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Alan “The Nice One” Jones

Adam Spencer_Circle Written by Adam Spencer

@welcometodayone

Get a list of the one piece of advice from over 15 startup founders interviews.

This episode was made in part by the support of New Economy Media, publisher of new economy news – innovation news without the jargon. Read more here –  neweconomy.media

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Today you’re going to hear from Alan Jones – The Nice One.

Alan Jones is a startup entrepreneur, a mentor to other startup founders, and an angel investor who is building a venture fund.

Let’s meet Alan Jones.

Transcript

Alan:

Differentiation’s important in venture funds, just as important as it is in startups.

Adam: 

Hi, I’m Adam Spencer and welcome to day one, the show that goes back to the very beginning, to share the stories of incredible Australian startups and the organisations that support them.

Today’s episode was made in part by the support of New Economy Media, publisher of new economy news – innovation news without the jargon. Read more at neweconomy.media

Today you’re going to hear from Alan Jones – The Nice One. 

More

Alan:

Differentiation’s important in venture funds, just as important as it is in startups.

Adam: 

Hi, I’m Adam Spencer and welcome to day one, the show that goes back to the very beginning, to share the stories of incredible Australian startups and the organisations that support them.

Today you’re going to hear from Alan Jones – The Nice One. 

Alan:

My name is Alan Jones and I’m a startup entrepreneur, a mentor to other startup founders, and an angel investor who aspires to be a VC.

Adam: 

This is a special episode between me, the other Adam Spencer & the other Alan Jones. Usually, Welcome to Day One shares either the stories of Startups & their founders or organisations that help startups. But sometimes, when we get the opportunity to speak to an ambassador, an advocate, a champion of the Australian startup ecosystem we take it. In this episode of Welcome to Day One, we are focusing on investing and the main challenge the Australian Startup scene faces moving forward. 

We start off this episode with Alan explaining why he and business partner, Emily Rich named their to be venture fund M8 vc. 

Alan:

I’m on a journey to build a venture fund. I’m working with a close friend and partner and so stepping up from investing my own money as an angel investor into responsibly managing investments of other people.

M8 Ventures. Letter M, number eight and that’s because we think that relationships with the founders in our portfolio are really important at the early stages of a venture-backed company. Money’s important to the business, but also connections and advice and strategic help and you’re just more likely to help people if you really like them. We think it’s important for us to build a portfolio of startup founders that we look forward to seeing so that when they fall on hard times and need help, we’re ready to rise forward because they’re mates.

Adam: 

What makes M8 vc different to other venture funds out there?

Alan:

Differentiation’s important in venture funds, just as important as it is in startups. Right? And so we both come from a product and technical background. Emily’s a skilled CTO with a successful exit on a company that did a machine vision as a service. And I’m an ex product manager originally. We are two scruffy nerds in jeans and tee-shirts and a lot of investors in Australia don’t come from the tech startup industry at all. And those that do come from a tech startup industry are much more likely to come from sales and CEO track or legal or finance. So we think our superpower is to be able to go in and look at the quality of the product that’s being built and the quality of the team who are building it. We think it’s possible to become a large successful company one day by starting off with a shit product and then later on when you’re really big, investing a lot of money and making it a really good product. But we just think it’s a heck of a lot easier if you start out with a world-class product and a world-class product and technical team working on it. So, that’s what we focus on.

Adam: 

Alan is a mentor to startups and an investor who has been involved in the Australian Startups scene from the very early days and is in the process of getting a brand new venture fund going so he’s in a good position to speak about funding in Australia. We begin by me asking Alan why is pre seed funding important in Australia…

Alan:

That’s a really good question and I think it’s particularly in Australian industry right now. It hasn’t always been as important as now and there may times in the future where I won’t be. But broadly what happens is the earliest stage of funding for any startup is probably the founders own time and money. And then when you’ve maxed out your credit cards or you’ve taken your own risk as far as you can go, ideally you’ll go out and try and do a friends and family round. You’ll go to Auntie Doris, you’ll go to your ex-boss and you talk to some of these people and they are investing in who they believe you to be on what they think your capacity is as an entrepreneur. They’re not necessarily able to score the likelihood that your startup may succeed, but they’re backing you as an entrepreneur.

The next round after that might be filled by an accelerator program like the remarkable or muru-dl or collider or start made, or Bluechilli, those sorts of programs. They’ll work with you for three to six months, maybe up to a year, and they’ll invest some money in the business at that stage. There may also be one or two angel investors that you might come across through one of those programs that might write an early angel check into the company to give you a little bit more runway. And then typically in Australia there comes a stage where a company can be valued at around about two or three million dollars, where it raises what we call a seed round and that seed round in Australia at the moment is largely filled by angel investors and there are a few challenges as a startup founder, particularly one coming out of an accelerator program in raising a seed round from angel investors.

I guess the first problem is that you probably only have three to nine months of runway remaining when you graduate from the accelerator program and how accelerator programs finish up in the US and programs like Y Combinator or Techstars is there will be 20 or 30 companies at their demo day that are approached by investors right there in their drinks stage, the conversation stage after the pictures. They’ll come up and say, “Hey, I’m really interested in this. I’d really like to explore investing, participating in a round.” That doesn’t happen in Australia. It’s more like a six month to 18-month journey for an Australian founder to raise a seed round. Part of that is because a lot of our angel investors are just as new at this as our startup founders are. They may be making perhaps their third or fourth investment in a startup, probably haven’t done much more than that and it’s very likely they’ll be making their first startup investment.

