'Love at first sight' makes solid foundation for new VC partnership

Rachael and Kylie are well known throughout the Australian investment community, with more street cred than most.

Rachael is an industry all-rounder, having founded Working Theories Angels, then started at Eventbrite, bringing the company to the Australian market as their Managing Director, and most recently was the Head of Startups at Amazon Web Services ANZ.

While Kylie was the Founder of Eleanor Ventures, a corporate lawyer, and a 20-year veteran of technology capital raising and M&A across Australia.

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And while the world was bracing and starting to take cover under the cloud of a global pandemic, the pair were talking possibilities.

“I remember talking to a few people about launching Flying Fox and then the pandemic happened, and I kept asking myself, ‘Are we insane going ahead with this now?’,” Rachael recalled.

“We’re thinking about innovation, and others are thinking preservation, so what made now the right time to invest in a high risk, high reward sector?”

“But I poked my head out and asked people who would most likely be my investors and they kept saying they had more capital and more hunger and desire to invest now than ever. There are founders who are hungry and all in, and real human customer problems to be solved.”

Flying Fox Ventures – timing is everything

Flying Fox Ventures is an early-stage venture firm looking to find and back early-stage startups to help growth and scale, and for more than a year now, the duo said there’s been no shortage of capital available or amazing opportunities to back.

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“We’re deploying around $5million annually and I have always said there’s never a better time to start a startup in Australia or invest in a startup and every day that gets to be more and more true,” said Rachael.

It’s a statement Kylie Frazer agrees with – but admits it’s surprised her, especially over the past 18 months.

“At the end of March 2020 as Covid was unfolding, Eleanor Venture was nearly a year old and I had 40 investors at the time.  I called each of them to check in; to make sure they knew that I would manage their existing investments – but that I would understand if the pandemic meant their appetite for new deals was on ice,” Kylie said.

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“40 conversations later I came away thinking I need to get into gear – this is the time. Investors in this asset class are pretty risk-tolerant and they weren’t discouraged by a global pandemic.”

“Opportunities don’t come when the world is looking rosy and when it’s easy to do business. The fact there were some challenges in the early days of Flying Fox underlined the importance of timing and we were lucky to be able to capitalise on that.”

‘High-conviction’ portfolio power

With 25 companies in their stable to date, and more soon to be announced, the Flying Fox Venture portfolio includes everything from sensor technology for preg-testing cattle by Agscent through to a non-alcoholic beer produced by Heaps Normal.

“I guess the common theme is great founders who have a personal connection to the problem and an ability to sell that story to their customers – that’s the unifying thread.”

“Rachael and I have always shared the view that it’s too early to pick sector winners in Australia, and those clear winners will emerge in time. It’s important for angel investors to have a diversified portfolio and we are constructing the Flying Fox portfolio in such a way.”

Kylie admits that while she doesn’t have favourites, she has long had a soft spot for agritech.

“Goterra – a waste management infrastructure company attempting to solve the food waste crisis – is an incredible success story for Flying Fox, Australia and, I think, the world,” she said.

Regardless of the industry, Rachael said the companies under the wing of Flying Fox are indeed, flying.

“For a typical portfolio at our vintage we’d expect to see more companies default dead, but right now we don’t have any RIP companies. They’re raising capital at the right stage for growth, and we couldn’t be prouder of our portfolio. We’re grateful to play some part in that journey and be along for the ride.”

Making partnerships work and fighting fair

From perfect strangers to the perfect partnership, Rachael and Kylie say Flying Fox Ventures works on trust and respect. “That basis means we can fight fair,” Rachael said.

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“When we make investment decisions, one of us will take the lead on doing the deep dive, and then present it to the other person. If there’s a violent agreement, we force the other to be the devil’s advocate to create healthy tension to make sure we look at it from both sides.”

“But if one of us is banging on the table, saying hell yes, then the other one trusts that.”

“I trust that Kylie is always the smartest person in the room so when she speaks, I listen. We can’t always do everything together, so knowing I can handball something to her and that it’s in a safe set of hands to do right by investors and founders – that makes it work.”

When you’re looking at more than 1,000 companies a year to only write 10-15 cheques, both Kylie and Rachael believe it’s the only way to build a professional partnership.

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“We have to give a hat tip to the rest of the people in our tribe who make it happen – we lean on investors and an elaborate network of co-investors and collaborators that help us to get a second read on things. We make the decisions, but we’ve taken on advice from experts from different backgrounds.”

Why Australian founders must stay in the know

As the adage goes, it’s not always what you know, but who you know.

“Anyone can contact us, whether they’re interested in investing or if they’re a founder looking for some fuel on their fire in the form of capital – but if you know someone who knows us, a warm introduction always helps,” Rachael said.

“It’s a shortcut for us to know who you are because the chances are we’ll be working together longer than the average Australian marriage – we want to make sure we have that chemistry right.”

“Once the deal is done it’s a wide-open book on both sides – we want founders to come with their big successes and in their darkest hours to figure out how to claw back to solid ground.”

Like founders, investors of all shapes and sizes are also welcomed to knock on the Flying Fox door.

“We have a huge network of former founders who have grown their own businesses, exited and are now looking for ways to give back, as well as a pool of investors who are working in corporate Australia who aren’t at a stage in their careers that they can dedicate the time to build a portfolio by themselves, so they use us to create deal flow,” Kylie said.

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“We also have later stage investors. They make some small bets with us and then double down in the later rounds on the startups they’re most excited about.”

“We’re set up to work alongside everyone from the novice to the very experienced investor. In that way, working with Flying Fox is like a ‘choose your own adventure’: we’re a safe space for people to get started or to continue their angel journeys – but it’s much more fun to learn from the mistakes of others than make them yourself!”

For more information visit Flying Fox Ventures here.