[Voiceover]: Often when people are successful, they're successful for a reason. And sometimes you have to have a good sort of look under the hood to sort of see why. That's part of the joy, you know, of what I do. I get to see those little miracles from time to time. It's easier said than done, as you know, because usually when everyone else there's fear and blood in the streets. Well, sometimes it's your fear and your blood and so you don't do anything, just like everyone else. Welcome to Add to Cart, Australia's leading e commerce podcast that express delivers all you need to know in the fast moving world of online retail. Here's your host, Bushy.
Nathan Bush: Welcome to another episode of Add to Cart. I'm Bushie and I'm joining you from the land of the terrible people, otherwise known as Brisbane, Australia on Add to Cart. We welcome everyone to share and listen to e commerce stories. The more diverse the better. I want to especially welcome the traditional owners and the original storytellers of the land that we are on, our indigenous and Torres Strait Islander listeners to join us in our e commerce conversations and our community. Let's kick off today's episode with a question for you. Why do you listen to Add to cart? Is it something just to fill the gap until you get to work? Maybe keep you motivated on your morning run? Maybe you're here because you googled a particular piece of technology or or a guest that we had on and now you're stuck with me. Joining me today is someone who contacted me to say that he listens to Add to Cart as part of a wider founder finding mission. I loved hearing that. And here he is on the show himself. Justin Ryan is the co founder of Glo Capital Partners, a growth equity firm investing in high growth brands and businesses in Australia and New Zealand. Having led 22 private equity investments and and a big fan of partnering with innovative entrepreneurs and founders, Justin started the Glo capital business in 2021 alongside Kate Morris of Adore Beauty. Earlier this year they secured their first major investment cargo crew. Justin and I chat about the benefits of having an experienced grassroots founder like Kate Morris at the head of the company. He also delves into detail around attractive unit economics that any business can use and shares the red flags he looks out for when investing in businesses and quickly before we get into today's episode, if you are a tech provider, a service provider or an agency in e commerce and you want to jump on and sponsor Add to cart in 2024, we now have our sponsorship packages open. We are limiting the 2024 sponsorship opportunities to two gold partners and five silver partners. If you want to know what those sponsorship packages look like, reach out to me directly. Nathandecart.com so, thanks to our partners, Shopify plus and Signet, here's our conversation with Justin Ryan, co founder of Glo Capital Partners.
Nathan Bush: Justin, welcome to ADD to cart.
[Voiceover]: Great to be here, Nathan.
Nathan Bush: It's great to have you here. We've had a number of phone calls where I've kind of dropped in the little hint of like, you should have this conversation on ADD to cart. And you're like, yeah, we will, we will. One day. One day. And here we are.
[Voiceover]: I'm finally ready.
Nathan Bush: Well, in my research, I'm a bit nervous now because in my research, I heard you were interviewed by Alan Kohler, who is one of my favorites to watch.
[Voiceover]: I survived it, but I feel that, you know, I've learned something from it and I'm trying to bring it into this conversation.
Nathan Bush: What did you learn?
[Voiceover]: That I could do better.
Nathan Bush: He is just so fantastic in the way he delivers and even his commentary around it. I saw that he wrote up. He's like, yeah, Justin's had a pretty good career in doing this and he gets okay returns. I'm like, just. Everything's very considered.
[Voiceover]: I do like him and I love watching him on the. On the ABC News. Actually, when he's not there, it's a bit of a disappointment for me.
Nathan Bush: I agree.
[Voiceover]: I agree.
Nathan Bush: All right, let's get into it. Exciting news from you is that you recently closed the Cargo Crew deal, secured last month, the month before.
[Voiceover]: Yes.
Nathan Bush: Congratulations on that.
[Voiceover]: Thank you, Nathan. You're very excited about that one. It's our first investment for the Globe Growth Fund, which Kate Morris and I have founded and we're building at the moment. Yeah, very exciting times for us.
Nathan Bush: Tell us about that business. What attracted you to Cargo Crew?
[Voiceover]: There's a little. I mean, with all these moments, it's a little bit of a history in terms of what, you know, really appeals to you. I mean, many years ago, I was on the board of King G. I. I was. I was involved in a buyout of Pacific Brands and had all sorts of businesses, including bonds and King GE was one of them. And I always thought that, you know, Uniform sector was an interesting one, actually. And then in more recent times, as you probably know, I was involved in modibody, which is a period underwear business and Love to Dream. This is an Arms up baby swaddle business, and they're sort of more functional Apparel and I think I was intrigued by the sector. And actually the other thing is sort of in the background too is I saw this business in the US called Figs, which has been a very successful DTC business. And actually the idea there, which is sort of where I'm getting to here, was that it really sort of modernized the approach to nurses scrubs. And instead of having scrubs that were sort of like an uncomfortable piece of linen, the idea there was really to make, you know, the offering for nurses to be sort of attractive to wear and very functional at the same time. And so I could see with Cargo Crew, it's like a design led uniform business. They really are trying to create uniforms that are functional and look good and people want to wear them. And if I go back to my time at King G years ago, I mean it was very much sort of blue collar, industrial high vis, not necessarily comfortable and you know, probably male orientated. So I thought Cargo Crew were doing something very innovative. And when I looked at their website and you know, things they were doing, it really looked like they had that sort of design led approach and we're doing some pretty, you know, clever things and then they have a f. The founder, Felicity Rogers and her team are fantastic. They've been building the business for 20 years and they have great systems and processes. But ultimately, you know, a brand, a really, I think, neat Australian brand addressing a need in the market and that is to, you know, is to provide a product that people want to wear and if they, they can wear it in a way that enhances the brands that they're working for. Yeah, that's sort of like the big thematic behind it, but it's otherwise just a great, well run business and we thought it would be a fabulous one to get behind.
