Mick Dempsey's entrepreneurial journey came unexpectedly after beginning life as an engineer. After becoming a childcare center developer, he faced constant cashflow issues from parents not paying fees. This pain point inspired him to create Ezidebit in 1999, a fintech solution that automated payments and sold after 15 years. Through his family office, Dempsey now makes $150K+ investments into early-stage tech companies,
Key Points
🔑 Went from engineer to developer of childcare centers, struggling with cash flow from unpaid fees, leading to creation of Ezidebit payment processing solution in 1999.
🔑 Bootstrapped and grew EziDebit organically for 15 years, selling in 2014 to Global Payments in a "life-changing, generational" exit without actively planning for it.
🔑 Shifted mindset post-exit to capital preservation, building diversified portfolio with VC", investing $150K+ checks.
🔑 Intensive due diligence on market size, assessing if founder is truly solving their own pain point as a "missionary" not just seeking a "unicorn".
🔑 Utilises personality profile testing to evaluate founder fit, looking for collaboration from founders with investors who can provide value-add.
🔑 Now tackling new venture EzyLegal to disrupt legal industry by providing 80-90% cheaper access to mediation/court versus traditional lawyers.
Tell us about your early career, from engineering to childcare developer, to the birth of Ezidebit?
I've got background as a mechanical engineer. Following a two year sabbatical over in London I got a job in the Middle East working on oil and gas pipelines in Yemen. That was a fly-in fly-out arrangement, but in those days it was six weeks on, two weeks off, and I was in the middle of the desert, so pretty harsh conditions.
I came back to Australia and got a job offer to go to the Kimberley's to do my top-up arrangement as an engineer. I then decided, you know what, this remote work's not for me. And then I went, you know what, this engineering is not really for me. So I think I was about 28/29 when I decided to throw in the engineering.
Another mate of mine was a civil engineer, and so we decided to get together and do some small-time developments. Part of that was building childcare centres. At that time the government was incentivising childcares because, believe it or not, it was only the beginning of the industry, there weren't many childcares around. And the government would give you three months of your forecast revenue the day you opened the door. So we always forecast 100 percent, as we didn’t have enough money as we were bootstraped. We’d get this cheque the first day we opened the doors and as we had our own building licence we'd have to pay the subbies and we found we were always chasing our tail and always short of cash.
We were building in lower socioeconomic areas because they were probably the only thing we could afford and we're finding it very difficult to to get paid by the <childcare> parents. I was on the phone constantly ringing people up, ‘We've cared for little Johnny, but you haven't paid us, where's my money? And then like next day, little Johnny be pulled out of the childcare and I'd never get my money. So that was how Ezidebit was born. I'd done just enough coding as an engineer to know how to write a specification. So I wrote a spec, I got another uni student to write my first application, and that was the birth of Ezidebit. So then I worked on that, thought it was better than childcare so I concentrated on that; but in the meantime, I had bought a pub, I had the Normandby Hotel, I had the Inala Hotel, I had some bakeries, so I had my fingers in a quite a few parts. But the main one was the Ezidebit payments application, and we grew that to an exit in late 2014. Had a nice American company, gave me some money so then I've had to switch the brain from entrepreneur to investor.
Tell us a bit more about Ezidebit?
We started out in '99. It was a FinTech, although it wasn't called that back then, it was just simply called a business. And so we're actually one of the first to have a SaaS-based application, but it wasn't even called SaaS back then. We got a student to build the first making of the app. We were processing credit cards with just a little merchant terminal.
We were behind the scenes with a spreadsheet keying in everyone's numbers and the amount on the day due, and we did that manually until we got to a point where we said we need to automate this somehow. So then we coded part of the app to automate that.
We pretty well never raised capital. I never paid myself. It was a side hustle to start with until it got to a point where it was self sustainable, i.e. I had enough to pay everyone else's wages.
You were essentially solving your own pain point you'd found in the child care system. How easily did it solve it?
