Rampersand founder and VC investor Paul Naphtali on working with a dad
As his VC firm turns 10, Rampersand’s Paul Naphtali reveals how a trip to Israel changed his life and the secret of doing business with dad.
Paul Naphtali jokes that he handed his father a new part-time job when he started the venture capital firm named Rampersand at the end of 2013.
Michael Naphtali had spent decades advising some of the nation’s richest families and entrepreneurs as a director with Hill Samuel, the predecessor of Macquarie Bank, and at investment bank Credit Suisse.
He was the managing director of the Pratt family’s Visy paper and packaging group for a decade and a half, before starting a boutique investment bank named Hindal Corporate in 1996, which he sold to Credit Suisse in 2008.
In 2013 he agreed to back his youngest son’s vision to start a seed-focused technology venture capital fund. But the son says his father always knew who was the boss.
“He and I would both say that, because the dynamic was me giving him a job rather than vice versa, he was supporting what I saw was our vision for Rampersand, and it actually created a very complementary dynamic,” says Paul, who before Rampersand, worked at start-ups in Silicon Valley, Israel and Australia.
“I’m not sure had it been the other way around that it would have been the same dynamic.
“It was never about control, I didn’t want to take over his business and, quite obviously, he was never doing that to me.
“So given some of the tensions of fathers and sons that I have seen running down generational lines, ours was in reverse. The tensions you might expect from families working together wasn’t present for us.”
After 10 years in business, Rampersand has now raised $150m in four funds, deploying $120m across more than 30 companies that have increased in value on average by 800 per cent.
Its funds have an average internal rate of return of 34 per cent and the first, worth just $6m, returned nearly 200 per cent in cash to its investors. Funds two and three will return capital over the next two years.
Rampersand’s best investment has been in workforce management application Skedulo, while its other successful bets have been in tech firms such as Hatch, Cuttable, JigSpace, PredictHQ, Cake Equity.
More challenging was its stake in superannuation and wealth platform Spaceship, also backed by Mike Cannon-Brookes’ Grok Ventures, AirTree Ventures and Hong Kong’s Horizon Ventures,
Last year Spaceship was temporarily banned from accepting new customers after the corporate regulator raised concerns about its strategies being marketed to unsuitable investors. Spaceship had been the subject of regulatory action from as far back as 2018.
A fortnight ago it was acquired by an Israeli trading platform in a deal worth up to $80m.
While Rampersand has grown in scale to become more of an institutional grade fund manager – although it will always been dwarfed in size by the big homegrown three, Blackbird, AirTree and Square Peg – Naphtali says the firm has retained its family values.
“I think that’s one of the things about venture capital, understanding the humanistic part of it,” he says.
“We are investing in founders, their whole selves and their families are part of it. Understanding the entrepreneurial journey is just fundamental to what we do.
“It is the same on the investor side. This is real people’s money. As the numbers get bigger and the investors that we work with also get bigger, the fact that we bring that sort of human side to this journey is important.”
In the early days Michael Naphtali insisted that no single Rampersand investor would be allowed to part with more than $250,000
Although he doesn’t blame his father for the risk-management strategy, with hindsight Paul wishes Rampersand had made bigger bets earlier on. He says that if the firm had raised twice as much money, it would have easily deployed it.
Over the past decade the Australian venture capital scene has grown from just five funds investing about $200m to more than 200 with more than $7bn.
“We have seen a cultural shift where being a start-up founder is now professionally and socially acceptable. It has left the best people in the industry,” Paul says.
But not all have been successful and some have had disastrous investments. Rampersand itself has had its challenges. Naphtali says the next 10 years will be very different.
“There was a huge amount of exuberance for a while but the boom market of Covid-19 has come off. The reward for deployment and growth in those years is not the reward you get today,” he says.
“In fact, you’ve got to run a much tighter business. But I think that’s really good for Australia.
Australians are better in capital-constrained environments than free money environments.”
Comfortable but not wealthy
The Naphtali family didn’t begin with wealth.
When Paul was young, while his father was working for Hill Samuel in Sydney, the family of five lived in a modest two bedroom apartment.
Even when the Naphtalis moved to Melbourne in 1977 they lived in modest homes in
East Malvern, Balwyn and East Hawthorn while Paul attended Bialik and then Scotch College.
“We weren’t poor. But a lot of the success that dad has had I witnessed it as an older child.
I remember restaurants were extremely rare. Holidays were very modest. But I had a great education at private schools,” Paul says.
When Michael Naphtali was headhunted by Richard Pratt to join Visy in 1978, it is folklore that he had to write his own offer letter and get his new boss to sign it, given Visy had never written one for any employee before.