Nathan Bush: Yeah, they weren't on my radar before our conversation, but I was surprised once I did a bit of research around all the different companies that they create uniforms for.
[Voiceover]: Yeah, I mean they do Aussie post, from Aussie post to your local cafe, they actually do a lot in hospitality and they do aprons as one of their strengths. And so we, you know, there's a little bit of can we create the figs for hospitality here? Which I think is a really exciting concept and we've just got a really great team to do it and in a good brand, something we can really work with. And look, you comment about, you hadn't heard of it. I mean our job is to really look high and low for these great stories. So we've looked at over 400 different businesses and this is the sort of one we've chosen. So yeah, we're very fussy.
Nathan Bush: Shopify have put together their version of the Australian e commerce avengers. 10 e commerce experts, including me. Unfortunately I think I'm the hawkeye of the group to give you tips on how to set yourself up for success this year. You'll even recognize some of the contributors from past add to cart episodes. Mark Bartzer, Kelly Slessor, Paul Waddy, Lisa Jones and more will share tips from how to create great discounts, how to boost conversion rates, optimize email and sms, even use AI to drive sales. It's all in there. I share how to set up your team for success. I can guarantee you will take at least two to three tips that you can use to optimize your sales this peak season. So put on your Spandex and join the E Commerce Avengers with Shopify's free Peak Season Playbook. Download it at shopify.com/guides peaksalesseason2023 or just follow the links in the episode show notes from the device you're on.
Nathan Bush: Let's take a step back a bit. Glow Capital Partners, you alluded to it before you founded it with Kate Morris back in 2021. Tell me the reason for bringing this together.
[Voiceover]: I was at another private equity firm called Quadrant. I launched a fund there, a growth fund and found it really enjoyable and met some great founders like Christy Chong at Modibody, Kate at Adore and I really was inspired by some of these great founders that had had great cultures and were building really exciting Australian brands and growing and growing them quickly and it all happened around the same time, you know, as the sort of the boom in a way in the DTC businesses. But it was a very happy period for me and was very successful. And I think part of the thinking with Glo is could by teaming up with Kate rather than sort of having a private equity firm that was sort of full of ex accountants and investment bankers, we could have a firm that had a true founder like a true 20 year sort of garage started in the garage type founder journey as part of the top team and that would make us different to many of the other firms. And so having that sort of real founder mindset which I think the venture firms have done very well, but really focusing in on how do we really communicate and empathize and make ourselves appealing to other great founders as a partner. And really that was the thinking with Kate and myself. I'm more of a traditional type private equity person and she is something different. And I think together we offer something different as a firm.
Nathan Bush: Amazing. And so when you set up Glow Capital, what's the prospectus look like? What's your message to market on the types of businesses that you're looking to invest in?
[Voiceover]: Yeah, we're looking for businesses that have got good founders, obviously. Great. That are likely to have a good brand or an authentic brand or an emerging brand and have gone some of the way on their growth journey, but are looking to go on the next leg of that journey with a partner that might be able to help them on that journey. And so we're looking at businesses that probably have earnings of maybe 3 to $10 million and probably enterprise values of 22 or 10 to $50 million. So we think it's a part of that prospectus for us is we think it's a very attractive part of the market. There's lots of businesses like that, which gives us a lot of opportunity to work through. Many of the other private equity firms are looking at larger businesses so we can focus on this smaller part of the market where we think there will be diamonds and cargo. Crew is one of them.
Nathan Bush: Yeah. And are you purely focused on consumer brands?
[Voiceover]: No. I mean, it's a good, good. I'm glad you asked that question. I mean, we. I have a quite a history in industrial brands. In fact, many of them over the years in private equity. But B and D garage doors is for instance, one of my first investments, Burson Auto Parts. You know, I've done a lot of industrial and in fact, I ran a public company called alesco. We had 100 industrial brands. So where it's more around the brand and it could be industrial, it could be consumer and it could be a service business, or it could be something different to what you might think of. That is naturally the first thing that comes to mind when you mention a brand. So certainly consumer. And look, ultimately many B2B businesses are driven by what the consumer wants, where the consumer's going, where society is going, full stop. So we've certainly got that mindset and clearly we had a good run. We've had a bit of involvement in some super E commerce businesses as well. But once again, Cargo Crew is not an E commerce business. It's primarily a B2B business. But it has an opportunity in E commerce and we can help enable that. So we think there's almost every business has to think about their digital strategy now. And clearly E commerce is something that is potentially open to many traditional businesses. And so if we can come With a focus on brand building and a capability around digital or E commerce, we think that should be some of the things that make us attractive as a partner for a founder of an up and coming business.
