Steve Sacks’ entrepreneurial journey began as a teenage programmer in Los Angeles and led him through roles at Oracle, founding multiple successful businesses, and eventually becoming an angel investor. After selling his consulting firm to Deloitte, Sacks transitioned to focus on mentoring founders and investing in startups. With 16 years of angel investing experience, he now has a portfolio of ~40 startups.
🔑 California born and raised, Steve started as a teenage programmer, publishing video games that funded his university education.
🔑 Studied Computer Science at the University of California, Berkeley
🔑 Joined Oracle shortly after IPO, when the team was just 100 people, helping launch their accounting and ERP products in Asia-Pacific.
🔑 2 x exited founder. A women's fitness franchise, and a consultancy which sold to Deloitte.
🔑 Began angel investing 16 years ago, and now has 40 companies in the portfolio.
Sophie Robertson: Hi all. Sophie Robertson at TEN13 here for the next instalment in our Spotlight Series. Delighted to be joined by Steve Sacks. Steve, thanks for joining us. We're going to unpack your brilliant career history and Angel investing story. I was fortunate enough to have a sneak peek at some of the slides you've prepared in this space. You've obviously given it a lot of thought, so I think there'll be some really valuable insights for everyone, so thank you for sharing.
Steve Sacks: Well, I'll do my best. It hasn't always been as planned as what it might look like on the slides, but we'll see what we come up with.
Sophie Robertson: Yeah, I'll just start with a few quick fun facts. So how long have you been investing in early stage technology?
Steve Sacks: It's been 16 years now. There's about 40 active businesses and about another probably dozen that have either exited or failed.
Sophie Robertson: Yeah, right. It's a big list. And what stage? What's your sweet spot?
Steve Sacks: Look, primarily it's been relatively early stage, seed, seed stage. In the past, I've primarily looked at businesses that are in market, have some kind of revenue, but you could actually determine if they've got traction or not. More recently, probably it's expanded a little bit out of there and there's a few pre seed and and a couple later stage businesses. But for my direct investments, I try and stick in the seed space mostly, and then I use funds to get the really early stage and later stage exposure.
Sophie Robertson: Yeah, OK, that sets the scene nicely for us. So can we just learn a little bit more about you, where this all began for you? Take us back to some of the early days right now.
Steve Sacks: Well, if we go back to the really early days, I grew up in Los Angeles. I was a total geek and nerd, very into electronics. When the first home computers came to market I begged my parents for the new Apple two computer which eventually they broke down and got for me and I just loved it, spent all my time on it. This is when I was about 13, playing early games a lot as well. And eventually I taught myself to program and decided to have a go at writing a game myself, which I did. And I thought, this is as good as some of the stuff that I've been playing, so maybe I can get it published. So I cut half a dozen floppy disks and stuck them in the mail off to a bunch of publishers who one came back and said, yeah, we'd love to publish it. Can you sign this royalty contract, which of course, I was 14 at the time and I had to get my parents to do it. But that was not a great success. But it went OK. But they asked me to write another one, which I did that was published and it was a lot more successful. And so that was my summer job, so to speak, because it funded me for the next few years while I went through university. So that was an exciting time. I didn't really think it was a big deal until I got contacted by a journalist for the American Airlines magazine who wanted to write an article about computer geniuses or something like that. And so suddenly I came back from summer holidays to school and all these kids came up to me. I said said, oh, we were flying back from holiday somewhere. And I saw your picture in the magazine, which was kind of funny. So I guess I was an entrepreneur from an early stage. I went on to study computer science at Berkeley and then I decided to take a job at what was still a pretty small software company called Oracle, in Silicon Valley.
Sophie Robertson: How small was Oracle back then?
