 2012 after selection into the high profile Australian startup incubator Startmate. The company has since gone on to become a leader in the burgeoning smart home industry. Ninja Blocks plans to use the investment to propel the launch of their next product – the Ninja Sphere – and scale up their sales and marketing efforts globally.   In a statement, Ninja Blocks chief executive Daniel Friedman says he’s “thrilled at the opportunity to work with such a high calibre group of investors on the upcoming launch of the Ninja Sphere.   “The early success of our first product, the Ninja Block, opened our eyes to the scope and possibilities of home intelligence. What started as a simple idea has grown into a product we believe has true global appeal,” Friedman says.   “Today’s investment will help with the first step towards realising this goal.”   The big difference between the Ninja Sphere and other smart home products is that it learns about the user, and their environment. It uses data from sensors and actuators to build a model that can inform users if something is out of place.   It can monitor temperature, lighting, energy usage, people or a pets' presence, and anything else connected to the Ninja Sphere. By combining all this data the Ninja Sphere is the first device able to deliver truly intelligent control of the home.   Niki Scevak from Blackbird Ventures says he was simply blown away when the team gave us an early sneak peek at the Ninja Sphere.   “The combination of sensors, gesture controls and intelligence put the Ninja Sphere is a league of its own,” Scevak says.   “It’s not really about home automation anymore it’s all about home intelligence, that’s where we see the next frontier. We believe Ninja Blocks have the right team and product to become the industry leader.”   SingTel Innov8 chief executive Edgar Hardless says: “We are excited about Ninja Blocks’ vision to make homes smarter. With Ninja Blocks’ product and team, they have the opportunity to make a significant impact in this emerging space.”   Friedman says initially the company will focus on the US market with the launch of a San Francisco office in early 2015.   “Our focus right now is on making the Ninja Sphere a household name in the US. To achieve this we will be setting a local presence, expanding the local team and focusing on delivering home experiences that feel truly magical,” Friedman says.   Follow StartupSmart on Facebook, Twitter, and LinkedIn.

Braintree and PayPal launch a blueprint for startups

9:05AM | Monday, 22 September

PayPal and Braintree’s Startup Blueprint, a global program to support startups making mobile web software or services, has launched in Australia.   The program was also launched in seven other markets in the Asia-Pacific including Singapore, Hong Kong, Indonesia, Japan, Malaysia, Philippines and Taiwan.   The Startup Blueprint program partners with startups from incubators and accelerators around the globe to help the next generation of mobile and web companies to monetise their businesses and connect with 152 million active account holders. Its Australian partners include Startmate, Blackbird Ventures, ATP Innovations and Oxygen Ventures.   Through the program startups get free payment processing for up to a transaction value of $US1.5 million with PayPal and $US100,000 with Braintree. The startups will also get access to a team of startup advisors who will provide one-on-one mentorship, workshops and support.   To be eligible for the program startups must focus on making mobile or web software or services, be privately held and make less than $US3 million annually or be less than five years old, and be nominated by a Startup Blueprint partner.   The program has been operating since late last year and has helped nurture successful startups including Memebox, Blitsy, Telnyx and Swivl.   Founder of Startmate and Blackbird Ventures Niki Scevak says both are thrilled to be Startup Blueprint partners.   “It’s programs like these that give our startups an edge when launching global businesses from Australia.”   Senior global director, PayPal and Braintree developer and Startup Relationships, John Lunn says it’s a way for the companies to give back to the startup community.   “We know every cent matters and we do not expect anything in return. PayPal and Braintree are driving Startup Blueprint because we have been there,” he says.   “We want to help startups get up and running. This program empowers payment capabilities and supports each startup’s growth.”   Follow StartupSmart on Facebook, Twitter, and LinkedIn.

We’re all just making it up as we go along, and other startup lessons from Sydstart