Nathan Bush: Makes sense. Now, as someone who is well outside of the private equity world, I'm hoping you can humor me and take me inside your world a bit.
Nathan Bush: Looking from the outside.
Nathan Bush: Established Glo Capital 2021. Is that right?
[Voiceover]: Yes.
Nathan Bush: Landed the first deal. Cargo crew, July 2023. You alluded there that you've spoken to 400 companies in between. Tell me, what does those initial years of setting up a private equity company look like?
[Voiceover]: Well, look, it's probably like starting up any business. We need to find the money to invest, we need to find a great team and then we need to start researching and building the funnel, you know, to use sort of E commerce language, building, building the funnel of opportunities. And so really over the last couple of years we've been doing those three things and in the market really with a lot of outreach, actually talking to founders and there's some great founders that have been on your podcast and we listen to your podcast, you know, every week because we, there are so many great people to hear from, but some of those founders we're in dialogue with and we're getting to know them. For us, it's really important, the people that we're working with. And so in a way, it takes time to get to know those people and to build a relationship of trust and see what they're doing. And so that's what we've been doing for two years. So we haven't been rushing, we've been taking our time in that. I think the other thing, Nathan, is it's been a really interesting. Not interesting. It's been tough. You know, I mean, we, we all know it two or three years ago was sort of like top of the market for everything. It was pretty happy days. We probably at that time thought the world was changed and going to continue like that. And it did. It's got tougher and I think it's been really hard. Often we're looking at businesses and trying to unwind what, what happened because of COVID and what it really looks like. And then coming into these more recent times, what's it look like with interest rates up high and inflation up high, that we've probably hit the top of that cycle now. But it's harder, it's a harder time. So trying to unravel the performance of businesses during that time has been hard. So we've, you Know, I think some people will probably just sit. I mean, in a way we did sit aside, but would find it too hard. We've done a lot of thinking about how to work through all that. That's really what we're. Our job is to do. But it hasn't been easy to try to work out what's the COVID bump, what's not, how's the business going to go in a downturn. All those sorts of things have made it hard for the last couple of years. So we've just really put a big capital L on our foreheads and said, yeah, we're learners and we're just out there studying and learning and practicing for now until we did the Cato crude deal.
Nathan Bush: And did this environment have a double
Nathan Bush: impact on you as you are raising funds for GLO Capital as well in those initial stages? Did it make it harder?
[Voiceover]: Yes, it did. Definitely. Look, it's definitely been a challenging environment for that. I mean, it's a. Ironically, it's a great time to be looking for opportunity, although it's a slow process. But it's also a hard time to get people to convince. To convince people, I guess, to. To give you money. So. Which I think is always the case, you know, I mean, it's kind of like that Warren Buffett like invest, you know, when everyone else is scared to death. Yeah, it's easier said than done, as you know, because usually when everyone else there's fear and blood in the streets. Well, sometimes it's your fear and your blood and so you don't do anything just like everyone else.
Nathan Bush: You feel like a bit of an idiot being the one dancing in the bloody streets.
[Voiceover]: So it's. It's easier said than done. But that, that is the theory to be courageous when other people are nervous. But it takes a lot of practice to do that. And I've been around a long time and I still find it very hard. But I'm trying. We are trying.
Nathan Bush: The general sentiment around investment switching from COVID being around investing in growth businesses versus profitable businesses today, is that a fair generalization or it hasn't really. The principles haven't shifted that much at all.
[Voiceover]: Well, look, the way I see it is that if you're alluding to the fact that a couple of years ago a lot of businesses were sort of being priced at sort of three times revenue versus today, you know, you might be thinking more six or seven times earnings. Yes, that's definitely a transition that's taken place. The logic for that, those big revenue multiples was at that time, those businesses were growing at 100% per annum and people thought, well, that's incredible. And if that continues, then this sort of pricing is reflective of that. And so what's been really tough is that in the last couple of years, those businesses that might have been growing at 100% per annum are now growing at very moderate rates, like 5%. And so it goes back to the old world of pricing, which is really a multiple of profit rather than necessarily a multiple of revenue. And that's been a tough landing, I think, for many businesses. And, you know, we all thought the world had changed a few years ago, but you know, it's. It's reverted somewhat and it's been a sobering experience for all of us and we just have to adapt to the new world, which is more probably like the pre Covid world. Yeah, obviously it was a mighty decade last decade. You know, the time from the GFC through to the COVID the interest rates were falling and valuations were going up. It's a little less certain now what the future holds. And I think that truth is that if businesses are really making a good profit now and are performing well now, then they must be pretty damn good. So they're the ones we're after, Resilient ones. Yes, because I think it is tough times and if you're going right in these times, you must be pretty damn good.
Nathan Bush: Do you think we are in the
Nathan Bush: worst of the worst times?
