Bringing Innovation to Venture Capital: Techboard speaks with Jeremy Liddle

In his latest interview for Techboard Robin Block from MitchelLake speaks with Jeremy Liddle. Jeremy is an entrepreneurial problem solver. He co-founded CapitalPitch in 2014 to bring capital access to people looking to change the world. Founded in Australia, CapitalPitch is now poised to create a global platform capable of reinventing venture capital.  In this interview Jeremy explains how CapitalPitch is using a digital platform to change the way startups approach investment.

Jeremy will be speaking at the upcoming Startup Investing Conference series brought to you by his company Capital Pitch in Sydney on 12 September and in Melbourne on 12 October. Read more about the Conference below.

“It’s ironic that the most innovative industry in the world — VC — rarely innovates around its own processes. There are a few funds and accelerators that have built their own technology — First Round, in the US, is one that has a brilliant platform to help companies within their portfolio connect with each other. One of the fundamental ideas, though, behind what we are doing is to create a baseline standard for what ‘investor ready’ actually is for startups, and bring that to people on a digital platform.”

CapitalPitch has created a SaaS based education, communication and modelling platform that allows startups to engage with outside investors, each other, and CapitalPitch's investment fund — all while improving their own understanding of how to run a business and raise funds. On 12th September, Jeremy, his co-founder Emlyn Scott will be speaking at the Startup Investing Conference about changes to the industry. In preparation, Robin Block from MitchelLake sat down with Jeremy to gain insight into his motivations for founding CapitalPitch, and understand how he views the future of venture capital in Australia and around the world.

Robin: What is the story behind the idea for CapitalPitch?

Jeremy: I hit a very rough patch when I was 18 and was heading down a dark path. What I took away from that was an understanding that you need to make every step count. For me, that meant building businesses that help people. Entrepreneurs solve the world’s biggest problems.

In both Australia and South East Asia, the general VC industry is underdeveloped and unsophisticated. That is not to say that the existing VCs are doing anything wrong, they are playing an essential role in an incredibly difficult industry, but there is just so much more to be done. We are continuing to fall behind the US, China and other countries when we should be working to catch up. We like to quote a statistic that 99% of companies go unfunded, which is based on the number of approaches to registered venture capital funds in the 2016 Innovation Australia Report. That is somewhat misleading in that many companies are better suited to grow by more organic means — and some companies are not ready for or should not be raising capital in the first place. However, we believe that every great company that needs a late Seed to early A round, should have a better opportunity to get funding.

In 2014, I hosted the G20 Entrepreneurs summit in Sydney. In doing this, I participated in a research project designed to produce recommendations about how investment can create local economies capable of generating jobs and growth. I have always been interested in how entrepreneurship can help solve the youth employment crisis. Being a young entrepreneur, I went in thinking that young entrepreneurs are the solution. What we found was that it's actually high-growth entities that create the jobs which go on to employ a disproportionate number of youth, minorities and women. The stumbling block that came up in the research as the #1 issue entrepreneurs face, especially in Australia, was access to capital. That was the start of CapitalPitch — making the world a better place and enabling entrepreneurs is what drives me.

Robin: Has CapitalPitch changed since you first envisioned the platform?

Jeremy: Like any start-up, it’s been a journey. We quickly found that both serial entrepreneurs and first-time founders often do not fully understand the process of ‘investor readiness’ — the documentation, financial modelling, building a data room, legal agreements, and going through the due diligence process that is necessary to find a professional lead investor. When you scratch below the problem of access to capital, there is a deeper problem around education and understanding how this process works.

There are a lot of advisors charging exorbitant fees for assistance on this issue. We saw a meaningful opportunity to digitise that information, standardise it and give as much of it away for free as we could. That was the foundation for the pitch template, financial models, and cap-table calculators we constructed. We were able to turn much of what is required into templates and ultimately software. We can only engage with a limited number of companies for direct investment, but there is no reason that every entrepreneur in the world shouldn’t be able to access these templates and education.

The philosophy behind the platform that has emerged is like Xero for raising capital. Every company should be using these processes and tools to learn how to raise capital for themselves. It is a process and methodology as much as a platform. Like Xero, our platform is intended to be used as a tool for investor relations, in addition to the more focused goal of raising capital. We’d also love advisors, funds and all categories of investors to use the platform to manage their portfolio.

Robin: Why did you develop a CapitalPitch specific venture fund?

