Transcript Synced · select any line to jump ▾ 0:02 Cheryl Mack: Founders scale faster on Deel. Set up payroll for any country in minutes. 0:07 Maxine Minter: Hire anyone anywhere. 0:09 Cheryl Mack: Get visas handled fast and get back to building. Visit deel.com/dayone. 0:15 Maxine Minter: That's d-e-e-l.com/dayone. Okay, 3, 2, 1. 0:26 Cheryl Mack: Hey, I'm Cheryl. 0:27 Maxine Minter: I'm Maxine. 0:28 Cheryl Mack: This is First Check, part of Day One, the network dedicated to founders, operators, and investors. 0:32 Maxine Minter: Investors. If you want to be a better early-stage investor, this is the show for you. 0:35 Cheryl Mack: So TL;DR, if you don't want to suck at investing, listen up. 0:39 Maxine Minter: Alrighty. 0:45 Cheryl Mack: Excellent. Okay, so this next guest is somebody that I have known pretty much as long as I've been investing, and much longer than that. In fact, he helped me get into angel investing. He helped me write my first couple of checks. I don't think I would be where I am today if it wasn't for Matt Brown from Black Nova. 1:04 Maxine Minter: Yeah, he was your gateway, right, into this ecosystem. And I think actually has been, you know, a supporting member of this ecosystem for so long, and it has been the gateway for a lot of folks into this world. He also, you know, has been an operator before, which is a fairly rare thing in the investor group in the Australian ecosystem. So super excited to have him on, to have him kind of riff a little bit on what are the similarities, what are the differences, talk a little bit about how he nerds out on boring businesses. I love the way he thinks about founding, he thinks about building. He's kind of an interesting combination of experiences that he is just, I think, a real value add to have around the table as an investor. So I am jazzed to get to be able to spend an hour with him just to nerd out with him on these businesses. 1:47 Cheryl Mack: Oh yeah, I think he has such a unique perspective on investing. Like, they're very thematic, but that comes from his experience as, like, he built a company, he exited a company, he's built several companies. Actually, the number of, companies that Matt has co-founded is hilarious. I'm like, oh, you co-founded that one as well? Yes. 2:05 Maxine Minter: Okay, great. Of course. Serial founder, can't stop himself. I guess that's one way to scratch that itch is instead of you founding the companies, go and back other founders founding that company so you could be a little bit along for the journey with them. 2:19 Cheryl Mack: Yeah. He's just surrounded by founders constantly and excellent founders too. And he is himself one. And I'm excited to ask him about what has it been like to actually co-found a funds management company, because that's what he's done, right? They are now building a different type of company that invests people's money. 2:38 Maxine Minter: Yeah, yeah, very different kind of business. I'm so excited to dive in. 2:42 Cheryl Mack: Yeah, let's get into it. Matt, you are somebody that I have known a really long time, and I think I was one of the first people that got into your fund, and you helped me make my first investment, I think, or at least one of the first. So, I'm really curious, what was your very first investment? 2:58 Matthew Browne: My very first investment, obviously outside of my own businesses, was a business called MeFleet. And it was both my first investment and my first failed investment. It was an area of expertise that I had. It was in the procurement space. It was helping consumers access better deals that were procured by procurement experts. It was kind of like a group buying, early group buying kind of app, predominantly focused on motor vehicle ownership. And look, the idea was really good. The product itself was really good. The deals that they'd managed to get on board the platform were really good. Their acquisition of customers sucked. And I think that was the challenge. And you know, it's interesting as an investor, I'm a thematic investor, especially these days. I only back the stuff I really deeply know and know how to scale. That business, consumer software, is definitely not my area of expertise. So it kind of reminds me, you should stick to the things you know and trust others to stick to the things you don't. 3:54 Cheryl Mack: That's amazing. That's definitely something I learned from my early investments as well. 3:57 Maxine Minter: Well. Yeah. And your first ever investment, like, in your life was a startup? 4:02 Matthew Browne: It was, yeah. So I— That's so cool. I guess technically that's a lie in that I was on performance bonus shares in corporate, and so I had, you know, public stock. But the first investment that I made where I thought about it outside of homeownership or my own businesses was absolutely a startup. Yeah. 4:20 Maxine Minter: That's amazing. 4:21 Cheryl Mack: I don't know if we've ever talked to— like, so far no one has answered that question that their very first investment was an actual startup. That's pretty cool. 4:28 Maxine Minter: Yeah, yeah, that is pretty cool. I will say there's a couple of people that have been like, they've counted their first home as their first investment. And so I'm sure if we like excluded that from the dataset, be like, sorry, you can't choose that. It would be interesting to see what their first investment was. But yeah, that's so impressive. And also like true to form, I feel like you are startup through and through. You know, you live, breathe, eat startups. 4:48 Cheryl Mack: Bleed. 4:49 Maxine Minter: Bleed. I bleed startups. 4:51 Matthew Browne: I bleed a lot. Bleeding heart. 4:56 Maxine Minter: Actually, one of the things that I'm super interested to get into with you today is this idea of like boring B2B SaaS. I feel like VC is gonna throw it around a lot. People talk about like loving boring, et cetera. And I don't think a lot of people actually talk about like, what is it? Why do we like it? Generally speaking, if someone says boring, they're not, it's not a positive thing. So like, why is it positive in venture? Can you give us a little like masterclass on like, Why is boring in B2B SaaS interesting and why do you like to invest in it? 5:27 Matthew Browne: Yeah, so I think like when I use the word boring, it's not boring at all. Like it's actually, you know, they're really interesting problems that they're solving for really critical sort of business buying decisions and for critical business processes. So it's not boring in the sense of, you know, there is an audience for it, they love it, they're absolutely mad fans of the types of software that I invest in. However, you know, if you compare it to putting first humans on Mars or, you know, delivery food food or the next cure for XYZ disease. It's a little bit more boring, a little bit more traditional. Where I really focus on is, and we use this term more than boring these days, mission-critical, un-turn-offable software. So it's the sorts of things that businesses buy, they have to buy. It's either a legislative tailwind, it's public pressure, it's board pressure, or it's core to how their business operates day to day. When they buy, they will go, you know, there is already a budgeted line item to buy that thing. You know, they're not having to think about it. There's not usually a lot of education required. When they buy