[Voiceover]: Pretty close? Yeah, I think so. I don't think it's the worst of the worst in the sense that it's not the gfc. You know, there's a reasonable amount of. You saw in the. You may have read in the papers today, the banks are all saying we think it'll be a soft landing, but I do think we're right in between the cycles. So it's hard now because of what we've come from. It's probably not. I mean, I'm a little bit older and 4 or 5% interest rate to me is not. Doesn't seem as outrageous as it might to someone that went and borrowed a house at zero and now it's 4%. Through the times that, you know, I've seen interest rates a lot higher and I'd say in a way 4 or 5% is not. I don't think is the end of the world. But obviously it's hard given where we've come from. For a lot of people, you better
Nathan Bush: be careful putting comments like that out into the world. You know, the social media backlash on news.com will be out to get you. You know, the generation that already own their house, all that sort of stuff.
[Voiceover]: All right, I'm sorry that I bought out the bit of this.
Nathan Bush: You know, I'm going to create a clickbait title.
[Voiceover]: Yeah.
Nathan Bush: Do you.
[Voiceover]: I sound like one of those old guys that are saying, look, you know, back in the old days, it was a lot.
Nathan Bush: No, you're absolutely right. But comparatively, you do see it on a Trend line. And 4 or 5% isn't abnormal. It's just abnormal compared to where we've been at for the last decade.
[Voiceover]: That's hard because we got a big. You know, that was very helpful when those rates were zero in the COVID times.
Nathan Bush: Yeah, absolutely. So tell me on the fourth 400 clients that you've been speaking to, it's a lot of conversations and I can imagine it's not just one. It's like you said, it's a relationship over time. What are you looking for? What are the key questions in your head that you're trying to get to the bottom of when you're trying to assess, is this a business that's right for Glo Capital?
[Voiceover]: Yeah, look, for us, it's sort of. It is some of the things I've alluded to to be for a great. An authentic brand. And part of that authenticity is around the founder story as well. Someone that's really grafted and built a business that addresses a need, a real need. So we're looking for that brand for that founder that's taken, that's addressed that need and built that brand over time. And then. And then attractive unit economics. I mean, I think that that is something that probably has caught people out over the last few years because I think, you know, there are many businesses, for instance, that got into E commerce, but they might have got into it at a time when barriers to entry to E commerce were low. I mean, actually, the flip side is that if I take another one of the business I've been involved with, Quad Lock, you know, there is a business where, in a way, the Quad Lock phone case never really had a great home. Pre. Not. I wouldn't say pre Covid, but it actually has thrived in the online world. You know, like, where did you buy a phone case before? It was at the back of the Telstra shop or JB hi Fi or something. But the Quad Lock system has sort of really, yeah. Thrived in that online ecosystem and also, by the way, has tremendous unit economics.
Nathan Bush: Can you share with us on the unit economics? Because we interviewed Sarah Hamilton, founder of Bella Box Strand sand and sky, and she said that was one of her key lessons as a founder, is to really understand unit economics. We never really got to dive into it much. Can you explain for listeners who might not be across unit economics what your version of strong unit economics is?
[Voiceover]: Yeah, I mean, I think for a start a high gross margin is very helpful. Yeah, a business that actually generates profit at the earnings line is very, very helpful. Now the high margin is a great start. And then the question is what about the other costs? And I think the next big one is your customer acquisition costs. So you do see businesses that have a very high gross margin. So that's sort of the cost of the product from the supplier and then they get to sell it at a certain price because they're a brand and make a profit out of that. But one of the things which is probably relevant for many of the listeners here is how much do they have to spend in their, in their profit and loss to acquire the customers? So in the sort of heat of the moment way back, you know, you might see businesses that were spending 30% of revenues on customer acquisition. So to do that you really need to have a high margin because if you don't have a high margin, there's just not enough left over to pay for your overhead, your, you know, all the other its costs and make a profit. And so I think the, where it's a big problem is the, if that, if the margin is really low or the customer acquisition costs are really high, then it makes means there's not much that drops out the bottom. So I think that's it in a nutshell. So you might have a slightly lower gross margin, but your customer acquisition costs might be low and it still is a very profitable business. But if you have a high customer acquisition costs, like a high marketing spend to grow or even to stand still and your margin is low, you're going to be in trouble because it's just not enough at the bottom. So sometimes businesses, they might address a need or have come up with an idea that there is a market for, but at the price they're selling it, there's not enough profitability in the system to make the whole thing work. And I think we both know that if a business actually generates a profit, it just makes it a hell of a lot easier to run.
Nathan Bush: It kind of helps.
[Voiceover]: It does help. And yeah, and I mean really in these times, you know, you've got a lot of these sort of venture style businesses that were burning cash, it will get hard when the cash stops. And so you don't, you just. The perfect system is the one that actually generates profit as you go.
Nathan Bush: Yes. Do you go in with a gross margin benchmark in mind that a company has to be above in order to even open a conversation or are you open based on the actual calculation and all the other factors combined into that?
