Creating wealth through a startup family office with Judy Anderson-Firth

Hosted by Jason Atkins
President & Co-founder, Cake Equity
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In this podcast episode of Startup Equity Matters, Jason Atkins and Judy Anderson-Firth of Euphemia, discusses the topic of creating wealth through startup-focused family offices. Judy is the CEO of Euphemia, a family office backing investors and founders in the fintech and startup industry.

Euphemia's vision and mission are focused on investing in fintechs, climate tech, women-led startups, and startup infrastructure. They manage a global investment portfolio of around $70 million and invest in various stages, from pre-seed to Series A, as well as in funds. The family office aims to support companies that are making a positive impact and have potential for growth.


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Jason Atkins: Hello, everyone. Welcome to today's Startup Equity Matters, a podcast about how to create value from startup equity. We're gonna unpack stories from capital raising, team equity, ownership culture and exits, and stuff like that. Today's topic is creating wealth through startup-focused family office. I'm excited about today's guest. They've had a career in innovation, a multitude of leadership roles, and now the CEO of a tremendous family office, Euphemia, that's backing the best investors and founders out there. Also, full disclosure, Euphemia is a Cake investor. Thanks for the support. I've enjoyed working with Judy over the years and seeing her awesome leadership. I'm really grateful to have you on the podcast today. Welcome, Judy Anderson-Firth.

Judy Anderson-Firth: Thank you, Jason. It's a pleasure to be here. Cake is just such an awesome business. When we saw the opportunity to invest last year, it was an absolute no-brainer. We're like, "How can we get in? What's the maximum check we can put in?" There was limited allocation at the time, so it's a joy to be a part of the journey. Thanks for having me.

Jason Atkins: I absolutely love hearing that. There's a lesson out there for all of you founders: find people that care about your mission, that are aligned with your mission and the problems that you're trying to solve, so life just keeps getting better and better. Thanks a lot for that. Look, thanks again for joining us. Tell us a bit about Euphemia. What's your vision and mission?

Judy Anderson-Firth: Euphemia is the family office for Aussie fintech entrepreneur and investor Dom Pym. Dom is most well known for being the co-founder of Up, which is Australia's most loved digital bank, which sold to Bendigo and Adelaide Banking Group at the end of 2021... very popular with under 35s. If there are any Upsiders out there, shout out to you. It's such a great product for financial literacy and wellbeing. Prior to that, Dom is an entrepreneur of 20 years. Oh, you've got some product stuff.

Jason Atkins: I just got this the other day, my new card. Even though I'm a tad over 35, I'm not going to tell you exactly how old I am. I'm still a… what are we called?

Judy Anderson-Firth: Upsiders. You're an Upsider. It's an awesome business for financial wellness. I became an Upsider after discovering Up at the Pause Fest in Melbourne a few years ago. But Up aside, it's an incredible business.

Jason Atkins: Amazing branding. How do you make banking actually feel fun? The bank really cares about you. All the big banks say all the right things, but it never feels right. But this actually feels like it was such a great mission and super fun.

Judy Anderson-Firth: Yeah. Beyond the branding, to make it practical for those who haven't discovered Up before… For example, one of their features is called Maybuy, which is a reaction to the buy-now pay-later trend in the financial services sector, particularly for young people. Rather than using a buy-now pay-later system, you can use Maybuy where if you're in the shopping cart looking for a new pair of sneakers or a new TV or whatever it is that you want to be buying, rather than doing it like an after-pay model, you can add it to your Maybuy in your Up app and then you can actually save up towards buying that product. It basically helps customers buy things that they actually want with money that they actually have. That is just one example of some of the great features that they've got. There's heaps more, but I won't bore you with them all.

Jason Atkins: Well, yeah, that's what I mean about a great brand that has a product that matches what it says on the front. That's what I love. Super innovative and really caring about the customer and solving real problems. Huge effort there. That was a big part of the establishment of Euphemia, I suppose.

Judy Anderson-Firth: Yeah, that's right. Euphemia is the family office of Dom and together, we manage a global investment portfolio of about 70 million, and we invest across four main verticals. We invest in fintechs to try and help fix money; climate tech to try and help fix the planet; women-led startups-- which are really any founder from a disadvantaged background who hasn't had equal access to opportunity; and startup infrastructure, which is a niche corner of B2B SaaS, where you're a high growth tech company whose customer is a high growth tech company a la Cake. Those are really the types of companies we invest in. We're typically investing in pre-seed to Series A when we're investing directly in a company, but we also invest in funds. We're invested in over 20 funds both here and abroad across pre-seed up to private equity and more broadly than the venture portfolio, the family office group at Euphemia. We have a property portfolio, a little bit of commercial, a little bit of residential, and a share portfolio, which is mostly listed tech stocks and a foundation to help people in need. That's the business of Euphemia, and we really are here to make awesome make awesome. We are trying to uplift the entire Australian startup ecosystem to help create more family offices that look and feel like Euphemia. Like what could a new first generation family office created from tech wealth look like? Because Dom's an entrepreneur of 20 years of hard knocks. He's most well known for being the Up co-founder. But before that, he had Pin Payments and CLEAR. He's lived and worked in Silicon Valley, London, Singapore… the list goes on. We've both worked in entrepreneurship and tech our whole careers, so it's a really exciting time to be at Euphemia.