it, they typically buy for a long time. They typically pay upfront annually. That upfront revenue helps the business to be a lot more resilient to capital market changes. And in many ways, the sorts of things we back are somewhat recession-proof. And so nothing's truly recession-proof, but if you are investing in supply chain software and your business has a core element of supply chain, it wouldn't matter if there's World War III as long as your business is still operating, you need to operate an effective supply chain, probably even more so during a war. And so, you know, Boring for us is about the core inputs to operating a successful enterprise business. And so we're looking for founders that are building the pixie shovels, the things that those companies that, you know, Commonwealth Bank or Telstra or Home Depot or whoever will purchase and then hold for the long term and not turn off. 7:23 Maxine Minter: It reminds me of, you know how people refer to bikie, like there's like a bikie with the nickname Tiny who's actually like the largest human you've ever come for us, and it's kind of like the same name, but for like investing, right? It's like deeply not boring. It's really interesting, really excellent businesses or making assumptions about the fact that you can never turn it off, right? LTV would be pretty tasty on those kinds of businesses. And so it's kind of like an ironic name. 7:46 Matthew Browne: It is. And the LTV is about as good as it gets. You know, I reflect on when I built my first software business, Donesafe, in the 7.5, 8 years that I operated that company, we only had one enterprise customer churn. And we had hundreds of customers and fairly significant ARR at exit and even more significant ARR 4 years later. And most of the customers that I sold to are still customers of the acquiring company that bought our company. And so I just think for me, if you can find a really acute problem that a business has and you can solve it effortlessly and you can also make sure that you do outsized customer service and support to that enterprise and make the enterprise buyer look good and all of those sorts of things. Not only do they buy it for their business and it's got a really long LTV, but when a corporate employee moves from one enterprise to another, they typically go and buy that software again. So your one-time sales effort can sometimes magnify 3 or 4 times across the life of you owning your enterprise software business. The same person I sold to at National Australia Bank brought it to Telstra. The same person that I sold to at SkyCity took it to a bunch of other places. And so we're looking for investing those types of businesses. 8:57 Cheryl Mack: But you must get tons of B2B SaaS companies that come to you, right? Because pretty much every VC in Australia does B2B SaaS. What are the things when you see one that comes to you, you're like, that's in the boring category? What are the attributes? What are the things that you look for to be like, that one's in the boring, but not boring category? 9:15 Maxine Minter: I love that we're using it as a term of art now, and it's like boring is a positive thing. Oh, you're so boring. I'm going to start using this to see how it works. 9:23 Matthew Browne: Maxine, you're so boring. If it wasn't for Elon Musk starting his boring business and calling it Boring, I would have probably called Black Nova Boring.VC. But, you know, that was kind of taken by Elon with his boring company. 9:37 Cheryl Mack: You can do Mission Critical.VC now. 9:39 Matthew Browne: Yeah, well, I have unturnoffable.com. That's one of my domain names. So we'll probably do something with that one day. I don't think we'll change the fund name, but I'm sure we'll do something with it. But look, I think the way that I think about it is if you're sitting in a back office function of an enterprise, you know, you're if you're in the risk team, you're using risk management software. If you're in the procurement supply chain team, you're using procurement and supply chain software. If you're sitting in HR, you have, you know, HRIS and you have some supplementary tools to manage your people and culture. If you're in finance, you know, you're using the finance section of an ERP, you're using accounting software, you're using cash flow management software. It's looking at like, what are the things that you absolutely have to do your job? And if you didn't have them, your job would be back to being manual and 10 times harder. Mm-hmm. And where the value exchange is at least 5 times greater. So, you know, your software costs you $100,000 a year, but it gives you $500,000 worth of cost savings minimum. Like, it's, that's the stuff that we get really excited about. For us, when we invest, it's not just about the boring problem that they're solving, but it's also about the person solving it. Did they come from an area of domain expertise? You know, have they felt this problem themselves? Have they tried to solve it themselves when they've sat inside an enterprise, or have they tried to solve it themselves, you know, when they've been consulting to an enterprise eyes on that problem and they've now found that software is the best way to solve it. 11:03 Maxine Minter: Because I imagine, I mean, it just occurred to me for the benefit of the folks listening to this, if you kind of the fundamentals of why that's so attractive to have a business that LTV sounds like it's pretty huge, right? Because it lasts for so long. For the benefit of the audience, LTV stands for lifetime value, i.e., how much revenue that customer is worth to you over an extended period of time. And I think the insight that you just shared there where like you can actually, sure, enterprise sales, the enterprise sales motion is quite long, but even if it does take a while, you get more than compensated for that on the back end because this revenue profile for these businesses is so long. And even better, you sell to them one time and they then move on to various other organizations that bring this product with them. And so your effective cost to acquire or CAC customer acquisition cost is super low. And so just from a bottoms-up perspective, it doesn't cost you that much to find them. Software in theory has marginal cost for delivery, so it doesn't cost you much to service them, maybe some account management cost, et cetera. And then you have kind of locked in long-term revenue on top of that, means that you have a really performant business in the long term. What about the competitive dynamics for these kinds boring businesses, right? And do we like them because no one else wants to touch them, or are they actually surprisingly competitive because turns out boring's hot? 12:28 Matthew Browne: Well, I think there are absolutely big areas of competition. I think what's really interesting though, and you know, as somebody who built my own software businesses, went through things like Y Combinator with one of them, and has worked on accelerator programs both here and overseas, I think that, you know, if you're a 25-year-old who's just finished their university degree and you're building your first stats business, you're probably not thinking about building the next, you know, risk management software for third line risk in a bank. Like, that's probably not what you're waking up to do. You're not going at 25 going, fuck, I want to, I just want to solve third line risk. Like, that's all I want to do. 13:06 Cheryl Mack: That's totally what I was thinking about at 25, Matt. I don't know what you're talking about. 