So they’re naturally going to be much, much more cautious about it. And also in general, an angel investor doesn’t really have any third party accountability. So as a venture fund manager, the fund has an investment hypothesis. This is our focus, this is how long we’re going to be investing in companies. This is how many of them will do follow on investing. We might have a particular focus on an industry or a set of industries that are related or particular kinds of technologies, but all of that is public and all that is known. You can go to Air Tree or you can go to Blackbird or you can go to Right Click Capital or Rampersand, all these great funds, and a couple of minutes on their website and you can see what kinds of companies they’re looking for. And so you know who to approach. And then if you choose to approach the other ones as well, you know at least it’s an outside chance.

Angel investors on the other hand generally aren’t that explicit about what they’re looking for and they change their mind about what they want to invest in next, like that. Sometimes it’s as simple as one of their previous investments is looking a bit shaky at the moment and they decide to take some time out of the market. It might be, some of us are at … Your marriage may fail, and you may need to set aside half of what you thought was yours to your ex-partner. Or it might also be, sometimes an angel investor will think, “Well, I’m investing in blockchain because blockchain is the next hot space.” And then I’ll start reading blockchain is not cool anymore, and I don’t think, “Oh, drones. Drones. I’m in drones now.” You know? So it’s very difficult for a startup founder who’s trying to grow a business and hire a team and make that last bit of runway last as long as it can, to also be going out there and doing the research about these angels who are changing their mind all the time and dropping in and out of the market.

And there’s not very much competitive tension to actually close a round in Australia. There’s much more capital trying to get into far fewer deals in San Francisco than there are in Sydney. In Sydney, most Angel investors can afford to take their time and essentially the longer they wait before they actually write a check, the more of their risks that they have been able to reduce. “Oh, the company, I thought they only had nine months of runway left and 12 months later they’re still going. Well, that’s even better for me as an investor.” So, a pre-seed venture fund doesn’t behave like an angel investor. So, a pre-seed Angel Fund says if you’re this kind of company, we pretty much have to make this many investments over the next few years, so if you’re one of the best companies we see in this space, then come talk to us and it’s in our interest as well as your interest to get that deal done quickly so we can move on to our next investment and our next investment.”

Adam: 

To wrap up this episode of Welcome to Day One, and I know it’s been a short one. I wanted to ask Alan what he thinks the biggest challenge the Australian Startup scene faces moving forward. 

Alan:

I think the main challenge is macroeconomic for Australia, there are many other nations out there that have understood that the world’s economy is turning into a technology economy. The resources will always be important and agriculture will always be important and services and banking and telecommunications, all of those industries aren’t going away anytime soon. But most of the future potential economic growth is definitely in the technology industry and more and more in the software that runs all the things. So the great advances we’ve made in the last decade obviously the hardware that powers our phones and our cars and all that sorts of things, that’s become much, much more powerful and capable of many more things at faster speeds. But the huge advantage has been in our ability to make those devices do more things better through software because the software doesn’t need to be unplugged and replaced with something else that comes from another part of the world and stuck back into that machine.

So an electric vehicle or somebodies smartphone, we can ship out an update to that and make it much, much better. So Australia’s always been an export-focused economy. We have exported primarily agricultural resources and services. All of those industries will continue, but if we want to participate in most of the economic value of the next hundred years, it’s going to come from being a world leader and developing the software that powers the hardware. One challenge about that for us as a nation is that we’re used the people working in groups and those groups of people working together in the same room. I meet startup founders all the time who own learning lots of hard but really valuable lessons on how to work with a remote distributed team over tools like Slack and Zoom and Jiro and Base Camp and all of these tools that are helping us actually work together as a team remotely, but the communication process is in a way we agree on how to move forward and the way we record what we’ve done so we don’t make the same mistakes again.

All of that changes dramatically when we’re working in a remote team. We’re a tiny, tiny nation of 20 something million people. And so there’s a tremendous future potential for us if we can strike the right balance between working together in the same physical space some of the time so that we can network and get to know each other as real people. But then in the rest of the time becoming the world’s best at working remotely as part of a remote team because although most of our population is up and down the eastern seaboard of Australia, it’s still a tremendously large eastern seaboard. You know, I drove from Sydney in the Coffs Harbor, which isn’t even halfway up the coast of New South Wales a couple of weeks ago to go and meet the tech startup community there. And that same drive will take you halfway across Europe, through three or four countries.

So, this is our opportunity to be in a zero export cost industry. We can ship software and have it in every global market in local currency and local language overnight, at the click of a button, it gets pushed out to an app store and it gets approved and bing, there it is, right? So we have an opportunity to stop putting live sheep on ships and we have an opportunity to stop putting iron ore on ships and coal on ships and waiting for it to get to market in 11 weeks time. We can actually be participating in that global software economy. And the faster we invest in skilling up our workforce, training young people to have the skills in order to be able to do that. And us as founders, recognizing that we have a responsibility to our shareholders and to our team to stop using remote working as a stop-gap measure or a workaround for now, but to start thinking of it as a competitive advantage. We have no choice but to get great at it. But then once we’ve got great at it, let’s be world leaders in that.          

Adam: 

Thanks for listening to this short and sweet episode of Welcome to Day One featuring Alan Jones. 

If you’d like to support the show you can do that by rating & reviewing the podcast by going to ratedayone.com.

And, Thank you for giving this episode of Welcome to Day One your attention. This episode was created by me, Adam Spencer.

Interview conducted by me, Adam Spencer.

A big thank you to Alan Jones for taking the time to be involved.

Music by Lee Rosevere, full attribution on our website welcometodayone.com.

This episode was produced and edited by me, Adam Spencer

Thank you and see you next time!

Less

 

Resources mentioned

Credits

A big thank you to Alan Jones for taking the time to be involved.

Music Credits

Music by Lee Rosevere.

Title: Let’s Start at the Beginning

Source: Let’s Start at the Beginning 

Licence: CC BY 4.0

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