AMA Webinar with Australian Venture Capitalist Benjamin Chong

Hey everybody, welcome to this Ask Me Anything session. My name is Jonathan Gritchen. I'm here with my friend Ben Chong, who's out here in the US all the way from Sydney. And I believe a lot of the people that are joining online are from Sydney, or I also saw Hong Kong, Kuala Lumpur, New Zealand as well. So thank you for joining us. Just as an introduction, this is a pretty open Ask Me Anything type of session. A bunch of people have submitted their questions ahead of time, which I have right here. So we're gonna prioritize some of those and we're gonna start going through those questions, giving some answers to them. But if at any time you also have questions, please throw them into the chat right here. We're eager to hear them. This is a 100% live event. So yeah, please don't be shy. If at any time, and I see Jeremy says hello. Hey, Jeremy Sick, how are you? Hopefully I pronounced your last name correctly. So just to get some things started, Ben, do you want to introduce yourself?

Hi, my name is Benjamin Chong. I'm a partner at Right Click Capital, where we invest in early-stage businesses across Australia, New Zealand, and Southeast Asia. And in my other time, I'm also the co-director of Founder Institute in Sydney. And I've been proud and very excited to be associated with John and the rest of the team for Founder Institute since 2011. In fact, we ran our first semester at the Fandler Institute in Australia in February/March 2012 when Adair Essie came out to Sydney. And I do remember that was a fantastic, fantastic first semester. And we've run many other semesters in Australia, in Sydney, in Melbourne, Perth, and there's even one running now in Adelaide.

Yeah, Adelaide as well, which is great. And yeah, I still haven't made it down there. And we talked about it all the time.

You're coming soon. I hope.

My co-founder Adeo has been down there many times, but I have not. I have not yet. And just as he's talking about the Founder Institute Sydney, the application deadline is coming up actually 2 weeks from Sunday. It'll be Sunday, February 9th. And there also are some upcoming events coming up, which you can see at fbi.co/events. And you could also apply for free to that program at fbi.co/join. /webinar. And if you register this, you'll get all this information in a follow-up email as well, as long as a video recording in case you want to see our faces more than you have to today. So with that being said, I'm going to start going through some of these questions. So Jeremy, I'm glad I said your last name correctly there. Hi Simon, welcome as well. So please, Jeremy, Simon, or anybody else that wants to be in the chat and join the party here, please don't be shy, throw your questions in there. We're going to get started on some of the questions that were pre-submitted. Okay. So let's see. The first question that we got was from Anthony in Melbourne. And this is probably going to apply to you more than me, but do VCs accept single founders for capital raising?

Look, I think it depends. There are, I know, some VCs who take a very strict approach to only investing in teams. And what the, research will show is that founders or companies that have 2 founders or more, in fact 2 or 3 founders, when it comes to IPO, have a higher median value at IPO than, say, single founder companies. But I think it all depends. At Right Click Capital, we invest in early stage, which is pre-seed, Seed as well as Series A and sometimes very early Series B in Australia, New Zealand, Southeast Asia. We like investing in software, we like IoT, and we also have a thing for deep technology. And I'd suggest that if there is something that is deep technology, you usually tend to have more than one founder, right? Sometimes with software, it is possible to have one founder. I would suggest that for us as a firm, we tend to invest in teams of at least 2 or more. And when we're talking about those teams, we like there being a mix of domain expertise, commercial expertise, and some technical expertise.

But if it was a solo founder, just to follow up on that, And but, you know, they had some other amazing thing about the business.

Exactly. If they had some superpower, yeah, then of course, I think in life, it's really difficult to never say never. Because sometimes when you see the lightning strike, like you need to go to that ground and touch it. Yeah. So I would never say never. And if I'm very candid, we have had situations historically where we've invested in a business where there has been a single founder. And what we have done is work with that founder very early on in the business to find complementary co-founders or at the very least early key team members who have a good chunk of upside equity. Because if you want to find great people, you need to be cognizant of ensuring that the the alignment is there.

Yeah. And one of the things that I like to tell founders personally is, because it's a general question, right? It's like, oh, if I'm a solo founder, am I just going to be a no to investors? And if you are, if that's the straight rule, then they're probably not a great investor, number one, right? But you could also see where that could be a factor because investors want to de-risk their investment, right? So if the data shows that generally speaking, the companies that have more than one founder are going to be successful, and that'll be one data point. But as I was bringing up, you know, if you can show other data points, if you can show growth, if you can show, you know, if you hiring great people to your team that maybe aren't necessarily co-founders.

That's right.

These will all, they can offset any kind of, you know.

Yeah, if your product is amazing and it sort of blows the socks off people the first time they look at it and even the second time they look at it, Sure. I would suggest though that if you have that type of product, you probably have a line of people outside your door who are knocking, wanting to say, hey, John, may I be your co-founder?

