Profile: OneVentures' Michelle Deaker

For many people, thinking back on the cast of characters in their college days inevitably leads to memories of the high-energy extracurricular all-rounder – the student who was always establishing and running various campus organizations. Before founding Australia’s OneVentures, Michelle Deaker was that person.

This entrepreneurial spirit helps explain how Deaker transitioned from a background in hard sciences to a career in the finance industry. While studying physics and chemistry at the University of Sydney and earning a PhD in applied science at the University of Canberra in the 1990s, a busy schedule outside of the lab hinted she would take a different direction than many of her peers.

Standout experiences during these years included part-time work as a coordinator for the Australian government’s CSIRO research agency and the creation of a specialist science tutoring business. Deaker also helped her mother, an entrepreneur in her own right, realize a grant-funded integration of new technology into the local performing arts scene.

“I never really saw myself sitting in a research lab my whole life,” Deaker says. “My science background was part of my learning process for how to think, reason, and problem solve – all those skills that you can then take forth and apply in a commercial venture. Of course, then you have to learn the ropes of business.”

Deaker made learning these ropes a full-time job in 1996 after she finished her studies and founded Networks Beyond 2000, an IT consulting firm that worked across hardware and software. This proved to be a stepping stone for her breakthrough project in the form of electronic vouchers and financial services provider E Com Industries.

A simple plan

E Com, which operated as Giftvouchers.com, is often recognized as one of the first financial technology companies globally, the first to file major patent for comprehensive online payment services, and one of the few Australian survivors of the dot-com crash of the early 2000s. The idea, which quickly penetrated markets in New Zealand, South Africa, and the UK, seems deceptively simple in hindsight.

“Literally, my mother-in-law got a gift voucher for Mother’s Day and my husband just says, ‘online gift vouchers would be a good thing to do,’” Deaker remembers. “I honestly don’t think he knew what he actually said, but I went straight home and bought every single domain name similar to giftvouchers.com. It was the perfect product because it was all electronic and I didn’t’ have to worry about warehousing or distribution.”

Translating this epiphany into a meaningful business helped hone some of the skills that would later prove directly applicable to OneVentures. For example, E Com was tasked with modernizing mainstream retailers that were contending with as much as A$500,000 ($370,000) worth of stolen traditional vouchers. These coupons would find their way back into the store, resulting in serious financial liabilities that would often be suppressed by founders who wanted to maintain a positive front for investors.

“When we recognized that the bigger problem was in the real world rather than the virtual world, that’s when we really became one of the first fintech businesses, and we started fully managing brick-and-mortar store networks on the internet,” Deaker says, counting off a number of E Com innovations such as insurance claim cards and real currency rewards cards. “At the end of the day, you have to solve a big problem to have a valuable company.”

E Com was acquired by UK-based strategic Retail Decisions in 2005 and Deaker stayed on for one year as part of the handover process. During this period, she learned about global expansions and how different markets often require a different approach to technology. It was also an opportunity to learn about the workings of a public company; Retail Decisions was listed on the London Stock Exchange at the time.

Toward the end of 2006, Deaker began thinking more seriously about investing and joined several angel rounds that played to her strengths in data and data security. These included an advertising technology business and a mobile payments company in the UK. “The problem I found with those investments was that I couldn’t do anything at scale,” she says. “I always ended up being a small angel when companies were doing much larger rounds, and I wanted to be able to participate in a more professional way.”

She subsequently began consulting with a number of high net worth investors and family offices that were interested in high-growth companies. A key advantage during this process was an arrangement with a local venture capital firm whereby Deaker would volunteer one day a week of desk time in exchange for exposure to the nuts and bolts of the industry and a better understanding of institutional investors’ expectations in a deal.

“Coming from the other side of the venture capital fence, I didn’t really know what investors were looking for at first, especially in terms of return profiles and portfolio construction,” Deaker says. “In fact, when I exited E Com at about 5x and a 70% IRR, I knew it was a good result for me, but I wasn’t sure if it was a good result for investors until people in the investment world told me it was.”

The venture capital environment circa 2008 bore little resemblance to government-connected start-up scene peppered with university incubators and accelerators that Australia enjoys today. This left a noticeable gap the entrepreneurial department, with most of the VCs at the time claiming backgrounds with big corporates, private equity, or strategic consulting, rather than a bootstrapped, sink-or-swim business experience.

“I thought I was just going to work with another firm because in the US most of the partners in VCs have built and grown an entrepreneurial venture,” Deaker says. “But I did not find that skillset in Australia. At that time, none of the venture investors had really been through that life cycle with a high-growth company, so I decided to build my own firm to fill that void – which was really like another start-up.”

Hard times

OneVentures was subsequently formed with likeminded partners Paul Kelly, a biomedical industry veteran, and Anne-Marie Birkill, a start-up developer and product commercialization specialist. The team went to work raising its first fund in 2010 with the global financial crisis still weighing heavily on the minds of prospective LPs.

At first, a major bank agreed to invest A$20 million, but then decided to sell off its private equity arm and the offer disappeared overnight. Sydney-based banking and investment firm Andover Group subsequently stepped in as a cornerstone backer and the debut fund was even temporarily renamed Andover but this too fell through and it was back to square one.

“Just getting into conversations with investors was exceedingly difficult because the world was really going to cash and getting out of illiquids,” Deaker says. “I sometimes joke that the only reason I could raise a fund in a global financial crisis was because I’d taken a company through a tech crash – they’re actually very similar situations.”

Fund I closed in 2011 with A$40 million in commitments, thanks largely to Deaker being able to tap some previous relationships with investors in E Com. This was followed in 2015 with a A$100 million raise for Fund II, and selection by the government to co-manage the A$500 million Biomedical Translation Fund (BTF) alongside two healthcare-focused VCs.

The nomination was a good example of entrepreneur-style opportunism. Despite Kelly’s expertise – and the significant life sciences backgrounds of both Deaker and Birkill – OneVentures never set out to be a biotech-focused firm. The government opened the mandate up to about 20 candidate GPs, and each one had to make their case. OneVentures was able to point to recent success with a number of relevant portfolio companies, including a peanut allergy treatment developer and a vaccination specialist.

Earlier this year, the firm backed artificial heart technology supplier Bivacor from its third fund which closed at A$170 million last year and has an exclusive focus on domestic healthcare. The vehicle received A$85 million from the government as part of the BTF initiative but, notably, also maintains ties with Deaker’s earliest partners from the decidedly different days of Giftvouchers.com.

“Some of those investors have invested across all of our funds, including our co-investment funds, and many of them are still investors with us today,” Deaker adds. “We’ve given them systems to make it easy to deal with OneVentures online and other regular reporting processes. They like that level of transparency, and I think that’s part of the reason they’ve continued to come back.”

In this context, the firm is currently raising a new fund that is expected to close later this year with a broader, technology-focused mandate. Some healthcare investments could still be part of the equation, but they will more likely be at the digital end of the industry. OneVentures is now fielding about 750 investment pitches a year with about two-thirds in tech and one-third in life sciences.

Wary that this pipeline has resulted in some frothiness in the early stages, Deaker expects the new fund to investment more extensively in Australia’s Series B to Series C gap. The strategy is an example of the kind of pragmatic adaptability that is considered fundamental to VC management – even if it can sometimes only be summoned by the problem-solving instincts of a founder.

“It’s comes back to being opportunistic and entrepreneurial,” Deaker says. “One door closes, and you open a new one.”

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• Topics
• Australasia
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• Australia
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