Life after Destra, and the digital future
Tuesday, July 15, 2008/
Dominic Carosa, 33, was until two months ago, the founder and chief executive of digital media and entertainment company Destra Corporation. He talks to AMANDA GOME about life after Destra, the lessons he learnt, his new plans and how the digital world is
Dominic Carosa, 33, was until two months ago, the founder and chief executive of digital media and entertainment company Destra Corporation. He talks to AMANDA GOME about life after Destra, the lessons he learnt, his new plans and how the digital world is changing.
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Amanda Gome: What have you done since leaving Destra?
Dominic Carosa: I’ve set up a new company called Dominet Digital Corporation and the core focus is very much around doing all things digital as well as being involved in various companies at the investment stage as well.
How many investments have you made so far?
I’ve got three businesses that I’ve set up or invested in. One of those businesses is mailinglists.com.au, and there’s a couple of others in the pipeline which I can talk about very shortly, and there’s a bunch of others as well. I’m just going out there and doing it all over again and having a lot of fun.
How are you funding your new businesses?
Out of some personal cash flow. At a certain point in time, given that I’ve had a bit of experience in raising capital albeit mainly in the public markets, I’ll be packaging up a number of those businesses. I’ve already had half a dozen people or so approach me and say ‘when you’re ready from an investment perspective let us know because we want to back you again’.
So that gives me confidence. But there’s no point trying to get investors in when the businesses aren’t investment ready. Making sure that from a corporate governance perspective the business structures, the back-end systems and the technology’s right, I want to make sure those things are right before I bring in any external investment.
But it’s a good time really to be building given the state of the financial markets at the moment.
It’s a bear versus bull market. Like all cycles the bull market will come back and by that time I will hopefully have half a dozen or so internet businesses that I’m able to raise capital in, trade sale, potentially consolidate those as well as a number of others and list into an IPO in 2009-10.
So what are you looking for?
I’m looking for businesses that are digital, highly scaleable, that make money when I sleep. I am very much relying on the power of the internet. From an investment perspective, I’m keeping a fairly broad net out there.
That’s everybody’s dream.
Well when I was away recently on my four week holiday, which is the longest holiday I’ve ever had in my entire life, I said to myself what are the kinds of things that I want to do when I come back, and one of them was to set up a number of businesses that were low touch and that just basically ran without me having to be directly involved.
Aren’t you going to be spreading your interests too widely? Obviously if these are start-up businesses, you’ll be in a hands-on role.
Right now I’m working in the business rather than on the business most of the time, and after having worked on the business for many many years at Destra I’m actually quite enjoying getting in and working in the business.
Getting in there, I’ve learnt so much more about search engine optimisation, online marketing, customer interaction.
I am fielding a number of customer inquiries and it’s actually been really good hearing from customers directly. It’s actually also nice to spend a bit of time rolling up your sleeves.
Now how long were you at Destra?
I listed the company in May 2000, so it was eight years ago.
Are you doing anything now with Destra?
I’m doing some ad hoc work with Destra on certain projects but right now my core focus is on Dominet Digital.
What is your version on how you left?
About three months ago Opes Prime effectively went under and Opes Prime had my Destra shareholding. Effectively they were like a broker/margin lender, and so about three months ago I had virtually all of my shares with Opes Prime.
People ask why did I have them all there, and the core rationale was I used Opes as leverage facility to buy more Destra shares and to exercise my Destra options, and unfortunately in hindsight I had all of my eggs in one basket.
Given what’s happened with this market and the regulators with incidents like the Opes Prime crisis, what would you like to see changed? You’re an entrepreneur, do you want more corporate governance?
Well I actually think corporate governance is the foundation of our financial community. The whole regulatory environment with the ASX running an exchange and at the same time regulating the exchange; it’s like having a kid in a lolly shop saying don’t eat any of the lollies. I mean what’s the kid going to do? He or she is going to eat some of those lollies, no matter what kind of processes or Chinese walls are built into those kind of organisations.
There is always an inherent interest or alternatively there is a perceived conflict of interest, so my view is someone’s running an exchange versus someone regulating an exchange should be in two completely separate organisations. That’s my own personal view and I’d be surprised if there isn’t a change over the next couple of years.
So looking back was it too high risk? Would you do it again?
I’ve asked myself this question many times, and when you really truly believe in the company that you’re building why wouldn’t you want to put 150% energy and effort and money, everything that you work into it because you believe in it.
Next time I’d do things like having two different margin lenders. Next time I would make sure that during the growth process I would actually (and this is the advice that I give budding entrepreneurs or people that are running companies out there) make sure that you take some money off the table as your company is being funded, and as you’re going through different rounds of funding or selling down some shares.