Yeah. Yeah. So it's, there's other ways you can get around it, but yes, it's better. It's not a deal breaker. And if it is for an investor, then I think then it's probably not, you know, they're probably not thinking too deeply about things, to be honest. Um, so I see some questions coming in as well. I see one from Danny, um, and, uh, hello Jessica, hello Steven. So please, uh, keep bringing those questions in and we'll get to them shortly. So, uh, Ethan from Auckland asked, how much luck is involved in creating a sex— a successful startup, or is it being able to sell your idea effectively more important? So basically the question is Is it just a question of luck? Is it a question of the best person who can pitch will win?

Look, I think luck always plays a part in the trajectory of your life.

In my opinion, just sorry to interrupt, but in my opinion, most successful founders will tell you that there were many lucky circumstances that got them where they were. Usually their abilities got them to a circumstance where one stroke of luck could then—

Exactly.

Exactly.

Yeah. So I think having a foundation and having a strong foundation makes it easier, if you like, for Lady Luck to work her lucky magic on you. I would suggest that if you have exceptional product, exceptional talent, if you have exceptional connections or you have found this new business model that is unique and that hopefully you're able to build some defensibility around it. We can talk later about how do you win in markets where maybe you don't have a technical moat. What are some ways that we've seen some of our portfolio companies get to the top of the pack in those circumstances? So I would suggest that yes, luck is always part of it and I think it's important for us all to acknowledge the touchstone of luck with some of the things that we've done, but I don't think there's any substitute for hard work and finding something that you are passionate about that also has an overlap with market opportunity. So if I'm passionate, let's say, about providing great customer service, And how many crappy companies are out there, terrible companies out there who provide poor customer service and you have this app, this software application that allows them to serve customers better for less money. Well, of course, that sounds like a wonderful thing.

Right. And whoever uses that product in your example will be happy about it. They may tell people about it. It's a win-win. Right. And somebody they tell about it may then be your stroke of luck because maybe that's your next investor or Right. So yeah, I think, I think in a lot of, in a lot of cases what we see is, is luck is usually this circumstantial, you know, it's not luck in the sense of winning the lottery, right? It's luck in the sense that, oh, this, this person reached out to me out of the blue, right? But yeah, they reached out to you out of the blue because you were doing other things right. You were building a foundation. That's true. Right. But, um, but there are always, yeah, there's always going to be a chance of luck involved, but not in the way that You know, it's just a slot machine in the way that you can get yourself at the table to get those opportunities, right? So Anthony from, or let's see, sorry, Perla from Sydney's asking, how do I get a response every time? So this is a very tactical one, which I love, right? 'Cause we love tactical questions. How do I get a response every time when I send a message through LinkedIn? As an investor, I'm sure you're getting a lot of them. Yeah, uh, I'm trying to find leads or build lead generation. So I guess Perla's problem is that she's trying to build leads. Her, her solution right now, or her tactic, is using LinkedIn.

Uh, I understand this predicament. I've been there, I've run— so I've been a fan of it. I've started tech companies since the '90s and I have been there building lists. And what I would say is this, you need to be persistent. You need to find what is the best method that gives you the most appropriate number of leads for the effort. And when it comes to using platforms like LinkedIn, Be direct. Don't beat around the bush. Don't give people an essay. Be very short. Say instead, "Hi, my name is Perla. I'm wondering whether you can help me do X, Y, or Z. If you can, I'd appreciate a prompt response." That's it. Can you imagine if—

Say 3 sentences.

Yeah, just keep it really short. Can you imagine if we were running, let's say, a coffee cart. We're running a coffee cart on the street here and people came up to us and just started talking about coffee and started talking about how nice the weather is.

Like sending us a PowerPoint link to the pitch deck.

Yeah, it's like, no, no, no, no, what do you want? Do you want a short black? Do you want a cappuccino? Do you want a latte? Just tell me, give me the order, I'll make the coffee for you. Don't beat around the bush, just be really clear and upfront and maybe That's also a way that you can qualify the people that respond because people who then respond to you are going to be a lot more qualified than if you have some kind of fuzzy request.

And I would have a couple of points here. I think this is one of those scenarios too where, you know, there's been a big explosion of all the sales automation software. So it's very easy to see I mean, I get these emails every day. It's very easy to see these emails that are supposed to be, you know, personal but are not.

Hi, John.

Yeah.

Good morning, John. Yeah. And again, if they're longer than 3 sentences, you know, oh, I don't need your life story.

Nobody's going to see that.

I mean, I do want to hear it eventually.

Yeah, it's— and yeah, I would— this is definitely a scenario where you want to do things that don't scale, so to speak, in the beginning, right? One-to-one. Most people's emails, I personally don't think LinkedIn's a great platform to do. Okay. Most people's emails are pretty easy to get. All right. My name's John. I work at Founder Institute. You can probably guess.

