Internet investment company Netus is redirecting its focus towards smaller ventures of less than $5 million, after selling its 40% stake in online energy price comparison site Switchwise.
Netus was launched in 2005 with a $40 million investment from News Corporation, and has since invested $21 million in nine businesses, four of which have been sold.
News Corp initially owned 75% of the company but saw its share fall to 50% in late 2009 when Netus management increased their stake.
Netus founder David Petre launched the company to bring overseas internet business ideas to Australia, either by licensing them to local companies or setting up joint ventures with overseas businesses.
Netus supported Switchwise through the start-up phase of the business, and was acquired by Service Works Management earlier this year.
Petre says Netus’ model has always been to build start-ups to the point where they can be acquired by more mature businesses, “whose appetite for risk and ability to nurture entrepreneurial businesses is lower than ours”.
“Several businesses in the remaining portfolio are now attractive to third party buyers. At the same time, the opportunity for building further businesses has changed,” Petre says.
“For Netus, the sweet spot for investing has always been in partnerships where execution matters as much as investing.”
“Going forward, it is likely that we will be focusing on investments requiring smaller amounts of capital, where we can bring our unique operational skills and experience, and we will look to apply this resource to a small portfolio of very high growth entities.”
“There are lots of opportunities for us to invest in smaller companies. That is, investments of less than $5 million.”
Netus will focus on smaller investments so the companies’ executives can have a direct involvement.
This appears to be a growing trend among investors, who are increasingly more likely to work alongside a start-up rather than remain in the background.
Australian start-up incubator Pollenizer operates by joining each start-up as a co-founder, working directly on developing and building the business.
Pollenizer co-founder Mick Liubinskas says Pollenizer takes a particularly hands-on approach by attempting to get the first version of a product to customers within the first four weeks.
“Until the business succeeds or fails, we are in it together. Our level of operational interaction will change… but we do whatever it takes to make it a success,” he says.
Similarly, the co-founder of chocolate retailer Planet Chocolate – which recently entered into a partnership with investment vehicle Inkuberra – says it will be an ongoing relationship.
“Inkuberra is very hands-on with everything – they’re certainly not a silent partner who just comes along and pays for everything,” Planet Chocolate’s Greg Factor says.
“Inkuberra will not be directly involved in the day-to-day running of the business but will help us to assess the bigger picture and be actively involved in deciding where the business is going.”