Our VC in Residence programme is designed for entrepreneurs and startups to access the advice and support of experienced VC’s to help them grow. The programme is an example of how we leverage our network for the benefit of members. This is brought to life through events such as workshops, fireside chats with global tech leaders, expert advisory sessions, fundraising talks and panel debates. We kicked off our first virtual Fireside Chat with investor and entrepreneur Bill Liao on July 2nd.
Bill Liao is a Chinese-Australian-Irish entrepreneur, investor, diplomat, business mentor, author, passionate leader and speaker, with a distinguished record in business development and community activism. We spoke about all things deep tech, accelerators, and exclusive insights about the upcoming SOSV Momentum Pre-accelerator program.
You’ve mentioned that you ‘unconventionally’ fell into the world of investments and startups, and that a turning point for you was recognising that someone with an engineering/technical background and sales skills is a unique proposition. Can you tell us a bit more about how you came to realise the power of those combined skills and the opportunities it created for you?
My saving grace from a low paid job, especially as I had no college degree, was my passion for computers. I was able to get a job within a multinational firm in the computer industry. I learned how to “do business” through multinationals. When I was 27, I found that I was solving problems that salespeople were creating. One day, I was asked to fix a HR employee’s computer and saw that their login was taped to the side of their computer screen- and of course I had to log on. What I noticed when I looked through peoples salaries was that salespeople are in fact not stupid- comparing the effort I put into my job and the amount they earn, even before commission.
I was working in this dead end job with a baby on the way and $30,000 in debt when my wife went to a session with the Hunger Project, who are a transformative charity that focuses on ending poverty through the empowerment of women. She came back from this meeting amazed and told me about 3 Indian women who never had electricity and instead of asking for money they were explaining what they’d do to end poverty in their villages. After hearing this, I felt that I had to pledge $5,000.
I went to another meeting for the Hunger Project and after the Director spoke to me and asked to imagine who I need to be to make a pledge to The Hunger Project without suffering. So the next day I quit my job and pledged $50,000. From there, I learned how to sell- cold calling, door to door, and any experience I could gain. The only way to learn how to sell is to roll up your sleeves, take a phonebook and start selling something. I got good at it, and started selling products that got engineers to learn how to sell. I managed to get some other coaches in and there was a management buyout of the business with me. I used that money to invest in a tech startup and was able to fulfill my pledge of $100,000 in 18 months… so yes, quite unconventional.
Your first couple companies were founded and floated in Australia and Germany. It’s always interesting to understand the different investment climates of different countries. Do you see a big difference in terms of investing and entrepreneurship?
There are some common behaviours and some differences between different countries.
- Due diligence is a very common thing all VC’s look for in a startup.
- Startups need to be very candid and transparent when meeting an investor. More startups in Europe are learning that they shouldn’t send an NDA to an investor.
- Coming to investors with ideas carry no value. Adding secrecy to worthless ideas doesn’t make it any better and puts investors off taking action.
- There are myths that it’s easier to raise money in the US but in my experience if you are an amazing salesperson with great potential this is true- but if you are amazing then it’s true globally.
- No matter where you are, visibility is so important. Stealth projects are great but don’t compare to massive engagement. If everyone is seeking that round your valuation will rise and competition will drive up the price. On the other hand, if the price goes too high and you need another round that can cause a problem. If you have a massive valuation in your first round then you will have to deliver 10 times as much in the second round.
- In the UK and Ireland because of the SEIS and EIS you can see a lot of common stock price rounds that are very small, diluted, and very expensive equity wise. However, in San Francisco you can see very high valuations with less transactions per startups. Although there are more investors and actual transactions, the proportion of startups that are successful is quite low.
- In the US grant money isn’t as normalized as it is in Europe.
- There are also differences in how investors view your pitch and team and what they consider traction is depending on the location.
- If you have a B2C business 10 million is the new 10,000 in the US. If you don’t have 10 million engagements in 3 months you will be wasting a US investors time. In Europe, angels and VCs are more lenient. They say “We can nurture you but because of that risk we do want a big chunk of the company”. Whereas valuation in the US can go crazy if enough people sweep in behind it.
Can you give us an insight into the do’s and don’ts for startups approaching investors?
- Don’t send me a cold email. I am open to speak to anyone during my office hours whether it’s 15 seconds or 15 minutes.
- Don’t live by the quote “If you want advice, ask for money and if you want money, ask for advice.” Investors have become privy to this so we prefer transparency and working with entrepreneurs who know exactly what they want. Don’t call up my office hours to ask for advice when you want money or ask for money when you want advice.
