Me and my investor: SkedGo and carsales
A strong relationship between investor and founder is crucial for success. But what does that look like? And how do you get there?
A strong relationship between investor and company founder is crucial for success on both sides.
But what does a good relationship look like? And how do you get there?
For SkedGo, a B2B mobility-as-a-service (MaaS) provider, partnering with ASX-listed carsales.com (carsales) involved a steep learning curve in disclosure, transparency and scenario planning.
The leaders of the investment — John Nuutinen, chief executive of SkedGo, and Stephen Wong, chief strategy officer at carsales — both agreed to chat with me to break down how their partnership works.
First, a little bit about each company.
SkedGo
SkedGo was founded in 2009 by Claus von Hessberg, Tim Cooper, and John Nuutinen. The trio were trying to coordinate carpooling, transport and parking for their local casual soccer games, only to realise there was no way to efficiently compare your options at once.
While building a calendar they could all work from, they realised they were solving a much larger problem than their own, and set out to fund a more ambitious project. Now, SkedGo’s apps integrate public transport, private rideshare platforms, walking and driving so that you can plan trips based on convenience, time, or carbon intensity.
The SkedGo team has built apps for consumers, alongside white-label options and APIs that other businesses can buy to build their own.
Headquartered in Sydney, SkedGo is now international with offices across Vietnam, Argentina, Germany, Finland and the UK.
Carsales
Carsales was founded in 1997 by Greg Roebuck and Wal Pisciotta when the duo saw the potential of the internet to disrupt print classified advertising for car sales, which at the time was dominated by Fairfax and News Corp.
Within 10 years carsales had revenues of $46 million and net profits of $11.8 million. It completely pulled the carpet out from underneath Australia’s two biggest publishing companies, which had misjudged how the internet would change consumer behaviour.
Now, more than 4 million people use the site every week, but the company is not resting on its laurels, with its early years informing its future culture.
As Stephen Wong, chief strategy officer at carsales, tells me: “We are paranoid by nature. What we don’t want is to be disrupted ourselves.”
This is why carsales is thinking ahead on consumer preferences, and “investing the right amount at the right time to improve our relevance”, according to Wong.
Which brings us to carsales’ decision to invest in SkedGo, taking a 20% ownership stake for cash, and a small stake in carsales for SkedGo, which they tell me is in the low single digits.
As part of the deal, Wong sits on the board of SkedGo.
The companies won’t, however, disclose the dollar value of the transaction. When SmartCompany asked about this, carsales says it does not disclose partial ownership details if they are not required to disclose them to the market.
Both Wong and Nuutinen describe the structure of the deal as ‘symbiotic’ where each partner has a vested interest in the other’s success.
Nuutinen says it’s nice having a “big brother” like carsales backing SkedGo. It gives him the confidence to be nimble and innovative with a solid foundation to work from.
Why carsales invested
Wong and carsales were looking for a partner that could build the backend for its Placie app, a mobility marketplace combining different modes of transport that users can plan travel with. That includes ride services, trains, buses, trams, cycling, driving, motorbikes and walking. SkedGo fit the bill.
So in 2018 they started talking, with the deal wrapped up by the end of the 2018-19 financial year, and the app launched in October 2020.
The Placie app is sold by carsales as a service to consumers and businesses, which use it to plan and pay for travel, with all their costs conveniently collated in the one place.
Placie user interface. Source: Placie/carsales
I asked Wong why a company that is in the business of selling personal motor vehicles would invest in a company that offers a way to organise travel through every other method available, given that they’re fundamentally opposites.
But he disagreed with my assessment.
For Wong, it’s just a natural step for a company that builds digital marketplaces for transport. In future, some consumers will likely move away from personal motor vehicles and they want to be ahead of that shift.
He says carsales operates as a middleman between dealerships and buyers, listing inventory on its website for both new and used cars. It sees Placie as complementary; a marketplace for travelling that can leverage the company’s strengths in B2B and B2C.
Demarcation and exclusivity
SkedGo has had a consumer app in the Australian market since 2015 when it launched TripGo, which is now available in 200 cities around the world.
TripGo’s user interface. Source: Medium/SkedGo
I asked Nuutinen and Wong how they negotiate boundaries between the two, when Placie seems to be a direct competitor to TripGo.
They say there are demarcation lines and they haven’t seen issues, as it’s a global market.
“There is more than enough room for both parties to flex their muscles and look for those opportunities,” says Nuutinen.
SkedGo is focused on the European market, which has more momentum as cities use MaaS to reduce congestion and emissions and introduce favourable regulation.
“That’s a green field that we don’t cross paths in,” explains Nuutinen.
