SEEK founder says crypto ‘like the early days of internet’

Heavyweight backers of Australia’s first cryptocurrency asset management firm, Magnet Capital, are eager to roll up their sleeves early in the crypto cycle.

From left, Magnet Capital co-founder Benjamin Celermajer, Matt Rockman, David Gordon, and fellow co-founder Egor Sidelska. Picture: Jane Dempster/The Australian.

Seek co-founder Matt Rockman, Caledonia Investments chair Mark Nelson and former Ten Network chairman David Gordon are backing a capital raising for Australia’s first cryptocurrency asset management firm, Magnet Capital.

Rockman, who co-founded online employment powerhouse Seek with Paul and Andrew Bassat, said the state of global cryptocurrency markets reminded him of the early days of the internet, when Seek took on and decimated the so-called “rivers of gold” traditional print classifieds business model of Fairfax Media.

“I remember the early days of the internet, and there were a lot of naysayers about the internet. They described it as a cottage industry, said it wasn’t really going to go anywhere and wouldn’t disrupt. We just feel exactly the same way here,” Rockman says.

“It’s very early days in crypto. There are a lot of naysayers out there and a lot of people don’t understand it. We just felt compelled to roll our sleeves up and join a good bunch of guys, to really get ourselves deeply entwined, educate ourselves, and hopefully do well in the process. So it’s very analogous to internet 1999 for us.”

The Magnet raising, worth less than $10m, is also being supported by Canaccord Genuity Australian chief Marcus Freeman and Terrace Tower Group chief Richard Weinberg.

Founded in 1985 by the late John Saunders, co-founder of Westfield, Terrace is a family-run real estate and investment company.

Magnet, which opened its doors in 2017, runs a multi-asset, actively managed long-only portfolio known as the Magnet Trust, providing diversified exposure to an array of crypto assets, as well as two passive trusts offering access to bitcoin and ethereum that are not traded or managed.

Together, the portfolios are now worth $50m and have delivered investors returns of more than 800 per cent over the past four years under the leadership of entrepreneurs Egor Sidelska and Benjamin Celermajer.

Magnet Capital’s distribution partners include the Winklevoss brothers, who run Gemini, one of the largest bitcoin custodians in the US.

Last week Commonwealth Bank supported the first-ever funding round for the New York-headquartered Gemini, which announced it had raised $US400m ($550m), valuing it at $US7.1bn.

Magnet believes that blockchain and digital assets will play a huge role in the future digital global economy.

The firm identifies opportunities based on the impact they will have to solving specific problems and, more importantly, their path to adoption.

It claims that by using wide investment criteria it offers investors the opportunity to make gains across the market, while limiting downside risk.

“The digital asset market will continue to evolve rapidly and with it we adjust our exposure. The fundamental strategy never changes, but we expect to have a moulding monthly portfolio as assets grow and adapt over time,” it recently told investors.

“In both upward and downward markets, our key objective is not to obtain the best Australian dollar valuation but to increase the number of tokens we have in each investment. By doing so in the long term we will obtain more value for our investors.”

After a year of gains and record highs, the top crypto currencies – bitcoin and ethereum – and platforms Cardano, Binance and the emerging Solana have been through a volatile period.

Magnet is now launching a marketing initiative to the nation’s biggest family offices and wealthy individuals to grow its funds under management as it prepares to launch an array of new offerings.

“We’re thinking about doing brokerage, by simply just giving high-net-worth family offices access to specific tokens, but they might not have the experience to do it themselves,” Sidelska says.

“We’re also thinking about expanding a technology side of things, so creating a type of automation for buying.”

Sidelska says Gordon and Rockman, who will join the Magnet board, will provide the firm with strategic advice.

“We understand the crypto market,” he says. “What we need is to be able to grow the business from a strategic point of view in a sensible way. So for Benjamin and I, we want to create a specialist advisory and investment firm that really is the go-to for anyone that wants to get access to (crypto) web 3.0 applications.

“The money (from the capital raising) will be used to build expertise in that area with staff and give us the opportunity to build products and services around that.”

Rockman and Gordon are making their investment in Magnet through their jointly owned investment group Ginger Capital, which this year bankrolled a capital raising for ordering and payments platform Ordermentum.

Gordon – who also chairs Australia’s biggest sneaker seller, ­Accent Group – says he and Rockman want to get involved with founders who were deeply embedded in and knowledgeable of the cypto industry.

“We met a lot of people and Ben and Egor stood out for us, because they weren’t trying to sell to us, they were actually trying to educate us. And that was a refreshing change. So we started talking about what they had done and were doing and where they wanted to take things,” he says.

“Both Matt and I have been involved in growing businesses across a pretty broad spectrum and believed that there was some value that we could bring to the table, both in terms of our experience in growing businesses and our network and relationships in terms of access to both people and capital. To provide some assistance to these two young guys who are really helping us understand a brand new world.

“And to some extent, they’re getting the benefit of the mistakes we’ve made in other places.”

They join other wealthy investors banking crypto plays, including Victor Smorgon Group – the company formed by the late patriarch of the Smorgon family, Victor Smorgon, and run by his grandson, Peter Edwards – which recently took a stake in emerging crypto platform ZeroCap to make investments across the asset class.

The Melbourne-based ZeroCap calls itself a full-service crypto investment platform for private clients and institutions.

VSG has also invested in the San Francisco-based Polychain Capital, a cryptocurrency hedge fund founded five years ago by entrepreneur Olaf Carlson-Wee, the former head of risk at Coinbase, the largest bitcoin company in the world.

VSG made its first foray into crypto funds management in October last year, investing in Apollo Capital, which is backed by billionaire investor Alex Waislitz.

Waislitz was also a pre-IPO investor in Australian crypto payments firm Banxa, which listed on the TSX Venture Exchange in Canada this year. Rockman says there are no plans to float Magnet Capital on the ASX, but does not rule out the prospect in the ­future.

Regulators around the world are looking closely at the regulation of crypto assets. Gordon says he would welcome the introduction of rules for the sector to protect retail investors, especially if they were focused on the “on and off-ramps” into the sector.

“Neither Matt or I, nor Ben and Egor at Magnet, are looking to participate in all of the pump-and-dump stuff that’s going on in relation to some of the outlying areas of crypto. What we want to do is build something that is trusted and reputable and that has expertise in the area,” Gordon says.

“We all think regulation is a good thing. What we’re keen on is seeing regulation that doesn’t stifle innovation.”