Go figure.

You could probably guess a couple times and reach me, right? Just through some common sense. So, you know, I would probably go direct to email. The shorter, the better. The more descriptive, the better. Don't ask people to go for coffee, for example. I'd probably have some kind of specific ask.

And I think another good approach, just to round out this question, is asking for help is often a much better approach than, "Hi, do you want to go and buy a set of steak knives?" It's like, "Oh, I'm doing some work around how best to cut steak. Can you give me your feedback?" 'cause you seem to be a world-renowned chef. That's a much better entry to the conversation than, hi, chef, you want to buy some special Japanese steak knives that can cut through anything? It's like, ooh.

[Speaker:JEFF_BULLAS] So I hope that's helpful. Yeah, just be direct and be short, I think would probably be the two takeaways there. So David from Sydney asks, I have a— so he's bootstrapping an idea and he paid an overseas company to build basically the MVP, or minimum viable product prototype. And he wants to now figure out how, like, what are some ways he can now take, you know, this, this small thing that he's built. It's an MVP, which probably is throwaway technology. But then now start to bring on a real technical team. Have you seen any of your portfolio companies? I mean, that's probably earlier than what you've seen, but—

No, we've certainly seen that. Yeah, there's nothing wrong, I think, with your MVP being really sticky tape and—

Yeah, that's the point.

And rubber bands. I think that's totally fine.

It's a tool to test, validate.

I think the big thing around the MVP is what does success of your MVP look like? And that is, in my view, working out beforehand what those measures are. So if your MVP, let's say, has 3 functionalities, 3 features, well, which of those 3 features have been used? Why did you think feature 1 would get used a lot when it isn't? Is it because it hasn't been implemented well, or is it because that, that's the feature that you envision in your brain, but in reality, that's not what the user likes? I think that is the important thing. And until there is proper feedback and a loop around that MVP, I would not proceed to MVP2. It's a little bit like if you haven't worked out how to crawl, why are you going to walk? So you want to know that the toddler can go from one end of the room to the other end of the room and do all these crazy things before he or she can actually stand up and begin walking. Right.

So I think they should figure out, like, they should have that kind of validation, that learning before.

That's right.

Yeah.

And Let's say you've done that. Let's say David's done that. Then I would be asking, what is the next thing to go and prove another assumption on my list? So can I make use of the existing MVP and modify it slightly, or do I need to do a whole MVP, as in a whole new a whole new set of code? Hopefully not. But I think it is trying to work out how do you get this to the next stage. So how do I get more users, or how do I get more usage out of my existing users, or how do I open up function 3 or 4 if there was 3 before, right? In terms of where your team is based, onshore, offshore, In the early days, I understand it can be a lot cheaper offshore. What I would suggest is that if you are wanting to have a very fast feedback loop, having team members that are more within your span of control is going to be easier. So if they are overseas, well, are they dedicated to you for some time? Or if they're local, are you able to sit next to them and get them to hear the feedback directly?

Got it. Yeah. So I think the main thing there then is, you know, this offshore team that you're using is really just a means to an end, right? The end being some key learning where now you can start the second phase where to bring in like a formal team to get it through. Okay, so I'm just going to jump in here. We do have some questions in the chat. So I am, uh, I'm gonna start going through some of these. Um, so Ken is from Sydney. I'd like to know, for what is the range of investment for seed? Um, and the other part is, what are the key points you look for in a pitch deck?

Great question, Ken. Look, seed capital, I think these days is, uh, an elastic term.

Oh yeah, it's open to interpretation.

The number of people who I have had come into our office and say, hey, I'm doing a pre-seed or seed, it's like, how many rounds of capital have you raised? I'll tell you my definition. I would suggest that a pre-seed round tends to be equated to a business that is pre-revenue. And it has not raised capital from anyone apart from maybe close friends or family.

Yeah, and we see that distinction a lot too. People will tell us, oh, I've raised money, so, but excluding friends and family money. So from a professional investor or an angel investor.

