“The fundamentals have not changed”: AfterWork Ventures on macro trends and six things it wants from startups

afterwork ventures

The AfterWork team (plus Adam and Dave, who are in NZ). Source: AfterWork Ventures.

Despite the macro pressures facing the tech industry, “there’s a confluence of talent and lifestyle and many other reasons that make Australia a great place to work,” according to the new VC kids on the block, AfterWork Ventures.  

Leaders from the VC firm were speaking at a startup event hosted at The Commons by SmartCompany on Tuesday evening in Sydney, when they were asked a question about the current macro climate where tech companies have seen their valuations slashed, and been forced to cut jobs, as rising interest rates have made valuations more volatile and borrowing more expensive.

AfterWork Ventures co-founder and partner Alex Khor said “the fundamentals have not changed” despite these factors.

“There is a great recycling of talent in the Australian and New Zealand markets, and a recycling of capital effect,” he explained.

“There’s also a general interest in Australia as a market. We’ve seen these success stories that have come out over the last 10 years and the world is identifying Australia and New Zealand as a kind of breeding ground for tech companies.” 

This, Khor said, in addition to a confluence of talent and a lifestyle make Australia a good place to work, is a fact that has not changed despite shifts in the tech industry landscape. 

Jessy Wu, principal and head of community at AfterWork Ventures added that despite rising interest rates, the impact is mainly on later stage startups as they’re subject to valuation techniques like discounted cash flow modeling.

“I think that makes the early-stage asset class look more attractive in comparison because you’re not being subjected to valuation volatility,” she argued. 

“Early stage startups are slightly more insulated from valuation dynamics because it’s much more about the substance of what you create than what the market out there is valuing.” 

What AfterWork Ventures wants from early stage startups 

Speaking at the event, Khor and Wu outlined AfterWorks Ventures’ investment principles, which guide its decisions about the startups it invests in. These include: 

  • A dent in the universe. The key here is the market — who are the customers, how many are there and how much value is the product creating for these customers? VCs need to be convinced there are enough customers who will derive value from the product and who are willing to pay for it; 
  • A formidable team. Every startup’s team will look different based on the kind of startup it is. Wu spoke to spikes and superpowers, or skills that will directly help drive the startup and help it succeed. 
  • A product for the ages. Is the startup attacking a problem that has not been solved, working on a product innovation that uniquely belongs to the startup and is it something that becomes an important part of the customer’s life?; 
  • Customer understanding. The startup should know everything about its customers, and should be able to articulate the company’s proposition from the customer’s perspective. AfterWork Ventures also looks for an understanding of how customers make their purchasing decisions and what it would take to convince them to purchase the product; 
  • Great momentum. Think velocity and mass. What do growth and revenue look like? But it’s not just figures but also about the team, which relates to mass. It’s about great founders and great executors able to generate velocity and momentum; and 
  • Capital efficiency. Is the startup able to change gears, be resilient and get to near profitability even with limited resources and no matter what the market throws at it? 

Khor added that it’s just as important for startups to look at VCs in a similar light.

“If you’re a startup and you’re pitching to them, they should create the space for you to put your best foot forward and to shine.”

“A VC relationship works really well when they give you the space to share your best insights and when they feel comfortable to put on a problem solving hat and work with you to get the right answer. It’s something founders should test for when they’re having these conversations.” 

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