9:06AM | Wednesday, 3 September

If the Australian startup ecosystem was to have a family reunion, SydStart might be it.   Over 1000 startup founders, budding entrepreneurs and investors gathered at the Hilton in Sydney yesterday for SydStart 2014.   Among them were Australia’s best and brightest entrepreneurs, Atlassian co-founder Mike Cannon-Brookes, Freelancer chief executive officer and chairman Matt Barrie, Startmate founder and investor Niki Scevak, Canva co-founder Melanie Perkins and many more.   It was Mike Cannon-Brookes, perhaps the most uncomfortable with his position as one of the key figures the Australian industry looks to for advice and guidance, who drew the most interest.   He spoke of feeling like a fraud when meeting other prominent startup founders from around the world and being pleasantly surprised by the fact that they felt the same way. And he had a lesson for founders: entrepreneurs are all the same.   “You move up this weird totem pole of entrepreneurs, where you get to meet more and more interesting people and you to these weird points where you’re so excited to meet them, and you think to yourself ‘Wow, I’ve read about this person 40 times, just to get a half hour coffee is amazing’,” he says.   “And then they turn up and they feel the same way and it’s like ‘wow, this is weird’.   “You realise all these other super successful entrepreneurs are in exactly the same boat and that never goes away. They’re all doing it for the first time, they’re all making it up as it goes on, they’re basically making smart judgment calls and getting 80% of the decisions right. Ploughing ahead and continuing to be bold. They don’t get timid as the stakes get higher.”   That point – all entrepreneurs are the same, all are learning on the job, all are “making it up as it goes on”, permeated the entire conference. Throughout the day, it was impossible to miss the many conversations going on between founders after advice and investors, or the successful entrepreneurs taking time to give it to them, regardless of who they were.   It was a point Niki Scevak later picked up on.   “If you look around the investment landscape you have all these people that believe in cliches that aren’t true,” he says.   “They want to invest in proven founders, with a great management team, in this really, really big market, as if any of those are knowable at the time you get to invest.   “All of these great success stories that Australia has been home to, they were started by, no offence, people with very little experience who had just finished university, no business experience, they looked like complete jokes and not only that they were entering into markets that were incredibly crowded.   “You’re actually looking for first time founders that look like a joke, it sounds a bit silly, but founders know that. Founders know it’s a complete mess at the start. It’s not actually about that, it’s a couple of levels deeper and what unique insight do you have.”   As Fishburners general manager Murray Hurps pointed out as the conference closed, when he began his startup 16 years ago, there was nobody to help out with that mess.   That’s since changed thanks to the many co-working spaces and community leaders like SydStart conference coordinator Pete Cooper, as some of the many founders in attendance pointed out. founder Nathan Murphy spoke of the value of SydStart to people like himself.   “SydStart is like a big family reunion every year where you get to see old faces, share war stories and hopes for the years ahead,” he says.   “You gather around the elders and listen attentively to their advice for finding success.”   For Play2Lead founder Theresa Lim, SydStart was not just about advice but also a place to recruit her team.   “I was only expecting to potentially (meet) developers who I might add to my team or investors who might be interested,” she says.   “No only did I achieve that goal, but I made several customer leads from enterprise as well.   “I’ve had so many doors open to key customers through this (Fishburners and SydStart) community. Everyone is driven and helpful – the event itself inspires me to just keep going! Pete Cooper and Murray Hurps are tirelessly dedicated to making our startup community thrive.”

Startup leaders respond with caution to possible ESOP changes

8:44AM | Friday, 1 August

Sebastien Eckersley-Maslin, Founder and CEO, Blue Chilli: "Ministers Hockey and Turnbull have been flagging changes since prior to 2013 election, so there's been more than enough time to put forward new legislation.   "We're competing in a global talent market and we're unable to reward and retain the best talent in Australia without these changes. Effective ESOP reform will cut the cost of early-stage startup innovation, get more innovation commercialised and help us create teams with a common purpose rather than an Industrial Age employer/employee relationship."   Yasser El-Ansary, AVCAL’s CEO: “Reform of the employee share scheme tax framework for early stage companies is long overdue.  AVCAL has recommended to the Government that employees of start-ups should only be taxed when a realisation event occurs.   "The approach also needs to be simple and low cost and will need to contain an appropriate definition of ‘start-up companies’.”   Niki Scevak, Blackbird Ventures director: “In a word: finally! Thank you to the government for finally removing this ill-conceived roadblock to Australia's best people working in startups.”   Adrian Stone, AngelCube co-founder: "The changes to ESOP are important because it removes one of the friction points for Australian startups at want to grow.   "At AngelCube, we had to use back door methods, such as reverse-option vesting agreements to achieve a similar result so, clearly, the need for ESOP reform is there even for startups making their very first hire. And, it's the earliest hires that make or break a new business."   Alan Noble, StartupAus board member, and Engineering Director, Google Australia and New Zealand:  “We look forward to changes to ESS/ESOPs that enable startups to be more competitive in attracting talent, and give employees more skin in the game."   Follow StartupSmart on Facebook, Twitter, and LinkedIn.

