As the growth of Pause 2017 into Australia’s premier event for those interested in the convergence of the business, tech, and creative spheres has shown, the Australian startup ecosystem has come in leaps and bounds over the last few years.
Where the terms ‘startup’ and ‘innovation’ were essentially unknown five or six years ago and entrepreneurship as a career path reserved for only a small subset of the population, now more people than ever before are thinking about diving into startup life and considering how to go about it.
Starting their journey three years ago were Lucy Lloyd and Heidi Holmes, cofounders of mentoring platform Mentorloop.
The startup aims to make it easier to start, manage, and participate in mentoring relationships within a company, with the aim being to facilitate the development of strong workplace culture, higher employee engagement, and lower staff turnover.
“We started Mentorloop like many people start their startups: as a side thing, fitting it in around our already busy jobs; Heidi had another full-time business, I was digital director of an ad agency,” Lloyd explained.
“The early challenges were ones of limited time and money, as we bootstrapped Mentorloop. As neither of us is a developer we paid external developers to build the product for us, which was our biggest expense, but it paid off for us in that, because we were so tight with money, we never built anything we didn’t need.”
The biggest was identifying and acting on the ‘all in’ moment, the point where they would leave their other commitments and go in full-time on the startup.
For Lloyd and Holmes this moment turned out to be last May: Mentorloop was in market, they had their first paying customers, and had attracted commitment on $200,000 of what would end up being their $350,000 seed round.
Attracting that funding was another challenge in itself. While there has never been more funding available across the Australian tech and startup landscape, the competition is fierce as the number of businesses increases.
If they choose to look for funding, the decision of when to go after it is yet another difficult one that founders must make. Then comes the question of, how much? Capital can help you develop and scale, but raising funding also means giving a portion of your business away.
Set to unlock the secrets of capital raising at Pause 2017’s Tech Day are Lloyd and Holmes; StartupAUS board member Glenn Smith; Alex Robinson, cofounder of Airly; and cofounder of Elevio, Chris Duell. The quintet will be speaking on an interactive panel about their experiences with startup investing in Australia.
For Lloyd and Holmes, the decision to seek funding came when they saw their first three paying clients were still with them six months later.
“We knew we were solving a real problem for our customers,” Lloyd said.
“We could have continued to plug along and slowly grow the business but we didn’t want to miss the opportunity, we wanted to accelerate our product development and business growth. This was the point where we decided to raise capital.”
Once the decision to undertake a raise was made, the process of preparing to raise took several months. For the six months leading up to it they talked with VCs, angel investors, and family and friends about the business and the fact they were raising to get advice and put feelers out.
From there the cofounders identified around 30 people they liked and thought would bring strategic value to the business, who in turn were interested in the cofounders and Mentorloop. From there they sent out letters and awaited responses, and then provided those interested with a formal deck on the business. A few months later they knew who was in, and for how much.
Key to it all, believes Lloyd, was being prepared beyond the pitch.
“While there’s a lot of emphasis on pitching in the startup scene, we didn’t see any investment arising purely from a pitch scenario,” she said.
“We got to know our investors over time, over many coffees, with a lot of back and forth. You need to know you can work together, so if you’re going to need to spend, say, 20 hours communicating with an investor before they sign, then you’d better get started well before you actually need the money!”
Another big lesson Lloyd and Holmes learned is that investors want to know about more than just the product, they want to know about the business. As well as opening up on financials, users, and projections, founders need to be able to pitch the business vision, the culture, their strengths as founders, the business model, and growth plans.
“The product is only one part of what will make investors sign on.”
While Lloyd believes the funding has allowed Mentorloop to do in 12 months what would have taken three to five years to do without it, for her and Holmes the ideal investors were those who brought value to the business beyond the money.
“We have a couple who are amazing connectors, always introducing us to potential clients and partners; we have a couple who have spent significant time in sales – they coach us on how better to qualify and close leads; we have a lawyer and accountants – always helpful expertise. We get along well with our investors, they’re a group of people we can get together with for a beer and good chat.”
With so many lessons learned in Mentorloop’s capital raising journey, Lloyd is eager to share all the advice she can at Pause 2017 to make it easier for others considering whether or not to take the first step.
“It’s been an incredible learning curve, which is why we’ve organised this panel for Pause Fest; there’s a lot of content out there from investors on why or how they invest, but we found the advice that made a difference to us came from other startups.”
Pause Fest 2017 will take place at Federation Square on the 8th-10th of February 2017. Tickets can be purchased here.