13:10 Maxine Minter: Yeah, reading my diary, it's pages and pages of third line risk banks. 13:16 Matthew Browne: And so, you know, you don't have like that that kind of, and not to say that everybody young is hungry, but you don't have that kind of atypical Silicon Valley young hungry group of 5 engineers that have just finished Stanford that are sitting together hacking together something to solve that problem. And so that removes a number of the typical competitors you have. If you're investing in software that sells to software businesses, then you've got a shitload of competitors to think about. But if you're thinking about HRIS or you're thinking about supply chain or you're thinking about risk management or you're thinking about call center optimization, or you're thinking about plastic reduction, maybe more plastic reduction, there's some young people thinking about that, but like there's definitely an area of kind of gray hair that kind of comes into the founders building those businesses. And so I think that does reduce some of the competition. You also have a lot of companies, like you have a lot of cottage industries in these spaces. So you'll end up with a lot of people that will build small to medium software businesses serving one vertical or serving one geography. Mm-hmm. That will be run by a domain expert who doesn't go and go for venture capital, doesn't have global domination on their mind. And so when you find a founder who has the right level of domain expertise, who has the ambition to build a really big, you know, longstanding business and is able to then attract funding through an investor like myself, then they have a real chance of taking a large chunk of the market. And over time, you know, they may choose to partner with venture or private equity to start up acquiring the small cottage industry businesses that are in there because it's cheaper to acquire their customers than it is to sell to their customers. And so I think that's one of the things that I really like about the space that I play in. There is absolutely competition, but probably a little bit less than the, the next kind of, you know, dev tools or productivity tool or, uh, consumer-facing marketplace or whatever they might be. 15:12 Maxine Minter: Super cool. Do you— are the businesses like— can you build these huge businesses within the four walls of Australia, or do you generally look at kind of international scope businesses? 15:21 Matthew Browne: Look, I think that if you're an enterprise software business, unless you're talking about probably 2 or 3 core disciplines, you have to be an international business. Australia is a great first market. You know, we've got relatively mature buying cycles that happen with the enterprise. Enterprises do in Australia give startups a go and like will buy it from a smaller business because of the nature of the geography that we sit in. And yet you're dealing with often, you know, Global 500 companies that are headquartered in Australia. So you do have that opportunity to really test out enterprise software locally, the reality is if you want to build a really big business and you're without using the typical unicorn or decacorn kind of terminology, if you want to build a business that grows to 50 or a million or 100 million in annual recurring revenue outside of a couple of core disciplines in B2B, it's hard to do that just in Australia. You're absolutely going to have to go into other markets. Now that doesn't mean you'd have to necessarily go and move to Silicon Valley to do that. Like you could absolutely be doing that in Australia and then going into Southeast Asia next or the UK next or Canada next. Or Germany next, or wherever it might be. But, you know, you will have to have at least a few markets to get to that $50 to $100 million of ARR, typically outside of, as I said, probably a couple of small categories. 16:36 Cheryl Mack: And you can also do that from Australia. You don't necessarily have to go move to the US. 16:40 Maxine Minter: 100%. 16:40 Matthew Browne: No, you definitely don't have to move. However, I think that there is a benefit to founders spending time in the markets that they're selling to and spending at least a reasonable amount of time. When I was launching Dunsafe in the US, you know, I went and spent sort of 6 months in residence in the US and then I was doing 8 to 10 trips a year to the US. I don't think that, I really don't think founders can ever move away from selling their product completely. And you know, the founder is the best person with the right energy and the right insights to spend some time in the markets they want to launch in, even if they're not going to become residential permanently. 17:15 Cheryl Mack: Yeah. So speaking of Dunsafe, you, you know, you obviously went from, well, you obviously invested first, but focus more on the, you, you were a founder first, started doing some angel investing, then built a fund. Can you comment a little bit on like that journey and how has it changed you as an investor? Like what does that mean for you when you start to deploy your own capital, having that experience as a fund, as a founder to begin with? 17:41 Matthew Browne: Yeah, look, I think, you know, when I built Dunsafe, there was very little capital available in Australia. You know, there was probably 4 or 5 VC funds with only 2 or 3 that had enough funds to actually deploy into anything at the point that we launched Dunsafe. And, you know, Blackbird had already backed SafetyCulture, so they were out. And, you know, we ended up getting check from Adventure Capital, which is now my business partner in Black Nova, Darcy Norton's first VC fund. 18:07 Cheryl Mack: He obviously liked you enough. 18:09 Matthew Browne: Yeah, they put a grand total of $200,000. The last $200,000 they had in the kitty, they put into our business and then we ended up returning their funds. So it was a good outcome for them, good outcome for us as well because I'd racked up about $100,000 of credit card debt to get the thing off the ground and as a business partner. And so, you know, I think like as a founder who's been on that journey and has understood what building a business means and what working with scarce capital means. I worked in the scarce times and we've just come out of a couple of years of abundance and into scarcity again over the last couple of years. And so, you know, I think that definitely gives you both some empathy, but some insight into what building a real company means and how to make your dollar stretch. And Aussies are known well for that in US investment circles as, as founders who know how to make the investment dollar stretch a lot further than a lot of other places in the world. And so I think that absolutely helps. And yet even making that dollar stretch, you know, typically they still perform like they do in the Olympics in the top couple in the world on a per capita basis, even with a lot less capital to play with. And so I think that that's, you know, an insight you have from operating and raising money and building and then selling into US private equity. You kind of get a feel for what it looks like over there versus here and what it means to build something here as an investor specifically, you know, it allows you to be a good reader of people when you're building a company with scarce resources. You have to hire a lot of great people. You have to be very quick to say no. You have to say no a hell of a lot more than you say yes, because you just don't have the capital to say yes. And so that makes you a pretty good investor because you have to say no a hell of a lot more than you say yes as an investor. I think when I look at the stage that we invest in, so we invest in pre-seed and seed, our first fund, We did 35 investments. 