Aussie startups shine at 500 Startups’ demo day

7:18AM | Thursday, 31 July

Three Australian startups from the Sydney-based seed funding program Startmate stood out at 500 Startups’ demo day for its ninth batch.   Venturebeat selected over-50s online dating service Stitch, photo organiser and enhancer Lumific, and crowdsourced sport predictions service SportHold as three of the five startups that caught the publication’s eye at the demo day.   Stitch was co-founded by Andrew Dowling, who is one of the Startmate program mentors, while both SportHold and Lumific were both took part in Startmate’s 2014 program.   The mentor-driven program offers $50,000 in investment in exchange for a 7.5% stake and access to countless networks and mentors.   Startmate co-founder Niki Scevak was not surprised they were making an impression.   “This is all fantastic evidence that Australia is producing great tech founders,” he says.   Scevak played down Startmate’s influence, crediting the Australian startup ecosystem more broadly, saying Australia and its startups continue to punch above its weight.     "5 startups that caught our eye from 500 Startups' Batch 9" - 3/5 are Aussie & from @startmate. Truly great program. — Mike Cannon-Brookes (@mcannonbrookes) July 30, 2014     In addition to highlighting three Australian startups, Venturebeat went even further, suggesting in a separate article that Dropbox should look at acquiring Lumific.   “I sure hope file-sharing company Dropbox sent someone down to 500 Startups’ demo day today because they should really talk to a nifty little startup called Lumific,” the article says.   “…Lumific would actually make for a perfect addition to the way Dropbox’s users interact with the photos they store in their Dropbox accounts, which the company has been increasingly refining,   “And Dropbox should really buy it.”   Scevak chuckles at the suggestion, noting it’s not Startmate’s preferred outcome.   “It probably does make sense but we don’t want them to sell,” he says.   “The core value of Startmate is to try and create something really big and durable that will last a really long period of time.   “Sure some exit early in their lives, and people fail lots of the time, but the passion we have at Startmate is for playing the long game.”   Applications are now open for Startmate’s 2015 intake.

Startmate opens applications for 2015 intake

7:54PM | Sunday, 27 July

Sydney-based mentor-driven seed funding program Startmate has opened applications for its 2015 intake, with the iconic program now entering into its fifth year.   First run in 2011, the Startmate program was a pioneer in the Australian startup scene. Based on an observation that VCs were missing in action in Australia at the time, it was inspired by the success of US-based seed funding programs such as Y Combinator and Techstars.   Startmate and Blackbird Ventures co-founder, Niki Scevak told StartupSmart the program has proven Australia has the talent to build world-class tech companies.   “If you look at something like 500 Startups or Y Combinator, a large proportion of the teams there are international and they’ve moved to San Francisco to start their business,” Scevak says.   “But really, you can launch a startup anywhere and we believe Australia punches well above its weight in terms of talent.”   Scevak says the big change in 2005 will be the increased importance of Startmate graduates from past years.   “The big change after five years is the network of alumni companies. We’ve invested in 29 companies over the years, and that network is increasingly becoming even more important to the program than the mentors.   “The folks who have gone through Startmate want to give back to the program, so the alumni and the mentors is really a one-two punch.”   Startmate initially offered startups a $25,000 investment in exchange for a 7.5% stake – a figure that has since been increased to $50,000 (which gives successful companies a valuation of $666k). Aside from the investment, the program offers startups office space and legal advice for its duration, and includes demo days where technology can be demonstrated to potential early-stage investors.   A key feature of Startmate has always been the use of high-profile mentors from the Australian startup and tech community. Some of the mentors have included Atlassian co-founders Mike Cannon-Brookes and Scott Farquhar; Tjoos co-founder Bart Jellema; and Spreets co-founder Dean McEvoy.   The first program in 2011 generated 86 applications, which were eventually narrowed down to just five participants. The first intake was made up of Bugherd, Chorus, IRL Gaming, Grabble, and Noosbox. By the end of the year, one of the participants, Grabble, had been acquired by the US retail giant Walmart.   Between January and April 2012, Startmate returned with its second intake, with the program increased to eight participants. The number of aspiring entrepreneurs and startups boomed to 164, with Clique, Flightfox, Property Inspector,, Ninja Blocks, ScriptRock, Setkick and Young Republic eventually chosen for the program.   It returned bigger than ever in 2013, with the initial investment doubling to its current level of $50,000 for 7.5% equity. The 2013 participants included 7pm Anywhere, Bugcrowd, GetStall, Kinderloop, SalesTeam, Shiftr, Storyberg, and Tutor on Demand.   In late 2013, applications opened for Startmate’s fourth intake, with the 2014 program kicking off earlier this year. The participants included Lumific, HayStackHQ, Inductly, Drawboard, Flirtey, Foogi, Composure, and SportHold.   In 2015, Scevak predicts Startmate will attract more than 250 businesses, with the growth of applications now tracking the number of startups in the ecosystem.   Applications for the 2015 program are available on this page.