Yeah, so professional investors, sometimes they'll go into pre-seed, more often they'll go into seed. We're professional investors, we're happy to go into pre-seed, we're happy to go really early. One of the companies we invested in, this is some years ago, we match— match-made the founders and then we helped them establish their company. We helped them incorporate, we recommended the lawyers for them to incorporate. So that I would suggest is pretty early. That's definitely pre-seed. That's impressive. But sometimes you see an opportunity and you just want to help and put it together. Thankfully, that team's going well. Now, in terms of dollar amounts, that's a whole piece of string. I remember in the early days when we were writing seed checks and they were maybe $100,000. Look, these days we'll write pre-seed checks of $100,000 to $500,000 and then seed checks of maybe up to $1 million to $2 million. And then Series A, I would suggest the definition for Series A is that you have a product that has a level of market fit. So the market fit is not necessarily proved, but you have customers and you have proven that your product works for the key use cases that your hypothesis is around. And then your question, Ken, around the pitch deck. A couple of—

how important is the pitch deck? Let's start there. For me, at your stage, because it's the—

look, it doesn't need to be a masterpiece. It doesn't need to be a Picasso. But this is what I want to know. What's the name of your business? What do you do? What do you do that is special? The Founder Institute, we like calling it the secret sauce. So you don't need to tell me your 11 herbs and spices, but tell me you have 11 herbs and spices and that's what gives it the zinger taste, right?

Yeah.

Tell me that. Tell me who your target market is. Like, is it for enterprises of a certain size in a certain geography?

The more specific, the better.

That's right. Yeah.

And then he's a little sick, but he's still taking part. Thank you, Brad.

That's okay. So I would suggest that In terms of your pitch deck, you want it to be 10 to 15 slides or less and being clear what your progress has been today and also your ask. So how much money do you want? And I think the big thing is this. If an investor gives you X, what is the why? You will give them in 12, 18 months' time. So imagine this. Hey, John, if you buy me a year's worth of golf lessons, what should my estimated handicap be? Like, if you were giving me that, then you were going to spend thousands of dollars on personal golf lessons for me, you probably want to know what the target is, right?

Yeah, what's the target? Not just how much gas do I want, where am I going to get?

Yeah, yeah. So maybe I play off 27 now, am I going to get down to 15, right? And then you can work out how many thousands of dollars it is per, per stroke, right?

Yeah, it's a lot of— you, you— I see a lot of decks, and a lot of times people just pick a nice round number like a million and Right? Sure, it sounds nice. But without the, you know, it should be reverse engineered.

Yeah, it should be.

It's where, don't tell me how much gas you need, tell me where you wanna go. Do you wanna go to this city, to that city? Okay, well, how are you gonna get there? What will that cost, right? I think going through that thought process is important. Okay, so Jeremy asks, so, all right, this is gonna be kind of specific, but it seems like it's gonna be a pretty good question. Jeremy's got a couple of tech founders. He's got a product idea. They've begun on the prototype, but he's hopeless on building connections and selling ourselves. What would be the advantages or disadvantages of us learning to be a CEO versus finding one? Are there any alternatives? So basically, it's not the kind of solo business founder conundrum, which we'll, we'll see a lot, right? Which is, uh, Hey, I'm a business founder, but I can't build the product that I want to sell. You know, this is the opposite, which is we're a bunch of technical founders. We can build, you know, a cathedral, but we can't sell it.

Yeah.

Or manage it, I guess, at the CEO perspective.

Oh, look, Jeremy, I think when we look at teams, we think that it's important for there to be commercial talent. Technical talent and domain expertise. If we were going to go and start an insurtech business, you and I, John, I have not worked in insurance.

We would fail. I love you, man.

Yeah, I don't think that would work. We know how to incorporate, we know how to do the marketing. I can set up some of the tech stuff, but I don't have relationships with insurers. I don't understand the industry. So I would suggest, Jeremy, at some time getting a key commercial person would be very helpful. But before you do all of this, I would talk to your potential customers, not to sell them. It's a little bit like this concept that we discussed before Just ask for their advice. Just get their feedback. Because if you think that you have the next best, let's call it, customer management tool, why don't you find out what are the current customer management tools being used? How much do they pay for those tools? How much would they pay to change tools? What is the cost of being able to acquire such a customer. I think getting all of that out before you build can save so, so much time because it can then inform your product roadmap as well as what are the smarts that you can use in order to meet and solve the problems that the customer has.

Yeah, I think half the sales process is just understanding what exactly the problem is that you're solving and kind of the keywords, right? Not from the SEO standpoint, but from a conversation standpoint that are going to trigger a response from your customers. So I think as a technical founder, you know, you just being very iterative and being very specific on, you know, finding people that may have the same, the problem that you're trying to solve. If you just keep doing that, not only are you going to be making a better product, you're going to start to encounter people that have that problem, that have a passion about it, right? And that's kind of the concept we were saying before where you can get quote unquote lucky, right?

Because imagine this, let's say you have that software and you have a fantastic conversation with that person at Company X, right?

You didn't sell them, you were just solving a problem for them.

They say to you, oh, 'This is a huge problem for us at Company X.' Wouldn't a good follow-up question be— and this is not necessarily a hard sales, white leather shoe type salesman question— 'What other companies do you think might also have this problem? Now, might you know people at those companies that I might be able to talk to, to see if their perspective is similar to yours?' You're not hard selling anything, you're just getting advice. Yeah, wanting to help.