28 of those investments were pre-seed investments. The majority of those investments we set terms on and led. And in our second fund, we're now doing our seventh investment. We've led, so of the six we've done, we've led five out of six and four out of six are typical pre-seed, pre-revenue businesses. Why I come to that is that, you know, I think when you're a later stage company, Series A, Series B, Series C, it very much becomes a finance person's game to invest. You know, I think I think when there's data, finance people can often make better, more unemotional decisions. When you're talking about zero to one, pre-seed and seed, I actually think operators make better investors. And the reason I believe that is, you know, at zero to one, there is no data to play with. You're validating people and their ability to get something done. Of course, you're doing market analysis to identify whether the timing's right and the market sizing's right and what the competitive landscape looks like and whether, you know, this is a thematic that you want to play in. But When you look at the actual individual founder, them building a product that didn't exist, then convincing people to pay for something that didn't exist 6, 12, 18 months ago, that's a founder's game. And I think, you know, I like to, I like to say that the later stage investing is science and the early stage investing is alchemy. And I'm, you know, like I look pretty good in a wizard's hat. So I think I've got the gray beard. So I tend to think that, you know, the founder expertise I've had building scaling businesses, especially because we play thematically. Yeah. I built mission-critical enterprise software businesses. I invest in mission-critical enterprise software businesses. There's a level of pattern matching and recognition that you get from there. There's an element of understanding what founders will be taken seriously by an enterprise buyer. There's an understanding of whether they have enough expertise to go and solve the problem. There's a level of understanding whether they have enough malleability and self-reflection to take on advice and not believe that what they're building is just for themselves, it's for others. And they're probably, they're building it just for themselves. they've probably got a really small market to go after. So I think that that's definitely the secret sauce to why we've performed as well as we have as an early stage thematic investor. 21:59 Maxine Minter: I think it's really interesting. So we had a woman called Trang from Transpose Partners on the podcast a little while ago now. They are both a fund of funds and a direct, and she made the point exactly just to kind of amplify that point you just made, which is like early stage investors and fund managers that get cut through in the early stage is so different than the far managers and funds that win at the later stages. Because a big part of early stage is the people. Like the founders have to pick you as well to the degree, to the same degree that you have to pick them and getting cut through with the best founders I think is so crucial. And if you've done it before, like it's so much easier than if you're coming at it like an investment banker, you know, and they're like, you just don't know what you're talking about. 22:38 Cheryl Mack: I'm totally gonna help your business. 22:40 Maxine Minter: Yeah, yeah, yeah. Let me talk about capitalizing your business and like, let me like just obsess over capital and the founder's like, like, okay, like, have you ever paid payroll? Do you know what that's like? You know, like, I think it's, it's a huge testament to you to actually, like, that you are building from that place and, like, building the fund from that place. I'll definitely say my experience, like, obviously the building a fund is the first time I've built a company like this, and fund business management is so different. I was, like, really pleasantly and unpleasantly surprised by how different the business of funds management is relative to the business like building other styles of businesses. But I'm interested in your perspective because I never built an enterprise motion B2B SaaS business. Mine was much more kind of like consumer focused. Mine, all the businesses that I've ever built have been like, there was a lot of a difference between that kind of like go-to-market motion and those kind of things. But my sense is that building a funds management business actually is kind of similar to building a B2B business, but I'd love your thoughts. Like what's similar, what's different? What have you learned from building fund management businesses that feel not obvious from the outside? And what is like, no duh, if you've built a company before, you're 100%, you can build a fund. 23:56 Matthew Browne: Well, there's absolutely the no duh part around, you know, it is still a business. You've got to pay people, you've got to hire people, you've got to, you know, you do your annual returns, you've got to, there's auditing required, there's legals required. Like there's all the standards of running a business are there. Yeah. What I often say to founders, you know, when I'm talking to founders about, you know, they're doing their million-dollar seed round or pre-seed round, I'm like, well, yeah, building a VC fund for the first time is like doing 25 seed rounds, except you can't have any of the same investors again. So it's like, that was probably the biggest lesson for me is just how many people I'd have to talk to to get a fund closed. I think after coming off a reasonably, you know, fast, like accelerated growth corporate career into some reasonably successful software businesses, I thought it was probably going to be easier to build a fund than I did. I may have even at one stage said VC fund is kind of like my retirement job. At one, it was just kind of a joke I probably made to some of the founders that were in my circle. It's the opposite. I probably have never worked harder in my life building a VC fund. 25:01 Cheryl Mack: How's that retirement feeling, Matt? 25:04 Matthew Browne: I had my hair color before I started this. I've gone completely gray. That's just because you just have so many more people and people's questions to manage when you're operating a fund, especially a small fund that has, you know, we have 133 LPs in our first fund. By the time we close our second fund in a few months' time, we'll have over 200 LPs across the two funds. So it's a very big stakeholder base to deal with. You will then have, you know, probably close to 70 startups in the portfolio. If you have two founders average per portfolio, there's another 140 stakeholders to deal with. You then, as an operator fund, fund. Part of what we do is help our portfolio company to hire people and also to find customers. So, you know, you've got probably another couple of thousand stakeholders to deal with across that audience. It's a lot of stakeholder management. I love it. Yeah. And the VPs and that, like, I put the VPs in the investor bucket because most of our VPs are also investors, but obviously the VPs, you know, their job's to make our life a little easier and they do a good job of that. 26:06 Cheryl Mack: Hopefully we do sometimes. 