Q&A: Glow Capital Partners' Justin Ryan

Q: On leaving Quadrant, did you know you would launch Glow?

A: I’d been at Quadrant for 10 years and I was 55. I knew there would be another chapter because I’m too young to retire, but I hadn’t worked out exactly what it would be. There was certainly no agreement with Kate [Morris, co-founder of Adore Beauty] at that time. The positioning – and the focus on growth – evolved after I left Quadrant. There was an opportunity to do something much more future-focused and better match-fit for emerging entrepreneurs. Venture capital is thriving in Australia, and buyouts have done well too. But they come from different worlds, and I think there is space in the middle around growth.

Q: And the VCs in Australia concentrate on B2B rather than B2C…

A: Yes, so there’s a bit of a gap. They don’t really know how to do deals with e-commerce as B2C, and perhaps not e-commerce as B2B either. VC investors tend to focus on software, and then if you look at companies like Canva and Atlassian, they are very global. If we invest at A$50-100 million ($36-72 million) and turn a business into A$500 million, that’s a great outcome. VCs want huge outcomes, and those are probably aligned with global conquests and markets.

Q: Prior to raising Quadrant’s growth fund, had you done any deals like this?

A: No. [Online fashion boutique] Princess Polly came up as an investment opportunity and we all scratched our heads and said, ‘We don’t know what that’s all about.’ And then AKA Brands, which is a Summit Partners-backed business, swooped into the market and bought it. Later, they bought Culture Kings [a New Zealand-based fashion brand] as well. Summit is a global growth investor. There used to be only one Silicon Valley, but now there are versions of Silicon Valley all over the world, including in Australia, thanks to digitization and the cloud. The likes of Summit, TA Associates, and General Atlantic hover around, picking off bits and pieces. To my knowledge, until I lead the Adore transaction, none of the domestic mainstream private equity players had made a major bet on an e-commerce business. We went on to do a few others in short order – ModiBodi, Quad Lock, and Grays Online. They’ve all turned out to be good investments, especially as the migration online was accelerated by COVID.

Q: But this wasn’t the primary purpose of the growth fund…

A: The thinking was we would leverage Quadrant’s relationships and do smaller deals because we’d left a gap in the market as the main fund became larger. The accounting firms, especially, were bringing us transactions that were just too small for us. There was never any discussion of pioneering a new style of growth investing. It will be interesting to see whether Quadrant persists in that area. They’ve raised a bigger fund – A$530 million – and as your fund size increases it becomes hard to find those assets. However, I do think the growth space in Australia will get bigger as well.

Q: What made Adore work as an investment?

A: It was valued so highly because of the growth rate – the company had A$70 million in revenue when we invested and this year it will reach A$230 million. That, and the disruptive nature of the business model, gets people’s attention. Adore was also a 20-year overnight success story rooted in a unique set of values. The founders [Morris and James Height] made decisions based on values, rather than just money. That was an eye-opener for me. Many of these emerging businesses are purpose-driven and that’s what enables them to grow and attract and retain the best people. We have the same mindset at Glow. For example, we will have a 50-50 gender split in the executive team. We believe this will position us well in terms of female founders – though we won’t only invest in female entrepreneurs – and in terms of recruiting female talent.

Q: Is it difficult to find suitably qualified female investment professionals?

A: There aren’t many, so it’s hard, and that’s why we need a great proposition. The penetration of females in private equity at the senior level was 4% in 2014 and 3% in 2019. Venture capital is better, with the penetration rate rising from 7% to 14%. We think it’s a great opportunity to fix the problem from the start. If you are a successful, longstanding private equity firm, you don’t have to change much because you are delivering great performance.

Q: In other markets in Asia, notably China, domestic brands have gained traction by appealing to local tastes and leveraging technology in marketing and distribution. Does this resonate in Australia?

A: Adore is domestic and it has become a media business as well as an online store, and this has become a big part of its moat. The company launched a podcast that immediately went to number one and has achieved five million downloads in a country of 25 million people. But 80% of Quad Lock’s business is offshore. There are some Australian brands that can become global brands. For the first time in my memory, technology is enabling niche Australian businesses to go global.

Q: What are the typical needs of companies in these growth stages?

A: There is often a desire to de-risk, which is what we used to help them do at Quadrant. The founder takes some money off the table, and it changes the risk profile, allowing us to put in capital and grow aggressively. One of the key things we did at Adore was recruit a CEO and management team to replace the founders. A lot of founders cannot attract talent, but once you get the right partner and put in place the right values and culture, it becomes easier. Other common initiatives include putting in new systems, launching new markets and products. Our experience is around that scale-up journey. I come from the large end of the market – I’ve done over 22 deals, with an average investment check of A$75 million – but this means I’ve seen what big looks like and that can be helpful. I know what organizational design looks like when you’re a A$500 million business.

Q: And competition for deals will come from the likes of Summit?

A: Yes. They are trawling the world for opportunities, and as a local player, we have advantages in terms of our networks and not being fly in, fly out. At the start of COVID, Kate launched an e-commerce leaders’ network, bringing together several hundred industry leaders on a Slack channel to share insights. Quad Lock reached out to her through the group and that’s how Quadrant ended up investing. Kate is also an investor in the business. There’s domestic competition as well – Quadrant, Five V Capital, Mercury Capital, Potentia Capital – but everyone has a different focus, and the market is growing generally. In addition, as these groups advance in scale, there will be opportunities for smaller players.

Q: How do you expect the investment focus to develop?

A: Kate and I have some real expertise in e-commerce, so it’s a natural place to start. We will evolve into a broader stream of investments at the intersection of technology and growth. The venture capital ecosystem is a great bedrock for this emerging growth equity space.

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• Topics
• Australasia
• GPs
• Technology
• Fundraising
• Growth
• Australia
• Glow Capital Partners
• Quadrant Private Equity
• e-commerce