20 VC 045 From Idea to Pitch with Alan Jones, Founding Investor @ Startmate

In episode 45 of the 20 Minutes VC, host Harry Stebbings interviews Alan Jones, chief growth hacker at Blue Chili, which aims to create 100 startups by 2016. Alan, also a founding investor and mentor at Startmate, discusses his journey from technology reporter to influential figure in the Australian startup scene. He emphasizes the importance of storytelling in pitches, the need for startups to validate their business models before building a product, and the critical nature of caring about the customer's problem. Alan also shares insights into his investment strategy, focusing on startups that offer solutions for other startups, and his recent investments in Muru Music and Zukuri. He recommends reading outside one's field, highlighting 'Predictably Irrational' by Dan Arielli as a valuable resource for understanding consumer behavior.

• Alan Jones is the chief growth hacker at Blue Chili in Sydney.
• Blue Chili aims to create 100 startups from scratch by 2016.
• Alan is also a founding investor and mentor at Startmate, an Australian Y Combinator-style accelerator.
• He advises and invests in startups through Blackbird Ventures, Pollinizer, and Startmate.

"Alan is chief growth hacker at Blue Chili in Sydney who have set themselves the incredible goal of creating a hundred startups from scratch by 2016."

This quote introduces Alan Jones and the ambitious objective of Blue Chili, highlighting the scope of their startup creation efforts.

• Alan Jones began his career as a technology reporter and editor of Macworld magazine.
• He foresaw the shift from print to online publishing and transitioned accordingly.
• Alan worked at Microsoft and was an early hire at Yahoo, which he considers his first big lucky break.

"I started as a technology reporter so long ago that in those days people read the news about the computer industry on the printed page in magazines, and I was the editor of a magazine called Macworld."

The quote explains Alan's early career beginnings in technology journalism and his role at Macworld magazine.

• Alan Jones co-founded a digital agency to help startups, leveraging his and his peers' experience as entrepreneurs.
• The agency specialized in creating project teams for startups.
• Blue Chili, sharing a similar business model with Alan's agency, brought him and his team on board.

"So we ran that business for a couple of years and then Blue Chili was a business that was similar enough to ours that we used to refer each other work and they were looking to bring a few new members of management team on board."

This quote describes the transition from Alan's digital agency to joining Blue Chili, emphasizing the synergy between the two companies.

• Blue Chili's goal is to build 100 startups by 2016.
• The organization partners with non-technical entrepreneurs to act as their technical co-founder.
• Blue Chili has a product development team and an accelerator program to support startups.

"So Blue Chili is a bit unique in that we partner with non-technical entrepreneurs who've got an idea for a tech startup."

The quote highlights Blue Chili's unique approach to partnering with non-technical entrepreneurs, filling the gap of technical co-founders in the Australian market.

• Prospective entrepreneurs can apply to Blue Chili through a prominent button on their website.
• The company receives about 200 applications per month and screens 20 for further due diligence.
• The goal is to negotiate with four or five applicants each month and bring two new startups into the program.

"We receive on an average month about 200 applications online... Then of that 20, our goal is to enter into commercial, no negotiations with four or five each month, of which we hope to bring two new startups into our program each month."

This quote details the application and selection process for entrepreneurs wanting to join Blue Chili's startup program, including the number of applications received and the screening process.

• Alan Jones discusses how his business is becoming more international, with startups in the US and Canada, and a majority in Sydney, Australia.
• They recently opened a Melbourne office with a dedicated team and five growing startups.

"Well, it's getting more international all the time. So currently we have three startups in the US, one in New York, one in LA, one up in Toronto, and that's been a great growing experience for us."

This quote explains the geographical expansion of Alan Jones's business, highlighting the international growth and the establishment of new offices, which signifies the company's broader reach and success.

• Alan Jones advises against building a product immediately after having a great idea, especially for non-technical entrepreneurs.
• He suggests that experienced product people with a tech background might bootstrap and build their own product.
• Non-technical entrepreneurs often waste time seeking a technical co-founder and may spend a lot on product development before validating the market.
• He recommends using lean startup methodologies and software as a service tools to validate business models and marketing strategies before product development.

