Digital Investment Group: Blue Sky strategies
An Australian Public Company with over 300 shareholders, Digital Investment Group (DIG) was formed in 2016 with a clear focus to grow a portfolio of quality platforms that are either purely disruptive or complimentary to existing platforms.
Steve Prideaux is the founder and CEO of DIG, an investor, inventor, and incubator of technology. DIG focuses on three areas of speciality: digital development, financial services, and incubation and innovation, and strives to provide cutting edge and disruptive solutions to an ever-changing marketplace. Mr Prideaux has over 30 years of management experience, starting his career in local government finance, before going on to establish his own chain of retail home entertainment stores. In the space of a few years he grew the chain to be one of the industry’s most prestigious and profitable brands, winning numerous national retail awards for excellence. Mr Prideaux spoke to The Australian Business Executive recently about his own entrepreneurial and business background, a current takeover bid from an ASX-listed company, and the Blue Sky strategies that differentiate the group from its competitors.
“I really started my life in accounting and finance in local government,” Mr Prideaux says. “I pretty quickly figured out that the public service, whilst it was comfortable, wasn’t really the place for me. It took me on a journey into private enterprise, and very quickly I got involved in the early days of the video industry.”
Mr Prideaux admits that the business at the time was an incredibly lucrative and exciting one, with some extremely profitable video stores running in the early days of the industry. This gave him the opportunity to become very entrepreneurial, to develop strategies for improving profitability and increasing investment to create new stores.
“[That] took me on a journey to ultimately having my own franchise chain of about 30 stores, which I ultimately sold to Blockbuster, and had a few wonderful years of my life on their international executive team, travelling the world and running 400 stores in Australia, plus several stores through Asia.”
This gave Mr Prideaux a solid grounding for early stage entrepreneurship, which then developed into working within the confines and structure of a NYSE listed company, where he learned to contend with the rigour of corporate governance and writing decision logics.
“I guess that really catapulted me into corporate life, but with a strong entrepreneurial bent. Through that time I’ve nurtured lots of start-ups and invested in plenty, so I’m really a passionate brand-builder. I love building and creating companies and hopefully sustainable legacies for the people who are involved in those.”
There are couple of golden rules Mr Prideaux has learned over the years, which have helped him reach the level he is at and to maintain his own success. One of these is the idea that ultimately people want to do business with people they like.
“Be a likeable person. I learned that at an early stage when I was setting up my franchise chain. We were industry-focused, passionate about branding and marketing, and yet we found that we were getting spoiled by the film studios. We were being nurtured by the marketing directors, because they were passionate about the business and our vision.”
The second key thing he has learned is the importance of taking care of human resources. Mr Prideaux has maintained close relationships with many of the people he has worked with over the years, mostly by taking an interest in their careers, which has enabled him to help people find what they are truly interested in doing.
“That often means leaving your organisation and pursuing your career somewhere else,” he says, “but that’s okay. Not everybody stays forever. What’s really important is that they contribute to your business when they’re there, and they think about the business warmly when they leave.”
Digital Investment Group
“Essentially, we’re an IT company that has grown into becoming a broad owner of a number of IT assets, and during that time we’ve streamlined that operation into three clear visions [digital development, financial services, incubation and innovation].”
Formed in 2016 as a public company, DIG has a broad and diverse range of subsidiary companies, and a clear focus on growing a portfolio of quality platforms that in most cases are either purely disruptive or complimentary to existing platforms.
“Our bread and butter is technical capability. We build things. We build apps, we build software, we build APIs, we build platforms and those sorts of things. Part of that journey led us into the financial automotive services, where we have another division.”
In the financial space, the firm offers bespoke software platforms, white-labelled salary packaging, vehicle wholesale trade exchanges, and a very interesting disruptive platform in the online virtual mortgage brokering space.
“When you’re in the IT space, you tend to attract a lot of interesting conversations from start-ups and people with great ideas. Through that we’ve grown this division, which is our incubator accelerator. We get involved in early stage start-ups and help guide them, and they either become clients or they become partners in our business as we go through that process.”
DIG is in the process of taking the company public, after starting its life as primarily an IT company with a hotchpotch of investments. The idea was then to tidy the structure up to give maximum value to shareholders.
“We ended up being taken over by a public company about four years ago, which was the birth of Digital Investment Group, and our intention through that was to build up the platform, the business and the profitability, to take it public and list it under its own right.”
During that journey, the firm developed a strategic relationship with a corporate advisory team, which introduced them to some other businesses, one of which is a currently listed business that has recently submitted a takeover bid.
“We have an existing ASX-listed company making a bid to acquire all of our business, but it’s really like a reverse takeover. We’re the larger party, so we will end up being in control of the entity, but it’s delivering a really tangible outcome for our shareholders to materialise investment from an off-market situation into an on-market, tradeable position.”
The company is involved with strong investors and backers that will help DIG sustain growth in the future, but also further investment into some of the projects, including an exciting early-stage incubation. Mr Prideaux has been asked to continue in his role as group CEO post-takeover.
“That all will come to fruition over the coming months. Obviously, as it’s an interesting time in the market at the moment, we’ll choose our time very carefully as to when we elect to commence trading on the ASX. But it’s a very exciting time for us.”
Blue Sky strategy
The company has a wide-range of tangible products, but most importantly it has early stage access to Blue Sky strategies, in particular three or four early-stage concepts that the company believes are going to accelerate massively in the coming year.