Instead, SkedGo uses Placie as an example of what it can do when pitching to businesses and government bodies in Europe.
Australian cities have unique transport challenges, given they have widespread populations with poorly serviced public transport connecting the outer rims.
SkedGo’s pitch to new customers points out that if it can solve transport issues in Australia, European cities are comparatively straightforward.
It helps that both parties are invested in each other, as Wong points out.
“You need to be in sync and have those lines, because ultimately you’re not fighting, you’re working together to grow value.”
What keeps the relationship ticking
SkedGo and carsales organise a weekly video call, but more commonly chat directly to each other informally.
At the start of the relationship, questions over authority and approvals needed to be sorted out first, particularly from SkedGo’s perspective.
“This wasn’t a standard customer relationship,” Nuutinen explains.
“In the early days some were people coming back to me and asking ‘is it okay to approve this? Can we do this this particular way?’
“Once you decentralise that authority out, it tends to run a lot more smoothly.”
From Wong’s perspective, it helps to have connectivity at every layer of the organisation.
“It’s about connecting the right people with the right people on the other end at the right time. When you need to solve a problem, do the people at the right level have the ability and the right to solve their problem?,” says Wong.
“What’s worked really well for us is that there’s a very open relationship between John, Klaus, and myself. At the end of the day, we don’t wait for a scheduled meeting to solve a problem. If there’s a problem. We just get on it and have a chat.”
As Nuutinen puts it, “it feels like we are working in the same company sometimes”.
How they would do things differently
Nuutinen tells me that this is the first time they’ve sat to have that conversation, and rehash the early parts of the deal.
“I think it’s good for your readers to get a bit of an insight into when a large company comes to you and talks to you about investment,” he tells me.
“You tend to get a little bit protective. I think we were over protective.”
SkedGo went from being a private company that held its financials close to its chest, to its founders suddenly being expected to share everything.
“We didn’t know Stephen, or the guys, we had just basically been introduced to them, then we start talking about financials and talk about equity holdings, we’re talking about strategy,” says Nuutinen.
“And we were thinking, this is not something we usually sort of discuss openly. And so it took us a while to get to the right mental space to be able to say, ‘Well, look, we sort of understand this. We’ve really got to let you know everything’.”
It was a learning curve.
“If we did it all over again we’d certainly be a lot more accommodating with a lot of this information. I do apologise to Stephen, and the team for making it a little bit more difficult than it could have been,” says Nuutinen.
Wong has been involved in more acquisitions and investments, and knew what to expect going in.
He points out that 90% of the work is in the last 10% of the deal.
“And you end up going through scenario planning for things that are probably never going to happen, and solving for all the mechanisms for if they happen,” says Wong.
“And while it’s good corporate practice to make sure that you cover off on those risks, real relationships are not built on what’s in the contract. Real relationships are built on trust and working through problems together, irrespective of what the contract says.”
For Nuutinen, the scenario planning was one of the most stressful parts of the deal.
“There’s always risk, but what’s the real probability of certain things happening? You can’t cover everything off in documentation,” he says.
“It’s, as Stephen said, more about the relationship itself.
“You know, in a funny way, when we got to the end of it, we had done the hard yards, had those difficult conversations and bonded over that experience as well.”
I ask each if they have a final piece of advice to share for small business owners seeking investors, and wanting a smooth relationship.
Wong says: “Having advisors that are commercial, and acting in your interest, but also understanding the other side’s perspectives is really critical.”
Nuutinen elaborates, spelling out how the process worked for them.
“The advisors tend to go and communicate directly with each other,” he says.
“It’s very easy to get to the point where you’ve got your people talking to their people, and that’s when things start to get a little bit more complex.
“Your advisor is trying to do the best thing for you. And obviously, carsales’ advisor is trying to do the best thing for them. But as Steve said, you’ve really got to put yourselves in the other person’s shoes and have some empathy and understanding what is trying to be achieved.
“That’s what we kept on coming back to, those high level conversations between Steve and myself to bring it back on course.
“Knowing what the other side’s issues are and what their aspirations are, and what they’re trying to get out of, it makes a big difference.
“If the principles are on the same page, the advisor’s job is much easier.”
Five key takeaways
When a listed company is looking to invest, be prepared to offer a lot more transparency over your finances.
Your commercial advisors are there to represent your commercial interests. But the process can be a lot smoother if each empathises with the other side, and their expectations. That’s the responsibility of the principles.
If you’re operating in multiple markets, consider the demarcation lines up front so that you don’t step on each other’s toes.
Scenario planning is there to protect both parties. While it can be intimidating to consider worst-case scenarios, it is simply good practice.
When each investor has a stake in the other’s business, you’re both invested in each other’s success.
