For startups hoping to secure investment from SEEK co-founder and Square Peg Capital investor and co-founder Paul Bassat, there are four things they need to know: how to be genuine; how to tell a good story; how to avoid false valuations; and how to tell their advisors to take a back seat.
Speaking at LaunchVic’s Yeah Nah conference in Melbourne last week, Bassat shared his journey from growing job-recruitment giant SEEK with his brother Andrew Bassat and Matt Rockman in 1997, to co-founding venture capital firm Square Peg Capital, which has invested in the likes of cyber security startup UpGuard, and email-marketing platform Vero.
While Bassat claims he and the Square Peg team have “still got our L plates on”, he shared with the audience some key dos and don’ts for startups seeking investment from the fund, which this year secured $233.7 million in venture capital to invest in tech startups.
“We see about 1500 startups a year and say yes to 10-12 — it’s an awful part of the job,” Bassat told the conference, before going on to explain the four things startups need to execute a successful pitch.
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1. Be genuine
Bassat said he tries to keep “really open minded” when deciding which startups to invest in, assuring founders that they don’t need to have the answer to every question just yet.
“You don’t have to have everything figured out. Don’t think you have to approach people like me and have every single answer,” he said.
“It’s okay to say, ‘It’s a good question, we spent time trying to figure it out and we don’t have the answer yet.’
“I love hearing that, as long as its genuine,” he said.
2. Tell a good story
Startups seeking investment should also focus on telling their story in a unique and engaging way, Bassat said.
“I want to hear your story — I’m really, really keen on hearing how you discovered the problem you’re solving, how you got to this point, how you’re being different about what you do,” he said.
For Bassat, having a strong vision for the future and a great team are crucial chapters in this story, adding that if he was starting a business today, “focus and people” are the two things he would prioritise from the outset.
“In particular we [Square Peg investors] really want to spend time with people and get to know people,” Bassat said, advising startups to practice articulating “what’s unique and special about what you do, and what it is that you do that no one else in the world can do”.
3. Leave the valuation up to the investors
“Don’t put in your deck your valuation comparisons; you’re an entrepreneur not an investment banker,” Bassat said.
Bassat warned startups against approaching investors and saying “this is the valuation I’m seeking”. Instead, he believes startups should “let folks like us [Square Peg investors] form a view on valuation”.
“If you don’t like it, go to someone else,” he said.
Including comparisons to other companies was also a no-no, according to Bassat.
“Don’t put in your deck all the different valuation comps [to other startups], and don’t put in one of those dumb pages that has your company and its attributes with a ‘tick tick tick’, [and] all the other companies and their attributes with a ‘cross cross cross'” Bassat said, adding that “almost every startup has this slide” in their pitch deck.
4. Leave the advisor at the door
Bassat says one of his major pet peeves is when startups bring their advisors along to investment meetings, because “advisors don’t run the business”.
“It drives me mad when an advisor starts talking about the business — I want to strangle that person!,” Bassat joked to the audience.
“If you do bring an advisor, don’t let the advisor talk,” he said.