Start one-to-one. Don't think about like, oh, I need to hire a sales team or all this stuff. You're, you're, you don't, you're not even anywhere close to that yet, right? If you start to just work one-to-one where you can literally, I mean, I remember back in the day I had a developer on my team and we'd be in a sales meeting and somebody would say, I have this problem, and he would, he would do it within like 30 seconds to be like, okay, it's live, fixed, right? Like, there was no selling going on there. It was just a delightful experience. He was creating a— solving a problem for a customer. So I think as a technical founder, you, you have that special superpower. I would focus on that and then just start to build relationships with those customers, not selling, right? Not selling at all, um, just learning. and then trying to reach out to other people. And it's, it's, yeah, I wouldn't consider it a selling process, but if you can start to do that really well, then it can reverberate and people will start to learn about it. And then you can start to get opportunities to get the right salespeople. So don't try to teach yourself how to sell. I, I wouldn't say, I would just say just try to dig in a little bit deeper into the, uh, question. All right, so we got a lot of questions here. So let's see. So I did see Peter asked a question here, and I know I did see this one in the— this one was, he pre-submitted as well, and it was one of the ones I almost asked before. So I'll bring that up. Peter from Auckland wants to know your views on space and moon investments, or, you know, so space technologies. And how do you envision their future?

Look, I'm very optimistic about that. We have a couple of investments in that realm, so to speak. One is a company called Myriota, which launches nanosatellites into the low Earth orbit, which provides connectivity for devices that are far, far away from the mobile telephone network. So imagine you've got a water pump in the middle of— whoop whoop— in the middle of nowhere. It's very valuable. If the water stops pumping, cattle may die. Instead of having to send a technician out there once a week or once every 2 weeks, you could have a sensor. And the sensor can talk to the satellite in close to real time. And you're thinking, oh, Aren't there satellites who do this already? Aren't there things like sat phones? Well, sat phones are great if you're prepared to spend $5 a minute on a conversation. And what happens if you've got 50 or 100 of these water pumps around your property? Well, Muriata allows you to do that for cents per day, which is really dollars per year. So it's quite revolutionary in the in the cost structure. And I think because nanosatellites are a much lower cost than the much larger satellites that used to be sent to space, that has allowed this type of communications at a cost to occur. So I'm terribly optimistic about these things. One of the things that Peter I talk to founders about when providing feedback is ensuring that the horizon— again, sorry for all these space terms— but the horizon for the technology to mature as well as for the technology to be adopted it needs to intersect with the horizon of the investor. And unfortunately, this is a reality. And if someone wants to ask me about how venture funds work, I can tell you that. But the thing is that most venture funds tend to have a lifetime of around 10 years. Of course, we raise funds after we have invested out of existing funds, raise new funds. But if there is an intention for us to have a return to our investors eventually, that being 10 years or so, then we want to make sure that there is a decent likelihood that we are able to see that technological success as well as the market success within that time frame.

Right.

Is that a helpful explanation, you think?

No, I think it makes sense to me. I mean, a lot of the stuff that I tell people in that space as well— again, we're getting in all these puns here— we recently partnered with NASA in the United States to to try to build some of these types of technologies.

Oh, yes.

You know, a lot of the— what I think is funny is that people are like, oh, space tech, right? But space tech, as you said, it could be satellite technology. It could also— like, we have— NASA has contracted with one of our grads that was building a biotech company, basically, right? That could— they're seeing as potentially a solution when people are in space to more efficiently give them nutrition.

Yep.

Right. So honestly, I think the line is going to start to to be blurred in a couple of years when more and more investment and more and more interest goes into just startups in general that are doing kind of some deep, deep, you know, technology stuff where it can be considered quote-unquote space tech. Just because everything in space is harder, it's harder to get there, things have to be smaller, they have to last longer, right? Like anything that does that, you might be able to consider space tech. Um, so we did have a— we have a couple questions in that were pre-submitted before. And I also see a question from Jason here that are just generally speaking— I mean, sorry Jason if I paraphrase yours and some of the other questions that we got in here from, let's see, Grace from Kuala Lumpur was talking about IP. I mean, there are a bunch of people that you can tell as early stage entrepreneurs are just sort of freaked out about the legal implications of of starting to build a company and what, um, you know, kind of what, what they should be worrying about at the early stage, what an investor may want to see from, from a legal standpoint, you know, IP or anything like that from a, from an early stage.

Look, I think intellectual property can be extremely valuable for your business. You need to work out what type of intellectual property you have. First of all, is it going to be protectable under a patent or not? That is probably a big question.

Is that, like, how important would that be in your general diligence process?

