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How to Find the Needle in the Startup Haystack

How to Find the Needle in the Startup Haystack

The 3rd quarterly Artesian Investor Update and Early-Stage Innovation Briefing was held at KPMG offices in Sydney on 6 October 2015.

The focus of the meeting was “How to Find the Needle in the Startup Haystack”.

The investor panel included Trent Bagnall (Slingshot), Vivian Stewart (Callafin, Sydney Angels), Jillian Broadbent AO (Director, Woolworths and Chancellor, University of Wollongong) and Adrian Bunter (Venture Advisory, Sydney Angels).

The startup panel included Jess Oliver (Pioneer Road), Doug Stuart (Instaclustr), Al Bentley (Simply Wall St) and Rob Nankivell (VentureCrowd).

The investor briefing was focused on the amount of available information at various stages of a startup’s development and the optimal investment strategies to be applied. At the formation and seed stages of a startup’s lifecycle there is very little information available. The founders may have an idea but as yet no product, customers, sales or revenue. It is impossible for an investor to use traditional financial modelling to value the venture. Qualitative data, competition and relative value analysis are more useful for investors during this stage of the startups lifecycle. Investors are effectively valuing the option value of their pro rata right to follow on in future funding rounds. Due to the asymmetrical nature of startup risk, it is critical that investors invest in a highly diversified portfolio of ventures – a beta approach.

As the startup gains traction, customers and revenue more traditional financial analysis may be applied to value the venture. It is now possible for some investors to add alpha, to “pick winners” and outperform a diversified portfolio or index. Corporates who bring customers and distribution as well as financial support are a good example of an investor adding alpha. VC and PE firms add alpha via their networks of connections, domain expertise and ability to attract talented executives and follow on funding.

The Artesian Australian Venture Capital Fund acts as a platform to allow individual, corporate and institutional investors to maximise exposure, scale analysis and outsource the initial pre-screening process. Investors are able to benefit from Artesian’s existing relationships with universities, angel groups, incubators/accelerators and broad network partners in order to establish optionality across a wide range of startups. Investors are also able to leverage the pipeline of deals to make concentrated, targeted investments at a later stage as well as access research and gain insights into broad technology innovation and disruption themes.

Artesian & KPMG Early-Stage Innovation Briefings are special events reserved for Artesian Venture Capital Fund investors only. To find more about how you can become an investor and gain access to exclusive events and research, visit our product page or request a follow up.

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