[Voiceover]: Look, it's a mix but that's a good start because a high margin, I mean ultimately the highest margin business and the reason that everyone loves them is the software and service business because they, they're like a 90% margin and everyone says that's the best, you know, what more could you hope for? And it's true, it's, it's unbelievable. But it's not just. I mean gross margin is some, is most of the story. But many years ago, the first, one of the first investments I ever did was I bought a furniture removal of business called Ridgeways. I mean it's probably, I don't even know if the brand exists anymore. But I was a bit shocked because it actually had very low margins but because when you were moving you gave a deposit, sorry, yeah, you had to pay a deposit in advance to the business. They actually had low margins but they also had what's called negative working capital and that is basically as you grow you have more cash in the bank because you get the money from the customer long before you actually have to pay it to anyone else. In a way like Woolworths is a little bit like that too and it's one of the greatest businesses in the country that I mean it's because they get great terms from their suppliers but there is the balance sheet as well as the P and L. So I mean the flip side is you could have a really high margin business but you get getting terrible terms from your suppliers overseas or you know, it's got very high capital capex requirements or whatever. And so it might actually have a high margin but it actually might still not generate any cash because it's got some features that really chew up the capital at the same time. So have to think about the balance sheet and the P and L, how does it all work together? You really want a situation where you have, if you could, you had high margins and you don't have to have too much tied up in working capital and so on net net you're still generating cash. Flip side is you could have low margins and quite a sort of efficient little business that has a really great sort of balance sheet set up whereby people are giving you money in advance and you've actually got tons of cash as well. So can't sort of. There's no sort of absolute rule and all the businesses are sort of combination of those things. You don't want to be too judgmental because they're, you know, then there's the sort of future in the past and what you can do with it and all sorts of things. And look, I think that's. Yeah, I have to be careful of that myself. I don't go in just with a whole bunch of sort of blind assumptions because often when people are successful, they're successful for a reason. And sometimes you have to have a good sort of look under the hood to sort of see why. Even though it may, you may be asking yourself that seems strange that they're doing so well. You have to really get in and understand why. And sometimes that reveals things that you would never have thought of. That's part of the joy, you know, of what I do. I get to see those little miracles from time to time.
Nathan Bush: I was about to say you must be such a rewarding job because you would always be learning and always challenged on new ways.
[Voiceover]: Yeah, definitely challenged. And I think sometimes, you know, it's that sort of combination of when you've been around a long time, you think from experience that you know everything but you know, especially with this whole new wave of E commerce, it's been a great. If you've got that curiosity and want to continue to learn then it's fabulous then to. Sometimes you come with a set of biases that can be quite disrupted by where the world's going. And so it's quite joyful to be, you know, seeing that, you know, the innovations and the way people are doing things differently and that are new ways to create value.
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Nathan Bush: Obviously you do come with so much experience behind you both as a leader within business and investing in businesses. One of the conditions that I understand that Glo Capital look for is in investment is having a seat at the board by yourself, Kate, one of the other directors or combination. What does that typically look like in those early stages? You're joining a board, you're coming from the outside, you're sitting there. Where are you looking to deliver value in that setting?
[Voiceover]: Yeah, I mean, overall, it's a strategy mindset. So we're certainly not looking to run the business. The way it usually works is we'd meet once a month for a board meeting. We might have a call once a week to see how trading is. But really it's. We agree up front what's the plan for the business, where we're trying to take it, and what are the. What are the key elements of the strategy to achieve that? There might only be three or four things that we were aiming to do over a period of time. So. And I think to your point, in a way, it's a shame you don't have Kate here, because I think someone like me has a way of looking at things that's often different to how a founder might look at things. And I think founders really value that different perspective. Not that it's easy to sort of sell that you've got a different perspective, but when you've been involved in so many businesses and seen a lot, you are able to draw parallels between situations and businesses and offer that, I think. And I mean, I've been involved in much bigger businesses as well, so that sort of helps in terms of how's the path forward look? Because, you know, I've been involved in businesses that got 100 million of earnings, you know, and so what does it create into, what does it require in terms of resources, organizational design, you know, thinking about projects and investing and so on. So we can help with that. I think another thing that we, as a private equity firm we can help with is getting talent to into the business. Because I think it's hard when you're a founder in a private sort of family situation to convince someone to come and join you. And I think that that is something we can offer and we have the networks, the networks to help do that. I mean, you know, Quadlot was a great example of that. I mean, the founders are still very much involved, but we've actually got the sort of ex CEO of Nike running it and the CFO out of Catch we recruited to join it. So you've got some super talent. And by. And that's, you know, obviously Part of that founder journey ultimately anyway. But I think that can be accelerated by having the right sort of partner and then a bit analytical firepower. So we, for instance, when we're looking at businesses, we use a software program called Alteryx and we can actually just plug into Shopify and get a whole lot of data and do a whole lot of analytics. We find that that is really helpful to the teams that we're talking to because we sort of play it back to them. Look, this is what we're seeing in your data. We can use that data, for instance, also to help with pricing and other things. So we've got a team of people that are highly analytical and can really help, I guess, resource wise in some of the areas that founders typically perhaps don't have time to because they're in the day to day running the business. So in the end of the day, we're trying to add value and be great partners for our founders and that even goes to the kind of people we recruit in the team. We really want to have a team of people that founders really want to work with and we can really add value to those founders. But after that, we obviously want a talented group of people. Not necessarily all the same, but people that we see would be valued by founders if they were looking for a partner.
