‘Give’. It’s the four-letter word that makes Steve Baxter’s blood boil when he’s being pitched to by a start-up in search of capital. The investor, tech entrepreneur and Shark Tank star discussed his pet peeve at Intuit QuickBooks Connect Sydney 2017, earlier this month, during an entertaining and candid interview with event MC Rove McManus.
Asked by the comedian and TV presenter whether it was important, as a start-up investor, to say ‘no’, Baxter said the word was his ‘default’ position. He explained, “I’m going to sit there during the pitch and say ‘no’ until you can prove to me that it works. The thing that really pisses me off when people pitch is if they use the word ‘give’ [as in] ‘give me money’. Continuing, he had stern words for start-up founders heading into a pitch: “Let’s just understand the commercial transaction that’s happening here – you have to pitch [the business]. You’re a sales person, you need to convince me to buy it”.
Nevertheless, Baxter admitted he had said ‘no’ to ideas he thought wouldn’t fly only to discover they were generating significant money and had a sizeable consumer base. He added, “I’m one opinion. Traction trumps opinion every time. It doesn’t matter what an old man thinks. What matter…is a customer taking their wallet out and buying your product. Never accept an opinion from someone who’s not a customer.”
During his interview with McManus, Baxter touched on the “horrible” situation he faced in his first and second companies (internet provider SE Net and teleco PIPE Networks); namely, Telstra was simultaneously their biggest supplier and their biggest competitor. Despite some ‘scary days’, he said Telstra had helped build the markets his businesses were operating in, using advertising to generate demand for “this thing called the internet”.
Baxter also spoke to McManus about his hopes for a future free of traffic woes (“I want flying cars”); his role models (“I take a lot of my personal make-up from my instructors and drill sergeants in the Army… they led from the front”); and his regret at leaving school at 15 (“Having a more formal education would make life easier… there’s value in getting someone’s else’s perspective and not making so many bloody mistakes”).
Following his appearance at QuickBooks Connect, Baxter took questions from Dynamic Business about his approach to investing in start-ups, the challenges he has faced in business and the Federal Budget.
What continues to excite you about investing in and mentoring start-ups?
Baxter: What excites me is seeing people have a crack. We need more courage in business and the best way to get that is to just ‘do’. Nowadays there is so much support and help, be it blogs, books, programs, co-working spaces where you can get answers – use all of those available resources for the best outcome.
Is it equally as important to invest mental capital in a start-up as it is money?
Baxter: I hope I am seen as smart money to the people I invest in. That means we think we can add more than cash. I have a team that I bring with me – analysts, operations staffs and accounting staff – we are more than money. Having your face on TV also means that you can get a lot of introductions that would otherwise be hard to get – this helps a lot.
To what extent are your investment decisions driven by a) the head (i.e. a strong business case) and b) the heart (e.g. the sense that something truly great is in the works)?
Baxter: Really, always the head. When it comes down to it, the team we invest in has to be able to execute, it doesn’t matter how much the heart screams – go with the head.
When start-ups pitch to you, what are some common ‘deal killers’? At QuickBooks Connect, you mentioned people who, during their pitch, use the word ‘give’. Anything else?
Baxter: Well, I really don’t like people who think that I will give them money, I buy their equity, they sell it – that is a well-defined commercial transaction. Other red flags for me are being lied to – if you lie in a pitch then what is to stop you lying post-investment? Don’t lie!
Is there a start-up in your investment portfolio you wish you’d thought of?
Baxter: I don’t really have any that I think I would be inherently better at than the founders we have invested in.
What about one you passed on that now you wish you hadn’t?
Baxter: There are plenty I would have loved to have invested in…but I am only going to tell you the winners. Some Brisbane ones I had a chance to invest in were SwipeAds and ClipChamp. A local one that has not needed investment but I would have loved to have helped out was Tanda.
What key challenges have you faced both as an entrepreneur and investor?
Baxter: Key challenges are always sales. If you don’t sell, you die. Selling never came easy to me. My first business was B2C so a mass advertising approach, mixed with word of mouth, worked well there. In the second one, I was good at sales to peers but outside of that I struggled. It wasn’t that I couldn’t do it but I was far outside my comfort zone. Thankfully once we grew, I got to stick with what I did best.
How do you find the time to juggle commitments to the start-ups you mentor, the boards you serve on and your own businesses, including Transition Level Investments and tech start-up hub River City Labs?
Baxter: Time is the one thing you can’t make more of – except by employing people. I have a team that assists in what we do. I like to keep busy, although tend to complain when I am busy – I complain worse when I am bored though.
What are your thoughts on the recent Federal Budget, including the visa changes, in terms of the impact on start-ups?
Baxter: The Federal Budget was a sign of the political realities of a country that has gone by too long without any real economic hardship. Weak leaders are not doing what is right and it seems neither side has the courage to convince us that we all need to share in the fix to the federal budget issues. As for the startup sector, not long ago it received the $1.1 billion NISA (National Innovation Science Agenda) package, it has gotten a fair bit in a short period.
On the visa issue, I think where a skilled migration visa is used to bring in a waitress to work here then that visa is broken and needs fixing. I think some of the rhetoric around the change was unhelpful in terms of highlighting Australia as a startup/tech-enlightened destination for smart human capital. We have missed the chance to seize on the fact that the US is on the nose for smart global mobile tech savvy workers and we need to seize on that to bring the feedstock of the tech startup sector (smart people) here.
See also: “It was very intense”: Sydney start-up PractiFI crowned winner of 1st Salesforce PitchComp and Fear not; it’s risky business but not as hard as you think says Steve Baxter of start-up hub River City Labs