Even if the white trainers and breezy attitude of startup capital may turn away listed equities investors, both groups are searching for the same thing: a charismatic CEO.
Although venture capital firms must deal with a completely new set of market circumstances, the rules of the game haven’t actually altered. It still all comes down to supporting the appropriate business owners.
Which ones you support determines whether a venture capital fund survives or fails, regardless of the funding environment or what the public markets have to say about how to value high-growth companies.
It was therefore appropriate that there were several startup entrepreneurs present at The Australian Financial Review Entrepreneur Summit on Tuesday in Sydney. The founders attended for a variety of reasons: some wanted to have their brand or “journey” recognised by their peers, others sought to raise visibility before a financing round, and some believed they could make a significant contribution to the overall discussion of innovation.
Some founders perform better than others in panel discussions. The crowd was eating out of Kayla Itsines’ hand because she exuded the confidence of a founder who had experienced a $400 million exit. Even though her business-to-business brand was less well known, Siobhan Savage, who co-founded the zero waste organisation Reejig, radiated passion and energy.
From where I was seated, it was obvious that some founders had greater charisma than others. It’s also noteworthy to note that the largest venture capital investor in Australia, Blackbird Ventures, looks for the same charisma when selecting the founders to support and the locations for the use of its recently raised $1 billion fund.
Even though things like financial measurements, target markets, and the like are significant, none of them are as significant as the founder’s capacity to captivate others. A significant factor is gut feeling.
Samatha Wong, a partner at Blackbird, claims she has a straightforward checklist of three criteria to consider when a founder approaches the company for the first time to ask for funding for a start-up or fresh idea.
1. They are magnetic; will the entrepreneur be successful in attracting quality employees to work for them? When they acquire venture capital money, hiring will be the first task they must complete.
2. The founder’s rate of advancement: What has he or she so far accomplished with the resources at hand?
3. Genuine ambition and clarity of purpose
When asked what qualities she looks for in a founder, she replied, “I feel it biologically when I’m in the presence of greatness. It’s very clear to me when it’s like wow, this is a special founder.”
In terms of the businesses themselves, it’s challenging to get venture capital-sized returns if there isn’t a use case outside of just Australia and New Zealand. That rule is similar across the larger Australian venture capital investment shops.
Of course, founders have a further crucial function to perform for venture capital companies. They can act as the strongest supporter of their VC backer, dragging them into further transactions or connecting them with other founders who have innovative ideas. Servicing the founder is therefore a key component of any VC firm’s message.
In listed equity markets, the founder is still the main emphasis, however the evaluation focuses more on the CEO than the founder. They are the same, despite the fact that established listed equities fund managers would criticise Blackbird for being less than ten years old, object to the white trainers and claim the business model is still a bit new and unproven.
The market for listed equities is also seeking for a charismatic CEO with the capacity to define the direction of the company, convey it to others, and enlist their support. A leader can only go so far with intelligence.