The physics of startup financing

5:50AM | Monday, 5 May

There is a fundamental paradox in the startup world: A lot more founders try to raise money than successfully do.   But for those that do, they raise on incredibly friendly valuation terms relative to other areas of the business world. The reason is growth and it’s useful to apply the metaphors of physics to understand why.   (For those not afflicted by tl;dr, read Paul Graham’s essay on growth.)   One of the most unanswerable questions I get as an investor is “what do my metrics need to be to raise a Series A?”   I can give a guide on numbers but the reality is that the static one dimensional numbers ($100k MRR, 1m MAU or whatever the most important metric for the business is) are only half the story.   I’ll use the three simple concepts of physics – distance, velocity and acceleration – and use a SaaS business and monthly recurring revenue (MRR) to explain why.   A common piece of advice, like I said earlier, is that you need $100k MRR to raise a Series A ($5-10m) in today’s market. But the problem with that simple answer is that it’s not about the $100k figure (the distance in this analogy) nor even about how quickly MRR is growing (velocity), it’s about how quickly the change in MRR is growing (acceleration).   Stay with me. If you have a startup which grows to $100k MRR by adding $2k MRR each month for 50 months (4+ years), you are unlikely to be able to raise a Series A. If the $2k MRR you are adding doesn’t itself grow ever bigger (acceleration), the business is not a great candidate for venture financing.   On the other end of the scale, backing out a few numbers, we can see ZenPayroll skipped right past the Series A and raised $20m from Andreessen Horowitz and General Catalyst at the time they had roughly $60k MRR (take the $400m payroll vanity metric, which would translate into roughly 8000 employees or 1000 businesses, who would pay roughly $60,000 a month according to their pricing page). You can bet that the revenue would have grown incredibly quickly, the change in MRR (acceleration) was off the charts and they had really happy customers with incredibly small churn rates.   That last part is incredibly important. There have been plenty of mobile games companies with short engagement curves, ad networks that were artificially inflating their growth by doing uneconomic partnership deals and local deals companies growing revenue at the expense of their customers’ viability.   So the first step investors tackle is evaluating the foundation of the building (how engaged and happy are the customers, how often do they use the product, how rarely do they unsubscribe from it etc.) and then they bet on the law of compounding growth (Warren Buffett attributes the lack of appreciation of compound growth as one of three reasons for his wealth) and hang on for a long period of time.   The rate of growth really matters a lot: 40% compounded over 10 time periods is 29X from where you started, compared to the 6x that 20% compounded over the same period is. Acceleration let’s you keep that rate of growth. And it’s all about the acceleration, not the distance.   Niki Scevak is a managing director of Blackbird Ventures. This post originally appeared on the Blackbird Ventures blog.

Google launches e-book celebrating the stories of Australia’s rising startup sector

4:46PM | Tuesday, 1 April

Google Australia has launched a campaign, armed with an e-book and video, to encourage Australians to take up coding.   Written by Fran Molloy, Start with Code shares the stories of the rising startup ecosystem, including startup founders including Noller, Peter Bradd, Marita Cheng and Mitchell Harper.   In the foreword, Communications Minister Malcolm Turnbull writes about the profound changes the internet and technology have wrought on the world.   “We need to improve the way we teach our kids; we need to inspire a generation of digital natives who are already avid consumers of technology to embark on careers as entrepreneurs and coders, in e-commerce and as engineers.”   The need to overhaul the education system to equip Australia with coding skills is something Atlassian cofounder Mike Cannon-Brookes also argues for in the book.   “At Atlassian, we know in the next 20 years we are going to have to hire a truck load of computer science people. We’ve got to start breeding them way earlier. We need to train them, at school, now.”   The investment in tech skills and the startup community, both key themes in the book, are argued for by accelerator founder and investor Niki Scevak.   “People call it a brain drain, I call it a brain boomerang, where they’re flying over but they’re coming back a few years later and bringing all that skills and knowledge they’ve had in Silicon Valley back to Australia.”   Google has also launched a video with the book, which celebrates Australian innovation so far and suggests learning to code is a fundamental step for any aspiring inventor today.   Check out the Australian inventions such as boomerangs, notepads, utes, wine casks and Wi-Fi in the video below.   {qtube vid:=THEpcW7vFkc}

