You’re dealing with different companies at different stages. Are you enjoying some parts of the job more than others? For example, is it good to get into some start-ups in some far off locations?
What’s interesting is that although they are in different parts of the world and the markets they operate in are in different stages of growth, the underlying problems are the same, the underlying approaches are the same. It’s just that they are at different stages of their life. So working with guys in Peru it’s about early market stages, how they can raise capital to grow the business or how they structure their sales force, and actually talking to agents and developers which is always fascinating. The problems that that company faces, or the opportunities I guess as much as problems, are identical to a conversation in Australia. It’s just in Australia the agents know their value in the internet and therefore are more advanced, but the company’s still got to serve those agents, the company’s still got to have innovation in products and services and still deliver the results. So the differences aren’t as much as you’d expect.
And are the entrepreneurs you’re working with similar too?
Yes, they are actually. I mean, we’re also selective on who we work with. I’m working while I’m in Vancouver now, I’m off to Miami next week to work with some guys there before going to Brazil to work with some guys there. While they have different backgrounds, their passions for the company and aspirations for the company – which are sort of two slightly different things – are very similar. Some of them have got different skill sets, some of them have got different market conditions they’ve got to work within and some of them have got very different access to capital which is always very important.
But what we’re finding is if we can help them through some of this learning process, then some of these companies we’re working with are really starting to get some momentum behind them. And at the end of the day if you can help someone grow and be successful, that’s a hell of a lot of fun.
What about the investment side of the business? In the last couple of months we’ve noticed a lot of investments in online properties of various sorts. Has there been a little bit of a boom in asset valuations?
There is. The other part of our business is an investment fund that has 10 or 12 businesses, including a business in Spain, Brazil, Japan, Malaysia (which is a Hong Kong-focused business called iProperty) and the US.
I would say that out of 10 companies, I reckon six or seven have all sort of hit this point in the last five or six months and they are just taking off, it’s phenomenal. I mean a great example is iProperty and that’s one that’s transparent because it’s listed on the stock market. Twelve months ago the shares were trading at 14 or 15 cents maybe and today they’re at 62 cents. And that business, they’ve got to put their results out but they’ll have some very good results for the last year and for us that’s a great deal of pleasure. Obviously because we own some shares in it but secondly we’ve worked with them on changing their structure, focusing the business, improving the management team and really growing their business. So I agree with you, the equity values of some of these businesses are really starting to take off in the right direction.
Are the valuations based on real profits this time around or are there signs of overheating?
I think it’s the fact that the businesses are starting to deliver results, which is giving the conservative market encouragement that this is a good area to reinvest in, and that’s starting to push the valuations along. Most of the businesses that I’ve invested in are at some point doing a bit of capital raising and the valuations we are looking at are three or four times more than what they were a year ago if not more. Which is good and bad. You want to buy more shares which is bad, but the shares you’ve already got are good.
Given that sort of capital raising program across your portfolio, is the strategy now to keep investing the current investments or look for new ones?
Of the funds to invest in over the next 12 months we would probably allocate 75% to increasing stakes and 25% to probably some new investments, because there’s still some interesting markets that I think are early stage. I’m sort of loving South America at the moment, I think there are some really interesting opportunities there and you can get your money out which is always very important.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