26:07 Maxine Minter: I hear one in particular is a real pain in the butt. 26:10 Matthew Browne: Yeah, yeah, yeah. 26:11 Maxine Minter: Her name starts with C and ends with J. 26:15 Cheryl Mack: Yeah, I don't know why you ever let her on board. 26:19 Matthew Browne: She brings good banter for sure. I think the, where was I going with that? Like there's a ton of stakeholders to manage and I love that. Like I'm an extrovert, I love people. So don't get me wrong. Like I go to work every day not feeling like I'm going to work. I really enjoy what I do. I enjoy working with founders and helping them to build a business. I enjoy educating investors on why this is a great asset asset class to get involved in and helping a lot of them make their very first step. I love working with our founder investors, people that are still operating a company or the senior execs inside startups who have also become investors in our fund, helping them to diversify out of a portfolio of one. You know, I think like from that point of view, I get so much satisfaction from what we do and I really enjoy it, but it's definitely a hell of a lot bigger lift than I had ever imagined, anticipated when I started out for sure. Yeah. 27:09 Maxine Minter: 100%. I'd like to also on record and publicly apologize to all of the investors that I met while I was raising previously, who, when they said to me, I too am an entrepreneur, I too am raising capital, I'm the same as you. And I thought in my mind, you're an idiot. Like, this is so different. You have no idea what you're talking about. I am officially sorry for the things that I thought never said to you because turns out it actually is quite similar in many ways. And as you said, like the stakeholder management is intense. Like you end up, I think Nick at Blackbird was saying for Fund 1, they talked to like 400 to 500 LPs. I think ours was probably similar. I mean, across my community, that seems to be like the Fund 1, you end up talking to kind of, yeah, 400 to 500 people to close it out. Fund 2, I imagine it's probably similar. Like it just, it's not retirement, or at least I'm hoping that this is not what retirement looks like because I'm not sure I'll still have this in the bank by the time that I, um, retire. What about from a, like, the creativity that you apply to the business model, the creativity that you apply to the product, like how you stretch that entrepreneurial muscle within the four walls of a fund? Do you feel like you get to apply that creativity in the way that you think about building Black Nova on Fund 2? And then as you start to think about Fund 3, or is it like fairly formulaic? 28:29 Matthew Browne: No, look, there is absolutely a part that's formulaic, like the actual, you know, raising selecting and investing, like that's fairly process-driven. And obviously, you know, in our area, there are big parts of it that are human-centric. And so every human, you met one human, you've met one human, every human's a little bit different, a little bit special. And so there's plenty that's not formulated about that part. But I think where I really get to stretch my entrepreneurial innovator muscle is designing the programs, the playbooks, the ways that we work with portfolio companies. And I think when you look at a lot of the VC funds in Australia, some of them are very well staffed If you're at the small end like we are, Maxine, they're very understaffed because you just don't have the management fee to carry a decent bunch of people. And I put quite a lot of my own money into the manager to build a bigger team than most funds of our size have. 29:21 Maxine Minter: Interesting. 29:21 Matthew Browne: And I think we were also very fortunate that we had a lot of exited founders and operators and people like Cheryl and others who got involved as investors but then became venture partners, giving up some of their time to work inside our portfolio companies. That gives us a lot of breadth, a lot of reach that we wouldn't have had if it was just the management company team. What I love though about being a founder fund, but you know, if you look at our first fund, 133 LPs, about 100 of those LPs were operator background. You know, we're building companies, we're working in high-growth startups. So we've got a really big community of people that have been on the tools or are still on the tools. That allows us then to select some incredible venture partners, which we now have 18, and those venture partners can spend up to 4 hours hours a week inside companies. The learnings that those people have working inside of thematic, again, we back mission-critical enterprise software businesses. So if you're selling a particular type of software to a particular type of company, yeah, the price might vary based on the value exchange, but the way you sell, the types of people you sell, the buying circles, the procurement processes, there are playbooks that can be built that we can start to continue to innovate on over time based on the feedback we're getting from what will be a portfolio. And by the end of fund 2, around 70 currently sitting at 41. You know, that, that group of companies and the learnings we get from helping them to sell into enterprise, helping them to build products for enterprise, helping them to serve enterprise, we can over time have a really unfair data advantage and playbook advantage. That's what I love, like being able to work with our venture partners to build these playbooks, to be able to think about how we offer the best possible coaching, to think about how we build the best, you know, network of enterprise buyers that can buy from the companies that we have, whether whether that's running our own buying circle events or dinners or whatever it might be to bring domain experts from cybersecurity or procurement or wherever together into a room and then present companies to those people. All of that stuff just gives me such a thrill, coming up with new ways to give more than just capital to the portfolio companies we back, which should, you know, and already is, I guess, in terms of the early performance, uh, give us an unfair advantage in comparison to other funds that are playing in the space that may not have that, that same access. Yeah. 31:37 Maxine Minter: That's super interesting. 31:38 Cheryl Mack: Yeah. As someone who's been kind of front row seat to that, I think it really is so cool how you've brought so much insight from all of these different portfolio companies because you are in that same space, bringing that to the table and seeing what's come through is really cool. The thing that I think is interesting though is around you do B2B SaaS for thematic mission-critical B2B SaaS. We'll repeat that another several times on this podcast. But it's not just enterprise, right? Like, I think you specialize in that enterprise go-to-market motion, but also like SMBs and smaller businesses. So like, how does that differ? And do the capitalization strategies differ across whether they're doing a, like an enterprise go-to-market motion or like a smaller SMB motion? 