I mean, I know it varies by company, but most of the businesses that we invest in that are, say, on the software side have not filed the patent. There are reasons for that, including it takes time, and when you file that patent, it obviously gets made public. Yeah. So if you have a truly novel way that is going to be difficult for people to either reverse engineer or reverse engineer using parallel technologies, parallel types of processes, that does not infringe your patent, on your patent, let's say it gets granted, then there are question marks. So what I would suggest that if speed to market and execution capability is part of your team's MO, then maybe you don't need a patent as a software company and you just go hell for leather. And of course, over time, you can start patenting certain aspects of your software program. And as you get bigger and get more funded, you can beef that whole intellectual property up. The big thing that lawyers tend not to tell you around intellectual property is that you are only as good, even if you have the best patent available, your ability to defend your patent is only as good as the size of your bank account.

Right. So somebody can just come in, Google can just come in and your patent's not worth anything.

Yeah. Look, unless you are Apple or a Samsung or or one of those folks, if Google wants to go at you, it's going to be pretty difficult, right? Yeah, like they have teams of lawyers, both internal and external, who can go at you on certain things. So I'm not suggesting that we should all be afraid of big tech. No, what I am suggesting is that you need to be conscious of what is the real protection that you get. From perhaps spending ridiculous amounts of money on patents. Yeah, all that said, a number of the companies we've invested in have patents.

Is there any kind of specific— are they software, or I mean, just generally speaking? Because it's going to vary by company, right? I mean, when somebody tells me a patent, unfortunately, I think most of the time they just You know, there's nothing in the world that's worse than a patent troll, by the way, right? I think we as entrepreneurs, we can all agree on that. But, um, you know, a lot of people think like, oh, the value of my company is the idea. Like, no, most of the time the value in your company is some— is a series of secrets that you've discovered in executing, uh, that business, right? And finding the right customer or delivering the right value or something like that. And it's not technology, but there are certain types of businesses. I mean, is there any kind of correlation just off the top of your head? I know I'm putting you on the spot here.

I'd say if there's something very unique, whether in the software or communications protocol or something that you can bake in early, that could be helpful. Yeah. Okay.

And I know, you know, in the United States, I give out probably unsolicited legal advice sometimes, but I always put that nice disclaimer on it. But I know we have a lot of people from Australia here. United States, one of the first things that I'll tell people is, look, you just need to make sure that you've incorporated properly, right? I don't know, is there any like high-level advice that you can give there? I mean, yeah, it's going to be the baseline, right? And proper, proper documentation between any co-founders.

Sure. Look, I'm, I'm not a I'm not a lawyer, but I have read a lot of legal documents and what I would suggest is clarity is key. Do not go and appoint your cousin who happens to be a real estate conveyancer to do the legals for your startup. Go and find a lawyer who has worked with startups before.

That's incredibly important.

Not all lawyers are created equal, and a good lawyer who has worked with startups before will charge accordingly. In other words, they should be flexible with their fees and go and ask for references of other startup founders around how they found that lawyer and their charging schedule, etc. So go and find a good startup lawyer. I'd say document things and also remember to document things as the business changes because we might have started off originally as equal partners and then I said, hey, John, I need to go take a 2-year vacation around the world. And then we didn't do the paperwork. And later, you get upset with me because we're 50/50 when instead it might have been 70/30. Right. Yeah.

I think, and that's, yeah, that's a big thing that we see too, especially between co-founders, right? I think investors will look into that stuff because disintegrating teams—

oh yeah, you have to play—

you see how you see—

I'm gonna play counselor and then divorce attorney, right?

So yeah, um, you know, so it's not just a makeup of a team, but teams falling apart is the number one killer of startups, or at least—

oh, definitely.

Don't quote me on that, but, but yeah, yeah, anecdotally, totally, totally. So making sure that that stuff— I, I I would definitely look, if any investor or anybody would look into a team's documentation and just see shoddily done co-founder agreements and stuff like that, 50/50 is always sort of a red flag, at least in our opinion, because it's usually not 50/50, right? It's just usually not. So that at least, yeah, I know we've had not everybody thinks this way, but we've had a ton of people tell us that that's sort of a red flag because that means that the two founders in any situation haven't really, you know, dove into the nitty-gritty legal conversations that they really need to have, um, because the chances of it being 50/50 are, you know, 1%, right?

So very rare.

Yeah, it's probably not. It might just be 49/51, but that's a really important distinction. So yeah, I would, I would look at it, I would look at it that way. So And I think just as a follow-up to some of this, right? Because now we're talking about lawyers and yes, all like lawyers are not created equal, right? I can't tell you the number of founders that will come to us and say, hey, here's my corporation. And we look at it and it's just like, this is, this is not going to work. Right. And a lot of the time, the reason for these shoddily formed corporations is financial. Totally, totally understandable, right? So let's see, just Chang from Sydney asked, you know, with very limited resources, uh, what is a reasonable salary for a full-time startup founder? She said team, but that's even— that's way— so even a founder, right? It's a really tough question, which is why I'm asking it.