"But if you're a great product person... then your greatest skill and your most likely part of the market is to bootstrap and build your own product."

This quote emphasizes that individuals with a strong background in product development should leverage their skills to build their own products, avoiding the need for external capital and utilizing their experience effectively.

"So in the last few years in lean startup methodology, we've developed a bunch of really great practices. And also there's a whole suite of really good software as a service tools that you can use to validate a business model, to validate a marketing strategy, all in advance of going through the trouble of building a product."

Alan Jones highlights the importance of using lean startup practices and SaaS tools to validate business concepts before committing resources to product development, which can save time and money.

• Alan Jones suggests that startup founders aim for the best in every role, including technical positions.
• He believes that great software developers often show their abilities early in life, suggesting it's a skill that might be innate or developed very early.
• For non-coders, if time allows and only a basic minimum viable product (MVP) is needed, learning to code could be an option.
• Otherwise, finding a technical co-founder or joining an accelerator program is advisable.

"For most of us, we would want the best possible technical founder of the business. And for most of us, if that was going to be us, then we would have learned that about ourselves when we were in our early teens."

Alan Jones argues that the technical expertise required to be a successful founder is often evident early in life, and not everyone is suited to be the technical lead in a startup.

• Alan Jones advises on attracting a technical co-founder by focusing on interesting problems rather than business challenges.
• He suggests reframing business challenges into software development challenges to appeal to potential technical co-founders.
• Alan Jones's answer on Quora about attracting co-founders is highly rated, indicating his expertise in this area.

"So there are things like recommendation algorithm, there are things like drunk walk solutions to trying to find the best way to get a package or several packages in a delivery vehicle through multiple stops along the way."

This quote exemplifies how business challenges can be translated into technical problems that are more likely to attract a technical co-founder with an interest in solving complex issues.

• Many startup pitch templates are based on a common model created by VCs or entrepreneurs.
• The typical structure involves identifying a problem, presenting traditional solutions, offering a better solution, estimating market size, and claiming potential market share.
• Teams also introduce themselves, state capital needs, and provide a timeline for closing the investment round.
• This model is popular because it allows investors to review many pitches and make logical decisions.

"So at some point, a VC or a textile entrepreneur has put up a template and everybody else has copied or make minor changes to that."

This quote explains the origin of the common startup pitch template, which has been widely replicated with slight modifications. It emphasizes the formulaic nature of many startup pitches.

• Pitching based on rational and logical metrics often leads to comparison with similar startups, which can be disadvantageous.
• When many teams use the same narrative, it becomes challenging to stand out, and even brand names become forgettable.
• Alan Jones suggests that this method of pitching is not the most effective way to capture investor attention.

"The reason why that model is so popular is that we pitch to people who are reviewing many, many pitches at a time."

This quote identifies the rationale behind the popularity of the standard pitching model, which caters to investors' need for an efficient way to process and compare numerous pitches.

• Storytelling is a fundamental form of human communication, deeply rooted in our history and evolution.
• Effective storytelling in pitches involves a narrative arc with a beginning, climax, and end, as well as characters like a hero and antagonist.
• Great startup pitches leverage storytelling to engage investors emotionally, which can be more compelling than fitting into a standard template.
• The goal is to evoke an emotional response and create a memorable impression, leading to further discussions.

"So we need to become great storytellers, and that never, never fits the templates that the vcs want to see."

Alan Jones stresses the importance of storytelling over fitting into a predefined template, suggesting that emotional engagement is key to a successful pitch.

• The primary goal of a pitch is to initiate a conversation with investors, not to close the deal immediately.
• Detailed discussions and negotiations, where metrics can be thoroughly examined, typically occur after the pitch.
• A compelling pitch should create enough interest to secure a follow-up meeting, where the startup can present more detailed information.

"The purpose of a great pitch is to begin a discussion, right?"

Alan Jones clarifies that the aim of a pitch is to start a dialogue with investors, rather than to secure funding on the spot.

