Half your luck
Your Morgo presentation was titled ‘How I got lucky with six successful tech startups’. But how much of your success do you really put down to luck?
Riding the right wave at the right time is really key. Timing does matter. But there’s a fine line between success and failure, so you do make your own luck by making everything come together. It’s never, ever easy. There are times you really have to pull out all the stops to land the right deal. If you’re driven and resourceful — and that’s what Kiwis are good at — you figure it out. And you get better at it; you’re more likely to put yourself in a situation when you’re older to be a bit luckier because you’re a little wiser. I did so many things so wrong. It’s all learning.
What was your first big bit of luck?
I got a job as a radio technician out of high school. I wanted to do something with my hands and I wasn’t worried about going to university. I think my parents were worried I was going off the rails, but that was a lucky break. I learned about technology and basic programming and once I understood that, it was so clear it was going to have a big impact. There were only six of us in New Zealand that got that opportunity. Then it was lucky that I had the confidence to leave. I could have worked there for 20 years. Everyone thought I’d lost my marbles when I joined a rock and roll band and moved to Australia at 18.
Weren’t your parents worried?
My parents always supported me. Luckily I didn’t go off the rails and die young. Then I was incredibly lucky to meet Paul Marks. He was my financier and we started [retail technology business] Computerland. Turns out that was the right idea at the right time. But some of my friends said, ‘you’re going to sell computers to consumers? What would they do with them?’ I said, ‘I’m not sure, but I think there’s a bunch of enthusiasts out there like me and I’ll figure it out’.
What gave you that confidence?
I was young and thought I had nothing to lose. I thought, I can always get a job back in radio or in farming. For me it was all upside, no downside, because I was broke, unemployed with a band. Basically I was on a working holiday. I thought, I’ll give it a go, I’ve got nothing to lose. As you get older you start to get a few assets behind you and you are a bit more risk averse.
Is it easier to be lucky in Australia or the US?
It’s just that the market’s bigger. Without a market it’s very hard to make a business. You’ve got to provide value somewhere in a marketplace and how big is the market? Kiwis have the opportunity to produce something here, get some support, some cashflow and get something off the ground. Americans seem to focus everything on that customer — is the dog eating the dog food? Whereas we tend to focus much more on the idea and the technology. Americans tend to do it in reverse: how do you, as quickly as possible, find out if the idea is going to run, then get the funding to develop it.
You’ve raised more than $100 million in capital. Any tips?
The most important thing is who you target. You’ve got to have the right message for the right audience. The more you can identify the right potential customer the better. And the same applies to the VC. You’ve got to find the VC that wants to replay the movie. Most of them are VCs because they created wealth and they’ve got money to invest, but they don’t want to do all the hard yards; they want to relive their lives through other companies. The first thing in a meeting is typically some idle chat where you build a rapport and in that time you do need to take a bit of the humble Kiwi out of you. Really get your elevator pitch right. It’s not a very Kiwi thing to do to put yourself forward. We often understate. But you don’t have to be a skite to do it; you can do it in a matter of fact way. Then you need to articulate the problem that you solve that exists in the marketplace. And generally having a customer that has that need helps. So it’s talking about the need, how you’ll make money and how big the market is.
How can Kiwi companies pitch better?
Segment the market out so it’s very clear. A lot of people talk about the retail industry; you want to talk about convenience retail or you want to be able to talk specialty apparel retail. ‘It’s a $10 billion a year industry and we’re going to get 1%’ — that never works. You need to be so well prepared because you never get a second chance to make a first impression. Practice your pitch with 10 people who have been through the process and you’ll be way more investor ready than if you just went in blind. Ask people for help and be prepared. Also, find an investor who’s basically got some relevance to your business — who can add value, smart money. Those people are more likely to invest and they’ll add a lot of value.
I’ve always been happy to give up some equity if someone is adding real value. A lot of Kiwis are reluctant to give that up, but it’s a common thing in the US. We typically create a pool of 15% for equity — and it’s not uncommon to have a pool of 20% — and basically the CEO uses that as currency to get value creation; to get people to bring in the value the company needs instead of raising that cash and spending that cash on paying people. In the Valley, in particular, there’s been so much wealth created through stock and equity. Microsoft, Apple, Facebook — these companies create a lot of wealth through the equity employees held, so those people really value equity. And a lot of people can really help companies that are willing to give up a bit of it.