Tinkler out but most made a killing: Secrets of the Young Rich

It often surprises casual observers that the annual BRW Young Rich edition counts the 100 youngest self-made entrepreneurs under 40.

After all, in most industries, awards for ‘rising stars’ and the like cut out at 25 or 30.

The reason BRW has to give people 40 years to shine is simple: hardly any businesspeople make a killing by 30. A list cutting off there would be dominated by sports stars and celebrities. And for a business publication, that wouldn’t interest its readers as much.

Almost all of the Young Rich 2013, unveiled in the magazine’s flagship edition out this morning, are aged from 30 to 40. The youngest person on the list, MotoGP rider Casey Stoner, is aged 27.

SmartCompany spent a fascinating morning dissecting the latest list. Here’s what Australia’s youngest millionaires have in common.

Life’s work

Most of the Young Rich are entrepreneurs, who started companies and over years helped grow them.

Apart from the sports stars and celebrities, there are few employees on the Young Rich.

Thanks to Nathan Tinkler dropping off the list this year, there are now two more. Todd Hannigan and Tom Todd made their $84 million joint fortune by leading Nathan Tinkler’s Aston Resources before it listed. In 2011 they lost their jobs, but were given six months’ pay and a whole lot of stock in the process. They sold their stock before things got rocky for the sector.

This must be especially galling for Tinkler. BRW doesn’t think his assets exceed his debts. He didn’t make the $18 million cut-off, leaving him entirely off this year’s list. Around this time in 2011, Tinkler was valued at $1.13 billion.

Most of the Young Rich have had a good year. Exactly half increased their wealth this year, while only 16 lost wealth. The rest were more or less steady.

Tech tricks

The full Rich 200 list, for which there is no age limit, is dominated by property developers. But the Young Rich has few of those.

Over one in three (34) of the Young Rich made their money in technology, of which 22 were web entrepreneurs. In the top 10, eight started technology companies.

These include Atlassian founders Mike Cannon-Brookes and Scott Farquhar, steady at number one with a joint fortune of $550 million. They were pegged at $480 million a year ago.

The fastest-rising names in the top 10 are Ruslan Kogan, of Kogan.com, who more than doubled his fortune to $315 million, and Freelancer.com chief Matt Barrie, who’s risen into the top 10 with $185 million (he was pegged at $50 million last year). Both companies are looking at listing on the ASX in the near future, which could see their founders get a lot richer if all goes well.

Reinvesting the profits

If so, they’d be some of the few Young Rich-listers to turn their business success into serious disposable income. For most of the Young Rich, their wealth is ‘paper money’. They own large stakes in highly successful businesses. If those businesses list or are sold, they can cash in some of that ownership.

Until then though, many of the Young Rich are fanatical enough to keep most of their wealth tied up in the one thing.

For example, at Kogan.com, the online electronics retailer, shareholders Kogan and David Shafer reinvest the profits every year. Shafer told BRW their remuneration was on an “as needs” basis.

“Building something is much more exciting,” he said.

Perhaps this need to reinvest profits is driven by Australia’s low venture capital spend. According to a recent PwC report, there is less venture capital available in Australia, relative to our population, than in Israel, the US, Norway, Switzerland, Demark,  Britain, or France.

When capital to expand isn’t readily available, revenue can be the best source of funds.

Slim pickings for women

As always with Australian rich lists, there are few women wealthy enough to make the cut-off.

Only seven women make the Young Rich, of which the wealthiest is Carolyn Creswell ($55 million), of Carman’s Fine Foods. The next wealthiest is Erica Baxter ($40 million), who is in the process of finalising her divorce from rich list-fixture James Packer, which could see her secure another $100 million according to recent reports.

Other women on the list are Lilly Haikin ($40 million held jointly), who bought chocolate café chain Max Brenner to Australia, PageUp People founder Karen Cariss ($25 million held jointly), golfer Karrie Webb ($22 million), MyBudget founder Tammy May ($20 million), and model Miranda Kerr ($18 million).

Image: Ruslan Kogan.