That was the beauty of it: it worked. It was a missionary type business. There was a problem. I thought it was a problem that needed solving. I solved my own problem. Man, it worked! Not only did I actually get money, but we had better retention because the old Johnny wasn't getting pulled out and we actually had high level of customer satisfaction because most of the complaints actually come from people who get behind on the payments and then they need something to complain about to justify why they haven't paid. There was all these factors that resulted in a significantly better business. So I thought if I'm experiencing this problem, I know there's got to be more childcare's out there that are also experiencing the same problem. So we rolled out and went really deep and narrow into childcare. We just stuck to that vertical until we had had 60 percent of that vertical, and then it just got to a tipping point where everyone just came on board. And it wasn't really until then that we went to a new vertical and that was health and fitness. And then we really mashed that vertical as well before we went to another vertical.
Can you talk us through the last few years heading into the exit and what that looked like? Were you planning for it?
We weren't really planning for it. It was only that there was some light businesses that had just recently been bought for $50-80m, that we thought we might have some value here.
And then we got a couple of knocks on the door and then we went, you know what, I think if we put the business on the block we'd probably get a decent sale, which we did. So we went on a dual track process - you have a trade sale on one side and then you're running an IPO process in parallel.
With the benefit of hindsight, I think we probably sold a little bit early. If we’d given it another few years, we probably could have had a far larger exit. But it was still a life changing event, generational change. We were probably a little bit worried that someone like Google or Apple were going to come into the space and smash everyone, so we thought we’d take it / bird-in-the-hand and I certainly can't complain. It's been a really good journey. And life since then has been really good too.
Following this life changing exit in 2014 did you jump straight into backing other entrepreneurs and investing?
Mick Dempsey: Nah I certainly didn't. It’s a funny thing, I got a cheque from Global Payments and I just threw them the keys; one day I owned the business and the next day I didn't, and then all of a sudden you look in your bank account and you go, geez, I've got all that money there, what's that mean? Is that going to stay there? Is it not going to stay there? How sticky is that? It takes a bit of time to adjust. And it's very different to running a business because as a business, as an entrepreneur, I'm high risk, I'm high reward. And then with a lump of money, it's more preservation. Yeah, so look, I certainly didn't rush into.
How did you get into angel or early-stage tech investing?
Our cheque size has been like minimum $150k. So I'm not sure if that's what you call angel or not but I got introduced to it actually through Steve Baxter and River City Labs. My first investment was actually through River City Labs and it was a little fun; we threw some money into that and there’s a couple still going. And then I also threw some money into Holland Healthcare; another introduction from Steve where the founder had been on Shark Tank.
How does the family office invest? Is tech a focus?
I had to change my mindset to preservation of capital which to me means building a diversified portfolio. We've got a range of different asset classes and the venture capital is my play bucket. That's where I have a bit of fun. The other stuff's boring, but necessary, unfortunately.
Do you have a strategy for how you approach the venture sleeve of your portfolio?
Yeah, look, it's an evolving strategy. We've made about 15 venture capital investments, ranging in percentages. We’ve made an investment in Employment Hero, but that was fairly late and we only got a tiny bit. Versus some other entities when we've got like 60%. We're sitting back a little bit at the moment just taking stock of what we've done and reviewing it. Reviewing the whole process and then just going back to what we think is the right allocation.
And are you going after specific sectors or stages?
So always tech. We somehow gravitated a little bit towards IOT (Internet of Things). Hardware with a SaaS play, and a few of those have been engineering based and mining, which is a little bit of my background. We haven't really done a lot in FinTech, and I think and the reason for that is if I’d wanted to stay in fintech, I wouldn’t of sold.
How did you setup and structure the family office?
I first experimented with a multi family office and it didn't really work for me, I wasn't getting the right reporting that I wanted. It wasn't customised or tailored enough for me. As an engineer, I like numbers, I like detail and I wasn't getting the detail I wanted so that's when I thought I'll do this myself. We've now got about six in the family office: we've got the CEO of the office, a couple of analysts, and an entrepreneur in residence. The idea of that person is to help some of our portfolio companies; he's mainly digital marketing and AI/tech focused, so he helps them out. I've also got another person who sells marketing and helps me with bit of executive assistant work.
Do you generally try and get something where you can have an influence or participate in the companies you're backing?
We do like that. There are some, like Employment Hero, for example, we're never going to do that. But generally we do like to have businesses where we're a little bit more hands on and we can hopefully guide them to to a better result.
What’s your investment decision process?
