An Investor's Lens On Governance with Blackbird's Sam Wong
You may have heard that Australia’s Blackbird Ventures have recently launched their first New Zealand fund. This is great news for New Zealand founders! Sam Wong (Partner) recently hit the ground in Auckland to lead the charge, so we took the opportunity to hear about governance as it relates to her role as an early stage investor. Top tips for founders to follow!
Many of Blackbird’s relationships with companies begin early doors, at the pre-seed or seed stage. When you are assessing these investment opportunities, what importance do you put on the advisors / directors?
In the earliest stages when Blackbird invests, we do not place much weight in advisors or independent directors when investing in startups. In fact, when founders over-emphasise their board or advisors this can be a negative signal for us. Outstanding founders don't need to cloak themselves with the accomplishments of others. We are always assessing what the company has achieved and how the founders communicate their vision, as well as the decisions they have made in building the company, when making investment decisions.
Got it. And when you do find an outstanding founder and are excited about what they have achieved and what is to come, and decide to invest, do you typically take a seat on the board?
Blackbird does not always take a board seat but we typically do if we invest over $1M or from Series A. We find often at seed stage the overhead or formalism of a board is not that helpful. Instead we like to focus on monthly catch ups where we catch up on the progress and try to unlock any problems the founders are encountering. Founders have such limited time - it makes no sense to spend 2-3 days preparing board papers when a bullet point email, some charts/google sheets and a coffee catchup would function just as well. As a company grows and raises more private investment this is obviously inadequate and at this point we would typically expect major investor/s to take a board seat, although it's not unusual to see founder-controlled boards at Series B and beyond.
When a formal governance structure is right for the stage and needs of the company, what value does an investor director typically bring to a board?
Each investor director will bring a unique set of insights and skills. Many will have operational experience that can be useful, networks that can be mined for customer introductions, hiring and investors who can lead later-stage rounds. In my opinion, however, the most underrated quality is an investor's belief. Starting a company is so emotionally hard – the reasons why it might fail far outweigh the ways in which it might work. The belief of your first investors is a powerful source of confidence and validation for the founders and not easily forgotten.
You must have some good insights from seeing what works well and what doesn’t as your portfolio companies grow and seek advisors and/or directors. Any top tips for founders on what to look for?
Try to assemble a diverse group who can complement you in areas where you are weak. You might choose to have someone who can help with fundraising, sales & marketing, people & hiring, industry insights and customer introductions and so on. The important thing is to be really specific about what you need help with and to set KPIs so it clear for both you and the advisor what their contribution will be judged on. Especially where equity is offered as compensation, make sure there is an agreement in place for a maximum of 2 years (not longer – the usefulness of most advisor relationships run their natural course within that time frame) and is subject to vesting, just as you would for employees. Always reference check advisors and board members too.
Blackbird's current New Zealand portfolio companies include Frieghtfish and Sunfed Meats. You can read about Tip's (Principal) thoughts on the opportunities in and direction of the New Zealand startup ecosysm here.