Box: A capital raising journey

3:30AM | Friday, 28 March

Box, the online storage company, filed to go public. More than most startups, Box reveals the awe inspiring Silicon Valley capital machine at work. Although some have focused on the seemingly small ownership stake of co-founder and CEO Aaron Levie, by going deeper into the S-1 filing we can see in immense detail of how the Silicon Valley sausage is made.   By reconstructing some of the equity data available in the filing we can see the progression of 8 rounds of financing over 7.5 years (there was also an angel round before the series A but that is not disclosed). From the $1.5m series A lead by DFJ on a $4 million pre-money in late 2006 to the $100m pre-IPO Series E-1 that Australia’s own Telstra participated in at a $1.8 billion pre-money in January, Box has raised and consumed capital at a magnificent rate.   So what did venture capitalists pay to invest in a startup like Box?   Series Capital Raised (millions) Pre-money (millions) Round Date A $1.50 $4 October 1, 2006 B $13.39 $17 April 1, 2009 C $18.26 $60 April 1, 2010 D $37.80 $199 April 1, 2011 D-1 $31.50 $602 September 1, 2011 D-2 $32.00 $727 March 1, 2012 E $150.00 $1,027 October 1, 2012 E-1 $99.98 $1,845 January 1, 2014   And what progress had the company made when investors parted with their hard earned cash? Unfortunately, Box’s financials are only disclosed back to 2011 and so perhaps the most interesting data (how much revenue does a startup have when they raise a Series A or B?) stays unanswered in the case of Box.   We do know that at the time of the $38m Series D financing the company was doing about $5million/quarter in revenue, or $1.5 million a month.   Would you have invested in a company doing $1.5 million in monthly revenue at a $200 million pre-money valuation? If you did in the case of Box, that $38 million investment has appreciated nearly 7x in just under 3 years and is now worth $215m at the Series E-1 price (the IPO price is likely to be even higher).   Why do VCs obsess over large ownership percentages in earlier rounds? Well the $1.5 million Series A investment by DFJ represented around a quarter of the company when it was made in late 2006. Through the torrid years of further capital raisings since, that Series A investment now represents just 5% of the company after it has been diluted. Don’t feel too bad about the diminished influence of those Series A shares, they are still worth a little over $95m at the most recent financing price, for a gain of roughly 63x.   The fate of Box is still incomplete. It’s unclear whether hiring expensive sales people to sell customers on $3653 annual storage plans proves to be a wise one. It may very well be if those same customers are coming back in year 10 and paying 100x the amount. Or it may be riding a wave of desperate grasping for growth in a low interest rate environment and hiding horrible unit economics. As Warren Buffet famously said, you only find out who the naked are when the tide goes out.   Note: You can see the full spreadsheet calculations here. The calculations won’t be exactly right because the option pool in the early years has been estimated and in the later years crude assumptions have been made (the option pool size at the particular round is assumed to be the option pool size at the start of the year).   Niki Scevak is a Managing Director at Blackbird Ventures.   This post originally appeared on the Blackbird Ventures blog.

Blackbird Ventures turns one and closes first $25 million fundraising

3:18AM | Friday, 21 March

Blackbird Ventures has finished raising its first $25 million, which it will use to back early stage technology start-ups with up to $500,000 each.   The fund has invested $4 million in eight companies and two intakes of the associated accelerator program Startmate so far.   Both initiatives focus on ambitious, globally scalable technologies rather than those that only target the Australian market.   Companies include sensor company NinjaBlocks, design software Canva and customisable ecommerce site Shoes of Prey, as well as drones, online security and cryptocurrency startups.   Managing director Niki Scevak told StartupSmart the common theme in most of the investments is the founders’ relentless focus.   “It really is all about the people at the early stages. We only want to back people who have the perseverance to create a great company and the grit to get through the initial stages of adversity.”   Blackbird also prefers founders with a background and passion for product development. “Product is a passion the team at Blackbird share, so it’s not an economic decision as one about passion and where we think we can add the most value,” Scevak says.   According to Scevak, while product people face a tough learning curve to become excellent chief executives, it’s much more likely that a good product person can become a good manager than the other way around.   While the companies Blackbird backs span a range of industries, Scevak says two business sectors standout.   “The bread and butter themes are enterprise software that is sold in a bottom up, through the worker rather than the CEO, and marketplaces with a global workforce,” Scevak says, citing portfolio companies workplace safety app Safety Culture and small business support marketplace Elto as perfect examples of these interests.   Blackbird intends to invest a further $8.5 million in new companies in the coming years and will hold $12.5 million to invest in follow-on rounds for portfolio companies.   “Over the next two or three years, we’ll work out which companies can grow to be great small businesses, and in the next five years we’ll see who can make it to become good large businesses.”   In November, managing director Rick Baker spoke to StartupSmart about the trends they were seeing in the 300-odd applicants to the fund and what they look for in a company.