Nathan Bush: Yeah, absolutely. And I think you mentioned there you bring your expertise, but obviously the reputation as well from the outside people knowing that if you've invested, you've obviously done your due diligence, you've gone through the process, you've open the bonnet as you said, and you've checked it and then that will give people a lot of confidence to go, oh yeah, this is a ship I should be jumping on board.
[Voiceover]: Let's hope so. We do do a lot of due diligence. It actually is a little bit of a painful process, but I think out of that, you know, also could spawn opportunity and insights for the future direction.
Nathan Bush: Yeah, makes sense. I missed the name of the analytics software that you use.
[Voiceover]: Yeah, Alteryx.
Nathan Bush: Alteryx. Okay.
[Voiceover]: It's sort of like an advanced, sort of more high powered version of Excel.
Nathan Bush: Yeah, okay.
[Voiceover]: Yeah.
Nathan Bush: Right. When you are doing those analytics or even in the pre stage, I want to talk about red flags. Is there any red flags that you come across when you're looking at businesses that go, that's a herring. I know, I know, that's a void.
[Voiceover]: Well, look, I think firstly, as I mentioned, the margin is a start. Also, I guess we've touched on, I think the trying to unravel the effects of COVID versus the, you know, how. How business is going to be affected by interest rates and inflation. I mean, that's been a. The challenge. Look, the challenge always when investing in the business is matching the founder's expectations of what it's worth with what your view is of what it might be worth. You know, that is the sort of challenging. Reconciling those two things is really quite a delicate process and a bit of an art form really. And then, look, I think the traditional red flag is that if they've got an advisor or someone in to help them, often they have what, you know, is known as hockey stick forecasts for the future. And so I would have thought actually, in a way, the first red flag when you see when a business shows you their numbers is they all, you know, are pointing to the sky. It's kind of like, well, you know, maybe not, you know, what we. And sometimes we can go, you know, with that analytics piece, we can go in and have a good look at the history and sort of say, well, you know, what would it require? What would it take for you to really hit those targets? And sometimes that sort of discussion, you know, can be. Can help both parties sort of realistically answer the questions, are those forecasts really achievable or not in the gentlest possible way, and try to be respectful with these things and put our. And empathize and put ourselves on both sides of the equation. And look, when people have spent their lifetime building a business, say they're in love with it and we want to be in love with it too, but, you know, it just takes a little while to fall in love.
Nathan Bush: Should we start another podcast here? Can you share of the founders that you've been speaking to, especially over say, the last six months and ideally in the E commerce space? How would you describe the sentiment at the moment? Are you feeling. Founders are feeling fairly resilient, lots of energy, or is there exhaustion or is there. What's the mood out there?
[Voiceover]: It depends how long you've been going. I mean, I think, I reckon there's a group of founders, younger, smaller businesses that have sort of kicked off in more recent times that are paving the sort of way for the future. And then there's another group that might have been going pre Covid and probably have been a bit fatigued and exhausted by Covid. And I think then there's another group that have been around a long time and probably went through the GFC and then Covid and they're like, well, maybe at some point I ought to be thinking about taking the opportunity to sell down a little or to find someone else to run this or build, take the business to the next level, because it's been a long time now and you just never know what's around the corner. So I do think this, you know, in this country. So there's different types of founders. There's sort of the young ones that are wanting to, you know, work for the next 20 years and others that might have been going for 20 years and have like, well, I wouldn't mind having a bit of a break. So. But I do think it has been an exhausting period. I think we all know that because we, we've all sort of been through it to some extent. We sort of ended up locked up in our houses, maybe not so much up in Queensland, but if you go right down the bottom of Victoria, I mean, that the people down there never got out. And so that, you know, that's been hard. And then you sort of came out and it was sort of like revenge on coming out and that, you know, in terms of all the stuff that you didn't do before catching, I mean, that could apply from weddings through to the stuff you didn't do in your business. And there's sort of been a swing, right. We've had to swing back to bricks and mortar. And look, some of the great firms are taking advantage of that. You know, you can see July and lskd launching stores, and it's absolutely fabulous and breathtaking to watch. But the world continues to change and that's exhausting trying to do all that stuff.
Nathan Bush: And I think too, from an E commerce perspective, it's been hard because we haven't ridden the traditional cycles of other businesses. During that Covid cycle. Right. Covid, we went great. You know, there was no shutdowns. It was beautiful. For E commerce come out of COVID E commerce flatlines because retail comes back in. So we've been kind of pushing and pulling against the economy all the way through.
[Voiceover]: Yeah, really hard. I mean, who would have thought the sort of COVID blessing that occurred, I mean, everyone was at home sitting on their computer and off it went. Yeah.
Nathan Bush: If we've got founders listening to this who are on their roadmap, they're like five, 10 years time. I want to be ready for investment. I want to be in a position where I can actually have these conversations. What would be your advice in putting the right processes, systems, strategies in place to make it as appealing to have those conversations?