Steve Sacks: They had just IPO’d, so there were probably a few 100 employees in the States. And after a year and a half there, I asked their head of international if I could get some international experience and come down to Australia and work for a while. And he said sure, I'm sure they'd love to have you. So four or five months later, I was at Oracle's headquarters in Sydney with about 30 staff. So it was very small. And I was in the fortunate position that I had been working on building some internal systems at Oracle that actually became their accounting and ERP products. And they decided to launch that as a product just a few months after I arrived down here. And so I was the only person who knew how it worked. So I got to be part of the launch team that launched that product set throughout Asia PAC, hiring support and consulting and training pre sales people and, and all that good stuff. And I did that for a couple of years in Sydney and a couple of years up in Hong Kong. And then I decided that maybe it was time to try doing my own thing. I felt like I could probably provide better service to customers than Oracle was. And so I started a consulting business based in Sydney, which went extremely well, very lucky timing. This was the early 90s, large enterprises were all trying to replace systems because of Y2K. And so we did very well with Oracle. Then another software company called PeopleSoft set up down in Australia. And then another software company called Siebel, which was a CRM product, probably the first CRM product started up in Australia as well. So we built relationships with all of them and had quite a thriving business across Australia when a whole bunch of the big companies came along realising there was money to be made. And we got in a bit of a bidding war with a few different buyers and ended up selling the business to Deloitte, where I was a partner for a few years running that part of their practice. And then when my golden handcuffs came off, I left and took some time off and eventually got asked by a friend if I could come in and run a project for this new CRM system they had just bought. And that was actually Salesforce's first big customer in Australia. So I got exposure to the world of SaaS pretty much as it was born, which at the time I thought, wow, this is amazing. I can stand up a new CRM system in six weeks. Whereas previously with on premise systems, you know, it took six months at best, which I thought was really exciting. Wasn't sure there was any way to make money out of it and was a bit burnt out on tech. So I took some time out of the space and randomly started a women's fitness franchise that we brought out from the US and that, that was also, you know, relatively successful. And I eventually sold that to my, my other shareholders in the business and was ready to get back into technology. So Salesforce and, and SaaS, you know, when, when I started out that that acronym didn't even exist. But of course, by this was probably 2010, SaaS was, you know, a real thing and Salesforce and and a whole bunch of other software companies started coming to market with similar business models. So I ended up, against my better judgment, building another small consulting company, which I eventually merged into a larger one and then went through a series of different roles both in startups and running sales for some organisations until about, must be about five years ago now. I thought, OK, well, I've had enough of this. I had done OK in some investments and I decided to just focus more on getting involved in the startup world, mentoring some founders and obviously investing in a bunch of them as well.
Sophie Robertson: Yeah, well, it's great to have you part of the Aussie startup ecosystem. Glad you stayed here. I’m keen to dive into that Angel journey: how did you get started?
Steve Sacks: Look, I kind of started when I had this franchising businesses and my partners in the business were also doing some private equity and VC type stuff. So there was deal flow I'd always been curious about with space but didn't know much about it. And of course when I started my companies there was virtually no start up community in Australia. So I was unsupported. And it was, I wouldn't say it was mature, but you know, there was a lot more activity I think by then than there had been 10 years prior. Anyway, they were seeing deals and two came up that I thought were kind of interesting within a couple weeks of each other. So I tipped into both and one was a great success and one was a spectacular failure. So that's kind of how it goes. And then over the next few years, it was more opportunistic. There was no real strategy. I'd come across a founder or a company that was interesting and when they were ready or if they were ready, I'd tip in some capital. While those first two, neither of which were in a domain that I really knew, the next probably four or five after that were all software based businesses, B2B stuff that I really understood. And again, some great successes and some failures in there as well. And so I kind of split my Angel investing journey into two cohorts. The first nine or ten years, I probably made a dozen investments with no particular strategy or focus. And then maybe five years ago, I decided, OK, well, I want to get a little bit more serious about this. I need to think about, you know, how I'm going to allocate funds, what types of investments do I want to make and became a lot more structured about it. So I've got that cohort one, which is my first fund, if you want to call it that. Luckily, you know, it's been successful enough that most of this next set of investments that I've made in the past five years have been really just recycling capital that had come back from from the original investments. So I've been quite lucky that way. And then in I guess it was 2020 or 2021, I did the VC Catalyst course at the Wade Institute, which was really helpful in terms of helping design a structure, help examine what I was looking for and how I was gonna get there. And so that's the deck that you've seen some of, or at least a revised version of it.
