So You Want To Be A Venture Capitalist?

There will be people who may use the opportunity to follow that entrepreneurial dream. Have you got any advice for where to start? How do you know if you are an entrepreneur?

There’s three questions that I ask in my mind when I’m meeting an entrepreneur for the first time. I think that if you could answer those questions to yourself and to your family, you’re on the right track. 

The first one is, why are you the most credible person to build this business? If you’re building a competitor to Halter and you’re building a better collar for cows, why are you the better person to do it than the team at Halter? What is unique about you? That goes into credibility, it goes into history and experience. Are you the only person? Or one of only 10 people that could do this?

Second one is why now? Why is now the only time that your company can exist? Why is today the day that your company could be founded? If it could have been founded five years ago, then it’s going to be hard for someone like me to invest in it because, why hasn’t somebody already done it? Where’s the uniqueness in this, where’s the cutting edge? 

This is one of the pitfalls that a lot of founders all over the world fall into. They say, ‘I’m building the Airbnb for this or the Uber for that.’ There’s nothing original in that. Why don’t you build the this for this? That’s much more interesting and much more investible than just copying somebody else’s idea. 

So why now, why does it exist today? Maybe that’s down to the technology that you’re building. If you’re a coder and you’re pioneering a whole new form of language, or you’ve become amazingly good at Python or R or whatever, that’s the question you need to ask yourself, why now? 

And then the last one is, why someone like me? If you need to go out and raise the money, you’ve got to ask yourself, what kind of investors do you need to get off the ground? Do you need to have any investors? If you’ve been laid off sadly, but you’ve got a few bucks in the bank, then maybe you could try and pull this together on your own and then go out and raise some money. Think about who you need to bring along with you to help you bring this vision to life.

Why would I be the right investor for you? That’s where founders fall down the most is when I ask everybody at the end of every pitch, have you got any questions for me? Most of the time, it’s always, are you interested in the company? I’m like, ‘Come on, you can do so much better than that.’ 

Find something that really pushed me. Ask yourself those three questions and work out who else you need to come along with you. Do you need a co-founder? Do you need a technical co-founder?

 

In terms of those priorities, I’ve seen some differing opinions. Some investors will put the idea as the priority, others will put the team as the priority. Where does it sit for you?

Team, number one, always. The idea is secondary. If you’ve got a great idea led by a sub-par team, then it’s not going to go anywhere. You’ve got to be hitting both of those to be fair, but the team is absolutely critical. 

The way you work together, the things that you’ve solved already together as a team, the problems that you’ve solved, the challenges you’ve overcome, the feedback you get from other people around the industry and around the market that you’re in and the investor community and the entrepreneurial community. 

Also, people that you just want to go and have a beer with at the end of the work, that’s a good team. You don’t have to be best friends with everybody, but you’ve got to like each other. I think there’s a whole bunch of different reasons, but that cohesion is probably the most important thing that will tell you whether you’ve got a good team or not. 

I shouldn’t say this too much about Americans, but the population is a very competitive culture and quite out for your own sometimes. It doesn’t always gel well for a good team. A founder who is willing to share in successes, having that dynamic is important to the team.

 

We’re starting to talk more about collaboration, as opposed to competition. As you mentioned before, the rising tide raises all boats. Is the world changing around us?

Yeah, I think we’re going to have to be forced to do it anyway. The cool thing is the eyes of the world are on New Zealand right now. Some countries are probably looking to New Zealand for leadership, whether that’s political or whether that’s the handling of the pandemic. There’s a lot of people looking at you. 

I think Kiwis have got to grasp that with every hand and toe that they’ve got because this is a unique time. I think you could do with being a bit more bolshy. Not too cocky or anything, but just make the ask. 

That’s another thing that a lot of British and Kiwi founders I find never do, they never ask me for the money. They’ll come in, pitch to tell me all about their company. I love it, love the products, and then they just walk out and I’m like, ‘Did you come here just to shoot the s**t? Or did you come in to ask me for some cash?’ Always ask for the money.

And Americans have no problem coming in and asking for the money?

Nope, no problem. That’s what they’re great at. I went to a really bad school, I didn’t grow up in a wealthy family. I didn’t get taught anything really about public speaking or about doing stuff like this. 