[Voiceover]: Yeah, look, I think in the E Commerce world, there's some pretty good systems that you can use that in a way are reassuring for everyone. And I've sort of heard on your Drew on the most recent one, you know, if you're running on Shopify, you're running on sin 7, you're probably using Xero. I mean it's, it's a kind of universal set of enablers around the tech. So it's probably the systems and processes behind that that need to think about. And one of the things that definitely happened in Covid and it happens in other business cycles, it happens like in the building business cycle. But in the middle of COVID the customers were coming at everyone so fast that they didn't really have to invest. I mean you would understand this being in the talent game. They didn't really have to invest in the staff, in their organization and build the infrastructure because the business was just throwing itself at them so hard that it was like a fire hose and they were just sending the stuff out and making great returns. And I. We do often see businesses that they have neglected to build the team and the talent up in a way that will endure in the tough times. And that can be tough, right, because then it gets back to this P and L and the margins and is there enough money around to support all that? Because it can be pretty disheartening when you thought you had a super profitable business, but you realize you have to build a marketing function, build a team to manage the warehouse, a team to order the stock, you know, all those sorts of things. And that's a real transition, right? When you often an E Commerce founder is, you know, one person at home side hustle, then all that cost that you have to put in, that's pretty, pretty disheartening. But in a way that's really what we sort of look for in terms of. Because if it's not there when we have to put it, we'll have to put it in ourselves. And then that goes to this sort of, you know, gap I guess in terms of expectations as to value and so on. So that's, that's part of it. But I look, I think, you know, building a brand and building a business that has a future is what it's all about. Because if anyone's ever going to invest in something, it's about the future. I mean it's the same for us. I mean we actually don't plan to be around forever. Like the way our fund is set up, we would invest and exit, you know, in three to five years and so. But when we do so, even though our involvement is for the short term, we have to build those brands and businesses for the long term, because if we don't, they're not worth anything. So there's no point in sort of. Often one of the issues is people like, oh, I'm not really ready. I'm not really ready to do something. But the irony is that there's two sides to the equation. I mean, you're never really ready. You just have to do it. Because if you wait forever and you wait for everything to be perfect and it, you know, it's all. There's nothing left for the next person. So, anyway, look, it's hard because the. You know, it's like a child of a founder, what the business, and it gets very emotional. So it's got to be handled very carefully and gently.
Nathan Bush: Wow. Okay. I like that.
Nathan Bush: I want to pick up on a
Nathan Bush: conversation we had online a couple of weeks ago, and we agreed on one of our personal philosophies being strong opinions loosely held. It's always something that's kind of ringing around in the back of my mind because I think it's something that I can hang on to, really works for me. And you said you resonated with it as well. Have you got a strong opinion recently that you've actually had to let go of?
[Voiceover]: Look, it happens to me all the time, Nathan, because I think, you know, we often. Yeah, I've got preconceptions because I've been around so often it glow. You know, an idea will come in and I'll be like, oh, no, that's. Yeah, that'll be no good. But. Or actually, that's probably not as often as. This is brilliant. This is an absolute ripper. We're going in. We're going all in. And then my team then explained to me these are the reasons why not. But, I mean, look. I mean, it can apply even in my personal life. I recently was over in Europe and I thought, what? I had bought one of the coolest, trendiest pairs of shoes ever. And I sort of came in to the home and said, guess what? Look at these. How cool is this? And my children and wife said, you cannot ever wear those shoes in our presence.
Nathan Bush: And so you've got to describe them now.
[Voiceover]: Well, I was sort of blue and shiny. They, yeah, had a sort of paisley element to them. They were sold to me by someone that was actually a studio musician who I thought was super cool at the time. So in many respects it was a. It was not a great Call. But my strong opinion was very quickly dropped.
Nathan Bush: Just give it a go. Give it a go. I want to see how they're in them.
[Voiceover]: I'll tell you what, if I do bump into you in person soon, I'll make sure I'm wearing them.
Nathan Bush: All right, good.
[Voiceover]: I feel like you may have an eye, you may appreciate something that others don't.
Nathan Bush: Exactly, exactly. You may be leading the way there.
Nathan Bush: I'd love to hear more around your
Nathan Bush: involvement with the Northern Territory Aboriginal investment. I only discovered this on your LinkedIn profile. I was doing a little bit of research. It's not something we've talked about before. What are you doing there?
[Voiceover]: Well, thank you for asking. It's a relatively new project for me. I mean, obviously it's a very topical area, but it's great for me to be involved in something like this. I was appointed by the former Federal Minister for Aboriginal Affairs, Ken Wire, to sit on that board and essentially it's, there's $500 million to invest in really for the benefit of the Northern Territory Aboriginal people. And then we give away 60 million a year in grants. So it's a big, it's quite a big and exciting undertaking. Exactly. What we're going to do with that 500 million, we're still working out. You know, we might be investing in place based projects in the Northern Territory. We, or we might be investigating it on the, on global markets. What we, the main concern for us is to make sure we manage that money in a way that's best for the long term interests of the Aboriginal and Torres Strait Islanders in the Northern Territory.