Sophie Robertson: Yeah, well, I'm really keen to dig in deeper into what you learn in that course and how you think about it now in cohort 2. But if we just go back to sort of cohort one, you mentioned there's been a few failures. What have you learnt from those early failures?
Steve Sacks: Well, I think the first thing is knowing if you're gonna do direct investments, not through a syndicate, obviously getting to know the founder and what their failure points might be is a really good place to start, which I've known all along, but maybe paid less attention to it than I should have in some cases. And the other thing that I've learned is that you can be incredibly surprised. I mean, there are businesses that I thought couple years in, no chance/mentally written off/never gonna see it again. And then suddenly three or four or five years later, they've figured it out. They've done really well and and they got out of there. So, you know, there's a lot of art, not a lot of science in my opinion. And yeah, there's a reason they call it patient capital as well.
Sophie Robertson: I know with Steve Baxter’s early portfolio, he's got similar stories in there. Some of the huge exits, a few years prior, you never would have picked them as the one. So were there any early influences for you? You mentioned a few other people in your circle doing PE and VC investing. Where did you get your inspiration and guidance and influence from?
Steve Sacks: I mean, a lot of it was gut; by that point I had built and sold a couple of businesses, so a lot of it was just based on my own experience. I did know a couple people who are also similarly quite new into investing in this sort of asset class. So we were all kind of fumbling along trying to figure it out as we went along. There were a couple of clients that I had in my Salesforce business, very entrepreneurial CEOs of businesses that were well past the startup stage. And I took some really interesting learnings from them.
I think Venture Deals was a book that had already been written. So I read that at one point, which was kind of helpful from the mechanics and the legalities and so forth. But yeah, it was a journey of trial and error really. And it still is. The difference of course is now there's all sorts of resources and communities supporting this sort of ecosystem than there were back then.
Sophie Robertson: So can we fast forward to today or, these past five years? What is that investment thesis that you've crafted?
Steve Sacks: So as I said before, my I feel like my sweet spot is in that seed stage. It's at a point where a company's far enough along that they have a good idea of what they're trying to solve and hopefully have some customers, but there's also still a lot of upside if they do well. So my thesis kind of focuses on that stage. I'm very agnostic. Like my background is software B2B selling to enterprise. So I have a kind of a personal bias or leaning or probably better depth of understanding than most people do for businesses in that sector. But I am trying to get a spread. And so when I invest through TEN13 or Angel List or one of the other syndicates that I'm involved in, I generally use that to find other types of businesses that maybe I don't understand the domain so well. But I'm hopeful that the syndicate leads know what they're talking about and I follow with them. I try and stay away from negative impact businesses. I'm not really a focused impact investor, but I'm also not investing in laser beams and, and stuff like that. What else can I say about my investment thesis? I do allow for crazy, you know, I've backed friends who I trust, whose businesses I know nothing about, but just on the basis that I trust them and let them give it a shot. And really in the last five years, I've also focused a lot on trying to get gender equity or at least diversity in My Portfolio. So probably 40% now in the portfolio have one or more female founders in them, which I think is also good for the long term besides helping the other half of the population.
I've set limits on how much I'll invest in risk capital in this asset class because obviously I have other investments in listed and and more staid markets. And to get some exposure outside that seed stage, I've invested and become LP's in a couple funds that either invest extremely early stage or you know, more in the growth stage, Series B and subsequent to that.
Sophie Robertson: And then what do you think about like diversifying over vintages?
