Notes from The Valley: ‘Mentor capital’ gets you further, faster says AngelList’s Ash Fontana

Published 26 March 2013 11:58, Updated 10 April 2013 07:42

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Notes from The Valley: ‘Mentor capital’ gets you further, faster says AngelList’s Ash Fontana

Aussie start-ups that make it to Silicon Valley are among the best of those I have seen in my time screening thousands of deals at AngelList – Canva, Kickfolio and the Startmate companies come to mind. This is probably not some magical cultural quality but rather a function of how Aussie start-ups utilise local mentors to overcome the barriers to going global. We need more of this local, low-volume “mentor capital” than we need later-stage funds. Advice is most useful when it’s local and accessible; capital is inherently mobile and only necessary once you’re ready to scale.

Local mentors provide frequent feedback on product iterations, advice on US fund-raising markets, connections to foreign customers and venture capitalists and assistance with global expansion. You can get a lot of this information through websites like Venturehacks and make connections with VCs and customers on AngelList but it’s good to supplement this with guidance from mentors with experience in scaling companies and products in global markets. One way to do this is through accelerators such as Startmate which give access to experienced mentors worldwide through email groups, co-working spaces and scheduled events. Frequent knowledge transfer during early business model and product iteration matters most. Capital, talent and attention move quickly once you’ve built something people want.

The word mentorship has a non-committal connotation but works if incentives are aligned with small stock grants or a small ($20,000) amount of accelerator funding in exchange for a few per cent of your company’s equity. I broadly call this mentor capital. Giving any more than that at the early stage usually leads to investors managing your company from the boardroom before it’s worth anything. Too much money too early kills start-ups, whereas low-volume mentor capital at the start of a company’s life encourages fiscal discipline.

Accelerators, co-working spaces and experienced mentors are great; big, local VC funds and passive government money are redundant. Knowledge transfer and local mentors holding local start-ups to world-class standards – both inherently cheap things – will lead to more Aussie companies breaking through to have a global impact.

Ash Fontana runs Fundraising Products at AngelList, the largest early stage fund-raising platform in the world. AngelList drives more than $50 million of fund-raising per month and has more than 100,000 companies raising money, recruiting and finding customers on the platform. Previously, he founded and sold Topguest, worked at Macquarie Bank and studied law at Sydney University.

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