Bitcoin's bumpy week: Australian investors still confident about crypto-currency start-ups

3:40AM | Friday, 7 March

The bitcoin rollercoaster continues this week with Japan announcing plans to regulate transactions, two bitcoin exchanges hacked and one closed, and a chief executive found dead of suspected suicide in Singapore.   This week, the Poloniex exchange and Flexcoin’s bitcoin bank were both hacked, with Canada-based Flexcoin announcing their closure shortly afterwards.   “As Flexcoin does not have the resources, assets, or otherwise to come back from this loss, we are closing our doors immediately,” a statement from the company said, which also confirmed the loss of 896 bitcoins, worth over $650,000.   The sudden closure of key Tokyo-based exchange Mt Gox last week sent shockwaves through the community. The bitcoin price dropped from around $US800 to $US500 before holding steady.   Australian bitcoin experts and entrepreneurs welcomed the news of Mt Gox’s demise.   The Japanese government did not. The Nikkei stock exchange has reported the government intends to establish rules for the trading of bitcoin, including taxes on bitcoin transactions.   But the bitcoin start-up ecosystem is weathering the storm. A hackathon is taking place in Texas and has acquired the ZeroBlock bitcoin trading platform.   US-based Bitcoin Foundation said in a statement last week that recent events were certainly not the end of bitcoin.   "As our industry matures, we are seeing a second wave of capable, responsible entrepreneurs and investors who are building reliable services for this ecosystem,” read an emailed statement.   Australian start-up leader Niki Scevak has significant skin in the bitcoin game, after leading an investment round for Melbourne-based bitcoin start-up CoinJar.   Blackbird Ventures invested $500,000, their maximum possible amount, in the start-up in December.   Scevak says while it was obviously going to be a bumpy road, they were not remotely concerned about the current issues.   “I have not changed my view at all about the long term potential of bitcoin,” Scevak told StartupSmart.   “The fundamental innovation of bitcoin is still strong. What’s amazing is bitcoin has never been broken on a protocol level. All the bad things have been human fallibility and the age old phenomena of people stealing or doing silly things.”   He adds bitcoin remains one of his biggest investment interests and Blackbird is actively seeking to invest in more crypto-currency start-ups.   In sad news that is yet to be directly linked to the turbulence in the bitcoin ecosystem, First Meta’s chief executive Autumn Radtke was found dead near her home in Singapore, where the exchange is based.   Radtke, 28, had previously worked for Apple, and Richard Branson as a business and sales consultant. She co-founded Geodelic Systems in 2008.   She had recently published an essay on the psychological price of entrepreneurship in the hardcopy edition of Inc. magazine.   In a statement, First Meta’s board chairman Douglas Adams said the team was shocked and deeply saddened by the loss.   “Our deepest condolences go out to her family, friends and loved ones.  Autumn was an inspiration to all of us and she will be sorely missed.”   Launched in 2009, First Meta has raised capital from Plug and Play, as well as Singapore's National Research Fund.   If you’re feeling depressed you can call Lifeline 13 11 14, BeyondBlue 1300 224 636 or MensLine 1300 789 978.

Bitcoin here to stay and ready to grow: Australian investors back CoinJar with $500,000