- Do your homework! Does your perfect investor even have any cash anymore? Most investors announce when they have a new fund that lasts about 4-6 years. If you research an investor and their last announcement was made about 5 years ago you may need to rethink your strategy. Has this VC invested in your industry before and if so, did they invest in your direct competitors? Usually we don’t like NDAs but in this case they’re a good idea so that you don’t give all of your proprietary information to people who have invested in your competitors.. too much of a moral hazard
- Do find ways to find startups that recently raised money. A startup that has raised money always has a very good relationship with their VC. So, make sure to help that startup- give out favours so that they owe you one. Make sure to network, do your homework, and be generous! If there’s a startup that has a good relationship with their VC it’s usually the CFO that is the main point of contact rather than the CEO. A warm introduction to an investor is the best way in.
- Don’t be reluctant to global accelerators. I see this in Ireland a lot and therefore the Irish are quite under represented in global accelerators. The beauty of an accelerator is that startups get to test their team, especially when travelling. Some complain that they have to get their whole team to move- which is the exact reason I think startups should go for it! This only means that they have nothing to do but concentrate on the startup and that’s a crucial step.
In 2020, do you think this disruption to the market will allow firms to take a step back and see how they’re investing and look at something more sustainable, and environmentally friendly. Do you think that there’s room for positive change?
As a startup founder and investor I have to say that I’m an optimist. As an environmental campaigner, not so much. It is a great time to reassess what you’re doing. We’re in 2 pandemics: one of Covid and a pandemic of stupidity! We run biotech accelerators. I know biotech protocol and I know how massively infectious agents can be and how to sterilize labs to prevent contamination. I can’t believe it when I see people congregate.. and without masks. That’s the willful ignorance that is fake news, which was a great term until it was applied to the mainstream media. So do I think things can get better? Yes. Do I think things will get better? In some areas. We need to behave on this planet like we’re here to stay and not a hotel room. I really believe we all need to become a little more sensitive to the environment. If you have a family name, you’re not renting it. This relates back to my favourite quote from William Gibson:
“The future has already happened; it is just not evenly distributed”
SOSV was the first VC firm to run their own accelerators. What are the challenges and rewards that come with working alongside startups in such an early stage in the life cycle?
I joined SOSV when I recognised that Sean O’Sullivan had the same desire as myself to do good. Sean is a startup founder and every partner at SOSV has the “startup mentality”. We do early stage accelerator programmes because we love that startup moment when people are intensely working to get something done. We all have real experience with it as opposed to the mainstream investors. At SOSV, we have 100 plus staff and 1000 companies in our portfolio, adding 100 per year (even in covid times). It’s so rewarding to see someone get a deal or start selling but we’ve also been through failure and it’s not necessarily always going to work- in fact the chances of working are actually quite low. The only chance of overcoming that low chance of success is enormously hard work. And we’ve all done it.
We are in some aspect a startup ourselves. We were the first ones to run our own accelerators, do verticals, and biotech. Additionally, because we run accelerators we do follow on into future rounds but we generally do not lead those rounds. We have a big network of investors that we encourage startups to meet so that they can lead the round we follow on. We deployed 50 million in cash last year (post accelerator) and other VCs into the same companies into rounds that they led and we followed on into have deployed just shy of a billion. Once startups come out of the accelerator we are enthusiasts but we don’t want to be the ones that are falling in love with our own children. We know that post accelerator other VCs can validate and put in more cash- we have a super good track record of doing that.
In addition to running Accelerator programs, you have recently announced the upcoming SOSV Momentum Pre-Accelerator program. Can you tell us a little more about that?
In running our high tech and deep tech accelerator programmes we noticed a gap in different settings where deep tech is researched in understanding all the career opportunities for those in deep tech. It is rare for those deep tech people to be told that they can create their own business and team and be an entrepreneur. I’ve got teams who during the accelerator raised millions and built their own lab in 6 months. They’ve raised $30-60 million and still have a great growing company while still owning and controlling their own lab with their product on the market. In San Francisco you can buy a delicious ice cream that’s never seen the inside of a cow, has a carbon footprint that is vanishingly small, and is lactose free. This is all coming from a team that came together in Cork. For a scientist who’s smart enough to get a degree, you’re smart enough to learn how to sell. On the other hand, I’ve not had much luck in training salespeople about neuroscience!
So our Pre-accelerator is all about putting that information out there and showing how people can roll up their sleeves and start their own business with what they have. A big part of the journey post pre-accelerator is to go to an accelerator. The point is just to see that entrepreneurship is not just a valid career path but an excellent career path. It is a gap in the market and it’s all about building that momentum.