“Growth-stage IT ventures had nowhere to go”: Why an ex-All Blacks captain built a VC fund
L-R: David Kirk and Paul Wilson, co-founders of Bailador Technology Investments
Fri 3 November 2017 - 7:00 amEntrepreneur | Featured | Professional Development
New Zealand native David Kirk has worn a variety of different hats throughout his career. At one time, during the 80s, he captained the All Blacks, leading the team to World Cup victory. Later, in the noughties, he served as the CEO of Fairfax Media. Today, he is a seasoned company chairman as well as the Managing Partner at Bailador Technology Investments (ASX:BTI), one of Australia’s top ten VC funds*. Employing 1,100 people across 13 countries, the ten company’s in Bailador’s portfolio have had a fruitful year, growing their revenue by an average of 37%.
Founded by Kirk and business partner Paul Wilson in 2010, the VC fund specialises in private, growth-stage, Australian IT companies ready for international expansion. To ensure Bailador’s investee companies (and their founders) are as financially, operationally and strategically prepared as possible to take on the world, Kirk said the VC fund leverages its “global contacts together with over 50 years of combined investing experience and expertise in various strategy and financial fields”.
Kirk spoke to Dynamic Business about his journey from athlete to Rhodes Scholar to media industry heavyweight to information technology investor. He also discussed his greatest career hits, the advice he lives by in business and what excites him about the information technology space.
DB: Why did you trade rugby for the world of business?
Kirk: I retired from rugby, at the age of 26, to take up a Rhodes Scholarship at Oxford University in the UK. As rugby was still an amateur sport in those days, it was only natural to move on and begin building a career for myself. Upon completing my degree in philosophy politics and economics, I was eager to remain in the UK. Fortunately, McKinsey & Co were recruiting for their management consulting office in London and it was an area I was interested in. Before commencing work with McKinsey as a management consultant, I undertook a very helpful mini-MBA with the company, learning business basics, including economics, strategy, finance, supply chain management and so on. During the three years I spent with McKinsey in London, I acquired business analytical skills and was provided with frameworks for thinking about strategy and business growth. To this day, I still use what I learned at McKinsey.
DB: What circumstances led you to Australia and Fairfax?
Kirk: I was transferred to Australia from NZ by Fletcher Challenge Paper to run the Australasian divisional of that global paper manufacture business. I then moved to PMP, assuming the role of the listed company’s CEO, before being asked to join Fairfax as CEO after Fred Hilmer stood down from the role. I understood media, had a successful business management career at a public company and was well equipped to respond to the digital challenges emerging.
DB: What responsibilities do you have outside Bailador?
Kirk: I am the Chairman of Kathmandu and Trade Me in New Zealand. Both positions provide helpful insights into the emerging challenges and trends e-commerce, online marketing, the use of data and the business models of the likes of Google, Facebook and Amazon.
DB: What’s been the through line in your career?
Kirk: Constantly challenging myself to keep growing, learning and developing as both a leader and business person. Also, leveraging the skills I’ve developed over my career into new and related roles.
DB: What was the motivation for creating Bailador?
Kirk: Paul and I co-founded Bailador in 2010 after recognising an emerging opportunity to invest in private, growth-stage Australian IT companies. Despite the rapid growth of the startup and angel investing spaces, we noticed that IT companies growing out of the startup phase had nowhere to go for further funding to scale. I was introduced to Paul through Andrew Bullock, then a senior lawyer at Gilbert and Tobin. Realising Paul and I had both floated the idea of a fund to invest in later stage IT companies, Andrew connected us – and off we went!
A few years after founding Bailador, Paul and I recognised a further opportunity to cater for Australian retail (i.e. individual) investors wanting to invest in exciting fast-growth IT companies. Due to reduced portfolio volatility, we saw a non-correlated stock like Bailador as an attractive option for someone keen to build a portfolio based on the large cap ASX indices. As our investments in ten companies are held in ASX-listed Bailador Technology Investments, this gives institutional and retail investors the chance to invest in these exciting companies through the listed share and to have ongoing liquidity.
DB: What have been some of your career highlights?
Kirk: I can think of a few…
- Deciding to join McKinsey in London and gaining a great grounding in business analysis and strategy.
- Moving to Australia from New Zealand as the COO of the Australasian division of Fletcher Challenge Paper.
- Joining Fairfax Media as Chief Executive in 2005 and, subsequently, coming to understand in detail the challenge to classified advertising in newspapers. This spurred me to rapidly buy Trade Me for $650 million, which everyone at the time thought was an outrageous price!
- Founding Bailador with Paul – building my own business with a partner in such an exciting space as late-stage information technology has not only been a great challenge, it’s been great fun.
DB: What excites you about the information technology space?
Kirk: The most exciting thing, as an investor, is the creation of completely new products and services as well as business models that are far superior to legacy business models and, therefore, able to quickly win market share. In both cases, there’s a huge opportunity for new businesses to rapidly scale into global markets. The most exciting business models we see to invest in are Software as a Service, and online and mobile marketplaces.
The wonderful economics of IT businesses is also exciting. They require very few fixed assets to grow and often they can vary their operating costs, which means costs only grow with revenue growth. This, in turn, means the best IT companies don’t need a lot of capital to grow and they are highly profitable at scale.
The five largest companies in the world are now information technology companies and we think the trend will continue.
DB: What approach do you take to building Bailador’s portfolio?
Kirk: We have a very rigorous and consistent approach to reviewing investment opportunities – and we get to see a lot!
First, we look for great founders – smart, motivated, open and honest, good with people, a deep understanding of the relevant technology and the problem they are solving, mindful of their competitors and a clear understanding of what it will take to win in their market.
Next, we look closely at the opportunity and the company – how big is the market they are addressing, how fast can they grow, what are the economics of growth – margins, customer retention, costs to acquire and serve customers and so on, and what stage is the company at and is it the leader of its chosen markets?
And finally, we look for a common understanding of us as professional investors and our needs, alignment around use of capital, what success looks like and timeframe.
DB: What have been some of Bailador’s success stories?
Kirk: We have invested in some wonderful companies and are enjoying their rapid growth in value.
- SiteMinder was the company Bailador cut its teeth on and which taught us all the disciplines and requirements of growing an SaaS business globally. Since we invested in SiteMinder, the company’ value has grown by over 800%, opened new offices around the world, hired hundreds of new people (including great leaders) raised more than $50m in capital. Today, it’s the world leader in helping hotels distribute their room availability online and optimise the revenue they get. In addition to opening office around the world.
- Straker Translations is the world leader in hybrid (machine and human) language translations and may well list on the ASX in the middle of 2018
- Lendi is doing a wonderful job providing online mortgage broking and allowing borrowers to complete home loans on line.
- InstaClustr is the world leader in providing technology and managed services for a new class of highly-scalable database. The company started in Canberra but is now based in Silicon Valley, and has been growing at more than 200% a year.
I could go on, but I’m sure you get the picture – we have some superb business in our portfolio!
DB: What do Bailador’s portfolio companies have in common?
Kirk: Big data analytics, machine learning and forms of artificial intelligence are used by many of our companies to understand their customers, improve their products and services and understand future trends. Cloud computing services which reduce and vary costs are used by all of our companies. Plus, all but two of our companies (both of which are addressing huge local markets) are expanding globally in the US, Europe and parts of Asia and South America.
DB: What mantra or advice do you live by in business?
Kirk: If you have the right people, you can solve pretty much any problem in business. You don’t have to start with the absolute best technology, marketing, brand or customer base. If you have the best people you will certainly get there. The same works in reverse. If there is a problem within a business that is not performing well, the most important thing is to get better people to run it.