When you’re one of Australia’s most successful tech entrepreneurs, and an active investor and mentor to startups, you often see where most founders go wrong.
Steve Baxter, the CEO of Transition Level Investments, spoke to me on the podcast recently.
Many of you will know Steve from his appearances as a ‘Shark’, on Channel 10’s Shark Tank Australia.
All of this, on top of his efforts in creating River City Labs, has given Steve more than enough experience at giving us entrepreneurs the advice we need.
People Probably Don’t want Your Product
Steve said many founders still can’t take a hint when people don’t want what they’re selling:
“People will get it wrong because they either don’t accept or don’t understand that people don’t want their product, or they can’t convince people to pay, or pay enough, or can’t reduce their costs enough to provide it appropriately. So they’re still pretty well falling over at some business fundamentals, to be quite honest.“
Launch Quickly, and Speak to Your Customers
Steve says the key to a good startup, is just getting your product out there:
“Gone are the days of years of preparation and launching a product, although we still see plenty of people who do that! And for some reason it doesn’t work. So, get your ideas, get your changes, get your modifications, get your pivots in front of customers as quick as you can with the appropriate level of quality — and that’s a decision for the entrepreneur and get the opinion from the people who count.”
Steve says the only people who matter are your customers:
“The only person who really counts for an opinion is the person who’s going to stick their hand in their pocket and pay for it. So that’s who you need to get in front of as fast as you can.”
Shark Tank Investor: How To Achieve Funding From Steve Baxter
I asked Steve what he looks for, given I’ve spoken to many VCs across the world, including Tim Draper:
“If it’s only an idea, then definitely it’s who’s behind the project. For us, we typically don’t invest in just an idea, we invest in traction. We invest in a business that has — whatever’s happened — it’s found some form of traction, be it profit, be it revenue, be it typically, usage.”
Steve wants to see you’ve been able to execute at some level:
“So, they’ve proved they can build something, they’ve proved they can get it out there, they’ve got some runs on the board…And we’re seeing the underlying economics of what they’re proposing to do. So it’s just a case of helping them grow faster and taking out some of the friction in the process, not just with capital, but also with experience and networks, other bits and pieces.“
Steve says with that traction, he holds the founder responsible for all things good and bad:
“A large chunk has to go to the founder regardless of traction. But if you’ve got the wrong people running the show, then ultimately you’re in trouble. There’s a saying out there which is unfortunate but true: “Most businesses die from suicide, not homicide.” It’s the people running them that blow them up.“
And if you think you’re “gifting” equity to investors, you won’t last long with Steve:
“If you’re putting investors first, you’re selling the wrong product. What a lot people don’t realize out there, and I give up on founders, entrepreneurs very fast, when they start using their terms “give” and “gift” when it comes to equity. You are selling equity to me, which I am paying for, that I expect to get a return on. It’s a very, very commercial transaction. Unless you get your head in that space, you don’t understand the business game you’re in.”
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