Steve Sacks: Yeah, look, I think that's a good thing. So these last five years, I was probably a little bit heavier investing in the early part then the last two years were a lot wider like they have been for most people. And I've done a couple of investments this year. So of that sort of 40 or so that are operating, you know, they've been spread across the pre boom the the peak. I probably overpaid for things and then also got some down right near the bottom. And I think trying to spread it over a couple of years is important. And I think probably, you know, it's a very different approach than that first ten years when it was very opportunistic. I didn't really pay attention to where we were in a cycle. Portfolio theory says you should invest the same amount in every investment. I did not do that at all. I had high conviction in some and put a lot of money in and others were just more ‘let's roll the dice on this one’ with a small cheque, whereas past five years I've tried to keep it a little bit more consistent.
Sophie Robertson: And what do you think about diversification across geographies?
Steve Sacks: That's a great thing. I mean, part of my reason for investing now, part of my why is really I'm just trying to give back. I'm too old to have the energy to start my own business. So I live vicariously through founders and if I can help them by introductions or just sharing experiences, that's great because none of that existed when I started my first company. And so as a result, I'm probably more weighted to Australia than I should be from a from a Geo diversity perspective. But you know, I'm an LP of a fund in Israel. I'm an LP of a fund in the US and I've made some direct investments in the US so to the extent it's possible, absolutely. But you know, it's challenging.
Sophie Robertson: Yeah, well, and it goes into your Why as well. You’ve got a lot to offer the companies you're backing and you want to pay it forward, so it makes sense that you're doing that in your home ground. And we, and we thank you for that.
Steve Sacks: Well, look, I mean, compared to where the ecosystem was even five or six years ago, it's extraordinary how much it's moved forward here in Australia.
Sophie Robertson: Yeah, there's some great momentum. Sounds like you're sector agnostic, but are there any emerging themes you're really trying to go down the rabbit hole on and and learn more and you know, see opportunities?
Steve Sacks: Well, it's no longer an emerging thing, but I started investing in AI and ML companies probably four years ago. I have a few investments in that now. It's so busy and crowded, I'm not sure that there's necessarily an edge to find. It's just kind of exploded to the point where you don't even know what to look at anymore. And, you know, some interest in robotics, don't have a lot of investments in that space. Interested in some of the quantum computing stuff that's happening, but I don't think I have any investments yet. You know, sort of a watching brief, but there aren't a lot of opportunities yet for that. And then look, I've invested in a couple companies that are climate focused and AgTech focused. I'm supportive, but I don't understand those industries very well. So again, I rely on on others to tell me which ones make the most sense.
Sophie Robertson: Perhaps a bit of a practical question, but you've got a very broad and long standing portfolio. How do you actually keep track of that? Are there any tools or resources you use that work for you?
Steve Sacks: Yeah, Excel.
Sophie Robertson: Yeah, I think that's a common one.
Steve Sacks: Yup. Can't beat it. I know that there are tools out there for sure, but I mean, it's a slow moving industry in the sense that it's patient capital, right. It's 10 years probably or maybe even longer before you know what happens. And so things don't change much. So you just kind of add a line to the spreadsheet every time you make a new investment and away you go. I probably have become better. I never did this in the early days, but more recently I'll often keep notes, my equivalent of a deal memo on my investments just so I can look back when I'm really old and see where I made the smart decisions and the dumb ones. But yeah, if you know of any good tools that might be better at it, that'd be great. But it's easy with a spreadsheet. And when you're investing through, you know, you guys have your own portal, Angel list have a portal. Our crowd has a portal. So, you know, there's really no consolidated place that I could look for all this information.
Sophie Robertson: Yeah, I'm still looking for the Holy Grail of how to do. And I'll let you know when I find it.
Steve Sacks: Right. Maybe you should enhance, maybe you should enhance the TEN13 portal so I can add investments from outside TEN13 and look at it all in one place.
Sophie Robertson: All right, it's actually not a bad idea. I'll take that one on notice.
Like you said, you write your own internal deal memo or points. Can you just double click on that and explain your decision making process, any due diligence you do? Obviously it's different for a fund versus a syndicate versus direct, but still a lot of these companies, there isn't really a lot of due diligence to do in the early days.