• Alan Jones looks for startups that genuinely care about their customers and the problems they are solving.
• Passion for the business and its mission is crucial for enduring the inevitable hard times and for achieving success.
• The commitment to the startup's cause is a significant factor in Alan Jones's investment decisions.

"We really need to care about the customer that we're addressing. We really need to care about the problem that they're facing."

Alan Jones explains that a deep care for the customer and their problems is essential for a startup's success and is a key factor he considers when deciding to invest.

• Early stage investors like Alan Jones must deeply care about the startups they invest in to effectively assist with future fundraising.
• It's crucial that both investors and founders are passionate about the customer and the problem being solved.
• Alan emphasizes the importance of working extra hard, which is contingent on genuinely caring about the startup's mission and challenges.

"And for me to be effective as an early stage investor, I have to help my startups raise the next round. And the only way I can do that is if I work extra hard. And the only way I work extra hard is if I really care."

The quote highlights the interdependence between an investor's effort and their emotional investment in a startup's success. It underscores the necessity of a genuine connection to the startup's mission for effective fundraising support.

• Alan Jones has a history in product development and communications, leading him to invest in startups that cater to other startups.
• He has found success in investing in startups that build essential tools and platforms for startup founders.
• Alan's experience with an Australian startup, Other Levels, which went public, demonstrates his investment strategy's effectiveness.

"So I think probably where I've been most successful is investing in startups that are solving problems for other startups."

This quote explains Alan's investment strategy, which is based on his professional background and understanding of the needs within the startup ecosystem.

• Blue Chili aims for aggressive international expansion and growth over the next five years.
• The venture fund of Blue Chili has started investing with a goal to significantly increase investment capacity.
• Alan predicts the emergence of larger tech startup funds in Australia and sets a high target for Blue Chili's startup portfolio.

"So I think we'll see in the next five years, I think we'll see a number of 100 mil and greater tech startup funds out of Australia."

Alan forecasts the growth of the Australian tech startup investment landscape and outlines Blue Chili's ambitious goals for expansion and startup support.

• Alan believes that startups with venture capital are more likely to succeed due to the ability to scale quickly.
• He asserts that investment capital not only funds growth but also enhances product development and opens up strategic business opportunities.

"So winning generally comes from scaling more quickly. Right? And investment capital gives you not just money to grow sales and marketing, but it helps you build a better and more effective product team and it introduces you to distribution, relationships and ultimately acquirers of your business."

The quote discusses the advantages of venture capital funding over bootstrapping, emphasizing the importance of rapid scaling and the comprehensive benefits of investment.

• Alan recommends entrepreneurs read beyond their field to gain diverse insights that can impact their business.
• He suggests studying behavioral economics, highlighting Dan Arielli's book "Predictably Irrational" as a valuable resource for understanding consumer behavior.

"One of my favorite fields is behavioral economics. One of my favorite authors is an MIT professor called Dan Arielli. And a good starting point for anybody who's interested in what makes people buy things is a book of his called predictably irrational."

This quote suggests that entrepreneurs can benefit from an interdisciplinary approach to learning, specifically pointing to behavioral economics as a field that can offer valuable insights into customer behavior.

• Alan's recent investments include Muru Music, which offers a unique approach to playlist creation, and Zukuri, a high-quality eyewear integrated with the Internet of Things.
• He is excited about these startups due to their innovative solutions and the strong teams behind them.

"The two most recent that I'm most excited about at the moment, one is called Muru Music... And we think that's the first time anybody's ever been able to do that."

"It's called Zukuri... This is a pair of glasses that you'll be able to find from your smartphone."

These quotes describe Alan's latest investments and why they stood out to him, focusing on the innovation in product offering and the potential impact on the market.

• Harry Stebbings thanks Alan Jones for his insights and concludes the podcast.
• Harry directs listeners to the blog for resources mentioned in the episode and endorses the hiring screen service.

"Now for all the incredible resources mentioned in today's show, you can, as always, head on over to the blog at WW dot thetwentyminutevc.com."

This quote provides listeners with a call to action to explore further resources related to the podcast's content and promotes an additional service for hiring needs.