Modern man is a hard driven nomad without any stability, not (as the Bible has it) a wanderer or a pilgrim, but a refugee-an escapist. Instead of meditation and reflection there is only speed, fear and “distraction.”
— Erik von Kuehnelt-Leddihn, born in 1909 - 111 Years Ago
Australia's biggest venture capitalist says there will be big winners and big losers out of this pandemic, and he is looking past the obvious impacts to determine what will change permanently and what will snap back.
Square Peg Capital's Paul Bassat says the timing of new trends is the most critical and underrated aspect for success. Arsineh Houspian
The country's leading venture capitalist, Paul Bassat, says there will be some big winners and losers out of the coronavirus pandemic. Unlike the global financial crisis and recent booms and busts – where most boats rose and fell fairly evenly – this crisis feels different.
"Everyone was a loser in the GFC, basically," the Melbourne-based Bassat tells AFR BOSS. This time, he says, there is a "cruel randomness" to some of the impacts.
"Some people are doing amazingly well and business has never been better, and others are doing dreadfully and revenue has just gone to zero. If you're a Victorian travel agent, for example, revenue has essentially gone to zero."
Bassat, an AFL commissioner and co-founder of SEEK with his brother Andrew, leads the venture capital firm Square Peg Capital, which he founded with former investment bankers Tony Holt and Barry Brott and investor Justin Liberman, from one of Melbourne's richest families.
Square Peg Capital co-founder Paul Bassat has hit the $1 billion funds under management milestone. David Rowe
Billionaire James Packer was among Square Peg's largest original investors. Other high-wealth backers include brother Andrew, carsales.com.au co-founder Greg Roebuck, stockbroker and former Essendon president David Evans, billionaire toy entrepreneur Manny Stul and director Carol Schwartz. Former Telstra CEO David Thodey is a special adviser.
Square Peg recently cracked $1 billion to become the country's largest VC fundafter closing a $350 million tranche, with Hostplus signing on for the third time and AustralianSuper coming on board for the first time. This week Commonwealth Bank tipped in $10 million to support and develop local fintech initiatives and emerging artificial intelligence opportunities.
"We have now returned over $200 million to investors and most of that has come in the past six months," Bassat discloses publicly for the first time. "We have finally reached the point where not only can you back entrepreneurs, we are achieving really strong realised returns. Some of the other VCs are doing the same, [and] that's a really critical milestone for the VC and tech industry in Australia."
Bassat, whose job is to predict future trends and pick winners, believes the current crisis has caused a massive acceleration of technology trends and digitisation that was already underway.
Bassat is looking past the obvious headline impacts to determine what will change permanently and what will snap back. For the things that do become more permanent, his job is to predict where the new normal will land.
"Zoom is a good example," he says. "It went from 8 million daily users in December to 200 million daily users in March, then 300 million in April. Let's assume we get to a point where the pandemic is over and it's safe to go back to the office – what does that number look like? It will be much higher than eight million but much lower than 300 million."
Bassat says that unlike typical investing and his former career as a lawyer, VC investors need to look at what can go right, rather than what can wrong.
"As an early-stage investor you really have to flip the investment approach on its head and focus on what can go right," he says. "If it is successful, how big can this company go?"
He says there are three key factors he looks for in a winning start-up, which offer valuable insight into the kinds of enterprises he thinks will thrive after the pandemic.
Getting the timing right, getting the strategy right, having the right team and executing right will make you the most successful.
— Paul Bassat
"It's 'what is the problem you are solving?' There is an aspect about the timing and most important is the who, the team. You can't boil it down to one thing but if you had to say one thing it would be the team."
But the timing of new trends is the most critical and underrated aspect for success, he says.
"The timing is about not being too early or too late. If you look at the iPhone, there were important technology enablers which meant when it came to the market in 2007 it was just an instant success.
"It's not always that [being] first wins. Google wasn't the first search engine, the iPod wasn't the first MP3 player. Getting the timing right, getting the strategy right, having the right team and executing right will make you the most successful.
"It is also self reinforcing," he says. "If we think about Afterpay, they've got more customers than anyone else, so they have more data and can manage and price risk better than anyone else. Secondly, if you're a retailer, you're most likely to choose Afterpay because their brand is the strongest and they have the most customers."
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