Australian Innovation Shootout – An Audience Member’s View on the Start-Ups Seeking Funding

January 21, 2010

I attended the Australian Innovation Shootout, a competition for Australian start-ups looking for American investors. I applaud all the start-up presenters for giving their pitches. It’s difficult to give a pitch to an audience who has heard it all before and who purposefully looks for the flaws, understatements, and missing information. Most investors have experienced both losses and profits, and have a tendency to be more naysayers than enthusiasts.

I sit through many, many start-up presentations in a month. I’m used to seeing start-ups present with the standard start-up slide deck format, where the focus is on the business and less on the product. At this event, they didn’t use the standard slide deck and overly emphasized the technology and product. An investor audience wants to know what the product is, with brevity and clarity, and introducing the product itself typically accounts for less than 10% of the overall presentation. Out of curiosity, I kept track of the questions asked after the pitches: 85% were about the business model and 15% were to get a better understanding of what the product is and does. If they had used the standard slide deck, most of the business questions would have been answered in the presentation. The questions about what exactly was the product just meant they needed to explain the product better.

Most investors come from Missouri, the “Show Me” state. Most of the time, investors want a specific use case, that is, tell them how a typical customer would use the product. And like most Missourians, the show me attitude comes with a healthy dose of skepticism. As the presentations wore on, I found myself yearning to hear those familiar use cases.

There were 7 start-ups looking for a total of $20M, which is about $3M per start-up. From my own experience, it seemed rather pricey for today’s investors. I haven’t seen many start-ups at the seed and series A rounds asking for this much money in a while. The question running through my mind was why they couldn’t find $20M in investment funds in Australia, why approach American investors, surely there must be some Aussie angels there. I can understand the position of those seeking to enter the US market, but I was puzzled by the others.

I made a few mental notes to myself during the event. The first is to never turn off the lights in a long string of presentations. It was a gloomy gray morning, it was pouring rain outside, and it was dark inside the auditorium. By the time the third CEO stood up to give his presentation, the audience had reached the point of saying to themselves “when will this be over”? I could hear the deep breathing and sighs from everywhere in the audience. Second, I made a note to not give panelists the executive summaries to read. I saw some of the panelists were reading the executive summaries during the presentations and not listening. Of course, this may have been because they didn’t use the slide deck format and they were desperately searching for the business information.

Venture capitalist, private equity firms and angels investors have a profile of the type of companies and the markets that they are willing to invest in. Venture capitalists are interested in moon shots. They’re searching for the next Google. Angels just want a great return on their investment, much better than just investing in publicly traded companies, and look for companies needing a total investment of around $3M. I heard an estimate last week that at any given moment, there are 6,000 start-up business proposals seeking funding in Silicon Valley. All of these Australian start-ups were viable businesses, but that may not be good enough for investors and there’s alot of competition for investors’ attention.