Investing in People and Products: Opportunities in pre-IPO investment in Australia. Techboard speaks with Alium Capital’s Rajeev Gupta

Rajeev Gupta is a technology-driven investor who has worked in the industry for more than 20 years. In 2016, he co-founded Alium Capital - a cross-over investment fund focused on technology and innovation, with his 2 partners Jason Rich and Michael Considine.  Alium has secured almost $100 million in capital commitments since its founding - seeking to capitalise on the growth of the Australian tech-industry, while helping to propel these same companies into their next stage of development. Alium's portfolio includes names such as Healthengine, Unlockd and Titomic (who have either topped or placed in the top 5 in a Techboard Ranking) as well as Nitro, StockSpot, Hit100, Credible and Bitcoin.com.au. MichelLake’s Robin Block sat down with Rajeev to discuss investment strategies and understand what sets Alium apart.

“My investment journey started when I was working in investment banking, where technology became an entrenched part of my life. I learnt to assess the quality of businesses and human potential. After nearly two decades in financial services, I got the itch. I had analysed, invested and consulted — I wanted to actually build something.”

Robin: What were the origins of Alium Capital — what are your differentiating characteristics?

Rajeev: When looking to enter the investment space in Australia we saw a significant gap in the market for technology companies making revenue and looking for investment, but not yet on the radar of public investors. Consider that circa 60% of the top US companies are technology companies. In Australia, within the top 500 companies, less than 5% are technology companies. We feel strongly that on a 10 year view, technology in Australia will become a meaningful part of the economy. With this in mind, we aren’t VCs, we won't invest in businesses that don’t already have traction, but we do predominantly operate in the space just before when companies list on the public markets. Our skillset is that we understand what makes a business work, and what is potentially attractive to public company investors. Collectively, Jason, Michael and myself have all been looking at businesses our entire professional lives — analysing their processes, customers, traction, catalysts  and a strong sense of valuation. Our firm certainly has a technology bias. But, its real differentiator is occupying a middle ground between angel investors, VCs and the public market.  

Robin: Is there a defining characteristic of your investment strategy — how do you pick companies to bring into your portfolio?

Rajeev: Having been an analyst and investor all of my life, I am strongly of the opinion that you can over analyse. Most businesses are either products or a feature. Features are easily disintermediated. We look for businesses that have a product and something proprietary. It is also risky to invest in a pivot — with only a few exceptions, we never invest in a pivot.

The third element we look at are the people. As a fund, we don’t get actively involved in a business — we don't try and control founders. If we have invested in your business it is because we have confidence in your ability to do your job. Beyond established revenue, if there was one thread between the businesses in which we have invested, it is people that we believe in. With very few exceptions, for example, would I invest in a technical business run by someone without a technical background. I have never been swayed by someone telling me to look at a business because other investors are interested. You have to maintain your independence and focus on the people running the business, building the product, and the team selling the product or service.   

 

Robin: What is the future of Alium and what do you think will help the Australian tech-space develop?

Rajeev: The Australian government and ecosystem are very supportive and powerful — they are part of the reason we are based in Australia. There are also fantastic incubator programmes attached to universities that feed directly into R&D grants — that is an enormous help for the sustainability of the ecosystem. The flip side is that can create a lot of noise and a lot of pre-revenue firms. The onus is on us to focus on what we think will become big.

The ecosystem needs to go through a degree of consolidation. People talk about a shortage of talent, particularly in the tech and cyber industries. However, there is a lot of overlap in what businesses do. We need more businesses to combine early on — taking out redundant processes and investments to allow the investment capital and human capital that exists to do the needed jobs. The fragmentation of the market is great and spurs innovation — but it is inefficient. I think this is something the whole market will see more of and is something we encourage in some of the businesses in which we invest.  

I think that people can get hung up asking what problem a business solves. This can be a great strategy — but it misses the businesses that think outside the box. I think it is possible that we may launch another fund in the future, under the Alium brand, that is more dedicated to a certain segment or different risk profile. You have to dream a little when building a business. If you operate in a sandbox, you are always defined and will always be thinking from a negative standpoint. I would like to say we have made some investments in people looking to go beyond problem-solving — but there are not many. It is what I always have my eye out for. When we founded the business, I said to my two partners that I wanted to find a business that gives us a 10,000% return. If we can do that in 5 years, we will have done what we set out to do — I intend to get there.   

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Robin Block is Head of Engagement at the MitchelLake Group in Sydney. Robin explores the human stories behind digital transformation and how they are changing the future of business.

Rajeev Gupta is an investor and entrepreneur. He is Partner and Founder of Alium Capital Management, a cross-over investment fund. He also founded Geckolife in Singapore, a collaboration platform for groups and individuals. Before founding Geckolife he had a career in technology investment banking.