Markus Kahlbetzer On Venture Capital & Investing In The Sustainable Development Goals

Markus has more than 18 years experience investing in a variety of asset classes including agriculture, venture capital, real estate and equity markets.

He is the Founder and CEO of the BridgeLane Group, a privately-owned asset management firm founded in 2009. A significant global player in agriculture with a multi-decade record in large scale farming and 12 year track record in finding some of Australia’s best venture capital investments. The Group also has a proud history in residential property development, commercial real estate and new business incubation.

Markus has recently co-founded and is a Partner at Side Stage Ventures, a venture firm backing Australia’s best founders at the pre-seed/seed stage.

Markus has a number of philanthropic interests including the BridgeLane Foundation.

Markus discusses why impact investing should be the norm and the key traits he has observed in successful founders.

Highlights from the interview (listen to the podcast for full details)

[Tom Allen] - To start off, could you share a bit about your background and what led to your passion in investing?

[Markus Kahlbetzer] - I've got a significant background in farming, and that's a family background where I spent a lot of time growing up on the farm. I was born in the US but raised in Argentina, which is where much of that took place. I moved to Australia when I was about 20 and I've been here ever since, and I'm now 41, so that's a large part of my life. I’m very happy to call Australia home. I've always had an entrepreneurial spirit, it's probably a family trait. My father was an entrepreneur; he migrated from Germany when he was very young and went through various businesses to finally land on what he loved ultimately doing, which was farming. Along with my brother, I'd say we all share a similar family trait.

What also resulted in me becoming involved in venture investing and being a founder was that it was something I could personalise to myself and my own characteristics. That really started to make an impact on my life in about 2010, when I made my first successful venture investment in a Mobile Virtual Network Operator (MVNO) called Amaysim, and that turned into meeting a couple of great guys who founded Airtasker (a business we invested money into in 2012). Airtasker is a well-regarded name in Australia, and those are some business names that the market might know.

I founded a venture firm called Tenshi Ventures with Tim and John from Airtasker shortly after. We had some amazing investments in that portfolio too, including one called Go1, which is a learning management system founded by a Queenslander named Andrew Barnes. 2016 came around, I still had the entrepreneurial spirit, so on the side I founded a business called BrickX, which was effectively trying to democratise Australia’s (and to a large degree the world's) largest asset class, which is residential real estate. It was a great idea, I raised venture capital from amazing investors, but ultimately, as the years progressed, we failed to be able to execute on that properly.

I empathise with founders in terms of what they go through in the creation, ideation and hope for success, but also the failures.

After that, I founded with a bunch of other guys a company called Sprout Stack, which really set out to grow leafy greens and micro herbs commercially. I'm happy to say that we probably are the first commercial producer of indoor agriculture under lights in Australia. This is not to be confused with agriculture in greenhouses; it's specific to a contained environment where we're using lights to grow indoors and using renewable energy and so forth to power it. That's pretty much the history of where I am today, I'm very much focused on venture funding. One thing we'll touch on later is Side Stage Ventures, which is my new project.

As the Founder of BridgeLane Group, tell us a bit more about some of the other projects and work you’re involved in?

At BridgeLane, we're effectively a single family office, which like many other family offices have the objective of managing wealth across different asset classes. The day to day is really based on scouting investments, primarily in private capital markets, because that's where we feel like we have a competitive advantage. We love doing it, we love speaking to people as well as getting out there and meeting new people. We see and hear visions and missions from the dreamers. Very much a large focus of that is in venture capital and growth stage companies, plus traditional asset classes as well (we still look at equities and so forth). But, we’re also on the philanthropic side at BridgeLane Foundation, which is a corporate PAF that we've set up. We allocate a proportion of our profits every year to build out the corpus and then manage that portfolio. Also, to generate returns, we distribute to charitable organisations and back two projects in the mid to long-term, so that we can build out a relationship, help them on their journey of creating their organisation, as well and hear what they really want to achieve, their objectives and missions. We've decided we'd like to focus on things that are close to our heart, and one of them is the environment and conservation, just because we have spent so much time on the land in the past.

The other area is youth, because myself and a lot of the people involved here at BridgeLane are parents, and that's close to our heart. We back one organisation in each of those categories. We will talk a little bit more about HATCH Taronga, and then there's other organisations like Sydney Story Factory who I work with.

How might capital be most effectively used to generate strong returns and a positive impact?

Side Stage Ventures is an early-stage venture firm backing Australia's greatest and most ambitious minds.

We look at founders early, and we think we've got the ability to identify a great founder really early on into their journey at the seed level. Then we try and partner with them to build a generational company that will help impact our daily lives in some form.

