Honesty is a virtue often underrated by start-ups seeking investment, according to local start-up ScriptRock, after it raised $1.2 million in a round led by vaunted US serial entrepreneur Peter Thiel.
In addition to co-founding PayPal, Thiel was the first external investor in Facebook. He still serves on the Facebook board and is also the president of global macro fund manager Clarium.
The investment, made through Valar Ventures, is Thiel’s first investment in an Australian company.
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Founded by Alan Sharp-Paul, Michael Baukes and Leo Venegas, ScriptRock provides software that automatically tests how IT systems are configured.
It recently won two awards at the Citrix Global Synergy Conference – the Startup Accelerator and People’s Choice awards. Amazingly, the business was only founded in February.
In addition to Thiel, the funding round includes investment from a number of well-known Australian and US investors such as 500 Startups founder Dave McClure, and Starfish Ventures.
Baukes says the funding came about while ScriptRock was in the United States as part of the Startmate program.
“We went to the US with Startmate and then we decided to spend an extra three weeks in the states. We met Dave McClure through Startmate – there was a whole heap of people attending some demo days,” he says.
“One guy there was one of Peter Thiel’s associates and we were introduced to other Thiel people. We started talking and developing more of a relationship over the three weeks.”
According to Baukes, start-ups seeking investment from Thiel’s investment group are required to pass through four “phases”.
“What seems to happen is you meet the investors, have a good chat with them and, if they like you, they start introducing you to other potential investors,” he says.
“You have a chat to those guys and they get to understand you a bit more. You have three or four meetings with them and eventually they review your product.”
“By then, you’ve probably met eight or 12 people, and then you’re pretty much seeing how it goes. We were lucky enough to get a phone call back and were invited out again and again.”
“We then received a phone call [from Thiel’s investment group] saying, ‘We’d like to invest’.”
Baukes estimates that in a three to four-week period, ScriptRock participated in as many as 70 meetings with potential investors.
He says the fact that ScriptRock had already won awards resonated with investors. But in the end, he says it all comes down to honesty.
“Being honest is so underrated. A lot of people have this propensity [to exaggerate]. Seeing an Australian guy pitch and then seeing a US guy pitch, they’re so different,” he says.
“With the Australian guy, you know he’d always tell it like it is. Being honest, having a great product and telling the truth about what you think – being really candid about it – is important.”
This article first appeared at StartupSmart.