Black Sheep Capital’s 2019 Investment Strategy

Dan Winter
Black Sheep Capital
9 min readMar 29, 2019


Black Sheep Capital’s investment plans for the new year, written by Dan Winter

Firstly, happy (very late) new year from the Black Sheep Team! We are very excited for another big year of growth and development in the startup/venture ecosystem.

To keep it short and sweet, rather than provide just another venture blog about what we did in 2018 and why we did it, we thought it might be more interesting for our readers to hear what we learned over the last few years, and how we are taking those learnings across into our 2019 investment strategy. I want to talk on the topics we found exciting and also highlight some emerging themes in our investment approach based on our experiences in venture over the last five years.

Since starting Black Sheep Capital, we’ve invested in so many great teams across a range of industries, from logistics, on-demand, the gig economy, learning and education, accounting, cybersecurity, finance, consumer transactions/loyalty, workplace management/efficiency and more recently in renewable energy. We’ve remained intentionally broad in our investment focus areas to ensure we can take part in every great opportunity that comes to us, that is in some way changing the game within a particular industry.

Image: Black Sheep Capital Portfolio in 2019

A belief we still hold strongly is that in the decade to come we’re going to see unprecedented and continuous changes across almost every industry and technology globally. There will likely be further political/societal pressures driving innovation and change, and potentially periods of economic instability on the way. No industry or technology can withstand these pressures. As a consequence, we’re still dedicated to backing the best companies/founders at the forefront of these advances across all industries, building business and technologies for tomorrow, today.

When we first started investing, we had one major priority: look for mission-driven companies led by passionate founders/founding teams seeking to solve problems that significantly enhance the way we live, work and consume — this hasn’t changed. What has changed is how we evaluate the new opportunities we are interested in backing, and further the relentless approach we take to ensuring every learning from each of our previous investments is applied to every new opportunity we back moving forward (both the good and bad learnings). Fortunately, we have a very strong portfolio so far, but that’s not to say every investment has been a success, and we think the less successful provide equally valuable learning experiences, if not more so.

Following on from this, rather than delving into industries and technology trends on the way, where we think technology is heading and why that is the case, I want to help you understand how we will be looking at each new opportunity presented to us in terms of both the dynamics of the company directly, and further, the characteristics of the founding teams leading it.

There are three major themes in our learnings over the past few years, most of which where the importance has been highlighted multiple times in the previous 12 months in one way or another. They are:

Theme #1: Exceptional companies are led by exceptional founders, so getting to know the founders at length is one of the first parts of our deal review process.

You might be thinking, “Well everyone looks for smart/strong founders, that’s not new”, and you’re right. For us, we’ve learnt how important it is to get far deeper than the typical conversational coffee, reference check and credential review.

We’ve seen first hand that deeply understanding our founders from day one and subsequently assisting with their development throughout the startup up lifecycle is not only a win for the founder/startup, but a win for us — stronger founders, stronger teams, stronger businesses = improved chances of success. Quite often we’ve found this approach enables us to not only jump in and support the founder/s strategically and operationally (where help is wanted), but that is also helps us and the founder/s identify critical additional team members early on to support them in areas they are less confident and experienced.

As an example, in mid-late 2017 we arranged a B2B enterprise sales conference for all of our portfolio companies selling products/service into enterprise. We flew one of the original contributors to The New Solution Selling over to Australia on two occasions. First for developing the skills of the relevant founders themselves, and secondly, six months later, to provide the opportunity for the same founders to bring along their core sales executives for an intensive three day solution selling course — all led by Phil McCrory (Note: If you are interested in an intensive sales training program I would highly recommend reaching out to Phil, he is a fantastic coach on all things sales).

Image: Black Sheep Capital Solution Selling Workshop

Theme #2: “Smooth seas never made a skilled sailor” — Franklin D. Roosevelt. The importance of having weathered the storms within your domain.

The quote noted above from Franklin D. Roosevelt: “Smooth seas never made a skilled sailor”, is as much a fantastic metaphor for life as it is for small business and early-stage startups. Given we are so focused on finding skilful sailors (as mentioned in learning #1) we can’t ignore the fact that being a skilled sailor is predicated on having experienced rough and many seas — which in our industry presents as real world business, procedural, regulatory, economic, environmental, political and societal challenges and experiences, or, problems needing to be solved. And not just meaningless problems — big ones, where a solution significantly changes the way that part of business and/or society operates. Put simply; it is our opinion that you are not best placed to fix what you never experienced the worst of, yourself.

The diagram I have drafted below, for lack of better name lets call it the ‘Founder Lifecycle Traits’ graph, is pretty well aligned with how we see value in specific founder traits and experience along the journey. Assuming all traits/skills start with an equal level of importance, some traits become significantly more important as the business progresses through the growth lifecycle — two of the significant growth areas being leadership and domain expertise.

