I managed to catch up with John Scull, Managing Director, Southern Cross Venture Partners, during his quick trip to Sydney a few weeks ago.

I had planned to do a typical interview with him, but as we started to speak I realised it made much more sense to keep my notebook closed and just converse. For those unfamiliar with him, John is a veteran of the Aussie, and global, tech startup and VC industry. Actually, best to let his official bio do the talking…

“John Scull is a founding Managing Director of Southern Cross Venture Partners and is based in Silicon Valley. Previously, he was a Venture Partner and member of the investment committee of the venture capital firm Allen & Buckeridge for 6 years…”

“…Prior to A&B, John had a successful 20-year operational career with leading edge technology companies primarily in Silicon Valley.He has been the CEO of two successful venture backed software companies (Macromind, which merged to form Macromedia (MACR) and PF.Magic, which was successfully sold to The Learning Company). John was also an innovative marketing executive at Apple Computer, where he helped launch the Macintosh personal computer and then started and grew the company’s Desktop Publishing business to over US$1B in revenues.”

As a successful tech entrepreneur and experienced Silicon Valley-based MD of an Aussie VC firm, John has a unique perspective on how Australian tech startups can better position themselves for success both here and overseas. It’s that experience and depth of knowledge that made speaking with him freely a much better option than a question and answer style interview.

That having been said, I did manage to capture a few key take-aways from the conversation for your reading pleasure : -

Relationships run the Valley.

I think the fact still remains that Silicon Valley still represents the peak location for tech startups to operate. As such, if you’re going to go to the valley in search of funding, it’s critical to know people who know people. However, it’s important to realise that the networking game is a two-way street. For VCs , relationships give them scale in the search for good investment opportunities. For Entrepreneurs, relationships help you get that all important warm intro.

Speaking of warm intros - they’re no guarantee of a deal or even being offered a term sheet. John explained that the investment bar is the same height irrespective of how you’re introduced. The benefit of the warm intro however, is that it will probably get you a meeting - and sometimes that’s the hardest thing.

So, if you’re heading over to the valley, make sure you put on your friendly hat and go out and meet people.

Rejection Isn’t Necessarily About Your Startup Being Good Or Bad

Don’t be disappointed if you’re rejected. Being rejected by a firm doesn’t mean you don’t have a good business, it means you weren’t the right investment at that stage. For instance, the partner may have invested once in the quarter and can only invest once per year, maybe the firm wants a diversified portfolio and they’ve already got something in your area, or maybe the firm has come across a similar startup and while both of you have heaps of potential they have to choose only 1, which may not be you.

The key point here that John made is that raising money is a difficult process, which is based on timing as much as anything else, so make sure you approach as many investors as possible and keep your chin up.

Good Companies Will always Have A Good Shot At Being Funded

Other than that, John reiterated many of the points that Jeremy Liew and Mike Zimmerman have put forward in recent interviews - good ideas, which address real problems and have a large potential market, will always do well irrespective of economic conditions.

So keep working on creating value, think big and trust that, as Aussies, we can compete with the people of any country in the world.

Risk Averseness of Local VCs

Moving back to a local focus, John made an interesting point about the perceived risk averseness of local VCs. The real issue is investment capital.  John explained that during the formative years of the local tech VC industry, VCs who invested early and took risk were often crunched in follow on funding rounds simply because they didn’t have the capital necessary to keep investing.

That’s starting to change now. For instance SXVP is currently 2 years into a $180M fund, Starfish Ventures are also there or there about. For John, around US$150M is the perfect fund size for a tech focussed firm. Anything bigger can create issues that distract the firm from its main focus.

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A big thanks to John for taking the time to meet in person and for adding to the information flow between investors and local tech entrepreneurs.

It’s clear from this, and previous interviews we’ve done with leading Aussie VCs, that Aussie VCs are just as passionate about the health of the local tech startup industry as the tech entrepreneurs themselves…and not only because of the potential for financial upside but mostly because they’re believers in the potential for global change that local tech startups, and the outstanding entrepreneurs that are creating them,  present.