Seven ways the young rich are doing it differently

This article first appeared September 26, 2011.

One of the most striking aspects of the new ‘Young Rich’ list from BRW magazine is the number of new names.

A total of 20 entrepreneurs aged 40 and under join the list, including the biggest debut in the seven-year history of the list: Steven Kalmin, the 40-year-old chief financial officer of commodities giant Glencore, who joins with a fortune of $458 million.

Kalmin and the other 19 new names (including Sass & Bide founders Sarah-Jane Clarke and Heidi Middleton, who rejoin the list) have helped boost the total wealth of the 100 members of the list by $1 billion, to $7.2 billion, in a year when the sharemarket fell 11%.

Many of the new names come from the tech sector, including Mark Harbottle, the founder of Sitepoint, 99Designs and Flippa, Hezi Lebovich of Catch of the Day, Rob Murray of Firemint and Guy King of Stateless Systems.

These tech entrepreneurs have some very different business ideas to their counterparts on the main rich list. The idea of spending an entire career building a single business is totally foreign to many of these entrepreneurs, who are taking a much more collaborative and innovative approach to building their empires.

Here are seven new ways young entrepreneurs are getting rich:

Collaboration

There are 15 joint listings on the Young Rich list, which is testament to the idea that building a fast-growth business is a task that needs many hands. ispONE founders Zac Swindells and Chris Monching (valued at $28 million) met in a pub, fell to talking and registered a business a few months later. Aconex founders Leigh Jasper and Robert Phillpot ($60 million) were old school friends. Andrew Barlow and Adrian Giles of Hitwise ($69 million) have followed each other into various businesses. Debutants Jim Campbell and Brenton Euller ($83 million) met through a mutual friend and built a civil construction business that has attracted investment from a British company.

New forms of funding

The rise of the tech entrepreneurs on the Young Rich list has also underlined a new approach to funding business growth. In the last 18 months, the Mike Cannon-Brookes and Scott Farquar of Atlassian (the pair are valued at $360 million), Leigh Jasper and Rob Phillpot of Aconex Mark Harbottle of 99Designs ($40 million) and Ashley Fraser of earthmoving firm Orionstone ($117 million) have all brought in private equity or venture capital investors to take their business to the next level. While Australian entrepreneurs have been traditionally loathe to sell any part of their businesses, younger entrepreneurs are taking a more American approach, where holding multiple funding rounds – and selling little slices of the business – is commonplace. These entrepreneurs don’t see raising capital as selling off the farm – they see it as building the valuation.

No longer a business for life

The Rich 200 list is full of entrepreneurs who have built a business over decades and will probably have some role until they die – Frank Lowy, John Gandel, Lindsay Fox and Gerry Harvey are great examples. But the Young Rich appear to be different. When they cannot take a business any further, the sell it – billionaire Nathan Tinkler, PC Tools founder Simon Clausen (valued at $207 million), PIPE Networks founder Bevan Slattery ($103 million) and debutants Guy King and Bevan Clarke from RetailMeNot ($77 million) are all examples of entrepreneurs who have sold up in recent years. This may also be a trend that is being driven by the tech sector, where small businesses can only go so far before they must merge or be bought by a larger player.

Serial entrepreneurs

The fact that so many Young Rich are selling up means we’ve seen the emergence of a number of serial entrepreneurs. Bevan Slattery is a great example – he sold out of PIPE Networks in 2010, moved on and quickly floated his new company, data centre builder Next DC. Nathan Tinkler has been an electrician, miner, investor, sports entrepreneur and construction magnate. Ash Hunter (valued at $45 million) owns media properties, a record label, a property development business and a manufacturing business.

An open approach

Many old-school rich list members are private to the point of being hermits. While there are plenty of entrepreneurs on the Young Rich list who like to fly beneath the radar, many have actively courted publicity and used it to propel their businesses. There is no better example of this than electronics retailer Ruslan Kogan, the second-youngest member of the list. His wealth had jumped from $29 million in 2010 to $62 million. During that same 12 months, Kogan has also become perhaps the second-best known person in Australian retail – behind that other retail showman, Gerry Harvey. The rise in Kogan’s media presence and the value of his business are not unconnected.

Smart use of technology

The Young Rich list contains many of Australia’s smartest web entrepreneurs and serial entrepreneur Mark Harbottle certainly belongs in that category. Harbottle is one of the rare Australian entrepreneurs who can rightfully claim to have started an industry. A few years ago, Harbottle’s IT education hub Sitepoint noticed that users of its forums were running informal competitions to help each other design logos, websites and other items. Out of this was born 99Designs, a site that formalised these design contests and allowed freelance workers from around the world to bid for work. With that new site, the now-booming crowd sourcing sector was born.

Stars and stripes

The American economy might be spluttering, but for many of the entrepreneurs the United States remains the Promised Land. Mark Harbottle, Mike Cannon-Brookes, Scott Farquhar, Guy King, Bevan Clarke, Robert Phillpot and Leigh Jasper all received money from US-based venture capitalists, while Robert Murray’s Firemint sold his business to US gaming giant Electronic Arts and Andrew Lacy sold his app developer Tapulous to Walt Disney Company. America, and particularly Silicon Valley, remains the heart of the global tech sector.