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HOUSEKEEPING 📨

Today was a rollercoaster of a day for me. The high was an incredible event I just attended, Startmate (we are interviewing the CEO today) Alumni Demo Day. It was a showcase of some of the accelerator’s best and brightest startup teams since their inception ~15 years ago. The list included Andy Miller (米乐), co-founder & CEO of Heaps Normal, Sophie & Christian Silver, co-founders of Polymath, Andy O'Connor, co-CEO & co-founder of JustFund, Annabel Hay, co-founder & CEO of Clutch Glue, Francis Vierboom, co-founder of Propeller, Gemma Lloyd, co-founder of WORK180, Chris & Alex Naoumidis, co-founders of Mindset Health, Ruby Jones, CEO of Aquila. Startmate’s funds perform alongside any fund in the world, most years sitting in the top decile of global funds. The event was one of the more inspiring things I’ve seen in a long time. The low point of the day was waking up to the news that Charlie Kirk had been murdered.

Charlie’s politics are not my politics. I don’t think I’ve agreed with a single framing he’s had in the years I’ve listened to him. And that is supposed to be ok. The idea of free and fair debate is what Charlie Kirk stood for. To me, he seemed like a principled family man, and even if he wasn’t, no one deserves what happened today.

The world today is fractured. We live at the behest of social media algorithms that divide us more and more every scroll we make. And we are all receding deeper and deeper into our own echo chambers. One thing I am conscious of is always listening to the other side. If you are conservative, listen to Ezra Klein now and again. If you are liberal, watch All-In. Read Pirate Wires. We aren’t going to get anywhere unless we get there together. And we aren’t going to move in the same direction if we aren’t at least listening to the other side. Enjoy today’s post, and thanks as always for reading.

INTERVIEW 🎙️

Michael Batko, CEO at Startmate

Michael Batko is the CEO of Startmate, Australia’s most active early-stage accelerator and venture capital investor. Under his leadership, Startmate backs around 30 companies each year and has invested in over 300 startups, building a portfolio valued at more than $4.5 billion. Originally from Austria, Batko earned a CEMS MIM International Management degree from the Vienna University of Economics and Business and started his career in corporate roles at American Express, PwC, and KPMG Deutschland before making the leap into Australia’s startup ecosystem.

His startup journey began as the first employee at Mad Paws, a pet-sitting marketplace, followed by scaling the consultant platform Expert360 through its Series A and $14 million Series B funding rounds. In 2018, he joined Startmate as Head of Operations before becoming CEO, guided by his philosophy to “pay it forward” and support dozens of founders simultaneously rather than just one. Known for his fast, hands-on leadership style, Batko also shares his insights in his newsletter, Batko OS, and has conducted in-depth research by interviewing over 15 top CEOs to better understand effective startup leadership.

What metrics matter most in early-stage startups?

The most important thing to me is always customer obsession. It's always about the founder talking as much as possible to customers, understanding them, and going really deep with them. If you really asked me for a metric, it would be something along the lines of the number of customer conversations they have per day. It literally should be per day. It should be a habit happening every single day or every single week, whether it's conversations, reach-outs, or meetups in some shape or form. I just want to know that the founders truly care about the problem they're solving.

That's somewhat uncommon, especially for some larger investors. At Startmate, we focus on seed and pre-seed investments, targeting founders who are deeply passionate about their customers and the problem they're solving. If your question was whether it's uncommon for founders, that's actually the other lens. It's uncommon. I think founders so often either have a bit of shiny tool syndrome, or they essentially love a solution and some tech that they just love building. Then they just don't go out and talk to customers. It's also the classic quote: ‘I'm going to build it and they will come,’ and they just never come. You can't just build the tool and then expect lots of customers to flock your way. You actually realise pretty quickly how marketing and sales are the majority of your job as a founder.

What's best about customer conversations is that you do the two most important things at the same time while you talk to customers. One: you're figuring out if you're building the right thing. Two: you're figuring out if you're building it for the right people. By doing that, you're literally having product insights as well as sales and marketing insights at the same time. It's so important.

What’s the most overlooked factor in team success?

I'll go with a slightly different one than most investors probably give you, and it's one that's really dear to me: the speed of communication. It's like night and day. Some founders literally need to be followed up with three times until they actually reply weeks and weeks later. The best founders I've found are literally the ones who reply almost instantaneously. They genuinely care about driving an outcome.

They know who the most important stakeholders are, so they don't procrastinate. They reply within 15 minutes of getting an email, text message, or WhatsApp, whatever it is. The reason it's so important is that it literally compounds for the entire journey of your company. If you do that well, it just builds trust with investors, customers, and your team. Those kinds of interactions have their own momentum that you're building, which can lead to massive outcomes later down the line.

What patterns define breakout startups in the accelerator?