Figure: Illustrative Founder Skill Importance over Startup Lifecycle

Note: While this graph by no means covers every skillset and founder capability, the point I am attempting to highlight is that over the last five years we have seen many companies grow through each of the phases illustrated and the two consistent traits that become increasingly instrumental are: leadership and domain expertise.

Theme #3: Exceptional communication is key to getting the most value out of your investor group. Investors can’t help you solve problems they don’t know.

One of my favourite authors and renowned clinical psychologists Dr Jordan Peterson often talks in his lectures about there being little else you could do throughout your life, that makes you more competent than to learn how to communicate. In our experience, the same philosophy applies in the venture/startup world for founders — learn how to communicate with your investors, find a style and frequency that works and stick with it. There are so many benefits of honest, transparent, precise and consistent communication with investors for both the startup itself and the current and future investors. As a result, we feel anything sub-optimal from day one, leaves far too much value uncaptured over the long term.

When founders implement frequent communication and efficient and effective reporting processes from day one, we are well equipped to help their companies in many ways. It enables us to be there to facilitate appropriate introductions, provide guidance, jump in and get operational where our help is wanted, communicate essential messages within our networks and so on. We are always 100% committed to doing whatever we can to help our portfolio companies if we can add value in doing so. If we are left in the dark (from either the good and the bad stories), we are not in a position to do this.

Image: Daniel Gavel: Director of Black Sheep Capital with James Moody — CEO/Co-founder of Sendle

What does this all mean?

All of the above predominantly references specific traits and behaviours of the founder/s, but the reality is while they are arguably the most critical consideration in early-stage ventures, they are not the only consideration. Below, I want to provide a bit more context on the types of companies taking our interest. Keep in mind the below provides only a summary of some of the key areas we are looking at when considering a company, and sits underneath ensuring there is alignment with our investment strategy mentioned at the beginning of this article.

The companies we love, typically demonstrate the following:

Company attribute #1: Strong investors before us, strong investors after us.

It would be wrong to say investors make anywhere near all the difference, but fair to say they have a meaningful impact on the startup throughout its life. Mainly if the investor is involved at board level and in the governance of the company. That being the case, we want to make sure we are working with investors that are 100% committed to the journey — not the paycheck at the end. We seek co-investors passionate about the problem who remain advocates of the solution, can add valuable expertise in their duties as an active participant in growth and governance, and are willing to dedicate the time and effort required to understand the core business. Throughout the last few years, we have had the pleasure of working with investors like this and are committed to continuing to expand on and build these relationships for our founders.

Company attribute #2: Some evidence that the business concept is working before we invest.

This one changes slightly depending on the stage of the business at the time of the capital raise. However, for early-stage opportunities (i.e. late seed and below — which is also our primary focus area) here are some of the ways we evaluate if the company appears to be working, albeit likely subjectively at times.

  1. You have a product/service offering in the market with some early customers that are paying for the product. Not willing to pay — paying.
  2. There are early indications that your solution is being used more and more every day — by existing customers, and by new customers.
  3. The users you do have are referring your business to others because they love it, and because it solved their problem, or, made their lives that much better. And finally;
  4. You have a clear and well-considered pathway to turning the dial on the above three leavers with a rough timeframe of major future milestones in mind — hence supporting the logic behind your current capital raise.

Company attribute #3: The company has a clear path/understanding of the next major financial hurdle.

By this, we don’t mean a documented approach covering every single action leading to the next capital raise — that would potentially restrict your operating agility. More so, we want to see a well-considered plan that takes the business from point A (i.e. the time that we are investing) to point B (i.e. a suggested time when capital either runs out and the company requires further investment, or when it can realistically become cash flow positive). I highlight ‘realistically’ here as to point out that any assumptions in modelling that show your business going from $10,000 annual revenue (AR) to $10,000,000 AR in one year at seed stage would need some very legitimate proof points if you want us to take your logic seriously.

As part of modelling this effectively, it is handy to have considered the critical implementation hurdles, model sensitives, and performance metrics that the company will need to hit to make sure the business moves up to and beyond point B.

Final Note

I hope the above has been helpful in painting a picture of the types of businesses we are looking for in 2019. If your company looks something like what is described above, or if you know somebody who is looking to raise capital that you think we should meet with, get in touch!

Finally, don’t be afraid to flick me an email and ask for more details. While the above highlights what we are looking for in our investment-ready companies, I’d love to speak with up and coming founders seeking some guidance around capital raising and positioning their companies for future investment.

Publishers Note: I am an Investor at Black Sheep Capital/ Full Circle VC, a former management consultant, strategist and tech enthusiast. For the record, any opinions contained represent me and me only.



Dan Winter
Black Sheep Capital

Pre-seed, Seed and Series A Investor at @FullCircleVC_AU & @CapitalSheep. For the record, all posts represent me and not them✌🏾