32:26 Matthew Browne: Yeah, I think, look, we typically stay away from small business software. It's predominantly mid-market and enterprise. We have got a couple of investments that absolutely sell small business software. It wouldn't be the majority, but in the minority, there are some that do sell to small businesses. And at the small business end, it becomes more like a consumer sale. You know, you really need to think about your channel strategies in those instances. Like, who are you gonna partner with to get your product in front of as many eyeballs as possible? Because you can't do the hand-to-hand combat selling when you're selling at a price point of $500 a month. It just doesn't make any sense. And so $50 a month, if it's really at the kind of micro end of small business software. And so, you know, from our point of view, our specialty is mid-market and enterprise. When we do make a decision to invest in something that targets small business, it's either for one of two reasons. One, we believe they'll move up stack into mid-market and enterprise and that small business is where they're starting and we have the expertise to help them move up stack over time. Or it's because we believe that the area that they're currently playing in is underserved and there's a real strategy to use partners. And again, we've got a great experience in onboarding and enabling partners. So if we see software that's in a category that's still paper-based or using really old legacy software or whatever it might be, and they've got a unique insight into that particular industry or area, and we're able to partner them with the right technology partners, consulting partners, you know, reseller partners, whatever it might be because of our network, then we may take a punt on something that's a little bit kind of down the stack on the sales side than we normally would. 34:07 Maxine Minter: Super interesting. What about, I mean, you mentioned that sometimes companies like will do both, right? Like you might invest in them if they're doing the kind of small market, even like low end of mid-cap, mid-market stuff, and then moving up further. For those companies, do you generally see that they like then maintain two go-to-market motions, or do you recommend that they like quick, right? They like actually fully move all the way up that stack. What do you generally see kind of works for companies? 34:34 Matthew Browne: I think it's hard to put a blanket statement on there because I think, you know, certain small, you know, certain businesses, one, starting small is easier to go big than it is to start big and go small. You know, if you have been building software for enterprises and you then want to sell to small businesses, there's a hell of a lot of rework that's required. If you start selling to small businesses, you can optimize your product to understand what the actual additional components that need to be turned on and off are for an enterprise, as apart to having to pick software back apart and refactor it later. So I think from that angle, it's definitely better to go small to large than it is to go to large to small in terms of how you think about architecting your software. I think when I focus on sort of the businesses that have migrated from small to large, or in the occasional instance where they've gone large to small, I think that you need to determine where you're gonna split your resources and whether you should split your resources. Now, sometimes you can, and that's totally okay. You might have a completely different team that's on the small business product than that's on the larger business product. You probably shouldn't be doing that before $10 to $20 million in ARR. So typically at the place we play, we don't like seeing people that are trying to boil the ocean too much. We'd much prefer them to be, I've picked a segment, I've picked a category, I've picked a geography, and that's where I'm starting. And only once I've got a little bit of critical sort of motion momentum in that area will I think about what's the next adjacent one. That's definitely my preference when I'm working with portfolio companies. 36:07 Maxine Minter: Yeah, April Underwood from Slack has a really interesting story that she tells here, which is like the discipline that they showed before they stepped into enterprise. They were getting like tens of millions of revenue opportunity pull from enterprise. At that point. So for context, Slack, I think most people probably listening to this know what that is. It's a communication tool. They started as a kind of freemium tool, meaning that you could use it for free and then you could pay a small fee to be able to use it. But mostly it was like individuals buying it with their own credit cards. And then at a certain level of scale, they started to kind of layer on those enterprise features. So to kind of highlight that step that you see a lot of companies take, which is like we build effectively for a consumer or an SMB market. And then at a certain point, we then add on features to become enterprise. I think that's really interesting. It's actually really hard. Like that motion upwards, see it all the time, really common, can often work quite well. I'd never thought about the other direction. I've never seen a company do enterprise down to SMB. That's really interesting. Like that's super hard. But April. 37:12 Cheryl Mack: Yeah, I can't think of an example. 37:13 Matthew Browne: We did We did it at Dunsafe, and it was really hard. And at first, we were trying to— So, one of the things that we did well at Dunsafe, and I'd love to say it was on purpose, but it probably wasn't, was we made the software incredibly configurable and compartmentalized. I don't know if that's a word, but anyway. 37:34 Maxine Minter: It is now. 37:35 Matthew Browne: Lots of components, very configurable, and that allowed us to size to solve, you know, really big enterprise problems. Now, that solution couldn't be sold to small businesses because a small business wants to buy software and doesn't want to have the big implementation or the big learning curve because they're usually massively under-resourced as a small business operator. So they want something that's turnkey that they can just get working with, uh, and, and off they went. So we definitely worked hard to build a version of that. Um, at first, the way that we did that was we— Because our software was so configurable, We worked with small business partners who configured our software for a small business version. And over time, we worked with those partners to then build a branch off of our product that was much more small business-centric. Still configurable for the partners, but much more small business-centric. So I think from that point of view, we were able to do it, but we wouldn't have been able to do it directly. Our internal team's motion was enterprise and mid-market. Like, we knew how to sell, we knew how to account manage, we knew how to do big implementations and data migrations and all the things you needed to do at the big end of town. If I'd asked anyone my team to go sell to, you know, a plumbing, a plumbing company in Western Sydney. Uh, you know, that business absolutely needed what we had, but we were not, uh, right-sized to be able to help them. And so it was partnerships that enabled us to do it in that instance. 