There's a classic quote here: ‘One of the easiest people to deceive is yourself.’ The most amazing pattern I've observed is that the people who truly get the most out of the accelerator, out of being a founder, out of life, are actually those who go in with a low ego and an obsession for truth. It's a certain sense of self-awareness and not taking yourself too seriously, genuinely looking for the insights and what customers are saying, rather than what you are shoehorning into your product or solution.

It also comes with surrounding yourself with the types of people who will hold you to account in a way. So the pattern itself is literally the obsession with truth. You always look for it, and you ruthlessly trim back if something doesn't stack up.

How should teams prep for fundraising success?

It will sound like a broken record, but I'm going to say customer conversations again, but I'll be more specific than that. To give you an insight into the accelerator, it's essentially a 12-week program, and in the first 10 weeks, you are not talking to investors. You're 100% focused on customers. You're either talking to customers or you're building product for those customers you talk to. Why is that actually important? Because by doing that, your fundraise will be so much easier. The fundraise is literally a function of how well you understand your customers and how well you build for them.

What do you need to do really well in order to do a good fundraise? Figure out, number one, what's the one thing that your startup does better than anyone else? Not just better, but ten times better than anyone else. What's the one thing? It's not about having a product that solves all the customers' problems. It's about the one problem you're going to pick for a customer and you do orders of magnitude better than anyone else.

The classic quote I can give you here—I learned this one from Rory from Propeller—is that founders often overbake their products and build way too many features. The quote that I loved was: "More dishes on the menu in restaurants don't make restaurants any better. If anything, the best restaurants are literally the restaurants with six dishes on them, and all six of them are incredible. If you get 30 pages on the menu, it's like, 'Oh my God, I don't even know what to choose,' and everything's sub-average."

You need to find the one thing you're going to do better than the competition. Sell that to a couple of people. When I say sell that to a couple of people, I don't even necessarily care about the price point. It's almost just the validation that somebody's ready to open up their wallet and pay a bit of money for it. If you do that, then that's the first stepping stone of actually raising a seed round.

How can founders become better storytellers?

I'll actually give you an example here from last night, which is perfect. I go for drinks, meet up with founders. A founder comes up and says, "Hey, can I get a bit of advice from you?" He starts explaining his company, and it literally takes us 30 to 40 minutes to get to the bottom of the company. It's such a classic example, which you've probably had hundreds of times, right? It's a long conversation. It's the whole unpacking of the industry, how it all works together, and so on. I said, "All right, cool. What can I do to help you?" He asked me to, "Help me with my narrative. What did I do wrong?" Then I did my best to pitch this company back him in 20 seconds flat.

To your question of how to be a good storyteller or have a good narrative, it is the skill set to be concise. It is the skill set to be able to communicate an idea to somebody in two or three sentences so they get it, and they keep asking you lots of questions afterwards.

The tip that I have for founders is that you need to assume that whoever you're talking to has no idea about your industry, and no idea about your product. We take way too many things for granted. We assume that people have way more knowledge than they actually do. Another is to start with the customer journey. The easiest way to explain a startup is literally, ‘Hey, my customer is X. This is how they currently do a thing, and this is how they do the thing with our product.’ The easiest narrative possible. You're explaining the pain and problem of what they do right now, then this is how they do it with us. You explain the benefit, and boom, it's done.

From that conversation, you can then unpack the market, how exactly it works, what the competition is, et cetera. But way too many founders over-explain. My tip is: simplify, simplify, simplify, and always approach it from the lens of starting with the customer. What do they currently do? What does the future look like?

What is one piece of advice early founders should ignore?

I'll stay on the narrative piece, sorry. I want people to ignore the advice that you need a pitch deck. I actually don't think you need a pitch deck at all. You don't need a pitch deck until you're ready to fundraise. And even at the fundraising stage, honestly, you probably don't even need a pitch deck either. You could actually raise money without one if you truly do the first step, which is understanding customers, building the right product, etc.

I mean, pitch decks have so many pet peeves in there. So many things are a total waste of time. ‘How big is the market? How big is the addressable market?’ Estimating the billions of dollars that it's worth, as if any of those slides were ever true. The best way to pitch someone is to not even ask about money. There's another quote in here: ‘You ask for money, you get advice, and you ask for advice, you get money.’ The best pitch you can do is literally not pitching somebody. You're just explaining to them what amazing thing you're working on.

If it's an investor you're talking to, then it literally is about catching up with them a couple of months before you're even thinking about fundraising. Explain to them: ‘Hey, this is the big problem I'm working on. This is what's happening. And this is where I'm going to be in six months' time.’ Catch up with that same investor six months later; no pitch deck required. ‘Hey, six months ago, I told you I'm going to be here. This is where I'm at.’ That's almost the best pitch I can tell you. All without a pitch deck.