Really, the big goal is to change the world in some way. I've teamed up with an amazing partner in Ben Grabiner as well as a great group of venture partners. We’re really backed by that strong team across the board, including our principals and associates who are also with us backing our mission. We don't have a specific ESG or impact focus, but that doesn't mean we don't view that as critical to our objective. We wouldn’t invest in start-ups that would be detrimental to the environment or even the Sustainable Development Goals (SDGs), so we ask that question for ourselves every time we get to a serious point with any of these portfolio companies. We dig deep into that.

We don't think we need to call ourselves impact investors; we just think it should be the norm. It shouldn't be just a subset of investing.

What is your opinion on the state of the impact investing ecosystem in Australia and what needs to change to help it develop further?

We need to get into the mindset that all investments should have a positive impact on SDGs, and then it's just a numbers game.

More of us that think in that way will mean more of the younger generation will have been brought up with that top of mind.

Then it's just the more impact we will make. I just believe that as decades pass, the younger generation, (I've got teenagers now), will get into their professional career and that will be the common thing to do. I don't think that there should be any favours necessarily for impact organisations, maybe just to help get it off the ground. But they should be able to stand up feasibly, and I think many projects do, especially good ones. It fundamentally comes down to more people doing investing that ticks the boxes of impact (the SDGs), and then the objective will just compound the effect. The world I think will change course and we'll be in a better place in 50 years’ time, when we can actually measure it significantly.

As a key partner of the HATCH Taronga Accelerator, what opportunities are you seeing for climate-focused entrepreneurs?

I think that the opportunities are clearly unlimited. There is just so much to do, it's about asking where do people start so that they're able to make an impact wherever they focus their attention. I just look around Sydney Harbour, and it makes me realise you can reverse things. It's amazing the amount of sea life that's actually in the water, how clear it is and how well managed the environment is around a city that's as big as Sydney. It’s an example to the world of how we can coexist and make things right.

The opportunity lies in thinking big. It's requires asking, “can my project really make a difference and move the trend line that we're on?” As a VC, we always focus on the dreamers, the ones that think big enough.

They focus on the things that sometimes look unachievable, and with those big visions and objectives, they can really turn the tide.

What advice would you give to a purpose or impact-led entrepreneur who is doing their best to raise funds?

I think it's no different than any other entrepreneur setting out on their journey. The ones that are focused on impact must go through a lot of the same hurdles. The one thing I like to really focus an entrepreneur's attention on is getting out, networking and meeting with people that are in the space they're tackling, or in a space where they can help you deliver on an objective.

It's about testing the idea to make sure that your customers see that something needs to be solved; that it really is a problem. Then, you can focus your energy into that.

We all have finite time, that's our greatest denominator. If we can't utilise our time in the best way to tackle the problems we want to, then we're not going to achieve our goals. It's sometimes sad to see founders focus on projects tackling something they perceived as a problem, but then maybe the customers didn't. Sometimes, they just simply didn't ask the question early enough. I would say in the impact space it's very similar. Anybody tackling environment conservation initiatives, HATCH Taronga is a fantastic place to start. You have so much expertise and plenty of professionals that can help lead people in the right direction.

What inspiring projects or initiatives have you come across recently that are creating a positive social change?

One that we've recently backed is the Taronga Wildlife Hospitals. I didn't realise how poorly we serviced the wildlife veterinary space; there weren't any that existed prior to these ones being built in Australia that would've had any significant impact. I think the fires of 2019 really brought that point home. I think fire management is going to be huge in the future, especially considering how we deal with that. But obviously, if they do take place, how do we care for the animals that have gone through trauma, and how do we teach vets to deal with these situations? We have amazing professionals out there, but they just don't know how to treat anything beyond livestock and pets. I think it's going to be a great initiative and story to tell for Australia as well, I'm excited to see how that evolves.

I would love to see the HATCH cohorts that have come through over the last few years and into the future make some lasting impact as well. There are so many projects out there, it's just a matter of time before we really start to see some great impact.

To finish off, what books or resources would you recommend to our listeners?

I wish I had more time to read books; it's something my family always criticised me for.

I spend a lot of time digesting daily information, whether that’s what happened overnight somewhere or what's happening in certain sectors. Venture capital involves constantly reading up on new ideas, new companies and so forth.

I spend a lot of my time doing that, but I do love podcasts, because when you are on your daily commute to wherever you're going, it's a good way to get myself into the workday. Even on the way home, I am able to start winding down and just listen. The one I'm listening to at the moment is Invest Like the Best by Patrick O'Shaughnessy. He's got some great content there, so I highly recommend that as one to start off with.