Paul Little’s big venture for entrepreneurs

Toll founder Paul Little is revisiting the heady rush of building from the ground up – this time, as a seed-stage funder.

Skalata Ventures chairman Paul Little, left, with CEO Rohan Workman: ‘We want to expedite success’

Paul Little will never forget the nervous feeling in the heady days of the mid-1980s when he started Toll Holdings, the logistics group he built into a global powerhouse over the next quarter-of-a-century.

“Looking back in hindsight, Toll was probably one of the things that you would not want to do because you had no history that you could point to, you were dealing with the multinationals, big and difficult companies to commercially compete with. So the early days were really tough,” he recalls.

“The big company customers would say ‘Come back and see us in a year or two’. I’ll never forget the day we actually picked up a BHP account, and the leverage we were able to get from that was amazing.”

The experience built Little into a street fighter, who famously took on Chris Corrigan in a bare-knuckle battle for control of the nation’s waterfront in 2006.

But it also gave him a passion for the entrepreneurial spirit, especially given the number of small logistics businesses Little went on to buy during Toll’s expansion phase.

Now that passion lives on in his chairmanship of Skalata Ventures, which started life as a Melbourne University Accelerator program developed as a mechanism to back young and bright entrepreneurial graduates.

Three years ago it morphed into being a stand-alone, for-profit company with a high-powered board led by Little and relationships across the Victorian university sector.

Simply put, Skalata vets, invest in, and mentors business talent coming out of top universities and works collaboratively with them to support early-stage companies.

“I love relating to the companies. You see their enthusiasm, their lack of respect for the need for a contact with the banks and a contact with the accountants and everything else, which is kind of nice. Really they are trying to focus on what it is they do and to be the best at what they can do,” Little says.

His workload at Skalata is about to increase significantly after the firm recently undertook the biggest capital raising in history, raising $44m through Bell Potter utilising the impeccable connections of its Melbourne-based principal Hugh Robertson.

The funding round including $35m for a so-called Skalata Fund II to make investments of up to $1m in 50 companies.

Its backers include billionaire investor Alex Waislitz’s Thorney Group, Afterpay heiress Wendy Ng, Kathmandu founder Jan Cameron, Monadelphous founder John Rubino, PSC Group founder Paul Dwyer, Perth entrepreneur Ian Trahar, plus Robertson and Little themselves.

Skalata plans to make initial investments in up to 20 companies during October and will fulfil all the capital requirements of the founders going forward, as well as making introductions to advisory networks, investors and corporate partners.

The firm is also planning a geographic expansion, with partnership discussions with universities outside Victoria well advanced.

“Every week, there’s another article about how much venture capital has been raised in Australia. But over the last few years, the amount of capital at the seed stage has actually gone backwards. And it’s actually far, far below what you would see in other more advanced entrepreneurial economies like the US, Israel, Singapore, even New Zealand,’’ says Skalata chief executive Rohan Workman.

“So if we don’t invest more at the seed stage, there’s not going to be the deals for progressing through to that venture capital stage. It’s really important that we stick to supporting this part of the market and I think we can do a pretty good job.”

Little — whose wealth was estimated at $1.34bn on this year’s edition of The List – Australia’s Richest 250 — maintained his large shareholding in Toll until it was bought by Japan Post in what turned out to be a disastrous $6.5bn takeover in 2015.

Now — in addition to its support of Skalata — his private Little Group ­has interests in real estate, aviation and transport, including the $100m VIP Jet terminal at Melbourne’s Tullamarine Airport.

In November 2015 Little and his wife Jane Hansen also launched the group’s philanthropic arm known as the Hansen Little Foundation, which has made substantial donations to the University of Melbourne.

Little is also chairman of the Australian Grand Prix Corporation and last year was a member of the National COVID-19 Commission Advisory Board established by the federal government to provide advice during the crisis management phase of the pandemic.

Now he is also chairing a little-known business advisory group quietly convened by Trade Minister Dan Tehan six months ago called the Simplified Trade System Industry Advisory Council, to help simplify and digitise the nation’s trading systems.

