Managing Director of Ready Media Group, Rob Langton, recently sat down with Partner at Rampersand and former CEO of Pratt Group, Michael Naphtali, in an exclusive one-on-one interview. We’ve looked through the nearly 50-minute conversation to bring you the highlights from this extensive discussion.
He studied in Chicago during one of its most volatile periods
“You saw a divide in society. Blacks lived here, whites lived there.”
After spending his youth in Melbourne and completing a Bachelor of Economics at Monash University, Naphtali spent the years between 1970 and 1972 at the University of Chicago, studying an MBA.
At the time, the city had a tense disposition.
“It was the end of the Nixon era... the whole university closed down at the time of the primaries, because two years earlier there were the riots in Grant Park.”
That said, he expresses an appreciation for what he learnt at the institution. Mainly, the importance of presentation.
“Americans are all about marketing. Some say that’s gloss and spin. But it was really learning to present the positive. State your case. Be clear. That was one of the great lessons."
He had to write his own offer letter for Visy Industries
Naphtali was head-hunted by Richard Pratt to join Visy Industries in 1978, but was initially hesitant to join.
“My late father could see going from an established bank to a smallish private company; that didn’t seem like a great career move in his view.”
But it wasn’t just the size and market share of the organisation that gave Naphtali pause. Part of his uncertainty stemmed from the lack of formality at the company.
“I [wanted] a job offer... Visy had never written an offer letter to any employee before. I finished up writing my own, and taking it over to Richard’s place and getting him to sign it.”
That was just the beginning of Michael’s work in formalising the structure of Visy Industries; a task that proved quite consuming.
“There were no clear budgets... and when I tried to put in timetables and said, “You need to have the information in by whatever date”, the manager [would say], “And what if I don’t?”
Creating a more ordered system of processes also involved getting his hands dirty, and being more stringent with receivables. Some of the company’s clients were lackadaisical with payments, and Naphtali had to sort that out.
“I rang the CEOs of those companies... and I said, “Fair’s fair, but they’re the terms. You’ve got the price you want. You’ve got to pay.” And I had some success.”
Getting his hands dirty was part of his responsibilities in the early days of his involvement in Visy Industries, and it’s part of the reason Naphtali became successful.
Naphtali backed Rampersand once they agreed to a “portfolio approach”
Prior to his son Paul’s company, Rampersand, finding its footing, Naphtali describes the Australian venture capital market as non-existent. That’s what prompted Paul to start developing his own organisation.
When he looked to his father for help, Naphtali made it clear that he would only support the enterprise if it met his meticulous standards of operation and due diligence.
“I said I loved him dearly, and I was happy to back him, but I did know that running into this area... you’ve got to have a portfolio approach.”
This was part of his philosophy that by raising capital and investing other people’s money, you had to be significantly more careful.
“When you invest other people’s money, you’re much more rigorous than when you’re dealing only with your own.”
“My role was to bring some structure and governance.”
Whilst he admits that he didn’t have much of a mind for the technological side of the business, he knew that he could add processes to the company that would enhance it.
Part of that was limiting how much capital investors could contribute.
“I said to everybody, “You’re not allowed to put in more than $250,000.” They were all people who, god forbid they lost it, it wouldn’t have hurt them, but they’ve got their money back a couple of times over.”
His sometimes-conservative approach to investment is part of his success; Naphtali understands when a risk is necessary, and when it can prove detrimental. In the case of Rampersand, who are in their fourth funding stage, its proven extremely profitable.
What to look for when investing
At its core, finding projects to invest in requires seeing potential in the bigger picture, according to Naphtali.
“It [must be] a platform, an idea, a concept that we think will work. That we think is scalable.”
But what's more important than the idea itself, is the team behind it. No one can go it alone, and Naphtali is only interested in projects that espouse that thinking.
“Anyone that thinks they can do it by themselves is uninvestable. Anyone who doesn’t have the capacity to build a team [and] maintain a team... that’s one of the fundamentals.”
Obviously, conducting due diligence still requires assessing the viability of the business in terms of its competition and its place in the market, but the group pushing the idea are more important than the idea itself.
“Building [a business] means bringing in people and building a great team. That’s always the key to success.”
Watch the full interview, conducted by Ready Media Group's Managing Director, Rob Langton, here.
