Sam Wong from Blackbird Ventures on taking investment to grow your business
“Be data-driven about everything, not just how to market the product, but what products to create and how to test ideas cheaply and quickly without going all in. It’s a fine balance because creative integrity also needs to be maintained, but it is a very high-risk thing to build a product without getting any feedback from customers before you do so.”
Today, we catch up with Sam Wong, Partner at Blackbird Ventures (and close friend of Team Flaunter!), to learn about what brands can gain from having a “startup” mentality and get her top tips for brands considering seeking investment to help them grow.
CAN YOU TELL US A BIT ABOUT YOURSELF?
I grew up between Perth and Sydney. My parents were technology entrepreneurs so I spent most of my childhood hanging around their office and listening to business chat. I think I had quite an abnormal childhood in some respects but I think it prepared me well for my career now!
I found school quite boring and I struggled at times because I was also quite non-conformist, so I did only so much as I needed to to get by. Then in year 10 I had a brilliant English teacher who saw something in me and took me under his wing. I learned how to channel my curiosity and analytical mind into a love for learning and ended up getting good enough grades to go to law school.
I never planned on being a lawyer. It just sort of happened. I enjoyed the intellectual stimulation and cut and thrust of legal debate but ultimately it didn’t satisfy any deep thirst in me. After a bit of experimentation I moved into startups, becoming a Product Manager at SurfStitch.com. That was 3 years of intense scaling in Australia and in Europe and a wonderful CEO apprenticeship.
After that I came back to Sydney and founded my own startup, and then after that, I joined Blackbird Ventures who I had gotten to know well while I was running my startup.
SO YOU’RE A PARTNER AT A VENTURE CAPITAL FIRM… WHAT DOES THAT MEAN EXACTLY?
Venture capital funds manage a pool of capital on behalf of others. The partners are tasked with making decisions about which companies should receive investment from the fund. Being a partner means that I go out and find investments for the fund to make.
DID YOU ALWAYS WANT TO BE A VC?
No. It had never crossed my mind before I joined Blackbird.
WHAT DID YOUR LAST 24 HOURS LOOKED LIKE?
Well, I’m currently on holiday so I’ll give you last Friday…
I started the day with 4 hours and 45 minutes of back to back meetings – with potential companies and with partners who could refer investments to us in future. Then the afternoon I spent an hour working on investment legal documents for a company we’re about to invest in. This is where my legal skills come in handy!
I also had a couple of hours of fund administration – reporting requirements and general queries from the fund’s investors.
Then I finished the day by attending a pitch event for an early-stage incubator program for founders who are new migrants and refugees. Great to end the week on a high!
WHAT ARE YOUR TOP 3 TIPS FOR BRANDS THAT ARE CONSIDERING SOME FORM OF INVESTMENT TO HELP THEM GROW?
1. Know your unit economics – if someone is going to give you $1, you should able to say how that is going to be spent, and what is the direct output you can expect for it.
2. Think carefully about who you take investment from. You can never change your mind and divorce your investor, they will be on your company register forever. Use your head and also listen to your gut. Consider how much control you want to give away as well as how much equity – you want to keep enough to keep incentivising you and your staff over many years of hard work.
3. It’s really easy for investors to say they have valuable networks and great advice but you should test this before you give away equity. If you aren’t seeing how helpful they are before they invest, don’t expect to see it after.
WHAT DO YOU LOOK FOR IN A COMPANY YOU INVEST IN?
We are looking at HUGE outcomes. We aren’t scared of losing money on an investment. We aren’t looking to minimise the downside. Rather, we are scared that even if the company succeeds, it won’t succeed on a large enough scale to make an impact for our fund size.
A rule of thumb is that we need to believe you can generate $100 million in revenue within 5-7 years at 70%+ margins. Obviously, these sorts of businesses are very rare and most don’t meet the bar.
Once we’re satisfied that the market is big enough, then we really want to partner with founders who are doing their life’s work. We want to see why they are uniquely positioned to build this business and win. We often ask ourselves “Would they be doing this even if they weren’t being paid?”. This is not just about trying to make a quick buck.
WHAT ARE SOME OF THE BIGGEST MISTAKES BUSINESSES MAKE WHEN TAKING ON INVESTMENT?
Choosing the wrong investors who aren’t aligned with the mission and direction of the company. For example, an investor wants to see a return on investment in 3 years and the founders aren’t thinking of selling for a decade or more.
Or, giving away too much equity too early. This can be really problematic for later stage investors who will worry that you don’t have enough skin in the game to keep pushing hard over many more years.
YOU HAVE EXPERIENCE WORKING IN FASHION E-COMMERCE… WHAT DO YOU THINK FASHION BRANDS CAN LEARN FROM TECH COMPANIES ABOUT GROWTH AND SCALE?
To be data-driven about everything, not just how to market the product, but what products to create and how to test ideas cheaply and quickly without going all in. It’s a fine balance because creative integrity also needs to be maintained, but it is a very high-risk thing to build a product without getting any feedback from customers before you do so. Startups would never dream of doing what fashion designers effectively do each season – gamble that their brilliant ideas are exactly what the market wants at a given moment in time. They run small, quick, cheap experiments to get a positive signal early. This is something all businesses should be doing as much as possible.
BLACKBIRD HAS ALWAYS HAD A STRONG VIEW ON BACKING COMPANIES THAT ARE ‘GLOBAL FROM DAY ONE’. HOW DO YOU THINK AUSTRALIAN BRANDS SHOULD APPROACH A PHILOSOPHY LIKE THIS?
One of the reasons Blackbird only invests in companies that sell to customers all over the world from the beginning is because we believe Australia is too small a population and economy to support a really big business. The internet is a great equaliser of access and there is no reason why you shouldn’t sell to the whole world from day one. Why put a lid on your ambition?
ONE OF THE PERKS OF YOUR JOB IS MEETING WITH HUNDREDS [OR MORE??] OF FOUNDERS A YEAR – BOTH IN AUSTRALIA AND THE US. WHAT MAKES A COMPANY – AND IT’S FOUNDER/S – STAND OUT?
It is very clear when founders are doing their life’s work. You can tell that it is a compulsion or a calling more than a job. That they would be doing this somehow, even if no-one invested in their company.
They are often able to tell a much more convincing narrative as to why the world needs what they are building, and why they are the people to build it.
When you meet these people you can’t help but want to be part of the journey and help them succeed on a huge scale.