Its members include WiseTech Global founder Richard White, NSW Ports CEO Marika Calfas, Bunnings boss Michael Schneider and CSR chief executive Julie Coates.

Its initial brief was reviewing the visibility and transparency of local supply chains, including their lack of data tracking capability and digital creativity.

But more recently it has broadened to building a collection of intelligence to better understand the total supply chain.

“Dan Tehan has given us the brief to use the industry advisory group that I’ve put together to actually go out and talk to business about what is it that they need, what is it that they want and what is it that they can’t have at the moment for whatever reason,” Little says.

Tehan will report directly to Prime Minister Scott Morrison on the project.

“We can’t be globally competitive in terms of trade until we have a capability within Australia that is at world’s best practice. We certainly don’t have that technologically and from an infrastructure point of view.”

Little points to the capacity of the Port of Melbourne as one pressure point. The world’s biggest container ships can take 25,000 twenty-foot equivalent units (TEUs) of cargo. The largest ship that can enter the Port of Melbourne can take around 8000 TEUs.

“We’re still lucky to get anything in excess of about 5000,” he says.

“So we are so far behind what the rest of the world is doing. And in logistics big is beautiful. Scale is what it’s all about. We’re sort of slipping and sliding where as the rest of the globe is pushing ahead quite aggressively, and we don’t have our own shipping line based here, we sold ANL. Now were at the mercy of the six or seven major shipping companies that do what they like.”

Little’s passion for logistics carries over to Skalata, where Rohan Workman and his team are seeing plenty of potential investee companies in the sector.

“Logistics is a fairly archaic industry and there’s a lot of room for improvement,” Workman says.

One investee firm singled out by Little is the digital freight forwarding software provider known as Explorate, which offers an on-demand ocean freight platform letting importers and exporters to book directly with carriers.

“This particular group has taken their unique technology and they’ve aggressively marketed their capabilities to Australian-based companies. They are doing incredibly well, there’s a huge demand for the sort of services they are providing,” he says.

“From my point of view, that is one that I’ve wrapped under my arm a little bit. I’m very cautiously optimistic that they can to do whatever they want to do.”

Not surprisingly e-commerce has and will continue to be a prime focus of many of the start-ups backed by Skalata.

“Obviously, with the pandemic, there’s been a huge increase in the amount of online activity in terms of e-commerce. There are companies in the portfolio that are supporting how those businesses operate. They are growing incredibly quickly,” Workman says.

The group has so far invested in 30 companies, including financial literacy platform Flux and Hearables, which makes custom-fit in-ear devices on demand.

So far in its history Skalata has delivered investors an internal rate of return of 44 per cent after fees, ahead of its longer-term goal of about a 27 per cent.

Now Little wants to help Rohan Workman build better relationships with the broader business community.

“We’re going through a learning curve in terms of a corporate Australia understanding what Skalata is about. Many people would say to me, ‘Well we have heard of you’ but they couldn’t really explain to me what it is we were doing.”

The group’s board includes Intrepid co-founder Darrell Wade, Lochard co-founder Martin Adams and Swinburne vice-chancellor Linda Kristjanson.

RBA director Carol Schwartz retired at the end of last year but maintains a connection with the group, especially around her passion for promoting female talent through its investee companies.

Skalata’s last staff intake had close to 50-50 gender representation.

“We have individual directors who will spend time with each company, helping them through some of the issues from more a sort of wisdom point of view, rather than the day to day mechanics,” Little says.

“And importantly, helping companies develop their contacts up and down Collins St is the way I describe it. So I think the mentoring, help and assistance and the hands-on involvement that the board have with these companies is really a unique feature of Skalata.”

Tonic Systems founder Anthony Glenning, who sits on the board of Pro Medicus and Azure Healthcare, is Skalata’s fund manager. He has recently been joined by former Starfish Ventures chief financial officer Eve Burgess.

With this embryonic investing there is always risk, but Rohan Workman argues the track record since inception has been better than many investors in mature businesses.

He says so far there have only been two failures, a tribute to the strength and depth of the management, board and investment teams.

“We want to expedite success but we also want to expedite failure for these founders,’’ he says.

“If they are wasting their time on a concept, it is more important they come to that conclusion quickly.”