Americans get taught it straight at the beginning, right through their whole education. They’re just wonderful public speakers. They’re dynamic, they’re engaging, they connect with the room. They’re good at that and so Americans are very well versed in sales, wonderful salespeople. I would say that there’s a little less substance than what I might see with some Kiwi founders compared with American founders.

 

You mentioned that some founders will go directly to the capital raising without actually trying to sell the product. Is that an issue that you see a lot?

Yeah, that’s a surefire way for you to give up far too much ownership in your company. The question is, do you go to an investor when you’ve got a million dollars in revenue that you’ve built yourself and you can value that company at $10 million? Or do you go to an investor when you’ve got a really cool idea and you haven’t really sold anything yet and you value the company at $2 million? 

It’s your choice. That’s not for everyone. Some people need money to build a product, they need money to build the prototype. There’s no harm in doing a little bit of capital raising and I think that goes back to the Māori principles about sustainability. 

I think that Māori entrepreneurs have got a unique opportunity to be able to build businesses that become profitable a lot quicker than perhaps others, because of that focus on sustainability. The big thing that people, particularly in Silicon Valley, worry about is, do you have enough ownership in your company? 

If you have less than 70% ownership of your company, when you’re trying to raise a seed round, at least most investors in North America would not be happy with that, because by the time the company sells, you just won’t have enough skin in the game to make it interesting.

That goes back to not raising too much. Just raise what you need, maybe three months more worth of money and then stop and then execute. Grow through your milestones and then do it again. But don’t raise six seed rounds, like I have seen in New Zealand. You’ll just get knocked down to 20% ownership.

 

Are we going to see more and more angel investors getting into it? Are there going to be more average Kiwis even more comfortable with really long exits and putting their money into things like this?

I don’t know, you might see more angels. I’m not sure. I actually think you’re going to see more VCs. That’s part of the reason why I’m doing this scout fund. I think you’re going to see more professional investors who want to come to New Zealand to try something new, they see an opportunity. 

I think more funds is a good thing. More capital in general is always a great thing as well and obviously angel investors are very important. But generally, the angel investors in other markets tend to invest at one point very early and then stop and then hand it off to the VC who does this permanently and full time and just keeps going from there. 

I think we need more VCs. We need more professional investors in this country and we need angel investors making more early stage investments, as opposed to continually investing and increasing their amount in a fewer number of companies over a set period of time.

There’s a point where you have to be okay with letting the company go. Just continuing to put another plaster on it doesn’t really solve that problem. I think things like the New Zealand Growth Capital Partners fund is a good thing for emerging VCs. They’re investing in emerging VCs. So more cool capital please. 

And also capital that doesn’t just dip in and out. You can’t just have these guys from Silicon Valley, or even from Australia, come in once a month, see what they can find and then run off again. You have to be in the market to make a difference. You have to be here. 

The founders I find, I’ll be talking to them at 10 o’clock on a Saturday night, or I’ll be going into the office to break up a fight between some people or I’d be going in there to give them some advice and have to do a cold calling session. You can’t do that remotely. 

I’m not a big fan of these funds that just dip in and go on a nice little holiday, come in and do some deals and then come back in three months, time to go surfing. You’ve got to be in this market to win it.

 

If you take a really wide look at the New Zealand economy, we’ve had some sectors that have just fallen off a cliff. What industries do we need to focus on?

I think you’ve got a wonderful time to basically reset the balance in this country. I think tourism will come back, this country is beautiful. People will want to come back to it. They’re not going to suddenly say, ‘Okay, I don’t want to go to the Milford Sound.’ 

I think there are ways that you can probably do more eco-friendly tourism. I think that could be a really interesting avenue. Countries like Costa Rica have developed phenomenal eco-tourism resorts and attractions. I think there’s a way to reset some of that stuff so that maybe you have a few less freedom campers blocking up all the roads, running over animals. You have more eco-friendly attractions. I think that’s one thing that will come back.

People are going to eat less and less meat. It’s very clearly linked to global warming in terms of the emissions that come from animals. New Zealand’s got a unique opportunity to pioneer more and more meat substitutes. That’s a tricky one because for a nation that has lots of cattle and sheep and deer, you’ve got to switch your mindset from that, but I think that’s not going to go away. 