I'm happy to type So I come across this daily. Yeah. So if the question is how much should you be able to pay yourself having received funding from a professional investor?

Well, this is a pre, so seeking your first. Yeah.

Look, we are happy for founders to pay themselves. Because can you imagine you are about to write a check into the next Google and you see your founders working a side hustle at some kind of burger joint on the weekends? You'd rather them be working on the next Google, right? So we very much encourage our founders to pay themselves a salary. We are very, I guess, excited and convicted when they're prepared to perhaps give themselves a salary holiday or give themselves a big pay cut. What I would suggest is that—

I mean, there's no hard line.

There's no hard line, but I'll give you a rule of thumb. I'd say somewhere, and this is Australian dollars for those people in Australia, I'd say paying a salary wage of $60,000 to $80,000 Australian dollars a year for a startup founder is probably okay.

At that stage.

Yeah. Like if someone says, hey, look, I can only be a startup founder on $100,000, $100,000 a year, I tend to go, wow, really? But I also understand that some people have children. They have commitments, all sorts of things. And I think it is a conversation with the investor. The big question that the investor will have is the question that we discussed before. For X, what will the Y be, right, in so many months' time?

Right, exactly. And I think in a lot of those cases, it's not— and I probably should have brought this up before, but, you know, we were talking about how important is the pitch deck. It's, it's the, it's the, the narrative, right? It's the story of where you're, where you're gonna get. So how many co-founders you have, how much you're paying yourself, I mean, all this kind of stuff is just sort the details. It's more, um, the bigger, the bigger picture.

That's right. Yeah, that's wrong.

Um, okay, so we had a question from Ben here, um, and Ben is asking, do you have any specific advice for entrepreneurs trying to raise money in Perth?

Right.

Uh, there's a lack of early-stage capital in Perth outside of anything but mining. Um, You know, would you recommend we focus on the Australian East Coast or more, or look more into the larger Southeast Asia ecosystem?

Good question, Ben. I think it is very helpful if you can find even small investors who are close to you, who are prepared to not necessarily lead a round of investment into your business, but who are happy to participate in a round of investment into your business. And the reason is this: investors like us, like a lot of other investors, we are sadly or not social animals, and we tend to look for, for, for signals. And one of the signals, like it or not, is if you can, cannot get any money at all from people or a community that you were close to, that you've lived and worked in for years, it's like, okay, So I would recommend if you can find even one, preferably a few more local business people who you can get to commit to rustle up a couple of checks for you, that would provide you with a high level of credibility if you were to then speak with VCs or other investors, whether on the East Coast of Australia or elsewhere.

Okay.

I, for instance, I just find it really strange if a company from the middle of nowhere, let's say, not in my country, sends me an email saying, hey, do you want to invest in me? It's like, I'm sorry, I just—

Don't you get a ton of those emails, right? Oh yeah, yeah, I get a ton of them too. Oh yeah, and, um, yeah, a lot of people try to automate those, those one-to-one interactions, and you just can't automate that kind of stuff. Um, so Mark from Sydney asked, what pre-screening methods do you guys typically use in establishing high-quality deal flow? So I guess, so I guess the question is, um, You know, so it's not so much, uh, you know, further into the diligence. I guess it's, uh, pre-screening. Yep, the top level.

We will often ask founders to send us a deck. Doesn't need to be a perfect deck, but a deck which summarizes their business, tells a little bit of a story, explains who the team members are before we arrange a meeting. And the reason is that we like to be prepared for a meeting. We don't like to go into a meeting and it's like, oh wow, I didn't know anything about this, because it then, it therefore allows us to have a much more informed conversation.

Sure.

And we can be very productive in the half hour or hour that we meet.

Is it typically one member of the team typically that, yeah, so push it to the next level.

Yeah, so in our team, we have— I have a number of colleagues, and each of us has the ability to perform an initial screen. And sometimes the screen is just off. Oh, would you like to invest in a company that makes coffee beans in a country that is far, far away from our areas of mandate. Well, there's really no need to see any more. And the most efficient thing for me to do for them and for us is to say, thanks, but this is outside of our mandate. But what then happens is that we will review, and what we do now is we tend to share the review with another team member. So there's two team members who will review some of these incoming decks and presentations. And then if they're a two thumbs up, if you like, then we will go and spend a bunch of time learning a bit more.

Okay, good to know some insight there on the inner workings of how a VC will work.

And I think that's I don't know, fairly typical in terms of, well, we don't want one person to just go, no, no, no, no, no, no, no, no, no, because that's like, seriously?

Yeah, that's not good for anybody. Yeah.