“We’re not being bullish and putting out forecasts and those sorts of things about it, but quietly we’re really passionately excited about genuine disruption and genuine game-changers in established marketplaces.”
Once the company’s ASX listing is finalised, the expectation is that the outlook will include a period of pure growth. This will begin with the commercial launch of a couple of DIG’s biggest projects, such as the virtual broker platform and the trading exchange in the automotive space.
“They’re huge, they’re both pure disruption,” Mr Prideaux says. “This is a time when business is light on resources and light on staff, scaling down, and we can come to them with digital solutions to revolutionise the way that they work, operating from a very low cost base. We think we’ve got a lot of advantages for our investors in the next six months.”
Once the group is in a listed environment, there will be a huge opportunity to raise capital and to create a fund where DIG can really invest in incubation for projects it is fiercely passionate about, which has not been the easiest to achieve widely under the previous model.
“We see so many start-ups and so many good concepts, that come to us and you just can’t find funding for them, and you know it’s a sound idea. Commercially, there is no reason why it won’t be a success, they just cannot find funding. We’re pretty risk averse in investment circles in Australia, hence why a lot of these guys end up overseas.”
At the time of talking with Mr Prideaux, the world is in the midst of the Covid-19 pandemic. With a large proportion of the global workforce currently working from home, the pandemic has been a game-changer for businesses, which have very quickly found out whether or not they can operate remotely.
“I think that’s going to dramatically change the landscape. We’re very interested in the emergence of AI and machine learning, and we’ve got some very talented young people who are leading that process for us. That’s part of the engine behind a couple of these new platforms that we’re building, which essentially can change the way businesses operate.”
For example, many car dealerships will be paying a finance officer $180k annually to write loans, when all they really need is access to a laptop so they can connect to an online digital broker. They will be taken through an application process for finance, with integrations back to its panel of lenders, and in many cases get instant approval.
This system can be used by dealerships that never had the luxury of affording finance managers – such as caravan dealers, boat dealers, and those in the residential space like kitchen builders – helping them revolutionise their offering.
“Those businesses that are capable of adapting to change are going to be huge beneficiaries of the platforms that we’re delivering. I think the current state of the market, with businesses going into hibernation and reduction of resources, puts us in an incredibly strong position to capitalise on the momentum when that curve starts to turn.”
Many of the products the company sells are available from others across the market, but Mr Prideaux believes that DIG’s real difference comes in its core disruptive platforms. Most importantly it comes from its incubation platform, which it calls ‘Start Up in A Box’. This usually applies to people in the early stages of their journeys.
“They might be an IT guru, and they know how to build an app, but they don’t know how to do a financial model or a marketing plan, apply for a trademark, set themselves up in a corporate structure and protect their assets. Or they might have a really good sense of business savvy to be able to do some of those things, but know nothing about IT.”
DIG utilises its internal resources within the group to assist these start-ups and work through that, going through an early stage evaluation process where the firm will either like the idea or not.
“If we like it, we’ll actually do things for free. We do it without receipt of tax, so we strike a deal where we take some early-stage equity in their business. Most of these guys don’t have access to cash; they’ve got a great idea, and if they had a bit cash they probably will have spent it already trying to further and develop their ideas.”
This is the group’s USP. DIG essentially wraps the start-up in a box and gets them ready to meet investors. There are lots of people out there trying to get as much financial gain out of start-ups as they possibly can, but DIG has no interest in dealing that way.
“We’re really passionate about helping them get ready, and genuinely partnering with them in the business. During that time it gives us the opportunity for a couple of things. One is to really understand the business and its capability, but the other thing is to really understand them as a budding entrepreneur.”
For investors this is an invaluable process, as the group is able to get in on the ground floor on a start-up, seeing the idea develop from its very earliest stages and being able to protect the investment at any stage by injecting more cash into it.
“If we find that magic formula that we like the people, and we believe in their ability to deliver their vision, and we like the platform, it gives us the opportunity then to put up the early-stage capital that the business needs to go to the next stage. I don’t know anyone else in that space that actually does that.”
“[The incubation platform] is a part of the business that really drives and motivates me,” Mr Prideaux says. “I get the most pleasure out of the emerging tech and helping people really see their dreams come to reality.”
In the uncertain environment created by the pandemic, Mr Prideaux admits that business is a little surreal right now. The group has closed the office and is implementing a work-at-home policy, an unprecedented step that never before seemed likely.
“Businesses right around Australia, right around the world, are experiencing this at the moment. We’re going through changing times and unchartered waters, and the level of support from the governments is unprecedented, in terms of the things that need doing to stimulate the economy and to enable businesses to continue to thrive.”
Conversely, Mr Prideaux feels a certain excitement around the present situation, with DIG being at the grassroots of a number of game-changing and innovative platforms that will help the group come out of this situation in the coming months.
“Now is the time to be bold; now is the time to be brave; now is the time to be innovative, and there is a lot of that lies within the IT sector. So I’m sure that we will continue to grow and continue to develop and be in a position to help many of those businesses rediscover new ways of doing things.”
With its diversified portfolio of IT investments, and the further growth of the company through a takeover bid, the current business landscape is a challenge DIG is well equipped to face. Find out more about Digital Investment Group by visiting https://digltd.com.au/.