I think even during the pandemic, I was reading the interest in organic foods and vegan diets has just gone through the roof. I think that’s important. Technology is only going to get bigger and better and more important to this country. I think it’s now the second largest export after tourism. There’s a lot going on in that space.

 

Can you suggest some skills that will prepare our kids for the future? Is coding useful?

Oh yeah, I’d get them on to it right now. Even doing things like Minecraft. I know video games for kids isn’t a good thing, but it does teach you the basics of building 3D worlds. I’m sure there are courses and books that break down basic forms of coding. 

Treat it like another language. It’s like learning Te Reo or French or Spanish, just learning coding instead. The earlier they start, the better. I intend to get my son into coding as soon as he can, along with learning Mandarin.

 

Is there a question that you would like me to include in my questions to business leaders and entrepreneurs?

It depends. If you’re talking to a founder who is from overseas and wants to come and set up a business here, that’s a different type of founder than somebody who is already here. If that’s somebody coming overseas, I want you to ask them, what are they going to do for New Zealand? 

I think that goes back to the whole issue that you’ve got with the border right now. I think New Zealand needs to apply a filter of hustle over every decision they make about who comes back into this country. 

Whatever you say about James Cameron, the guy hustles. He hustled his way in and why not? He’s creating a thousand jobs. Go for it. He may be a billionaire, but he still is 24 karat gold. 

I would ask them, what are you going to do? How are you going to push the needle on the new economy that we’ve got? How do you create more jobs? How do you push the technology and innovation agenda? What are you going to do for our kids? How are you going to help our kids at school? Are you going to go to teach them coding every once a month? That would be nice. 

I’d be asking them about what they are going to do for New Zealand. For those who are in New Zealand and have done well or wanting to expand or starting their own startup, I’ll be asking them about how different they are from their competition? Because a lot of Kiwi founders that I meet aren’t necessarily always aware of competition that might exist that is doing something exactly the same as what they’re doing, but in Russia or in Greece or Czechoslovakia. 

I’ll be asking if they’ve considered their competition, not just within Australasia, but beyond. How are you going to tackle that?

 

Can you sum up what you’re going to do to push the needle of the new New Zealand economy?

The beauty is I’ve just made my first investment into New Zealand. I funded the company in Auckland called Yabble. We’re creating 15 jobs straight off the bat. Jobs that pay somewhere no less than $70,000 and probably up to $125,000. Brand new jobs for the economy. 

I’m going to do many more of those. I’m going to do 20 investments from this fund, which could mean somewhere from 250 to 500 new jobs. That’s something that most people don’t think about with VCs. We are job creating engines. That’s where our money goes. Most of my money goes into hiring people. That’s something that I’m going to be doing. 

Second is I’m actually co-founding the first eCommerce platform for Māori and Pasifika entrepreneurs and people in the arts and crafts industry who are making products. We are creating a dedicated website that is going to be focused purely upon them. Maybe it’s Manuka honey, or maybe some amazing carvings from a wonderful artist, or you just grow amazing strawberries. This is all going to go through this platform. I’m building that company with a friend of mine in Auckland who is an amazing founder. 

I’ve launched a scholarship at University of Auckland called the Strong Bear Scholarship. Strong Bear is named after my son, who’s called Arthur. I’m a Celtic Brit, so Arthur means ‘stronger’ in my culture. That is a scholarship that is for the first in families of low income Māori and Pasifika students to go to university, all things paid. 

I’m doing a whole bunch of things that I’d love to tell you about that I will be able to in probably three months with a whole lot of very cool entities who might change the landscape for entrepreneurs in New Zealand. And then I’m also trying to start my life in a new country. I’ll be buying a house eventually and choosing a school for my son, stuff like that.

 

That’s quite a benchmark for other other VCs to follow.

It’s meant to be. You shouldn’t be coming here just to dick around. I’m coming to work. This is a full time job. This scout fund on its own is a job that I have to hire someone for. I have to wait until I can get back over the border before I can hire someone for this, because I have to meet them in person. But as soon as I do, then the scout fund is a pretty big initiative that I’ll be handing off to someone to help me with.