Startup interest fuelled by FOMO

Canva might have been the tech success that got away from Western Australia, but veteran investor Bill Tai believes local startups might benefit from investor fear of missing out again.

As a visitor to Perth more than a decade ago, Silicon Valley-based Mr Tai was an early investor in international success story Canva well after the then startup’s founders Melanie Perkins and Cliff Obrecht had failed to capture the interest of WA’s investment community.

Back in town last week as part of the West Tech Fest he helped found Mr Tai thought there was much less chance of the next Canva slipping through local fingers.

“All it takes is a hit,” he said.

“I think the US markets became unlocked when they saw these things that everyone turned down that were out of the blue wonders - like Apple and Intel.

“And so when people realised it was possible, then the people that were on the fence were able to jump in and have some level of confidence.

“I think it's clear that the Canva story is making people second guess their resistance everywhere here.

“Not just in Perth, but everywhere in Australia.

“You just need to see it happen once and know that it can be done to have 100 other ones possible.”

Credited with recognising opportunities ahead of others, Mr Tai’s Canva investment was not a one-hit wonder. He was a seed investor in Zoom and backed Rick Baker’s successful Australian venture capital firm Blackbird Ventures.

Speaking to Business News at the end of the West Tech Fest, Mr Tai said his arrival in Australia – lured to Perth by the kite-surfing as much as the opportunity to test out the local startups – coincided with a dramatic shift in the technology sector.

New companies were exploiting the cloud and mobile telephones to create products that were relatively cheap to develop and distribute.

“That produced an explosion of companies and that was happening right at the time I came out here,” Mr Tai said.

“It was not just here it was world wide but because Perth is so far away from everything else the infrastructure changed things in that way it was a great leveller.

“Anybody could start a business anywhere as long as they were connected to broadband.

“The telephone infrastructure meant it wasn’t a matter of 26 hours on a plane, it was 200 milliseconds versus 100 milliseconds, on the internet, because Perth is still a couple of hundred milliseconds from the USA.”

Mr Tai said he had already started investing in those less capital-intensive businesses, usually led by one to three founders.

“When I first came out here I was just funding a bunch of companies that were of that ilk,” he said.

“They had started as one to three person teams, who had digital products distributed on mobile app, driven by cloud on the back end that were hitting (goals) and I was confident that could be done anywhere in the world, despite most of my US venture capital brethren saying it was not a good idea to fund things that you could not visit every day

“Don Valentine who started Sequoia Capital said never fund anything that was more than an hour away from your office.

“I had a fairly distinct advantage that I understood but the world didn’t yet understand in that I had seeded Zoom.”

Mr Tai said it was not until Covid that the power of remote working through applications such as Zoom became better understood, although he still believes it is underutilised.

“I had a distinct advantage because I was already used to remote work and hybrid work and building teams where the people were literally almost anywhere in the world and most others hadn’t.

“I do remember when COVID hit in 2020 Zoom, all of a sudden went from a very, very well run $300 million a year revenue company to, you know, a ramp that took them to billions.

“I suddenly realised I might have lost my competitive advantage.

“But I was wrong because most still don’t understand how to do and I see companies wanting to return to the office, I understand why they want to do that but I think the startup player it is so important to get talented people to work together and if you can lower the friction of them joining your team you have a real advantage.

“If you are used to it and know how to do it, working on Zoom across times zones is not necessarily a disadvantage and in many ways it is a great advantage because you can have development going 24-7 and you can wake up and stuff got done overnight and customer service can be handled 24 hours a day.

“It is a certain kind of work that lend itself to that kind of thing, it is not everything.”

Mr Tai said that he had learned other lessons along the journey, including not to jump out of stocks too soon, having been an early investor in several major businesses but then exiting them when their best growth period was yet to come.

“There isn't really such a thing as a Warren Buffett of venture capital, but I like to think I'm wired the same way,” he said.

“We’re very, very long term.

“And I've just seen over my career in tech, that if you pick the right companies that have a market in front of them that is always evolving, and very large, they just keep getting bigger.

“Early in my career I did not fund Intel, but I remember buying their stock when the company was worth about one and a half billion.

“I thought it was a genius, because it went to $4.5 billion in a year and I was like, hey, 300 per cent or 3x (times) in a year.

“No one else does that so I sold.

“I thought I was just really smart, and every time I looked at the stock later, it was expensive.

“And it went to $500 billion. So I made 3x. But I missed the next 100x.”

“That changed everything,” Mr Tai said, regarding his investment strategy.

“When I saw what, what could happen, I realised, you know, we live in a sector that has extraordinarily asymmetric positive risks.

“And that if you feel like you're on a winner, that's well capitalised with a great team … they can keep evolving.”

Mr Tai returns to the story of Canva when it comes to the key factors that he looks for in a business, being the size of the market and the opportunity within it, coupled with the energy of the founder or founding group.

If he thinks the founder has something special, but the market is lacking, he may even pass on investment and wait until they have strengthened their hand.

He said he recognised something in Ms Perkins that led him to believe that there was capacity for Canva to be big.

“I honestly didn't know whether Mel (Perkins) and Cliff (Obrecht) would be that at the time, but I couldn't count them out either.

“And the space (graphic design) was one that I knew was very big, and the timing was right to restructure it because you had one major player in Adobe worth $30 billion at the time which was still selling products on CD ROMs and boxes when everything was going mobile.

Mr Tai said that when he learned Ms Perkins was not a technical person he was disappointed until he realised she just needed to find the right match to make the investment work – in the end that was Cameron Adams, who remains Canva’s chief product officer.

“There was a moment of deflation, for a second,” he said.

“Okay, well, she's not going to go back to her dorm room and code it up, but I said if you could find the right technical co-founder, I might be willing to back you.

“And with the help of (Google Maps co-founder) Lars Rasmussen, we found him and turned out to be a gem, Cameron Adams.”