Derek Gerrard explains what the six month old $3M fund is looking for, and gives lots of general pitching advice too…
Launched with much fanfare in September 2018, the RAC WA backed seed capital fund has had 90 applications over its first six months, invited 18 in for a one hour pitch and Q&A, and is going through due diligence on 5 deals.
Soon two new deals will be announced. We already know the first one, Power Ledger, which had been done a year or so back.
The second recipient of an investment from the BetterLabs fund will be announced very soon, as the deal is being signed this week. A third deal will then follow closely behind it.
So momentum is starting to build, with the expectation that ten or so investments in WA startups will be made within two years.
If you are looking for early stage investment for your startup (they do look at companies that are pre-revenue), then there are not many options in Perth.
So what are Derek and the team looking for?
- Clearly articulate the customer problem and why they will pay you to solve it; don’t just bang on about your features.
- Where’s the innovation?
- What WA market are you going after? BetterLabs want you build a significant business here. They want to see a path to $10M+ revenue in WA within a few years.
- Ideally, the founder team has both industry and tech knowledge.
I’ve seen over 1000 pitches, and founding team is ultimately the most important factor.
I look for the 3C’s: Character, competency & chemistry. The first two 2 you can work on. For the third, we either click or we don’t.
And whoever you pitch to, or do business with, you should test the 3C’s on them too.
Derek Gerrard
5. Traction – the more traction you can demonstrate, the better. Revenues, customers paying, proof that customers will pay, app downloads, freemium customers, visitors… some important number should be rising.
6. Value. BetterLabs probably want to see a board in place, with some governance, they want you to create value. How else can they help you?
The Process
A typical investment is $150K – $500K; for a 10-20% stake. So valuation will likely be in the $1.5-$2.5m range.
You can apply online, and it takes 15 minutes. If you’re invited in, you have 30 minutes to pitch and then 30 minutes for questions. Many people practice a 2 or 3 minute pitch – can you do 30 minutes, with real depth of understanding and relevant detail?
If things go well and BetterLabs want to take things further, they will request more information; and that stage will be happy to sign an NDA.
If it lines up, they will go to term sheet. They will ask for 4 weeks exclusive due diligence. If nothing shows up to stop the deal at that stage, then they invest the cash.
A few final tips
“We’re looking for MORE than mobility solutions,” said Derek.
“We’re investing in you, not your advisers. Don’t bring them to the pitch; don’t do lots of equity deals with them. We want to talk with you.
“Don’t change what you want between the application and the pitch. This looks bad, and it talks to the first C – character. Can we trust you?
“You must be full time and focused on your business.
“We’ll also want to know how much have you invested? Time does not count; we mean cash. If not, unless you are young and have no spare cash, then why should we invest?
“And to be brutally honest, if you’re older, what have you done with your own money to date? Why should we trust you with ours?
“Most importantly, how is the money we give you going to create a big return from you? So if we gave you $300K, how is that investment going to return $3M for us? How will you 10x your valuation and our money?”
BetterLabs are open for applications.
~~
For more on BetterLabs, visit their website.
MAIN PHOTO: Derek Gerrard from BetterLabs Ventures, speaking at the second information session at FLUX basement in Perth.