12:38AM | Tuesday, 3 December

CoinJar, a Melbourne-based bitcoin exchange and payment system, has raised $500,000 in seed funding from a range of individual investors and the Blackbird Ventures seed fund.   Launched in February by Asher Tan and Ryan Zhou, CoinJar currently has over 10,000 active users in Australia. The company charges a low single-digit percentage fee for each transaction.   Tan told StartupSmart the funds would go towards enabling their global expansion. They’ll be investing in new hires, including support and technical talent such as Ruby on Rails developers.   “A lot of people talk about a bitcoin bubble, but the case is too strong to ignore,” Tan says, adding the investors were compelled by the story behind bitcoin and the use cases.   “One of the unique draws of bitcoin is totally people-powered. As long as people remain interested, bitcoin won’t die out.”   Tan says while they’d welcome regulation around bitcoin to further legitimise the currency, it was important law makers take the time to understand the scene and potential.   He adds creating the right infrastructure and increasing the ease of cashing in and out of the digital currency will boost usage in the coming year.   Tan says the investment is a breakthrough for them as it brings credibility to the nascent technology.   “It’s not just about the money. We’re very new to this, so the investors are bringing legitimacy to our business. A lot of people ask us how do they know we’re not a scam, so having such well-known and respected investors means people will trust us more,” Tan says.   CoinJar received their first funding of $20,000 earlier this year when they took part in Melbourne accelerator program AngelCube.   Blackbird Ventures co-founder and serial entrepreneur Niki Scevak led the investment round. He told StartupSmart it was exciting to see Australian entrepreneurs taking on the emerging bitcoin industry.   “I love the ambition of the team. Asher and Ryan are remarkable people who are creating something special. They’re committed to being the best in the world rather than just the best here, which is very cool,” Scevak says.   He adds while bitcoin is very young and there are significant risks, the founders and the progress they’ve made since launching earlier this year convinced investors.   “This is very, very early on in the life of bitcoin. The majority chances are that bitcoin start-up investments will amount to nothing. A lot of bitcoin companies that have achieved success have been hacked, so that’s a big risk because once you’re hacked you’re dead because the trust is eroded,” Scevak says.   He adds the investors were excited by how effectively Tan and Zhou had iterated on their offerings, and especially about their development of an API strategy. This technology would speed the uptake of bitcoin.   While Tan says he expects bitcoin will become mainstream, but is wary to gaze into a crystal ball and set a date as there are so many variables, with regulation being a predominant one.   “I do welcome regulation, provided it’s informed regulation. Governments will need to ask some hard questions, but we’re all doing this for the first time so it’s important we don’t jump into regulation. We all need to develop considered, well thought out plans about something that could be beneficial to the whole world,” Tan says.   Pioneering a new technology comes with many challenges, with CoinJar battling the Commonwealth Bank earlier this year after their personal accounts were shut down without warning.

The Weekly Digest: Don’t give up this Global Entrepreneurship Week (or ever)

11:48PM | Sunday, 24 November

Happy Global Entrepreneurship Week! Here’s the wrap of the stories we covered this week, so you can catch up on your reading over the weekend.   Apple Inc has hit a roadblock in their bid to trademark “startup” in Australia, and Kogan got into a fight with Click Frenzy.   We spoke to the local co-ordinator for Global Entrepreneurship Week about the 230+ local activities, new research revealed Australia is the third most entrepreneurial country in the world, and some of Australia’s leading entrepreneurs were celebrated at an awards night on Thursday.   Meanwhile, Ireland is making a play to attract our best and brightest, announcing a start-up ambassador for Australia, a campaign director told us how to get more sales via Facebook, and Nina Hendy shared seven tips to make your business look bigger.   Don’t give up   The big theme of our stories this week is a perennial mantra for start-ups: don’t give up.   Niki Scevak, serial entrepreneur, investor and advisor, shared why ideas don’t fail, teams that give up do. It was also a recurring theme in the Start-ups are Scary series we launched this week.   We heard from the co-founders of 99designs, Canva, Thank You Water, Vinomofo and Seek about their toughest and most terrifying moments, and how they made it through.   Investment and accelerator news   We spoke to an investor and advisor who’s worked with some of the world’s leading start-ups about his top five tips for seeking investment, heard from a start-up that raised $2 million and got the inside scoop on what the plan is for the new Telstra-backed accelerator.   The ANZ Innovyz Start program, one of Australia’s leading accelerators, announced they’ll be opening an intake in Sydney early next year. We spoke to managing director Dr Jana Matthews about why they chose Sydney, and how the program has evolved in the past few years.   Entrepreneurs shared their plans   Start-ups may be hard work, but they’re also rewarding and a lot of fun, especially according to this MBA student who’s chucked in her plans to get a corporate gig to work for a start-up instead.   We heard the business plans, passion and growth strategy behind a nursery furniture company, a museum mapping tech company, a Melbourne beer company, and a start-up turning one-week-old this weekend.   Also this week, find out how to boost your profits as we head into the traditionally quiet period of Christmas, why getting a handle on hyperbolic language will revolutionise how you do business, and how to find the perfect business partner.