His work at Visy, where his initial focus was on formalising the structure of what was essentially a family business, gave the Naphtalis an insight into a world of wealth they had never known.
Paul describes Richard Pratt as being “like a great uncle” to him.
The Naphtalis – Paul has an elder brother named David and a younger sister named Lisa, both of whom he is “super close” to – were regular Sunday evening invitees to the Pratt family’s Raheen mansion in Kew for Chinese takeaway.
“We were there in a family environment with Richard. We came to admire and respect but not be overwhelmed by the wealth,” Paul says.
He describes Richard Pratt as “the most successful entrepreneur of this lifetime”.
“Richard’s clarity and his warmth was incredible. His ability to care for an individual was something we have taken on throughout our lives. (Richard’s wife) Jeanne is like that too. She’s fascinated with everyone’s story,” he says.
Asked about Pratt’s flaws – the daughter of the late billionaire’s mistress is currently engaged in legal action trying to prove she is legally entitled to a slice of the multibillion-dollar Pratt family fortune – Paul is reluctant to comment, except to say: “It is not normal to be hugely successful. Not-normal people do incredible things. Sometimes they are wonderful and sometimes they have edges.”
More broadly he says his father always had a love of the entrepreneur, that has now manifested in the Rampersand business.
“We had those people turning up at our dinner table, and we were so fascinated by their journeys. That comes from Dad but also my mother. They made that a very welcoming, whole family experience,” he says.
David Naphtali, who spent 20 years in Hong Kong building a corporate trust and agency service business in Asia, last year partnered with his father, and Hawthorn Football Club president Andrew Gowers, to launch a local advisory firm focused on managing succession planning for wealthy families.
At Rampersand, Paul says his father has been one of his most important mentors.
“Every one in their lives needs a work dad. I’m lucky that one of mine is a ‘dad dad’. If we could have chosen a partner to help us get off the ground, Michael would have been it and that’s fantastic,” he says.
“Mentorship is critical. Having people who have your best interests at heart who can show you patience relative to impatience, to help guide and nurture you, is really important,” he says.
Michael Naphtali agrees he learned much from great mentors in his own life, who have also been successful entrepreneurs.
“More recently I’ve tried to pass on the lessons and, when the people I advise and mentor thrive, I take immense pleasure in their success,” he says.
“For it to be my son in this case, and for us to have had such a productive working relationship, is an extra special pleasure.”
But Paul says his biggest supporter, above all, has been wife Lynne Storey, a managing director at global consulting giant Accenture.
Not only has she been endlessly subjected to work talk with her father-in-law over the dinner table, but she and Paul who both work full time have together brought up three children.
“Her support of me moving to the US and then back to Australia and the partnership we have forged is every bit (and more) as important as finding Andrew and Taryn to help take the Rampersand business to the next level,” he says.
Moral clarity amid a rise in anti-Semitism
Michael Naphtali and wife Atida have been active members of the Melbourne Jewish community for many years. Michael has worked with, and led, several Jewish communal organisations.
So being Jewish has always had an important place in the lives of their children.
But Paul says he was changed forever by a trip to Israel he and his brother took in May this year with a 30-strong delegation led by Zionist Federation of Australia president Jeremy Leibler and NSW Liberal senator – and former ambassador to Israel – Dave Sharma.
It visited many of the communities targeted by Hamas during the October 7 terrorist
attacks.
“My wife said I was a different person coming back,” Paul says.
“I came back not only really inspired, but with great moral clarity. What we often see reported is an upside down version of what we see.
“It’s just Orwellian in its incorrectness and to be on the ground and see it, and see that what the people say, do and want, it was really clear.”
Going forward he says Australians must stick with their values, however they are challenged – especially given the rapid rise in anti-Semitism over the past year.
“What has been a bit shocking here is how easy it is to diverge from those Australian values,” he says.
“I think Australia is a wonderful place, but what we must do is be vigilant and protect those values, especially when we see things sliding.”
Another thrill for the Naphtali family during the 10 years Rampersand has been in business has been the three Australian Football League premierships won by their beloved Richmond Football Club.
Paul and his father have been members of the club’s coterie group since 2010 and are passionate supporters, so much so that he openly admits “how Richmond plays on the weekend affects our mood.”
He now thinks about the next 10 years of the venture capital firm he started, as “Rampersand 2.0”.
“Our job is to back and support the best founders in the country to make a lot of money, and really that means our job is to deliver significant returns to our investors,” he says.
“But our broader mission is to make this a sustainable ecosystem that lives on forever, because Australia needs it.”
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