Steve Sacks: It's really about, is this founder tenacious, persistent? Do they have hustle? Are they coachable? Do they have a connection to the knowledge or domain or market that they're trying to get into? Is this somebody I would buy from? You know, just like when I used to hire sales people, it's like, is this somebody I would buy from? Because if not, they're going to probably struggle to sell to anybody else as well. I'm a founder. If I understand the industry, it makes it a lot easier. If I don't, I'll often do a little bit of research apart from what they tell me the industry is about. But then it's a lot about, who are your customers? Are they using it? Are they realising value from it? I mean, obviously there's the what's the problem you're solving and here's the solution and stuff, which is all great. But do you actually have customers that are using it and starting to realise value? Because if that's happening, then you know you're at a good start.
Sophie Robertson: Yeah, you keep going.
Steve Sacks: Yeah. And I can keep going. A lot of the other stuff at an early stage is not that important. I mean, competition, sure. Size of market, sure. But, you know, if you've got a good offer, if what you're doing is actually solving somebody's pain, the market's always, almost always big enough. So I don't tend to worry about that too much. And similarly with competition, it's good to know what's out there. But if you're solving the problem better, faster, cheaper than somebody else, then there should be an opportunity for you. And I guess the lesson that I've learned probably later in the journey has been getting an understanding of how much more capital they're going to need to raise for two reasons. One is, how far am I going to get diluted down the road if I don't keep topping up? But also more importantly, I guess in the near term for these businesses is where are they gonna get that next round of money? So if this investment has a whole bunch of angels in it, but no institutional money, when they need to raise the next round, are they gonna have to start from scratch? Or is one of this group of investors going to lead the next round or be able to introduce them into a fund or some kind of institutional money? And I think that's, you know, especially over the past couple of years, that's become incredibly important because most of these businesses do need more capital. Having said that, there are times when I'll invest in a business that I don't think is venture available because maybe their market's just not big enough or for whatever other reason. But as an Angel and early stage investor, it's OK. Like as long as you go in thinking, all right, well, this probably will top out at 10 million of revenue and they might sell their business for 50 million. If you're an early stage investor, you can still do extremely well out of that, even if they don't become a billion dollar business. Australia is probably even more so than say, North America, most of them are not going to be venture businesses, but that doesn't mean you can't do extremely well as as as an early stage investor by investing in them. And so having some kind of understanding going in of what you think the potential is for the business is probably important.
Sophie Robertson: So what's the advice for a founder in a in a pitch? They've got 30 minutes with Steve Sacks. What's the one or two key questions you're looking for comfort on?
Steve Sacks: Well, look, I wanna know what problem they're solving, how they're solving it, what the ROI is for a customer if they buy it and use it, and what their traction is, how much success they've had so far in improving that. I mean, really, that's the crux of it. You can ask questions and I do, I will ask questions to the founder to try and assess some of those qualities that we're all looking for. But I think, you know, when I do direct investments, it tends to be a relationship has been built over a period of time. It's not just a pitch. And I make a decision. And so I think some of those qualities only emerge after you have some kind of relationship with the person. You know, prove to me that you're persistent isn't gonna kind of come out in a 30 minute pitch. So I tend to use signals, but probably not question too much around that kind of stuff and really just spend some time with them.
Sophie Robertson: Yeah, it's a good reminder, right, that it is a relationship business. You're on that cap table on a journey together for a long time. And when you meet someone is not the time you're going to close them as an investor. It's needs to be built and you need to go on the journey together.
Steve Sacks: And to go back to your question, I think it's important for founders to also understand their own ambition. It's a waste of time to go pitch to, you know, Blackbird or Square Peg or any of the big boys if you don't have like a crazy idea that has a crazy big potential. And so if you know your ambitions or your market or whatever is not at that scale, don't waste your time. Go find investors who will back you and what you're doing very well.
Sophie Robertson: Is there anything you think people get wrong about Angel investing?
