AdRoll managing director Ben Sharp is no stranger to the start-up and venture capital community, having been a successful founder, investor and board member for a few media businesses, including Allure Media and, more recently, Conversant Media. Sharp sat down with B&T to chat about start-up funding for all you entrepreneurs out there.
How do you know when your startup is viable for external venture funding?
When you see three things going well:
- When you have an outstanding business plan and clear description of the problem you are trying to solve for your target market, with 100 per cent focus on one problem.
- When you see a growth opportunity from investing and a forecast return, either through revenue return or product growth, that will allow more commercial opportunities.
- When you feel that you have ‘tested the market’, built an initial prototype, been running lean and have mentors around you to guide you through the process (if this is your first start-up).
What is the best strategy to attract venture capitalists?
Be an expert. Show your understanding and knowledge of the industry you are working and launching in.
Demonstrate that a venture capitalist can provide both strategic input and generate a financial return while building their own knowledge.
What kinds of investors should I look for?
Investors who can provide diverse knowledge and different support for your business.
Money is not the only factor you should be looking for. You also need people who can help and mentor you around different areas that complement your knowledge.
An example of this is a one start-up I am currently involved with. It has a mix of investors with different expertise: financial skill, sales and commercial skill, human resources and recruitment skill, and tech industry knowledge.
What is an accelerator? How does it work?
An accelerator is an organisation that will support your start-up in the early days. They do not usually invest, but will take a percentage ownership.
They will help with building strategy, building a business plan, providing engineering and product support, office space, mentoring and knowledge sharing amongst other start-ups, and a shared workspace. For example, Fishburners.
Why should I take venture funding if my start-up is already making money?
To help aggressively ramp up expansion and product development, if you can show that additional investment will allow you to ‘double-down’ on those areas working well like new product engineering to grow product offering, expanding into new markets or territories, or recruiting additional sales staff if you are limited with market access.
How do I find strategic partners as investors?
Network, network, network. Research. Attend as many events as possible. Search out your local meet-up groups like Sydney FinTech Startups Meetup and AdTech Meetup.
Approach the incubators and accelerators – just make a list and approach them all with a clear idea of what you do and what you are looking for. Think of this as part of your sales role.
Search out and join a bunch of LinkedIn communities, and identify influencers you would like to get an introduction to.
How long should I expect a series A fundraising round to take?
How long is a piece of string? One of the recent series A funding rounds I have been involved with took six months from start to finish, but 12 months of planning prior. The process itself – once you have found your investors – can also take time, especially if you have multiple people doing due diligence throughout the process.
Can a start-up go straight to an A round without going through a seed round?
Of course. It is not a linear textbook approach and all depends on the maturity of your business, how much you are looking to raise, and what support you will need from your investors.
What is best pitching practice for a series A round?
Be clear, concise and focused on what you are trying to do.
Have a great investor deck that outlines your business, the market and opportunity, what problem you are looking to solve, financials of your business as it stands now, and forecasts over the coming one to two years.
Do you think the Australian venture capital pool is large enough, or is sourcing overseas capital still necessary to fund a good idea?
The Australian venture capital community has grown considerably over the last few years. There is absolutely an opportunity to raise funds here.
I would only encourage someone to look overseas for funding if their business is already successful in another market, and you need more knowledge of that foreign market.
How do you know when to sell? Moreover, who to sell to?
You need to find a purchaser that values your business in the same way that you do – both financially and how it may be integrated and merged into another business.
The sale process can take a bunch of different forms, but on a private basis, you need an idea on a bunch of potential suitors (or industry), and then decide whether you can do this yourself or have the need (and funds) to use an M&A specialist in your space.
How do you repeat success?
Look for talented people that are focused and passionate about the business, industry and space they are working in.
It is very similar to a job interview – past performance is a guide, but someone who can pivot when needed is also highly valuable.