We have a process where we have an initial screen, like a go, no-go screen. Then once they get through that, we do a deep dive - our couple of analysts and portfolio manager will write up a paper on it and we'll go pretty detailed into it. And then we'll make a decision on an investment committee level, which meets fortnightly.
What’s on the no-go list? What do you look for in an investment?
The first thing I look for is missionary versus mercenary. I look for someone who's solving a problem. I generally steer towards someone who's been in an industry, they've seen something that they don't like, and they're solving that problem.
But then you've got to go, okay, what's the size of that market? One thing we've learned that we really dive into is the size of that market, but it's not just the market actually, it's whoever the customer is, the one actually pulling their wallet out and paying you.
So that's the customer and how many of them are there. Sometimes you see these estimates of this addressable market and it might be like in mining for example. We had one where they said there's X dollars worth of mining equipment in the world. And we're going, no, hang on, that's not your market. In this case, it was diesel fitters who were using a tool to to service the equipment. But it’s not just how many of these diesel fitters are there. You have to look at how many kits per diesel fitter, which was like one per four. So that's a crew. So you determine how many crews there are, and that's your total addressable market, not the total by your machines. So that's the next step. We see that a fair bit where you've got to really dive down into who is actually that customer.
Determining who is going to pull their money out of their wallet and give it to you. The hardest thing in business is actually getting customers to pay you for your product or service.
And then we go, so what is the size? How many of those people are there? And how willing would they be to part with their money for your product or service? That's probably a big thing that we look at.
How do you asses the actual founder with regards to them being the right person to solve the problem they've identified?
That's a really hard one. It's it's like an interview and you can interview someone and they interview fantastically, but three months down the track, you go, what the …?
I wouldn't say it's hard, but I think I'd go back to the first point which is are they missionary? Are they passionate about solving a problem? My idea for Ezidebit, I solved a problem I was passionate about, and for me the money will follow you; so anyone who's going ’I'm here to make a unicorn’ you go, see you….next…because it just doesn't work like that because in order to get staff to rally around, you've got to have a cause that someone can identify with and you are all rowing in the same direction. And if the cause is to make a unicorn, sorry no one will relate to that.
The other thing that we do - have you heard Ray Dalio? He has his ‘personality profile’ and we use that; all of our founders have to be personality profiled. And then we constantly review to see if there any common characteristic in the ones that are succeeding or failing. So if you look at that test and you go, hang on, there's a couple of things here in this test that the ones who are failing have all scored low in this, then we go that's a bit of a red flag for us.
Is there anything you wish founders knew about investors?
As a shareholder in your business, they are along for the ride. There's got to be some collaboration with them and they've got to be prepared to work with those investors who who can offer something.
Anything you think people get wrong about early stage tech investing? If you're new in this space, any lessons you'd like to pass on?
It's risky. It’s a high risk strategy. You need to be prepared to to lose some of your money. It can be high reward. So I guess that's probably the biggest thing. If you're thinking I'm just going to put my money in and get an 8-10% return, or if you're thinking, you think I'm just going to put my money in and get 25%, there's a good chance you could get zero.
But you keep going back, so you're obviously a believer, or you're at least getting the returns that warrant the risk?
Yeah everyone talks about the power law: you put in, whatever it is, a hundred bets and you get one unicorn or whatever. We don't really have that approach. We'd probably prefer to see some businesses that we think that are solving a problem in just one market that is big enough for them to get an exit, whether it's a couple hundred million to, to a billion. And if we can get that, I think if we can get a few of those, we're probably a lot happier than to just go and have a whole lot of little bets and hope one comes off.
And finally, what are some of the things you're working on at the moment that really excite you?
So look I've dived back into my own little startup. So that's in the legal space called Ezylegal. That one's all about disrupting the legal sector. Over the years, I've been sick of lawyers who basically have their snouts in the trough. So this is a client based legal disruptor - and our cause is everyone deserves access to justice - and it's hopefully reducing the fees of what it costs to get to mediation or court. We're targeting like 80-90% cheaper versus what it would cost you to go through a standard lawyer.
Mick, so nice to chat to you today. Great to hear the early days, pre Ezidebit even, and into the past 10 years of venture investing. Thank you for sharing your story.