Leading accelerator program Startmate opens applications for fourth intake

10:26PM | Monday, 7 October

Designed to turn Australian technical founders into successful global entrepreneurs, one of Australia’s first start-up accelerators Startmate is now open for applications.   The program will run next year from January to May. Companies will spend three months in Sydney and two in San Francisco.   Startmate is seeking around eight companies, which will receive $50,000 in seed capital, in exchange for 7.5% equity.   Startmate co-founder Niki Scevak told StartupSmart they’re seeking founders with big dreams and plans.   “Beyond the very product centric technical team, we’re looking for people with large ambitions, the crazier the idea the better. We really want to work with teams who want to make a big difference in the world, so the scale of the ambition is what we’ll be selecting,” Scevak says.   He says they’re committed to approaching each pitched idea with an open mind, adding that being the hundredth start-up to tackle an idea didn’t hurt Google, Facebook or Atlassian.   “Anyone doing anything in an incredibly crowded area will be taken as seriously as brand new ideas. The ideas may sound incremental, but it really does matter why the founders have chosen to pursue this idea, and if they have a unique insight into it,” Scevak says.   “It’s about why they care about their customers and if they have an authentic connection to the market. We look for what in their lives have driven them to this idea.”   The program includes an impressive line-up of mentors including Atlassian co-founders Mike Cannon-Brookes and Scott Farquhar; Tjoos co-founder Bart Jellema; and Spreets co-founder Dean McEvoy, as well as several partners from Square Peg Capital and Blackbird Ventures.   This will be the fourth intake for the program. Previous participants include BugCrowd and NinjaBlocks.   Start-ups can apply via Angel List.

Tech start-ups could contribute $109 billion to local economy by 2033

4:17PM | Monday, 22 April

Tech start-ups have the potential to contribute $109 billion to the Australian economy, or around 4% of GDP, by 2033, according to a new report, which identifies four key ways to unlock the potential of the sector.   The report, titled The Startup Economy: How to support tech startups and accelerate Australian innovation, was commissioned by Google and prepared by PricewaterhouseCoopers.   Preliminary findings of the report, which provides a snapshot of Australia’s 1500 tech start-ups, were released in March.   Google commissioned the report after helping form #startupAUS, a new industry group that is working on a national campaign to promote the Australian tech start-up sector.   The group is led by Google Australia engineering director Alan Noble, founder Matt Barrie, Shoes of Prey co-founder Michael Fox, Fishburners’ Peter Bradd, Southern Cross Ventures’ Bill Bartee and Startmate founder Niki Scevak.   Google and PricewaterhouseCoopers have now released the findings of their report, which shows start-ups have the potential to contribute $109 billion or 4% of gross domestic product – and 540,000 jobs – to the Australian economy by 2033.   According to PwC partner and economist Jeremy Thorpe, the findings will prove useful as the start-up sector continues to grow.   “There is no comprehensive catalogue of start-ups in Australia [but] we believe there’s 1500 start-ups in Australia… The majority are in Sydney,” Thorpe says.   “The vast majority of start-ups do not succeed – they actually fail… [Only] 40% of entrepreneurs in the start-up space, when they fail, will start again.”   The report highlights four key ways to unlock the potential of the Australian start-up sector:   Attract more entrepreneurs with the right skills   In the short term, Australia needs 2000 more tech entrepreneurs each year drawn from the existing workforce.   In the long term, Australia’s education sector must produce more skilled tech entrepreneurs.   Encourage more early stage funding   Funding for the Australian tech start-up sector will need to increase.   Australia invests approximately $US7.50 per capita in venture capital per annum, compared to the United States ($75) and Israel ($150).   Open up local markets to tech start-ups   Governments are major consumers, with spending totalling $41 billion in 2012. They can become more start-up-friendly with procurement reform.   “Companies can [also] think more innovatively about how they use start-ups,” Thorpe says.   Foster a stronger and open culture of entrepreneurship   Australia has a considerably higher “fear of failure” rate than nations like the US and Canada, constraining the sector.   The tech community is key to changing this by celebrating its own success and becoming more inclusive.   According to Noble, this last point is a key takeaway.   “This is a good thing – that the community realises the fate of the sector is actually in its own hands,” Noble says.   “#startupAUS is a start-up itself. We’re still actually figuring out what the organisation’s structure will look like. It will be some form of not-for-profit.   “We want to make sure it’s very much driven by the community itself. It won’t be like your traditional government body – it will be a much more community-led organisation.   “A big part of its success will be ensuring we do provide ways for the community to collaborate… and, with any new venture, no one has a monopoly on ideas.   “Hopefully the research released today will go some way to helping to inform the debate and get to where we need to go by 2033.”