The ups and downs for smart ball maker Jetson Industries was quite radical between the first and second times their CEO Ben Tattersfield spoke to Bullpen.
In part two, he spoke about the pitfalls of raising capital, especially when raising capital sours as a young start-up, and how that was overcome.
BP: What has been happening since we last spoke?
BT: “It’s been a real rollercoaster ride. One of the companies that came in to help us with our capital raise basically screwed us, so we had to get rid of them and that caused one of the investors who had agreed to invest some money to back away because of uncertainty.
“We basically put ourselves into a spot where we had the wrong people around us and that made the investors a bit nervous.”
BP: How did it go from there?
BT: “We got to the end of the HYPE Spin Lab, pitched at the Commonwealth Games and off the back of that we had three different offers for investment. We went in there with a 500,000 dollar ask during the event, and while we didn’t win the pitch we had the three offers and one of them was quite good in terms of their connections and savviness on top of the finance they can bring, so we locked them in.”
BP: Can you describe the investors?
BT: “They’re a group of Brisbane based investors. A lot of high net worth individuals as well as a few people who have been through the start-up world and have taken start-ups to exits over in the United States or had them listed here in Australia.
“We’ve also got people lined up to invest in the next round.”
BP: Other than the monetary investment, do the new investors have ideas on how to commercialise the product suite or extend the product reach?
BT: “A couple of the investors are from the horse racing industry and asked if they could use this to help monitor the health of horses. They could use our technology and measure if horses start to limp before anyone visually picks it up by using our sensors on the hooves of the horses.
“Those applications are cool and it’s the exact same product that’s inside our golf ball.”
BP: You’re almost going into injury prevention analysis territory.
BT: “We’re a bit lucky that Joan Norton (HYPE SPIN Lab Program Manager) is actually a well-known vet in the equine industry. A phone call with her helped push that idea. It fits into that injury prevention and recognition area. As a vet Joan raised a few points because one of their trickier jobs is that horses limp for a whole lot reasons, it could be their foot, hips, back but what we’d see in the data is they’d be limping in a particular way which would make it for easier for a vet to identify why it’s limping.
“We’ve had to prioritise our current customers at the moment but it’s about showing the scope of the product is growing. It also shows that the value of the company grows as well because there’s not a lot of development from our end in moving from sport to sport.
“Overall it fits in perfectly with our brand, our whole motto is ‘innovation in sport through technology,’ and as horse racing is a sport it’s not a giant leap for us and we still stick to our core principle.”
BP: With the initial loss of capital what have you learnt about accepting capital from certain people and companies?
BT: “It’s a weird one because I was recently in Melbourne and met with the person who had initially pulled his investment and he’s now back on board. For him he just got nervous about the investment group that I was working with and how they were approaching things, their potential rogue conduct which forced him to step back. That is what triggered me to act and get rid of that group too. When your investors are stepping back from you because of someone else you have to intervene decisively.
“When it comes to investors, The main thing is it’s important to think of is their capabilities of helping you move forward in future rounds, not just the current one. Can they invest in a future round or do they have connections or skills that will be of use during the journey?
“You go to bigger investors and they say you’re too early to invest in. Then you go to ‘friends, family, fools’ to put in what they can. You get your product and business to a point where you’re ready for the big investors and they look at your cap table and say it’s full of rats and mice and they don’t want to work with you. You’ve got to have an argument as to why each person on your cap table has the right to belong there and what they’re offering the company. Having your neighbour throw in $5000, your barber $2000 may solve the short term cashflow issue, but it causes nightmares when you’re trying to go for a seed round or further. It sounds stupid, but these larger investors don’t like the concept of ‘free-loaders’ even though those people had the right intentions in just trying to help you be successful. This would have to be the worst part of my whole start-up experience, and it’s definitely something I’d suggest other start-ups be wary of.
“The other main lesson is that initial company that I had engaged promised me that they would help handle the capital raise and I made the mistake of committing to that deal because they dangled a million dollar investment in front of me that they never had. They basically tied me down to a contract which meant I couldn’t do anything capital raising wise, I couldn’t go out and raise capital myself. I was completely reliant on them to do it and they just weren’t delivering.”
BP: With the shake-up, who has been appointed and come on board Jetson Industries?
BT: “The official board is coming together and Archie Fraser (former Head of the A-League and CEO of AFL club St Kilda) is the first one to be onboard, he’s going to be the Chairman of Jetson Industries.”
BP: Did anyone leave the company due to any of the upheaval that occurred?
BT: “Not one person. That’s the cool part is that the team believes in the product and they can see that while the clean-up of the company has been messy they can see the benefits of it.”