It takes many things to get a business off the ground.
It takes a flash of insight, plenty of drive, and good advice. It takes savvy staff and helpful networks. It also takes something few start-up founders have to begin with: money.
Australia’s venture capital industry is growing and maturing. But the funds to finance start-ups don’t just come from high finance. Increasingly, a generation of Australian entrepreneurs who made or grew their fortunes over the past decade are investing their money back into start-ups, either directly or through niche venture-capital firms. Through this, they’re helping build a start-up ecosystem able to support new, growing start-ups, using the spoils of yesterday’s success stories.
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Here are just a few rich listers putting some of their money back where it came from.
In many ways the trailblazer in this regard was James Packer, who made a fortune investing in companies like SEEK and Carsales.com.au a decade ago.
While by no means a successful start-up leader (Packer inherited most of his money), he has nonetheless grown his fortune through savvy start-up investing, a passion that doesn’t appear to have ebbed with time.
Packer bought a 25% stake in SEEK for $33 million in 2003. When the business listed, Packer’s stake was worth $150 million. By the time he sold out, he had made $440 million from his investment.
He was also an early investor in Carsales.com.au, putting $100 million for a stake in the company that sold for $500 million a few years later.
Those were some of the best dot.com investments ever made in Australia, and, perhaps spurred by his early success, Packer has continued to invest in start-ups with potential to disrupt their industries.
One of his most recent investments was last month in taxi app goCatch, which could radically disrupt Australia’s cab companies and Australia’s Cabcharge monopoly by allowing passengers to book a taxi by directly liaising with the driver.
Packer is joined in his goCatch investment by Paul Bassat, a cofounder of SEEK who’s since left running the business to his brother while he focuses on investing.
Bassat is the cofounder and joint chairman of Square Peg Capital, a newly minted venture capital firm that’s already put money into a heap of start-ups like beauty-box business Bella Box and design start-up Canva.
“First and foremost, we want to back fantastic people who are smart, passionate and high integrity,” Bassat told our sister site StartupSmart when Square Peg was formed a few months ago.
“For businesses that have been around for a few years and have a bit more traction, the question of if they’re solving a problem has been partially answered. If it’s an early stage business without a track record, we want to know exactly what the problem you’re trying to solve is if you’re actually solving it, in a unique and differentiated way.”
Bassat is also a mentor at Startmate, which offers mentoring and seed financing to online and software start-ups.
Mike Cannon-Brookes and Scott Farquhar
Bassat isn’t the only rich lister to volunteer his time mentoring young companies.
Scott Farquhar and Mike Cannon-Brookes, who cofounded Atlassian and for two years have topped the BRW Young Rich list, are also mentors at Startmate.
Last year, Cannon-Brookes also invested in Shoes of Prey, which gives shoe lovers the chance to customise every part of their shoes online and have a unique pair created and shipped.
Both Atlassian cofounders put money earlier this year into Ninja Blocks, a Sydney start-up that builds devices that let people link their devices to physical things in their homes (‘SMS me when the washing is done’, for example).