Jeremy: The hardest part in securing capital for a new company is finding a lead investor — someone who will write a check for a couple-hundred-grand, roll-up their sleeves and bring in other investors through their personal brand. To put it in the context of our company — getting Mark Maloney and Tulla onboard were the big steps that really finalised our firm's growth trajectory. It's not just their money, but their brand and time. Mark, along with Kevin O’Hara, the CIO at Tulla who pulled the deal together, have both invested a significant amount of their time and expertise to help us.

We now work to provide that advice and assistance to companies that our fund will invest into. We created the venture fund within CapitalPitch to be that lead investor — allowing us to not only fund their projects, but add the gravity that initial VC investment can bring. This is something we have been able to achieve, in large part, through collaboration with Mark, Tulla and the broader group of investors in the fund.

I believe that business should be a vehicle through which you generate enough money to do good things for this world. One of our best success stories is OpenMarkets. We helped them raise two rounds of capital and they are now flying — second only to CommSec in terms of an online trading platform. We have been able to create an end-to-end process and provide the groundwork for founders to pick the right investors and grow at scale.

Robin: What is your vision for the future of CapitalPitch and VC in Australia — do you have any advice for entrepreneurs beyond visiting your website?

Jeremy: With the addition of the fund, which is now an unconditionally registered ESVCLP, there are now two main halves to our business — the fund and the platform. We intend to focus on the fund and continue to grow it through targeted investment. For the platform, our goal is to expand and help as many startups as we can, globally. We get a lot of traffic from the US and Asia on the site already. We had previously been focusing on providing free content in the form of templates and other tools. As I said, our goal is to create a baseline standard for what ‘investor ready’ is, and make that standard available to as wide an audience as possible.

If we want to build a great technology industry, we must have a vibrant VC industry. To achieve that, we need VCs that are returning a positive ROI to their investors. In the last 4-5 years, the big players such as Blackbird and Blue Sky have started producing good returns. But, the Australian venture capital community is nowhere near as strong as in the US, Israel or parts of Asia. There is certainly a claim in Australia that VCs are too risk averse — and that may be correct when compared to the US and Israel. However, they are managing other people's money and losing that money would be catastrophic to the entire industry, so it is prudent to be somewhat risk averse until there is far more liquidity in the market. Ten years ago, when the former vintage of VCs lost money on the dot-com bubble and in the global financial crisis, all the institutional investors pulled out of the VC industry — it was horrible for the whole ecosystem.

I hope that the recent growth we have had here for VC is the start of something great — not just a blip on the radar. Depending on which statistics you look at, something like 21% of US GDP is generated by venture capital backed businesses — in Australia it’s something like 0.01%. In both the US and China, the technology industry is generating the lion’s share of growth. Unless we get the capital markets right for early stage technology, we are going to struggle, or just continue to slide out of the G20 and down the global rankings — if you are as competitive as I am and many Australians are, this is not acceptable. We can do a lot better than that. The Australian VC industry needs to build a track record capable of convincing super funds and other institutional money to start taking this asset class seriously.

I think that Australia is a dangerously big market. People think that they can build a great business only in Australia. What some people don't understand is that you are competing with the rest of the world whether you are targeting 20 countries or only one. I think the best advice I can give someone who is looking to start a business is to find a bigger problem. People often get excited by ‘great ideas’ — ideas are meaningless. Find a big problem and figure out how to solve it. That will create a business that makes an impact.

Jeremy Liddle is a VC Lead Investor In Tech Startups, CapitalPitch Co-Founder and Entrepreneur. Jeremy is also a member of Techboard's Panel of Experts for New South Wales 

Robin Block is Head of Engagement at the MitchelLake Group in Sydney. Robin explores the human stories behind digital transformation and how they are changing the future of business.

Startup Investing Conference

CapitalPitch, a venture capital startup dedicated to connecting great founders with sophisticated investors, is hosting two Startup Investing Conferences, taking place in Sydney on the 12th of September, and Melbourne on the 12th of October.

This event will feature elite networking opportunities and exclusive presentations from professional investors such as Elaine Stead (Blue Sky) and Mark Maloney (Tulla), and technology industry leaders including Sam Cawthorn (Speakers Institute) and Catriona Wallace (Flamingo).

Put simply, this is going to be an unmissable day, that will give you an unfair advantage. There are only a very limited number of tickets still available. Book your tickets now to avoid missing out, as these conferences WILL SELL OUT.