38:50 Cheryl Mack: That's so funny, because Maxine and I were talking about this in the prep for this episode, around like, we've seen companies that come to us saying like, yeah, we're totally going to do enterprise and SMB sales. And it tend to be like, I, I just don't believe that you're going to be able to do that. But there are examples, right, where like, you know, Dropbox has been able to maintain both both of those go-to-market motions. Granted, maybe that's only now and wasn't how they started, but I think it's pretty unrealistic, like, and looking at companies as an investor to think that that's going to be able to be successful. 39:20 Matthew Browne: Absolutely. I think Dropbox ran the wave of product-led growth, free install and expansion into first paid contract. And, you know, it started with individuals that moved to teams and then they sandwiched it with an enterprise and partner channel strategy later on. So they very much started small and ended up big. And I think most of the examples of companies that have gone that way, there are examples of companies that have gone big to small, but they're fewer. 39:48 Maxine Minter: Yeah, yeah. That's so impressive that you guys pulled it off, 'cause it's, I think they're fewer because it's super, super hard. 39:54 Matthew Browne: It's hard. And you know what, we probably shouldn't have, like if I'm honest about it, like we probably should have just doubled down all of our focus on enterprise and mid-market and geographic expansion. But I'd always, when I started Donesafe coming, I started Donesafe coming out of industry, out of health and safety. Tech background, but I spent a few years in health and safety and I felt like everybody deserved the right to access health and safety. And you know, I, when I started it was like a safety professional in your pocket was our tagline. And so I didn't want to exclude small businesses from using it, you know, and I think had I been where I am now with the learnings I have now and the knowledge I have now, both on the building a company side and the investment side, I would have whispered in, you know, younger 27-year-old Matt's ear and go, hey Matt, don't do the small stuff. It's going to take you a lot of time and cost. You could just be focusing over here where you're making lots of money and the LTV is insane. Yeah, but yeah. 40:44 Cheryl Mack: So do you see it as a risk then? Like when you talk to founders who are wanting to do both or who want to focus more on the lower market, do you see that as a risk and a reason not to invest? 40:54 Matthew Browne: I see it as a risk if they're unwilling to take feedback. I see, I love their ambition. Like if a founder comes to me and has heaps of domain expertise and wants to boil the ocean, I'm not unhappy about that person coming to me with that perspective. Give. What— where I won't invest is if I don't believe they can take feedback and triangulate and then work out, well, what's— where do I start? Yeah, I think that's, that's the most important thing is being able to take the feedback on where should I start. 41:20 Maxine Minter: I think, I think that's a key piece, right? Like, because I think I've seen a bunch of founders do the version, like the bottom-up version, like start small, get bigger, because it gets them into market quite quickly, right? They can start small in a way that allows them to start getting revenue. So this a lot in fintech, for example, you know, that you would get like, you know, a fintech who sells to other fintechs who gets a whole bunch of smaller fintechs and then goes and chases a big bank, for example, because they can get to market much quicker. They can get some revenue, they can show traction and validation, but ultimately like the big fish are the ones that have these really long protracted procurement cycles. If you went after them straight out of the gate, like they probably choke you out in like resources because you just wouldn't have the account managers or the revenue to be able to support. 42:06 Cheryl Mack: 6 months later, you haven't made your first sale. 42:08 Maxine Minter: Right, yeah, exactly. And— it's like really hard. 42:10 Matthew Browne: 3 years later. 42:11 Cheryl Mack: Yeah, 3 years later. Yeah, right. 42:13 Maxine Minter: 3 years later and like 14 members, you know, like full court pressing this like one motion. So I think, you know, it can be really excellent for founders to go from going small to big as a way of like proving out, getting traction, getting revenue, and then like earning, right? To kick off some of those longer extended sales motions, which I come back to, it makes it even more impressive. The like arse end backwards where you, you went like big end of town first and they were like, yeah, why not? Why don't I add the small stuff on at the bottom? Just, you know, 4 and 9 off my home fees. That's really interesting. 42:46 Matthew Browne: It's funny you say that. I reflect on one of my favorite kind of memories of building Donesafe and, you know, when we won our first— so we had a bunch of small-ish kind of mid-market clients. We had Audi, the dealer-owned dealership in Sydney, for example. And we We had very little software at this point. Like our software was more vaporware than software. And I remember I got introduced to the head of health and safety at Suncorp and managed to convince them that we could build what they wanted and then managed to convince Brickworks. That was on Friday. And then on Monday, we convinced Brickworks we can do the same. And we just raised our $200,000 from Adventure Capital. So we had $100,000 of that left because I needed $100,000 to pay off my credit card that I was getting I think the reminders that I just spent that on the business, I got approval from Darcy at the time to say, yeah, you can pay that off and then just use the $100,000 to get the business off the ground and go back on your credit card if you have to, you'll still have that limit and it won't be paying the interest on it, which was nice. Thanks, Darcy. And we just signed these two deals and they were both six-figure contracts paid upfront and we didn't have the software for them, but I knew it would take six months before they were ready to install it. And 'cause there'd be a bunch of requirements workshops and all the rest of it. And so I knew I could build the software as we were doing the implementation. But we had a half, a part-time co-founder and myself full-time and two offshore Russian software engineers at the time. And here I am trying to do sales calls while spending 8 hours on the phone getting absolutely reamed by the business analyst stakeholder over in one of the enterprise companies. And it was madness. It was madness. It was scrappy as hell. But both Suncorp and Brickworks are still customers of Donesafe today, a decade later. Impressive. 44:38 Cheryl Mack: It's even more impressive that you actually were able to smokescreen that together and make it happen. 