San Francisco based Marvin Liao joined Derek Gerrad and Tom Young for an enlightening conversation focusing on funding opportunities for startups in Western Australia. Marvin is no stranger to the world of startups and the make-or-break role that funding plays in their growth. Currently Partner and investor at 500 Startups, the micro ventures capital fund’s mission is to discover and back the world’s most talented entrepreneurs, helping them to successfully scale their companies.
Marvin joined 500 Startups after 10 years as an executive at Yahoo, where his regional and global management roles fuelled his passion for digital marketing and company development. Leading onto angel investing, he now runs the San Francisco Accelerator program for 500 Startups, whilst also investing in seed stage startups.
Responsible for their accelerator program, Marvin decides which companies are ready for the next stage of development with venture capital funding and direct seed deals. Funding opportunities can boost a startup into a thriving business if utilised successfully, however Marvin emphasises that founders need to be smart about their growth plans.
“One of the main problems I see in business is the mentality of ‘if we build it, they will come’. A big reason startups fail is they don’t invest time and funds into customer acquisition. Marketing needs a lot of work and it’s disappointing to see them fall down due to their lack of ability to get customers.”
With Marvin’s extensive industry experience, 500 Startups has evolved to address this issue – focusing on founders who have a solid product but need help with scaling of customer acquisition. “You really shouldn’t be doing an accelerator program if you are not Venture Capital fundable” he shares.
“It’s a lot cheaper now to form a startup, but it's really hard to scale and break out of being an early stage business. There is so much competition, the market in some areas is really hard to get into. The competitive level in early stage startups is high as there are so many companies. You need an ‘edge’ and often need to raise funds to break out of this competitive space. What is your new solution to acquire customers that no-one has thought of yet? You need to calculate if there is a need for the product, don’t just spend time building it. Before you build anything, make sure you are talking to a lot of potential customers."
One of the biggest questions startups regularly face is ‘when should I look for investment?’. Obviously, venture capital funding can encourage growth opportunities but Marvin is a strong advocate of ‘bootstrapping’ for as long as possible. “You need to really consider if you should take investment. Most investors add zero to negative value, and you can't get rid of them once you've taken the money. It’s a lot of added pressure and risk, for this reason always make sure your values and your goals are aligned if you do take the investment route. A lot of startups die by bringing in the wrong investor.”
A number of Western Australian startups have achieved success with other forms of raising investment, such as crowdfunding. The West Winds Gin equity crowdfunding recently raised $932,000 from 293 investors. Tom Young, a Plus Eight 2018 graduate, raised over $500k in funding and was oversubscribed 300% on seed raise. He is familiar with funding in the local ecosystem and added to the discussion. “It's a very hard thing to do, to turn down a half-million dollar cheque when you're broke because you've got a gut feeling, but it's important to make these decisions seriously.”
Derek Gerrard, Spacecubed’s current Entrepreneur in Residence, helps steer the Plus Eight program. “It's important to remember that funding comes with an agenda, and you need to take the right funding at the right time. That's the approach we are bringing to Plus Eight.”
Are you ready to scale your startup? The Plus Eight accelerator provides seed funding, support and mentorship for founders ready to take the next step. Read more about it, and sign up for the 2019 program, here.
