Two local family offices have found mutual benefit in working together when it comes to investment in emerging companies.
A chance catchup at a stockbroking function 15 years ago sparked a meeting of minds for Craig Burton and Rod Jones, two of Western Australia’s biggest private investors.
The pair found they shared views on investment in emerging and growing companies. This common interest developed into a form of cross-pollination that has resulted in a meaningful overlap of their extensive portfolios (somewhere less than 15 per cent, they estimate).
In some instances, they even sit on the boards of the same companies; notably fund managers or other investment vehicles that are backing startup businesses or those looking to scale rapidly.
Both sit on the Business News Rich 100 list and each is estimated to be worth more than $400 million.
Mr Burton is a venture capitalist, having generated his wealth through astute investments (such as backing Mader Group), while Mr Jones made his fortune by founding education company Navitas, later establishing his family office Hoperidge Capital to manage and diversify his holdings.
“I think we caught up at an Argonaut function,” Mr Burton said.
“We were both clients and started talking and realised we were like-minded people.
“We started swapping ideas.”
The pair prefer to describe their working relationship as one of overlap, where they share knowledge and opportunities based on common connections.
“I would find something I thought was pretty good and I would pass it on to Craig, and vice versa,” Mr Jones said.
“We are certainly involved in the same sort of things.
“It is not integrated. We use our own people.”
The pair’s first shared investment, in 2016, was venture capital investment firm Asia Principal Capital, established by a group of experienced investment bankers.
“They set up APC explicitly to pursue tech growth opportunities out of Sydney,” said Mr Burton, whose family office is Verona Capital.
“We linked up with them and provided them with financial backing.”
That group has promulgated other investment vehicles in which Mr Jones and Mr Burton have been involved: fund manager Factory Capital and pre-seed and seed stage disruption technology funder RealVC.
Also linked to that ecosystem, Mr Burton and Mr Jones were cornerstone investors in Morpheus Ventures, a US-Australia venture capital group they jointly backed with $US11 million.
Morpheus has two funds with a collective commitment of around $US300 million, including in Queensland startup SafetyCulture.
The pair has also shared past or present interests in WA firms Firesafe Group, Enerdrill and IXUP, the last of these listing to later become Sydneybased Dataworks Group.
Mr Jones said sharing knowledge and then investing together with experts in various fields had proved beneficial, especially as he had emerged from running a business to becoming an investor.
“Selling a successful business doesn’t necessarily give you a skill set to make further wealth,” he said.
“I learned that the hard way.
“I lost money on investments that didn’t work.
“Looking back, it was my naivety.”
Mr Burton said the pair had occasionally joined with other WA high-net-worth investors, but it was rare.
He said most family offices were focused on investments with a lower risk profile.
“It is a scary area and there are lot of pitfalls,” Mr Burton said about emerging companies.
“You can lose a lot of money very quickly.”
However, Mr Burton and Mr Jones agreed on the importance of backing locally based wealth by supporting young companies that, while often past being funded by family and friends, were not yet able to meet the requirements of institutional investors.
“We think there is a real role for high-net-worth families to actively invest in companies that would otherwise find it difficult to find capital,” Mr Burton said.
“It is not just philanthropy. It is good for the whole economy, and there are rewards.”
Both family offices have their own investment teams to look at investments, as well as having close relationships with the specialist funds they have backed.
This often brings the opportunity for secondary raisings.
Australian Securities and Investments Commission records show Mr Burton has been active in this space, with previous support for Safety Culture and Livewire Group.
“We are taking a portfolio approach and sharing risk,” Mr Burton said.
“You don’t want all your eggs in one basket.
“We are also invested in tech funds. That will be a committed fund where we agree they can draw down X dollars from us.
“They might be an eighty-million-dollar fund and we might have five per cent each. That would be fairly typical.”