Nathan Bush: Amazing.
[Voiceover]: But it's a great, it's great to be involved and look, I've been involved in other things in the past, not for profit things, but this I felt was a great challenge and opportunity for me to make a contribution at this stage in my life. Yeah.
Nathan Bush: Well done.
[Voiceover]: Thank you.
Nathan Bush: What has been your proudest career achievement to date then that begs the question
[Voiceover]: in terms of investments or whatever you
Nathan Bush: like, but yeah, maybe investments. Is there one that sticks with you always to go, God, I was smart that time.
[Voiceover]: Well, look, I mean I've been involved in a few. 22 actually, over 20 years. One that it's not a case of necessarily being smart a long time back and it's a little bit of that. Strong opinions loosely held too. I, I bumped into this guy at a golf game and he had this data center and I thought, what data center? Sounds like rubbish. And I didn't follow it up much and then he, he turned up Again, you know, a year or so later. And he had a. This business called Canberra Data Centers and we invested in that at Quadrant and I think we bought it for 3 or 400 million and sold it for a billion and we thought we were absolute heroes, but actually, as it turns out, it's now worth $10 billion. So that was. That's sort of the one that went on to, you know, the greatest heights. Yeah, but you know, that. That's probably, you know, in more recent times. It just being involved in something like a, you know, a Quad Lock is a great. Is of great pride to me because I feel that is. I saw recently Rob Ward posted that if you looked at the Google Trends analysis for quad lock since2013, it actually has better statistics than All Birds and Away. And I think, you know, that just shows to me that this is an Australian company that people don't know that much about. And yet he's as good as some of the best DTC businesses in the world. So I'm very proud to have had an association with that.
Nathan Bush: Nice, fantastic association. Yeah, we had Rob on. It was probably two years ago now and I was super impressed by the ecosystem that they've created and how smart they are with such a limited amount of SKUs worldwide distribution. Bloody smart. Very smart.
[Voiceover]: And sort of born global and born digital. I think that was really cool. And probably at a time in the cycle where people are a bit perhaps more skeptical and negative on these D2C businesses, in my opinion, that's one of the best businesses that I've ever seen.
Nathan Bush: Yeah.
[Voiceover]: Great.
Nathan Bush: So what's next? What do the next 12 months hold for yourself and the team at GLOW Capital?
[Voiceover]: Just more of the same, Nathan. We remain curious where we're keen to keep looking and build those partnerships and relationships and hopefully we can build our own Glo brand into a brand that's associated with. With a potentially good partnership for some of the great founders. I mean, our purpose really is to help founders achieve their dreams and that's really what we're going to keep working on.
Nathan Bush: Beautiful.
Nathan Bush: And if people want to get in touch, what's the best way to do so?
[Voiceover]: Look, LinkedIn's fine. Or the Glo Capital Partners website.
Nathan Bush: Beautiful.
Nathan Bush: Justin, thank you very much for.
Nathan Bush: Feel free to shoot us a picture of those shoes and we'll put it up on our Instagram page.
[Voiceover]: All right, Nathan, I'll do that.
Nathan Bush: Thanks for joining us on Add to Cart.
[Voiceover]: Wonderful talking to you, Nathan.
Nathan Bush: You too.
Nathan Bush: Now, I'll regularly chat with Justin on the phone. He's always good for a bit of a chat, but it was nice to sit down a little bit more formally and hear more about his backstory and the the Mission at GLOW Capital. I'm always impressed by Justin's patience and his curiosity. Those two don't always work well together, but he's got it. Here are the three takeaways I took away from this chat. Number one Veer towards universal enablers Justin stressed that one of the things he and Glow Capital look for when investing is easily accessible systems. They don't want to sink a huge amount of capital into redundant or complicated systems, especially when they first invest. Universal platforms such as Shopify, Sin7 and Xero are great building blocks if you want outside collaboration and maybe even investment. Get your unit economics right Justin mentioned the importance of unit economics whether you are looking for investment or just looking to run a profitable business. These are the costs and returns from the sales of single products. How much does each product cost and what margin are you making on that product? These are essential to know off the top of your head. And number three, we're between cycles. Justin gave us a great insight into where he thinks the market is at. It's the question we all want to know. He thinks we are right between cycles. He said that while a lot of founders, especially in Equal Commerce, are feeling the pain, he doesn't think it will be as bad as the GFC and we are reaching the bottom of it. And I hope, I hope that gives you a little bit of pep in your step today. Thanks for joining us today on Add to Cart to listen to all our e commerce conversations now in the hundreds. You can head on over to add to cart.com there. You can also join up to our free private Slack community to share e commerce ideas, tips and questions with other listeners. You can also subscribe to the Add to Cart weekly newsletter and browse some of the video highlights from our chats. There is a lot there that's add to cart.com and if I can ask you one thing before you go. If you enjoyed today's episode, make sure you share it with with a friend or a colleague who could benefit or
Nathan Bush: leave us a review.
Nathan Bush: It really makes a difference. Thanks again for listening and until next time, keep those customers Adding to Cart.