Steve Sacks: Well, I mean, part of it's what we were just talking about, which is as an Angel investor, you can still do quite well even in a successful investing in a successful business, even if it's not a billion dollar business. I see the Angel investment community that's developed over the past 3-4, five years, right; a lot of them are much younger than I was when I did my first investment. And you know, 10 year horizon when you're 25 is a long time. And I think people who are just starting the investment journey really forget that. Yeah, you might get lucky, you might get an exit in three or four years. But chances are you'll probably get a failure in three or four years. You'll probably won't see that money again for eight to 10. And so that, that patience and the sense of the duration, I think new investors really need to kind of learn. Sometimes it's learn by experience. But I often say when people are interested in either startups: starting up one or investing in them, my best return of any investment was going to work at Oracle out of uni. My stock options that I received and I didn't even know what they were at the time. But the ones that I didn't sell for, paid for my first house that I still hold. I mean, I've got a sort of 7-800 times return on them. So go work for a start up, you know, or scale up or a pre IPO company. Be one of the first 100 employees. Get your little slice of equity and learn about growing a company before you try and do it yourself. And if you want to, if you want to invest 20 or 50K in these startups now, maybe think about taking a pay cut. Go work for a startup for a while, get your equity and learn about it that way. I don't know if that's the best way to do it, but I do sometimes suggest that.
Sophie Robertson: Yeah, no, I think that's great advice, right? And it reflects your journey you've had and a very successful journey at that. What would you say makes a good Angel investor?
Steve Sacks: Patience. I think a willingness to open networks is broadly the most benefit you can give a founder. So if you're going to be investing but not prepared to introduce them to that great CTO, you know, or the sales guy or the organisations that can be customers that that might be of interest to the startup. Look, I just think that's the most important thing. And almost every startup that I've been able to help, sometimes it's sharing experience, but more than anything, it's made helping them make connections. So having that quality is important. Don't do it if you're not willing to open that up. And yeah, be ready for a wild ride and potentially a long time before you you see a winner and don't get despondent about early failures because that's just, that's the nature of the asset class, isn't it?
Sophie Robertson: Yeah, good advice. So last question, is there something you're working on or one of the companies in your portfolio at the moment that, that you want to talk to that's really exciting you?
Steve Sacks: Yeah, sure. I'm involved in and on the board of a company called Sonnet, which kind of started out initially as trying to build metadata layers using machine learning for audio streams. So podcasts, broadcasts, that sort of thing, which they've done successfully, but they've been focusing on publishers. So the people that actually create the broadcasts or the sports broadcasts and so forth, they've got a great corporate VC behind them, which is Southern Cross Austereo, who's also been a Lighthouse customer who have been absolutely fantastic. And they've made their first stride acquiring some customers in the US and have done some amazing things with machine learning and natural language processing and so forth. But what they've come to the realisation over this year really is that the publishers have no money. It's the advertisers that have all the money. And so they're in the process of essentially pivoting to serve both sides of that market. So both advertisers and publishers with the concept of essentially AdWords for audio. So advertisers are looking to the whole audio advertising marketplace is very immature. You know, it's still kind of, they think about it like radio. And so programmatic advertising is really in its very early days and there aren't a lot of good tools to help advertisers target the audiences that they want to reach. And inside a podcast or a broadcast that you convert to podcast, there's tons of data about what they're talking about. And so, if you're doing a podcast about beer, well, obviously a beer brand is probably gonna be interested in advertising. And it's very hard to match those with current tech. So Sonnet's really trying to fix that problem both by providing more targeting information for advertisers as well as the sort of brand safety and suitability stuff to make sure they're not, you know, a particular brand is not advertising on a show that's talking about something that is contrary to their brand values. So it's been a pretty interesting ride. And they're just in the process of doing this pivot and trying to secure advertisers to take on the other side of the business. And yeah, we're optimistic that it's gonna take off from here, but we'll see.
Sophie Robertson: Steve, a huge thanks to you for joining us. Really great to learn of your early story and Angel investing journey over the past 16 plus years. Thank you for your time and look forward to seeing you in person soon.
Steve Sacks: Great. Thanks, Sophie, good to chat. Be in touch.
Sophie Robertson: Thanks.