I know it’s one of the most difficult things to do. For the eight years that I was heading Destra up I never sold a Destra share. I was a net buyer of shares because I believed, but in hindsight, and hindsight is a beautiful thing, maybe I should have sold some shares.
Did you take a good salary? Did you get good dividends? Was it worth it?
From a balance sheet financial perspective? Maybe not. If one looks at it from the knowledge that I gained and the people that I met, this has been one of the best learning experiences.
When I was on my four week yoga retreat I actually asked myself the question – if I had my time again would I actually want to go through the same process; effectively losing all my Destra shares. Initially the first reaction is of course not. I’d want to change this and I’d want to change that, but I keep on coming back – and I don’t know the reason why – I keep on coming back to this; everything happens for a reason and I actually wouldn’t want to change a thing because there’s a reason why everything’s happened.
So the second time round with these number of businesses that you’re building, what are some of the key lessons you’ve learnt from your first start up?
There are start ups and up starts…
So, tell us the difference between upstart and start up…
A start up is, you’re starting from a completely blank sheet of paper. You’ve got this great idea. Usually there’s zero revenues. There’s zero relationships or business relationships in place, and it’s just basically an idea.
An up start is a business that’s gone through those first 12 months of gestation. It’s got some small revenues coming in. There are some relationships. There are some mistakes that they made that have been learnt from.
My sweet spot is very much about the up start rather than the start up. So taking businesses like mailinglist.com.au that I invested in earlier this year, that had been running for roughly 12 months, and helping take that business to the next stage; that’s my sweet spot and I think you should continue focusing on one’s strengths, which is what I’m trying to do.
What are the key things you do to take it to that next level?
Well I guess one of the first things which I learnt from the Masters of Entrepreneurship and Innovation at Swinburne is conduct an opportunity valuation. Even before I get involved from an investment perspective I ask myself the question, is there an opportunity, is there a gap in the marketplace.
Two, is this product or service defensible. If it’s not defensible right now, what are the things that can be done in order to make it defensible.
Three, what is a potential exit for this business.
They are really the three core questions that I ask myself.
How is Destra changing since you’ve left. I read on a site a suggestion Destra may sell its music and video divisions, which is 80% of the revenue, or 80% of the Destra business. Is that true? Is it going to sell off the music and video divisions and keep Destra Media?
On an official basis I’m not really able to make any formal comments in relation to Destra and I think I know the sites that you’re referring to that have alluded to Destra potentially selling those businesses, and all I can say is Prime Media which is the Channel 7 affiliate across Australia….
Which owns about 44% of Destra?
… yes, that’s correct. They’re the major shareholder of Destra. They’re in the media advertising business and I can see how that makes logical sense for them. I’m obviously not involved in any of the details or the divestment of those specific assets but I can see how it would make sense, but that’s ultimately up to the major shareholder to decide.
So that’s sort of a bit of the end of the dream though isn’t it? Of building this media company with the different divisions.
It was… if I look back at the last eight years of the Destra experience I have loved every minute of it. Listing during the dot-com crash; having to rebuild the company from nothing.
Having then built the second largest hosting company, which we ended up selling for $19 million mainly in cash, and then having a digital media dream which unfortunately we weren’t able to complete.
I look back fondly like a father who’s seen their child leave home for the first time, and Destra will always be close to my heart. I’m very proud of what we were able to accomplish. I mean we’re a company with annualised revenues in excess of $100 million.
Just going forward, how do you see the digital landscape changing?
Well hopefully we’ll get high speed broadband in Australia over the next couple of years.
Where are the big opportunities with high speed broadband?
There are still the opportunities in video. Whether it’s video for music and video type of entertainment or for business content. IPTV and these things that we’ve spoken about for the last five to 10 years, but also in advertising. Advertising in a sense of one-to-one style advertising.
We’ve been bombarded with banner style advertising that is relatively generic for many, many years. We now have moved on to the Google AdWords which are definitely a lot more targeted, but the next level of advertising is very much about I, as an individual, visiting certain sites and only being shown adverts that I am interested in 100% of the time rather than maybe only 10% of the time.
There’s already some interesting Australian technology companies out there that are creating adverts on the fly based on the users that are visiting those sites and really smart technology coming out of Australia that has global appeal. I think they’re the kind of things that we’re going to start seeing a lot more of.
Secondly one thing that I predict, and I don’t think it’s a secret, the big sites, the megasites like the Yahoos and the Ninemsns of the world; we’re going to continue seeing a gradual decline of those sites where in the olden days, five or seven years ago, people used to go to those sites to find information.
