Startup News was down at FLUX Basement this week to hear what the $3M BetterLabs seed fund is looking to invest in…
About 100 people showed up to hear from RAC’s Entrepreneur in Residence and Better Labs Ventures Director Derek Gerrard to discover first hand what types of startups and businesses the brand new $3M fund will invest in.
“Already, in just six weeks, we’ve had 60 applications, 10 of which have proceeded to pitches and 2 are in due diligence,” Derek told the audience.
“Over the past few years I must have seen over 400 deals, so I can tell you the kinds of things NOT to have in your pitch, and maybe some things we are looking for.”
Apply Online. Don’t ask for Coffee.
Firstly, all application are done online. Don’t go ringing up expecting a coffee meeting. Derek and the team do not have time to have coffees with every applicant.
The form takes about 15 minutes to complete, assuming you have everything in place and are organised.
As it is backed by the RAC, businesses should be doing something in WA, or at least have WA as its first client base.
It’s expected that there has been 12 months of work already done on the business, so although it may not have revenues (but equally, it may have) there has to be evidence of ‘something happening’ (traction.)
The application should address at least one core pillar (as per the website: Clean Tech, Life Work & Money, Third Age, Member Community, Next Gen Insurance, Mobility of the Future).
“It’s more than likely that you are a B2C service or product, not a B2B,” Derek said.
“Being who RAC is – ‘for better‘ – then we are a member organisation and are looking for businesses that are consumer facing, or at least B2B2C,” said Derek.
The fund is looking to invest between $100K and $500K on eac hbusiness, and close its $3M fund over the next year or so with perhaps ten investments.
There is no definite end date, and Derek even hinted there could be another fund opened up once this one had vested its money.
“We’re looking for a 10x return though, so will take our time to find the right deals,” he said.
“As for valuation, applicants would expect their business would be worth around $2m to $3M, so the investment of $250K would take about 10 or 20% of the business.
“We’d also want first right of refusal for any follow on investments,” said Derek.
Pitching Do’s and Don’ts
If you get invited to pitch, Derek has some clear dos and don’ts:
- Make sure you clearly articulate the customer PROBLEM you are solving, and why CUSTOMERS WILL PAY YOU to solve this problem
- Don’t feature bash
- Don’t bring your adviser to pitch for you!
- Your application and pitch need to have the same message
- Be ready; (“we will assume you are ready to go when you apply”)
- We expect you have put your own money – not just time – in; (…”if not, why should we?”)
- Know your numbers! Customer acquisition costs, lifetime value of customer, conversion rates, etc…
- Show how you can get to $10M+ in revenue in WA in 5-6 years
- We’re looking for great founders, who have the 3 Cs
“I’m always thinking about the 3Cs when I meet you”, said Derek. “You should be able to answer tough questions, politely, and accept a ‘No’ gracefully if given. Don’t get personal. Perth’s too small.”
“Just because RAC is the backer of the fund, does not mean you will have automatic access to RAC’s million strong member base… but if you do well, and grow strong, that could be something we offer. We can also offer some space down at our Wolf Lane labs, if that works for you.”
If you get through the initial pitch – which is 30 minutes pitch and then 30 minutes Q&A – you will then have to provide additional information for due diligence and sign a NDA. After that, the investment is made.
Two companies are already at this DD stage currently, and the fund also invested (two years ago) in Power Ledger.
FOR MORE INFO on the BetterLabs fund, and to apply, visit their website.