Flying Fox co-founder Kylie Frazer on great companies in hard times, and the brilliant people who keep her excited about startups

SmartCompany caught up with Kylie Frazer, co-founder and partner at Flying Fox Ventures, the angel investor firm that launched its search for great early stage Australian and New Zealand startups in June last year.

Ahead of her judging appearance at the Pitch, she filled us in on Flying Fox’s progress, changes in the market and why it’s the people that drive her passion for early stage startups.

Flying Fox Ventures kicked off just over a year ago. How has the time been for you?

It’s been great. We’ve been operating for a year under the Flying Fox brand, but had kind of been evolving for three years before that. So it looks like we’ve done a lot in a very little time but the truth is there has actually been quite a long run up to get to this point. But we’re really pleased with how things are going, we’ve got $20 million in funds under management, we’ve invested in 42 great companies and have more on the way. We’re very active and excited for what’s coming next.

Obviously in those few years a few things have changed significantly. How have economic uncertainty and the pandemic influenced your approach to finding the right startups?

I think there are lots of people in venture pretending that what’s happening in the broader world doesn’t have an impact on us, and the companies we invest in. But you know, none of this happens in a vacuum. And there is an impact. But cycles happen and we need to get used to investing through them. Great companies will be born in this stage, in this ‘down market’, or however you want to categorise it. It’s not like everything gets put on hold just because the world turns to shit. We are somewhat insulated at the early stages because in Australia — and certainly how we have invested — we’re not investing on valuations at gross multiple valuations, so, it just doesn’t have as much of an impact at the early stages. But we do need to be mindful of what it means as the company grows, particularly around their ability to access further capital and their ability to access customers. Are their customers feeling the pinch? Because if their customers are feeling cheap, then that’s not good for anyone.

Trends in startup ideas naturally echo trends and needs out there in the world and the market. What trends have you noticed in recent pitches you’ve seen?

We see such a variety. It’s kind of hard to pull out ones that we’re seeing more of than others. There has been a real increase in mental health apps over the last 12 months I would say. There are still a lot of companies working in that space.

We are seeing a retreat from ‘consumer’ in the current markets. We’re not a consumer specialist, but we say we’ll have a look at anything, and we are definitely seeing fewer of those companies at the moment. I think perhaps because they are not capital efficient. And companies that are not capital efficient are struggling to raise in current times, and founders who had dreamed of starting a consumer business are perhaps thinking now is not the best time to be going out to market to raise for that.

What excites you about the future of early stage startups?

Early stage startups is a people game. So it’s always going to be about the people. The ideas come and go; I am struggling to keep up with the brilliance of the people I am speaking to on a daily basis. That’s not going to change. I love the way people can bring their connection to a particular problem space to light. And that’s what excites me. Seeing that personal connection and then bringing a toolkit to them to help them amplify that and achieve the scale that they’re hoping to.

Was it people that drew you to the space in the first place or was that a nice surprise you discovered along the way?

I came to this space very green. I did not come up through the ranks of a venture fund; I came in as a founder and then was lucky enough to start angel investing off the back of that and learned that way. I definitely learned it along the way, which was a nice surprise!

Want to hear more from VC leaders like Kylie Frazer? Don’t miss the Pitch. Frazer joins Alex Khor of AfterWork Ventures, Adrian Osman of Mr Yum, John Kearney of AWS and Chris Dahl of Pin Payments on our expert judging panel.