These days people are a lot more internet savvy and if you want to go to a site targeted towards SMEs you go to SmartCompany. If you want to go to a site that has certain types of financial information you’ll go to Business Spectator rather than going to sites that try and be all things to all people. Once again it’s that whole notion of tailored content and people just want that information and want that instant gratification on the spot.
So what are the opportunities within that?
I think long tail is here to stay, and long tail will become increasingly more important and not only from an advertising perspective but even from a music content type perspective. That’s one of the things that we pushed at Destra, and Destra had a number of sites. Each of those sites was focused on a very specific demographic and when you’re focused on a specific demographic, you are able to build a better understanding of who those customers are and then sell more targeted advertising towards them.
I must say, without wanting to put anyone’s noses out of joint, I still think a lot of advertisers and agencies out there are a little bit lazy.
I know I’m going to get some abusive emails for saying this, but it’s easier to say OK I’ve got 10 or 50 grand to spend. Let’s just do a blanket style approach across the top three or four websites rather than thinking ‘who is my target market and can I actually achieve the same result with five or 10 grand rather than spending 50 grand, because we’re targeting a specific market and it’s not going to be for all advertisers’.
I mean some advertisers want reach who have got a mass market product, but I think Google has shown the rest of the world and the rest of the community that targeted advertising works, and that’s why they’ve been growing at ridiculous rates every year and it’s not going to stop. Not only for Google but other niche-orientated sites.
What’s happening in search?
We’re going to start seeing a lot of smaller websites adopting a similar style technology because right now, as you know, dealing with lots of small customers is a bit of a headache. When you deal with them, when you touch them too many times, you actually get to this point when you’re not making any money out of them, so providing SMEs tools so they can go on line, and they can book the adverts themselves, check the results themselves, similar to what you do on Google AdWords but on specific websites, I think that is ultimately the next wave of advertising and you can aggregate AdSense.
You worked very very long hours at Destra.
I think over the last 15 years or so, normally anywhere from 70 to 90 hours a week.
And you didn’t burn out doing that? How did you manage that workload?
One thing that I’ve been doing religiously for the last three or four years is taking a holiday, a one week holiday, typically overseas every quarter. One week every quarter, and what I do is book my next holiday when I’m either on holiday or the week that I’ve come back from that holiday, because what happens, you know, if you want to book a holiday every quarter, if it gets to the end of the quarter things always happen and you’re always too busy to take a holiday, and by doing that it just gives me an opportunity to recharge the batteries.
Just even in a week?
A week is better than zero weeks, and obviously a longer holiday over the Christmas break; and I mean I’ve just come back from four weeks which is the longest holiday I’ve ever had in one bit, and I’ve said to myself that for the next six months I’m going to take it easy, so I’m only going to work 40 or 50 hours a week. I haven’t done particularly well in the last…
I don’t believe you…
… in the last one and a half weeks, but I’m loving what I’m doing so much that I actually don’t consider it work. But I guess it’s kind of psychological, I think by telling myself I’m only going to work 40 or 50 hours.
If for some reason I do, I won’t feel guilty about it because I think being an entrepreneur and running a business there’s actually a guilt aspect there…
If you’re not working you feel guilty?
Yeah; if I’m not working and creating something because there are people that are relying on me. There’s staff and there’s shareholders and investors, and all those kind of things. Undoubtedly I do feel guilty.
You spend your time between Melbourne and Sydney. How do you divide that?
Usually I do a week in each city. I love both cities. I love Australia and I just find it works extremely well for me. I’ve been doing that for a number of years and it’s something that I look forward to continuing to do.
And do you travel overseas to look at new opportunities or just to have a holiday? How often do you sort of go on education trips?
Typically I’ll try and do at least one if not two educational trips a year. Whether that’s attending trade shows. The cost of going to London or going to New York, it’s almost the same cost as just doing an around-the-world trip, so I’ll do a round-the-world trip for a couple of weeks, go to a trade fair, go and meet up with a whole bunch of other entrepreneurs in other cities, and I just find you try and spend a bit of time in each of the key cities.
You just learn so much by listening to other entrepreneurs that are doing it in other countries and just seeing other things, so it’s a learning opportunity but secondly because you’re in another country you’re not dealing with the day-to-day and you can focus more on working on the business rather than in the business.
When people tell me they don’t have time to take a break or go and explore these opportunities and my view is well actually I think you can’t afford not to do that because that’s the way that you can improve the business that you’re currently running.
(This is an edited version of the transcript).