Entrepreneur and fund manager Jeremy Samuel saw an opportunity in the small business market, and risked everything to make it happen.
Appen founders Julie and Chris Vonwiller built a very successful Australian small business, providing language data that supports speech recognition to global companies like Microsoft and Google. They were soon-to-be grandparents when the company took off, so retirement and quality time with the family quickly became a greater priority. But, understandably, they didn’t want to relinquish total control of their pride and joy, especially considering the potential for growth.
Enter Jeremy Samuel and Anacacia Capital. Ten years ago, Jeremy founded Anacacia as a platform for investors to co-invest in small- and medium-sized enterprises (SMEs). Specifically, he set out to manage a portfolio of “nimble market leaders in consumer, industrial and services” that turn over between A$20 million and A$250 million in annual revenue, and tend to have large companies as customers. Appen ticked all those boxes.
“We were searching for companies that took advantage if Australia’s multicultural capabilities, and contacted Appen back in 2009,” Jeremy explains. “To cut a long story short, we acquired a majority stake from the founders and helped them strengthen the management team, enabling them to step back into non-executive roles. Several years later, we helped make a strategic acquisition in the US, which focused on the related content market for search engines and social media.”
Jeremy Samuel: It’s been a privilege to help entrepreneurs
The business continued to grow until it was servicing eight of the 10 largest technology companies in the world, Jeremy says. “The founders have done well, with the share price now 50 times its value when we entered, and the founders remain more than 10% shareholders. Chris Vonwiller is an outstanding non-executive, and he and Julie have time for their children and grandchildren when they are not providing helpful counsel to the CEO and management team. It’s a wonderful Australian success story, and we’ve been fortunate to be involved in many of these.”
It’s been a privilege to help entrepreneurs like the Vonwillers to nurture and grow their businesses, Jeremy explains. “I think many business owners believe there are only two alternatives. One is selling to a competitor and the other is holding onto the business forever. And many of them don’t want to sell out 100%, but they also want to spend more time looking at things beyond the business, to have something to retire to. We provide that middle-ground opportunity, to sell a majority stake but keep some equity to share in the future upside.”
"We provide that middle-ground opportunity, to sell a majority stake but keep some equity to share in the future upside."
Anacacia starts by investing through its private equity fund and placing several of its team on the company’s board to support the CEO. Then it may look to list the company, at which point it removes its advisers from the board and becomes a supportive minority shareholder through its public-equity fund, Wattle Fund.
Anacacia Capital looks after its investments
Other well-known companies that transitioned from family enterprises to market leaders under Anacacia’s guidance are Home Appliances, Big River, Yumi’s Quality Foods, and Rafferty’s Garden. Anacacia invests in only a handful of new companies in any given year to ensure it doesn’t compromise its ultimate objective, to “pass them on to others in much better shape than how we found them,” Jeremy says.
“For these entrepreneurs, their companies are like another member of the family. We take our responsibility to look after them very seriously. At the same time, we have a bunch of leading institutions and family offices that invest money alongside us, so it’s more than just our interests at stake.”
That’s a pressure Jeremy is used to, having called on “trusting investors” to back Anacacia when he first went out on his own.
“When I started Anacacia in a small office in Sydney’s Double Bay, I gave up a stable, well-paying job chairing the private-equity division of a major bank. I had a very understanding wife – and our first young child – who encouraged me to draw down on our mortgage and put almost everything we had into the business. Fortunately, we had some trusting investors who, based on my prior track record, initially put in A$50 million to invest alongside us into our strategy of leading SMEs. That private-equity fund became Australia’s best-ever performing buyout fund.”
Passionate about producing golden returns for SMEs & investors
The leading SME strategy continues to be so successful that Jeremy insists Anacacia has no intention of entering other markets. “There are many leading SME owners facing retirement soon, and many of them don’t have children in the business who are ready to take over,” he reveals.
“There is a large opportunity for Anacacia to partner with some of these entrepreneurs and enable them to sell down their equity. We can then partner with them or their management team to help grow the business to the next level. There are 50,000 companies that employ 20 to 200 employees, so there is plenty of scope there.
“We’re one of the largest investment teams in Australia, but we’re still a very small team and we’d like to keep it that way. So we stay very focused and disciplined. We don’t have an aspiration to some day invest in the large banks and companies and play in a different space – we’re extremely passionate about the small-to-medium market.”
Moreover, Jeremy’s very passionate about producing golden returns for his SMEs and investors. In fact, the name of the firm was chosen for that reason. “We chose the name Anacacia because we wanted to create a firm with deep roots in the Australian SME business community that would be resistant to droughts like the acacia plant in the desert – it produces Australia’s national wattle flower – yet still produces gold flowers each year for its investors.”
If anything, he is outperforming the analogy and you can expect Anacacia to continue to blossom strongly for its investors regardless of future economic climates.
The CEO Magazine, November 2017