💡 Fun fact: Batko’s newsletter and his series, How Do You CEO, loosely inspired this very newsletter.

How long should an early-stage fundraise take?

Fundraising is at least a three-month full-time process, and when I say full-time process, I mean 40 hours a week; all you're doing is fundraising as a solo founder. The problem is you're still trying to talk to customers, trying to build product, trying to run a company. But fundraising is a crazy process, particularly for solo founders. If you have co-founders—two or three people—what I always recommend is one founder goes hardcore after fundraising, the other founder doesn't even touch fundraising and doesn't get distracted until the final stages of the approval processes, at which stage the second founder can get involved as well. But yeah, in terms of effort, it is a three-month full-time journey.

What are the different steps involved? In an ideal world, you literally have had those advice conversations with investors months and months before you even start fundraising, because then, as we just mentioned, you can build those lines, not dots. The first thing that happens is you create your pitch deck. That is the usual thing. But the pitch deck itself takes you a week. You get a bit of advice, but it takes you another week. While you're doing the deck, you're essentially trying to get an investor list together. At Startmate, you get a list of 1,000 to 1,200 investors from us.

Website outreach has the tiniest chance of success. I don't even know a single company that was ever successful by just submitting the pitch deck on a VC website. This is already a dead end. What you need to do in step number two is to get warm introductions.

Who do investors trust? They trust portfolio companies. Great introductions come from portfolio companies. They trust their own LPs, which are much harder to get through, but they make for great introductions. They also trust accelerators and people who are well-connected in the ecosystem. If you do it well and you can design a database of the investors you want to talk to, send it to 20 people who can introduce you to someone, and watch people literally just jump through the database and put the name against who they can introduce you to. I've seen really good processes run like that. Within two days, you can get lots of warm introductions this way. Let's give that a couple more weeks. So we now have preparation for two weeks, warm introductions for another two weeks. You're already a month in.

You get a coffee meeting of 30 minutes with an investor. What you want to do in an ideal world is create a sense of FOMO. You want to essentially batch all of those coffee meetings into a week. You want to always pitch it as, ‘Hey, in this week, I'm meeting all of the investors. And if you don't want to miss out on this round, you're literally going to meet me in this week.’

After the first coffee meeting, if a VC does actually like you, though, they're going to line up a second meeting pretty quickly. The second meeting is often with an associate and a partner together. They then end up doing a write-up and a memo of a couple of pages. Then it takes you to the final meeting, which is an investment committee meeting, which usually has all of the partners in the VC fund in there as well. That usually takes 45 minutes to 60 minutes as a meeting itself. Off the back of that, if you’re lucky, you get the term sheet.

After the term sheet, it's subject to due diligence. Due diligence takes maybe a week or two. And then you should have the money in the bank. Database to money in the bank—that is three months. And that's if you're actually having a successful fundraise. Unsuccessful fundraises can go on for five years if you have the runway.

What startup trends are exciting or overdone today?

What's probably a bit overdone by now is—and this is maybe a personal bias and a scar from my experience—probably marketplaces. We have passed the age of marketplaces. We've had plenty, and there are plenty that already exist; now everybody's trying to differentiate. It's a complex business model to make work. You need huge volumes, which usually means one player wins, which is totally cool if you are that person.

What is underrated? Well, the interesting one with AI is that even though there's this massive hype around AI, I do actually still think it's underrated in a way. Because it's such an easy one to go like, ‘Yeah, but everything's been solved already. Everybody's already building with AI.’ Honestly, it's just the beginning. There's so much more to happen. So I am actually really excited about it.

But because I know you're not going to let me rest on just AI because it's the obvious answer, I would actually say that the other part which is really exciting is robotics. Robotics is a pretty epic space, and mostly because to me the ‘why now’ is really exciting. Why is now precisely the time in history when robotics is going to take off? It's because one, software for robotics has become so much easier thanks to AI. But then, the other part is actually from a hardware perspective; it has become so much easier to prototype hardware than it ever used to be. 3D printing itself has already made prototyping and iteration infinitely faster than even five or ten years ago. It's so much cheaper and faster. You can do it in your own home. That is actually really exciting. I do think that's going to push the entire industry forward.

Are there any books that you recommend as gospel for early-stage founders?

The classic is always Zero to One. I'm not actually going to even recommend that because everybody does. But the one that actually comes to mind is my favourite book in the world. I would recommend it to anyone—and it really applies to founders as well—which is The Courage to Be Disliked.

Because it's so easy to accumulate hundreds, if not thousands, of notes from customers and investors, and to try to blend in with the other founders in your co-working space, becoming just average, but as a founder, you can't be average. It's almost as if you are average as a founder, you will not make it.

And that’s it! You can follow and connect with Michael over on LinkedIn and Twitter, and don’t forget to check out Startmate’s website.

BRAIN FOOD 🧠 

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