And at the same time, anyone in our team has the ability, if they see something that is red hot from their perspective, to go, boom, I'm going to jump on it and I'm going to escalate this and we're going to go go all in, that can obviously happen too. Yeah. So it's not like it is, it's not like a bureaucratic government form that you need to fill in this and fill in that.

It's agile.

Yeah.

Yeah. Because yeah, I know as an investor, I mean, missing out on a big thing is—

Yeah, FOMO is out there.

Yeah. So, and that's why we will see it a lot too, you know, if an investor does say no, or even, you know, even if investor ignores you or something, right? Probably don't— I would say maybe don't take it personally.

Yeah.

How many pitches are you seeing a year?

Last year we ran the numbers. So this is excluding the coffee beans from the faraway country. I think it was over 1,400.

Right. And those are real, like, decks?

No, no, 1,400, like, within mandate type stuff.

Yeah.

Decks.

Not the random things that people— Oh, no, no, no. Yeah, that's probably exponential. Oh, yeah.

So, yeah, 1,400 that we seriously spent time on.

Right.

So you do the math on that.

Ben's sick, but he likes to sleep everyone.

50 weeks a year. So that's what? 30-something a week.

Yeah. Okay, so, um, I'm gonna do, uh, 2 last questions here, and then we'll, and then we'll wrap things up. So let's see, Camu asked, you know, how should a startup deal with taxes in their early stages before they've registered a company?

Um, oh, I can deal with that very quickly, Kevin. So taxes A company in its early days is not making money, so the company itself has no taxes to pay. But in countries like Australia and New Zealand and even in the United States, there is withholding tax. In other words, if you pay staff, you need to withhold taxes from their pay on behalf of the tax authorities. So you need to make sure you do that. And my suggestion is that you find a reputable startup-friendly accountant who can advise you through those processes. Yeah.

And then the last question here is Paul from Sydney is asking, you know, so some of the more successful graduates from Sydney, Evan Wong.

Yep.

Danny Evans. Is there any, I don't know, any traits that you see on them, or just that, you know, just a lot of investing is pattern matching, right? I think a lot of entrepreneurship in general and innovation and all that is pattern matching. Is there any kind of thing that you can see in some of those guys?

I think in both of those cases, And if I add additional cases to that, there was a visceral desire to do something better, an absolute perseverance continuing, and an openness to feedback. Now, not all of the feedback's taken on.

right?

Because if you take on every bit of feedback, well, you're a bit of a Frankenstein. But I think what good entrepreneurs have is a trait that's called judgment. So you take on this feedback. If 10 people say that I have a tail, then I probably have a tail. Like if one person says I had to tell you, I can dismiss that. So I think what these founders have is a real deep desire to solve a problem. They have a perseverance to walk over hot coals and to have personal sacrifices.

But to still have the humility to— Oh, absolutely. To take the feedback, not necessarily put it into action. Right.

Well, I think with all feedback, if you take 100 points of feedback and put nothing into action, it's like, oh, really? But yes, you're right. It's listening to feedback and then filtering working out, okay, what's— what ought to change, if anything, because of that. And that's what they have in spades. And look, founding is a long journey. It can be a tough journey. But if you speak with some of these folks like Danny, who I was just chatting with the other day, or Evan, it's terribly rewarding. Yep, yep.

And I, I think I, I meet a lot of founders too who, you know, perseverance, determination, those things are, are so important, right? And it's one of the biggest things that we look for in Founder Institute as well. But, you know, where I think a lot of people— there's a misconception— is that determination means just, you know, blocking out all the noise. Oh yeah, yeah, yeah. You know, you have to be able to take the feedback and some of the feedback, most of the feedback, 90% of it, you should ignore, right? But when you start to see the patterns and this kind of stuff, you need to still have that, you know, that agility, so to speak, right? You can't just sprint 100 miles an hour. You have to be able to change course and to be able to take those inputs and do that side of it too.

Yeah, I agree, John. I'd say I'd sum it up by when I see founders like that, I see a glint in their eye and it's like, oh, I want that. I will chase you. I will be your friend. I want to hopefully invest with you.

All right. Well, thank you everyone for joining. We're getting to the point now. We've statistically tested these webinars and we know that most people start dropping off at about 45 minutes, and we're an hour in. So for all of you that are still in, thanks for hanging out with us tonight— or sorry, today in, uh, in Australia. And, uh, if you have any other questions about the Founder Institute, please don't hesitate to just reply to any email that you've received from us. You will be receiving an email in 24 hours with the recording of this video and some of the other details that we mentioned. And also please do check out any events locally in your city at fi.co/events. All right, thanks everyone for joining, and I hope you have a good Friday afternoon. Take care. Or no, Thursday afternoon, Wednesday afternoon. It's been a long week. Sorry. Either way, take care, guys. Bye.