44:45 Matthew Browne: Yeah, and it wasn't without pain. Don't worry, the customer was just as unhappy as I was getting constant sort of small cuts. I had death by a thousand cuts, but we turned it around and through good account management and through a desire to get the problem solved in those businesses, a desire innovate and, you know, some really like sort of at the cutting edge corporate stakeholders who made those buying decisions to trust a startup to do that. They ended up with the product they wanted. And, you know, yes, it hurt and took time to get it done on both sides. But, you know, it set my business up. Like we had 6 figures of revenue, sort of double, you know, 200K, 300K of ARR on top of the 100K we had in the bank to pay our 4 people. You know, we were able to get it done. And so I think sometimes enterprise enterprise, although the sales cycle can be really hard, if you can find an enterprise that's willing, really wants to solve the problem, they pay upfront, you know, and like you can use that money to build a business. So, you know, small business selling is like cold calling 1,000 small businesses to get your first customers and then trying to convince your first channel partner to sign up and you probably still don't have the same ARR we had of those two sales. 45:53 Maxine Minter: Right. Yeah, true. True that. I mean, I think I think part of being an entrepreneur and part of being like that DNA and the way you operate and like thinking about the way that you build the fund, maybe kind of the last thing I'd love to go explore with you is any advice for the folks that listen to this that are thinking of funds management at some point in their future, right? They maybe they have written their first angel check, maybe they haven't even done that yet, you know, from that journey, scrapping together, you know, quite a few very successful businesses now and then now two funds. Any tips or tricks that you would suggest for people? 46:29 Matthew Browne: I think if you're an angel investor that's thinking about getting into funds management, one, think about it really carefully because it's a very different discipline from operating a business. You really have to want to do it. I'd make more money building another software business than I would running a venture capital fund, but the ecosystem will be better for it by me running a venture capital fund. And I feel like I'm in the privileged position where I can do that. You know, I get up every day feeling very privileged that can, you know, contribute to our ecosystem and help the next generation of founders build businesses and return money to investors, which creates the virtuous cycle of more money into the ecosystem. Like, that's what I'm here for. Uh, and you know, I think you really, you really have to want to do it for the right reasons if you're building a VC fund. And you also have to understand what sort of VC fund you want to build. We've chosen to stay small. Like, some funds want to go and get big and get, get drunk on superannuation. Money. Other funds are quite happy to stay small and, and to own their lane and win in their lane. And that's, that's where we've chosen to play. I think I would definitely get involved in a venture fund if you have the ability to do so. So, you know, a number of the bigger funds run great angel programs. Cheryl with Aussie Angels runs great angel education, and you can jump in and get involved in syndicates and, and get your exposure that way. And, and at least on a deal-by-deal basis, get the sense of how a manager might operate great. If you have the opportunity to invest in a fund and become a venture partner, that's a great way. That's how I got started. I invested in Antler and became an Antler venture partner. I became venture partners of some other funds overseas. I got involved in some angel syndicates. I got involved in some angel groups where I could invest as a group and pull the money together. I think, you know, It got to a stage for me where I did sort of high double-digit angel investments approaching 100, where it started to become a full-time job. So a fund was the only way I could keep going. But, you know, yeah, I think get the experience and make sure you actually truly love it because it is hard work. It's harder work than building a software business, in my opinion, after doing two and then doing this. That's a hell of a longer commitment. You've signed investors up, you're managing other people's money. It's not your money anymore. You know, yeah, your money's probably in there alongside them, which absolutely helps. But, you know, you've said to people, I'm going to give you a return. And there's a lot of places people can put their money to get a returns. So, you know, there is a real sense of when someone backs a startup as an angel investor, you write that check knowing you very likely might lose your money. When you invest in a fund, you're trusting a manager who's going to back a portfolio, and you, you probably don't have to say an opinion that I, I'm okay if I lose my money. 49:07 Cheryl Mack: No, you're expecting a return on that. 49:09 Matthew Browne: You're expecting a return on that. So just, I think that's the difference. Keep that in mind. You're managing other people's money, and you've I love doing it because it is hard, it is a hell of a lot of work. There is a hell of a lot of rewards too though, so I wouldn't dissuade anybody from doing it, but just make sure you're doing it for the right reasons. 49:25 Maxine Minter: Love that advice. So the last question we ask all the folks that come on our podcast is what is the biggest big kahonas moment you've ever had? A moment that you felt super brave. 49:38 Matthew Browne: Biggest big kahonas moment. Oh, I've had a couple. I was terrified heights. And when we signed SkyCity Entertainment Group, they operate the Sky Tower. There's a video of me on YouTube. I was about 40 kilos heavier than I am now, so it's quite an embarrassing video. It was a video of me on YouTube squeezed into a flight suit with a harness around me jumping off the Sky Tower to launch SkyCity Entertainment's version of Dunsafe. That for me, like, as somebody who couldn't even stand at the ledge of a window, like on— 50:09 Maxine Minter: What's the— 50:10 Matthew Browne: On Centrepoint Tower, you know, to jump off a building jumping off a building was pretty much insanity. I was channeling every Richard Branson book I'd ever read. You know, you get shot out of cannons and jumped out of planes for me to jump off a building. The funniest part of that story was the person who jumped off before me was celebrating her 80th birthday. And I went, "God, if she went, I can't chick it out, so I have to jump off this building." I want to meet that woman. 50:36 Maxine Minter: How impressive jumping off a building at 80 years old. Really, like, fear of heights is so real. Um, and so I'm so impressed you, you know, literally will do anything for a customer. That's very impressive. I'll do anything for a buck. 50:50 Cheryl Mack: But it was safe, and that is the most important thing. 50:53 Matthew Browne: It was safe. I was testing the safety. They said it was incredibly safe, they'd never had an injury. So I'm like, all right, let's put it to the test. 50:59 Maxine Minter: Put it to the test. Thank you so much for joining us, Matt. This was the best. 51:03 Cheryl Mack: It's fantastic having you. 51:05 Matthew Browne: Thanks, Maxine. Thanks, Cheryl. Great to spend this Next time.
First Cheque with Cheryl Mack & Maxine Minter
Presented by Deel & Pear Tree 
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