Dovetail Venture Studio Raises New Fund - Afterpay Backers

Dovetail: A Venture Studio Empowering Founders

Operating from Sydney and Auckland, Dovetail functions as a comprehensive venture studio. It collaborates with founders possessing innovative concepts, yet potentially lacking in technical expertise. Dovetail assists in the complete construction of companies, positioning them for expansion and subsequent funding rounds.

Origins and Successes

Established in 2014, Dovetail has achieved notable successes. These include Afterpay, a prominent Melbourne-based unicorn in the buy now, pay later sector, alongside other key players like Klarna and Affirm.

As explained by Dovetail co-founder Nick Frandsen to TechCrunch, the firm essentially serves as the technical co-founder. They are responsible for leading and implementing product strategy, design, and the development of products capable of scaling effectively.

Current Funding and Investment Strategy

Currently, Dovetail is in the process of raising a $10 million AUD fund (approximately $7.5 million USD). This capital will be allocated to seed, Series A, and Series B funding rounds for 15 of the most promising companies emerging from its venture studio program.

Dovetail’s investment amounts range from $150,000 to $1 million AUD per company.

Preparing Startups for Venture Capital

A key objective for Dovetail is to prepare startups for securing funding from other venture capital firms. Notable investors in Dovetail’s portfolio companies include Blackbird, Qantas, and Wavemaker.

The Advantage of Collaborative Development

“We have the benefit of having worked closely with these companies, often on a daily basis, for a minimum of three months before a seed round and twelve months before a Series A,” Frandsen stated. “This provides us with an informational advantage akin to that of a co-founder when making investment decisions.”

Furthermore, Dovetail distinguishes itself by sharing ownership in its portfolio companies with the entire team. This fosters a stronger sense of unity, dedication, and a collective drive for success.

The Afterpay Partnership

Dovetail’s collaboration with Afterpay began in 2017, when the company consisted of fewer than 40 employees. Founders Nick Molnar and Anthony Eisen sought a partner for digital product development to build and scale their mobile and web applications.

While possessing extensive experience in financial services, both founders came from backgrounds outside of technical development. Dovetail stepped in to construct Afterpay’s technology platforms and facilitate the launch of its consumer products.

Other Portfolio Companies

Other notable startups that have benefited from Dovetail’s venture studio include:

• Runn: A resource planning SaaS platform.
• Marmalade: A tool for one-click invoicing.
• Provider Choice: A management platform for providers within Australia’s National Disability Insurance Scheme.
• Landmarks ID: A privacy-focused mobile location intelligence platform for marketers.
• Fluenccy: A service designed to reduce foreign exchange costs for importers and exporters.

Founders’ Previous Venture

Prior to establishing Dovetail, Frandsen and co-founder Ash Fogelberg’s previous startup, 1-Night – a ticketing and payments platform – was acquired by TicketDirect in 2013.

Sector Focus and Founder Qualities

Dovetail’s venture studio operates across various sectors, with particular strength in fintech, SaaS, and marketplaces. They collaborate with startups that may be in the early stages, even without a fully developed product.

The firm prioritizes founders who are ambitious, commercially astute, and possess significant industry expertise relevant to the problem they are addressing.

Evaluating Startup Potential

Dovetail assesses potential founders based on the viability and scalability of their ideas. This evaluation includes the founders’ suitability to tackle the identified problem, the potential market size for growth, and the level of existing competition.

Geographic Focus and Future Expansion

While Dovetail maintains a product agency serving primarily U.S. clients, its venture studio is currently focused on startups in Australasia. Plans are in place to extend operations into North America in the future.

“We are actively searching for industries that are substantial in size but currently overlooked by the startup ecosystem,” Frandsen explained. “We seek ideas that necessitate substantial industry experience and are difficult for teams of young entrepreneurs to replicate quickly.”