Tech entrepreneur Steve Baxter shared some really valuable and timeless lessons at Spacecubed. He was introduced with a brief to be candid, frank and perhaps blunt. He was direct, succinct and valuable.
The session was opened by Brodie McCullough from Spacecubed and Rob Nathan from Vocus Upstart both of whom have done an immeasurable amount for Perth’s startup community. I am delighted to have be invited by Rob to be a mentor for Vocus Upstart.
The following is my takeaways and summaries of his comments.
Ten tips from Steve Baxter:
1. Innovation is a horribly overused word. You have to be in business first – do not stick innovation before the business. Innovation for sake of it leads to poor outcomes.
2. Something like $27m was spent on advertising for a startup ecosystem package of $16m. There is too much going into CSIRO
3. Don’t do trade missions, they are boring and diplomatic. They serve outcomes that aren’t necessarily in line with growing businesses
4. Many people are planning to fail and either don’t realise it or don’t acknowledge it. Some people love the hipster lifestyle – which really is the new millennial version of being in a band. Don’t be in love with the startup lifestyle – be fighting to create and sustain a growing business
5. Steve has invested with some ex SAS people – they have a total intolerance for failure
6. Business is hard. So fully understand the problem you are solving, and why it might not be working before you pivot to something else Steve has invested in retail – and retail is the hardest business to be in
7. You do not have the right to investment. If your business is good enough, you’ll get investment. Steve’s view is that the notion that there isn’t enough money for investing in growing businesses is false.
8. Check the advice you are getting. Really understand the background and bias of the person so you understand the opinion you are getting
9. We can get too clever with tech. In many cases replicate the real world in the online world makes most sense and will be most successful. As an example, the current emphasis on smart cities where we are not doing the basics.
10. IT departments in corporates exist to keep ideas out, not to help. They manage risk, not innovation
Why companies Fail Due Diligence on Shark Tank
– There may be lazy parts of the business, and the owner realises how hard it will be to get to the next level and beyond. They decide they don’t want to go on that journey
– Owners lie to get investment – the business idea and traction is a fabrication
– Got to be able to get along – trust relationships are vital from both sides
– Some people are just interested in a giant TV commercial from being on Shark Tank
What Does Steve look for in startups
1. Got to like you first
2. Must believe in your skills
3. Must be able to answer the question of: Is the problem big enough – and will people pay to have the problem resolved?
4. Traction trumps opinion
– have a willingness to change if something isn’t working and a bias to action. Innovation is often a bias to research rather than action, hence a lot of money is wasted on innovation
– listen to feedback
– use data to inform the next action if something isn’t working rather than gut instinct or doing the same thing again hoping for a different result
– Valuations are hard as there are lots of unknowns, and often little revenue
– Revenue and profit make valuations much easier
– Guiding principal is to the leave founding team with 10 to 40% at exit
– The AVCAL open source documents provide a good starting point for founders agreements
In summary, it was a great session with many interesting questions from people that are on a startup journey.