What I've been up to

A new baby and a new fund

TLDR; a new baby, a new fund, and what I’ve been reading.

Friends.

It’s been a while! My last Kvetch was in June, almost 2 months ago. Feels like longer. This has been the longest stretch between Kvetches since I began. Apologies. I guess you get what you pay for… 😉

I had my 4^th baby almost 4 months ago. Wife is well and fully recovered and ridiculously good looking. Boy is beautiful. I think I’m enjoying him the most. Maybe because it’s been a while between drinks — his older sister is 4. But despite also being ridiculously good looking (and powerful… so powerful) he’s the most difficult of our babies. Sleeps the worst. And I admit that’s taken the wind out of my sails. I’ve still been reading, but I haven’t had a moment to write anything down, or even much of an impulse to.

That’s even despite having dozens of drafts that are near-ready. I haven’t had the headspace to do even that.

Handsome devil like his father

There is another reason. 

I’ve launched a new fund with the excellent team at EVP. I rarely write about investing or my professional life (although I have an excellent piece comparing an Australian private equity battle and a Lyndon B. Johnson election coming at some point… extremely kvetchian content only fit for the sturdiest of kvetchers). So I don’t expect most of you to know I am an investor by day and a kvetcher by night.

So a new baby and launching a new fund have taken up ~100% of my bandwidth. It’s been thrilling. In due course I will write again. It’s a very special, very important part of my life and I appreciate you reading, sharing, and writing in. Thank you. (Hilariously, my new partners ran Kvetch through diligence before hiring me…)

I thought I’d do two things in this Kvetch:

1. Tell you a bit about the new fund. (Legal disclaimer: It’s open to Wholesale Investors only. This is not an offer to invest and contains general information only). I’ve been pleasantly surprised at how many investors write in to me. Similarly surprised and appreciative of how many twitter friends have reached out and invested after reading about it in the paper. So I thought I’d kvetch about it, and if you want to back me, you can. We’ve raised our target amount — so we’re already there, it’s just a special pleasure to have readers onboard if that’s your jam. If this is not for you — that’s cool, feel free to skip past. I promise to return to regular programming in due course.

2. Share what I’ve been reading. An interim kvetch.

The EVP Opportunities Fund

I’ll give you a brief overview and explain what I’m up to. If interested to invest or learn more, go here or reply to this email.

I’ve spent the last few years of my private equity career investing exclusively in B2B software. And this is what I noticed:

• At the bigger end of town, there’s a fairly active market. Whether it’s the specialist software fund I was at, or other domestic or global funds, there are people writing big cheques into B2B software in Australia and New Zealand (ANZ).

• At the early stage there’s EVP. EVP is a VC but they’re not like the other girls. All they do is B2B software. If you want flying cars or artificial meat, you go elsewhere. They only invest post-revenue. They always take a board seat. And so they have concentrated fund portfolios of leading B2B software businesses. These do not follow the typical accentuated Pareto distribution of returns you’d expect in VC. It’s a more targeted investment style with a narrower expected band of outcomes. Consistent performance has been their bedrock. And they’ve delivered: over the last decade they built the best B2B software portfolio in ANZ, with companies like Deputy, Hnry, Ignition, Mutinex and Shippit.

• And in the middle — between EVP and later stage software investors — there’s not much. No one in ANZ is dedicated to the space or could really write $5 – 10m cheques. Partly, this is because if you’re successful you grow out of the smaller end of town quickly. You raise bigger funds, which means you write bigger cheques. Big dog investor swing for $500m or >$1bn deals over time. They manage more money and make more in management fees. (But the dirty little secret is that it’s easier to turn $5m into $20m or $30m than it is to turn $500m into $1.5bn).

So I approached EVP. (I knew them well — I had previously tried to buy a business from them and had competed over another — long story). I told them I saw a gap in the market and it was a natural extension of their early stage B2B software franchise to invest slightly up the maturity curve into growth equity. After a decade of early stage investment in the space, there’s a large pool of companies generating $5 – 15m ARR that are too small for later stage investors and too low growth for VC that are underserved.

EVP agreed. Partly because they saw the same market opportunity, and partly because they’ve seen their own portfolio of ~50 B2B software companies grow up. Those companies have attracted almost $1bn in follow-on growth capital (mainly from US growth funds), and have periodically approached EVP to provide liquidity to early investors / founders.

The EVP Opportunities Fund will do both:

1. Provide liquidity to shareholders across its portfolio and follow-on in growth rounds where it makes sense.

2. Be a capital partner of choice for established ANZ B2B software companies seeking $5 – 10m to provide their shareholders with liquidity and / or provide growth capital, bridging them to later stage investors or ultimate acquirers.

I’m excited — to me it’s a very obvious investment strategy. We’re targeting >25% gross IRR. We should be able to generate excess returns for two reasons. We have the small end of the market to ourselves. And exclusive access to back the winners in EVP’s existing portfolio is an unfair advantage.

Email me or click here to learn more.

What I’ve been reading

I last wrote about Don’t Sleep, There are Snakes which was a surprisingly popular Kvetch (?), and Question 7, which wasn’t. Since then I’ve been reading:

Poor Charlie's Almanack, by Charles Munger.

Sexual Personae, by Camille Paglia.

Douglas MacArthur: American Warrior, by Arthur Herman.

• I am a Herman maximalist and recommend anything by him.

• When General Douglas MacArthur agreed to be military advisor to the Philippines in 1935, his package included 0.46% of Philippines defense spending until 1942!

• "All occupations are a failure" — wise words from MacArthur.

• MacArthur, who accepted Japanese surrender in Tokyo in 1945, was a direct descendent of Commodore Matthew Perry — of The Last Samurai! <100 years between them.

The Guns of August, by Barbara Tuchman.

The Origins of The Second World War, by A.J.P Taylor.

Democracy in America, by Alexis de Tocqueville.

Voss, by Patrick White.

• Audio format is the wrong format for fiction but I never learn.

The Leopard, by Giuseppe Tomasi di Lampedusa.

• Wonderful so far…

We Dared to Win: The SAS in Rhodesia, by Andre Scheepers and Hannes Wessels.