- BRW Lists
Published 12 March 2013 12:02, Updated 12 March 2013 14:53
Silicon Valley mentor and angel investor Mike Loftus says Australian entrepreneurs are selling themselves short if they don’t set their sights on America.
Loftus, a 20-year veteran of the start-up scene and entrepreneur-in-residence at US-based The Angels’ Forum, says Australia is a great marketplace for start-ups to test things out, but they need to live and breathe Silicon Valley to take their business to the next level.
“I like to remind people trying to do stuff here, if you are great in Australia, that’s like being great in Texas,” Loftus tells BRW. “How often have you heard [people say] ‘we were really great in Texas’, as a company that was really successful and funded? Probably not.”
“Australia is one of the greatest test markets. It’s a way to prove that what you’re doing has value, customers will buy it, businesses will buy it. Bring that as part of your story to the next step. The next step is to come to America.”
Loftus is a mentor with ANZA Technology Network, which is a business accelerator that works with Australian, New Zealand, American and Asian entrepreneurs to commercialise globally.
Speaking with BRW while in Australia , he said he had looked at more than 3000 businesses making funding pitches last year and only 25 were successful in getting investors on board. Those companies had a few things in common.
“I say it like this,” Loftus says. “Team, team, team, IP and – money”.
Team is most important, he says, and he looks for businesses that don’t just have a person who is good at coding.
“When you say team, it means you have someone who can take nifty ideas and turn them into code, and you have another person who can take nifty ideas and turn them into selling propositions,” Loftus says.
The process of applying for a patent is also important, even if it is not successful.
“If you can’t embody it into something you can commit to paper, you haven’t got an idea,” Loftus says. “It’s going through the exercise of attempting to protect it, then it’s of value, it’s your child.”
The last piece of the equation is money or prospects, or in other words, future customers.
“Our first question is: Have you run this by any . . . future customers?” he says. “Get it out there, have your customers or your users give you real feedback. Don’t keep it in the lab. That way you’re getting real feedback.
“With an Amazon account and a couple of engineers, you can get anything up to a point where it is demonstrable.”
He also says investors look for commitment to the project, which takes a number of forms.
“When I listen to guys here and they say, ‘I’ve got a full-time job and I’m doing this at night’, that’s a turn-off. You won’t get a dime from investors. Not a dime. Go get money from friends and family to get it to a place where you can quit. You’ve now made your first commitment. You’ve quit the other part of your world, because your world is now a start-up. It’s a commitment to the journey.”
Those seeking funds in Silicon Valley need to be there for the long haul, he says. It helps to mention immigration issues when pitching about your business, to show you’re at least thinking about it, he says.
“The chances of you getting an investment if you’re just on a round-trip ticket to Silicon Valley is zero,” Loftus says. “They want you to commit to be there for two to four years, which means you have at least started thinking about the immigration stuff.”
He says incubators based in Australia that select start-ups and take them on a trip to Silicon Valley are playing a useful role, and helping create an environment where it’s safe to fail. But they’re not going to make your business fly.
“The incubators here in Sydney and throughout Australia, there’s five to eight of them, they all preach that our program, and there’s several that proselytise this, that we’ll get you into the program and you’ll come out the other end, and they show you the two or three that have been successful out of 43,” he says. “But it’s more than the program. It’s the idea, it’s the circumstance, the timing, all that stuff that blends into what makes a start-up a successful start-up.”
He says the Australian start-up ecosystem is getting better, and the quality of Australian companies coming to Silicon Valley is getting better every year. But they’re missing out if they don’t make the trip, he says.
“I just feel so sorry for people who don’t understand the difference between anywhere and Silicon Valley, much less some place that’s a 14-hour air trip away from Silicon Valley,” Loftus says. “You might as well be on Mars.”