Ahead of the full BI Australia Tech 100 list we are publishing interviews with a selection of the honorees. The full list will be published tomorrow.
Paul Bassat is a rare breed in the Australian business landscape. He has been on both sides of the investor table and his career has seen him move from tiny startups with a handful of staff to the heights of corporate Australia, where he now sits on the board of the conglomerate giant Wesfarmers.
In 1997 he and his brother Andrew launched Seek, and it has become the largest online employment marketplace in the world. Looking for a new challenge, he started Square Peg Capital in 2012 and now spends his time investing in the entrepreneurs and tech driven ideas of the future.
Business Insider: Tell us about your year.
Paul Bassat: It’s been a really, really busy 12 months for us. It all really falls into three buckets.
Most importantly – investing. We have made five or six new investments. We co-lead the B round in UpGuard, which is a great Aussie founded company that we love and have invested in four times. We invested in LifeBEAM, with is an Israeli founded wearable technology company that had a really awesome Kickstarter campaign for its first direct to consumer product and will be launching early next year.
A product called Vi, which we invested in the B round that we led. We also led an A round in a company called LTG, which is an Israeli founded but US based company in the online education space mobile test preparation market. So it’s been a really exciting period from the investing perspective. We have some pretty good pipelines, so we would expect to make a few more investments between now and the end of the year.
Secondly, earlier this year we did a first close on our fund and that’s progressing really well. I think we announced at the time that we raised about $140 million Australian dollars. We’re now working towards a final close for fund later this year. We expect $200 to $250 million by the time we close out the fund. It gives us a bit more fire power, but that’s still a work-in-progress.
In terms of organisational capacity, we continue to invest in building and strengthening out the team. We have nine investment professionals across our Sydney, Melbourne, Tel Aviv and Boston offices.
Lastly, it’s been a really great year for the tech industry in Australia.
BI: You mentioned your Tel Aviv office and a couple of Israeli founded companies. What is it about the region that made you want to expand there?
PB: It’s an incredible technology ecosystem. We’ve seen a large number of really exceptional technology companies emerge from there over the last twenty of thirty years. We also have strong, deep networks in the market there.
We thought that we had something to offer and to add to that market and there’s a lot of fantastic opportunities. We also think that exposure to the technology ecosystem and the various players in that market is helping us to increase the contribution we are able to make to help build the Aussie technology ecosystem.
BI: Do you think that Australia is going to become more of a major player on the global technology scene?
PB: I think it’s a really exciting time for the Aussie tech industry. We’re seeing more great companies, more aggressive and focused entrepreneurs who are trying to solve big problems, we’re seeing more capital come into the market, more accelerators, and more government support.
The one thing we have to be aware of is that we are really upping our game and effort, but so are most other countries. In order to maintain your relative position you have to be making significant progress. In other to improve your position you have to be making fantastic progress. It is incredibly important to the future prosperity of the country. We’re relatively early in the journey but the progress is really exciting.
BI: Do you think our location, size and where we sit technologically in the space has meant that we have had to work a little bit harder than other countries to make a mark?
PB: It’s a good question. There a different elements required to build successful technology ecosystems — the biggest in the world by an order of magnitude is in the Bay Area, where you have massive size scale, massive domestic market and a huge amount of talent. We talked about Israel, which is a completely different scale in terms of size, and they’ve turned their small size into a virtue.
Some people argue that Australia is at a disadvantage because we’re neither big like the US or small like Israel or Singapore. I’m not sure that I really accept that argument. I think the reality is that because we have so may countries understanding the importance of building a world class technology ecosystem, by virtue of the level of competition you have to be very, very good to get ahead of the pack.
BI: Where do the biggest opportunities or gaps in the market lie for tech based startups going in 2017?
PB: The migration of vertical specific software from traditional software delivery models to the cloud is still in its early days — we’re seeing emergence of more business models in that area. I think another area is security — one of our portfolio companies, Upguard, plays to that theme. Every single major corporation, government enterprise, and not-for-profit are incredibly focused on risks around security. That’s an area where we’re going to see a significant amount of activity.
Another area is big data and machine learning. Machine learning is something that’s been around for decade,s but a number of forces mean that we’re seeing the emergence of really significant business models in the area. Those forces are driven by things like the explosion of data and massive improvements in processing power.
BI: Have you always been drawn towards technology and tech-driven companies?
PB: My background was as a lawyer, and I had an idea for an online business. I really came in off a low base and have spent the last 19 years trying as hard as I can to understand and learn about technology and trends. Because of the rate of change your ability to absorb new information and learn through selection than the rate at which change occurs. You’re constantly battling to keep up as best you can. From my perspective, that’s a really exciting thing.
BI: What are the attributes you most look for in entrepreneurs and businesses to invest in?
PB: The thing that excites me is meeting really talented, passionate men and women who are trying to build amazing companies that are hopefully going to make a positive contribution to the community. It’s exciting when the people who are brave enough and have the self confidence and the wherewithal to set up their own companies and try disrupt the market. The optimism and conviction to do that — I get really motivated by meeting those people on a daily basis. I feel very lucky.
It also comes down to what the problem is that’s being solved, how it’s being solved and who is solving it. Ultimately, we’re making the decision around the people. It’s incredibly hard to take something from an idea to a very large, successful company such as realestate.com.au, Campaign Monitor or Aconex — very few can do it. You need to have outstanding capabilities, drive and motivation. A bit of luck along the way also helps.
BI: What is your biggest tip for someone wanting to launch a startup?
PB: Really, really understand the problem that you’re solving and have conviction that the solution you’re providing is an order of magnitude better than the current way that the problem is solved. If you come up with an idea that’s 5% or 10% better than the existing way of doing things people won’t shift. Unless you’re doing something that’s quite unique, special and a significant improvement on the incumbent method, process, technology or business models then you won’t be able to attract.
BI: Was that the mindset you were in when you started Square Peg? How is it different to other venture capitalist competition?
PB: It’s a good question! We don’t really see them as competition — we’re all trying to invest in and back great Aussie companies. They show us opportunities they’re already investing in, we show them opportunities — there’s a lot of cooperation. At the end of the day their success is our success and our success is their success. We all want to have a really active, vibrant tech ecosystem.
But I think if you drill down to the next level your question is very fair. Whether you’re a startup or a venture capital fund, what is your point of difference? I think for us it ultimately comes down to the relationship we have with the entrepreneurs, the skill set and experiences we bring from our past careers which are varied and pretty broad, the way in which we want to align ourselves with the people we’re backing and being incredibly supportive.
The way in which we want to position ourselves is as a very entrepreneur-friendly fund that has the ability to identify great entrepreneurs in this market, south-east Asia and Israel. There’s a uniqueness in the geographies that we’re focused on.
BI: What vision do you have for Square Peg Capital over the next 12 months and beyond?
PB: Continue to identify and back world class entrepreneurs who are doing really exciting things and hopefully make a small contribution to the building of a strong technology ecosystem.
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