Jason Atkins: It's a wonderful business. We're mega aligned on mission and vision around creating innovation, entrepreneurship, and driving the Australian ecosystem forward, so I am very grateful to be having you on our side and leading the way. You mentioned a bit about your background. I'm excited to dive into that in a tick, but before we do that, as a CEO, what are the big three things you're working on at the moment? It's always interesting to hear what people are really focused on.

Judy Anderson-Firth: Yeah, I'll start with an exciting one and then I'll slide a boring one in the middle and then finish with an exciting one. Yeah, a boring exciting sandwich. The exciting one is we're helping a lot of our companies that we've already invested in. We've got over 50 direct investments now within the portfolio across those four verticals that I just mentioned. Dom and I are spending a lot of time working with the founders and the executives within those teams looking at their next capital raise and playing a bit of a strategic advisor role there on like, "What does that rounding look like? How do we set it up for success? Who should participate? What should a lead look like? What should the price look like?" Those kinds of things. We are working on a little bit of cap raising strategy. One of the boring things is we're just setting up some boring tax compliance across the group. There's about a dozen entities in the Euphemia group, and they all have their own P&L and balance sheet and tax.

Jason Atkins: It doesn't get any better than multi-entity tax planning. That's fantastic.

Judy Anderson-Firth: Very important. It is very important at that time of year. Obviously, I don't have to do everything. We have fantastic accountants and tax advisors, but it is my job to make sure that it gets done. The last exciting thing is just the time of year. We actually just get to celebrate everyone's accomplishments. It's a really difficult and challenging year for everyone--the markets span on a dime. Everyone had to recalibrate, and we've still got a lot of companies that are just refining their feet after the year that it's been. So we're actually spending a bit of time. It's the 1st of December today, not to date this podcast, but it's a time for celebration, so we're spending a bit of time with founders just looking backwards and celebrating their accomplishments.

Jason Atkins: Love it. Yeah, I'm sure some founders are super hard on themselves, especially in a year like this year, so we all need to get around each other and make sure that we acknowledge all the progress that's been made. I think a few times throughout the Cake journey, I'm just grinding away, and when you do take time to look back across the whole year, you can be pretty shocked how much has been achieved. So, good shout out.

Judy Anderson-Firth: Yeah. Every startup should create their own Spotify version of the 2023 wraps or whatever year you might do it necessarily.

Jason Atkins: Awesome. How did you get into innovation in the first place? Looking at your LinkedIn looks like you were kind of born into it. What's the origin story of your passion for innovation, Judy?

Judy Anderson-Firth: It does feel like I was set up to have a career in tech , entrepreneurship, and innovation my whole life. My dad was a railway engineer and my mom was a primary school creative arts teacher. So on each side... a super linear dude and a super creative mom. The combination of the two just totally set me up to be fascinated with problem solving--but not just solving a problem, but also convincing other people that it worked. So, my dad's idea of playtime was going to a garage sale, buying a computer, bringing it home, we'd pull it apart, we'd have to put it back together again, and make sure that it worked. So very much set up. Then in high school, it was very obvious. The subjects that were easy were business and literature, which are all about where the answer is whatever you can convince someone the answer is, as opposed to what the black and white science tells you. Not that I'm not a lover of science--I studied entrepreneurship at university. I always wanted to invent things that would change people's lives. I was always tinkering around. My mom would always lose her glasses. So I entered an invention competition in primary school and I was like, "I'm totally going to solve that problem." My mom is always interrupting my playtime with my sister to help her find her glasses, so I went down to the hardware store, bought a little tracking device, and soldered it on to her glasses' frame. Then I put a finder button on her car keys. So anytime she lost her glasses, she could just press this button and go off and find her car keys. It was awesome. I ended up winning this competition, but then she lost the car keys a week later, so it didn't end up being as very good. But that sense of invention and being fascinated with that, I've always had that as part of my DNA.

Jason Atkins: Yeah. It's very hard to account for all user error when you're innovating.

Judy Anderson-Firth: Yes. Prime example of that learning.

Jason Atkins: Awesome. So right from a very early age, you just had the spirit and you had that problem-solving attitude. Amazing. Very cool. What are a few of the highlights and maybe a couple of inflection points along the way? Because, before Euphemia, being a CEO of a pretty major industry group here, and having quite a few cool leadership roles, I saw that you were a keynote speaker quite a few years ago early on in your career. Were there a couple of inflection points along the way that you could share that were kind of important?

Judy Anderson-Firth: Yeah, definitely a few. As they say, like hindsight's always 20-20. You can find what those moments are when you look back. It's a lot harder to know when you're in them. But what they all kind of have in common is that they all felt wildly uncomfortable at the time. My first one was when I was at Deloitte very early in my career. I'd finished my studies in entrepreneurship, and I couldn't get a job, ironically, because entrepreneurship was a really unemployable degree to have chosen, and I couldn't find a job. It was like a recession was in flight and I really was struggling. So I ended up taking a stint--selling toilets at Reece Bathroom--believe it or not--just to find any job and to pay the bills. I was very persistent to get this job at Deloitte because I wanted to learn how innovation was done at the top end of town, how do really big companies innovate and keep disrupting, how is that done in practice? I want to be a part of that. So I'd applied for three different jobs in various sorts of innovation and tech roles at Deloitte and got rejected three times. Then the last time, I finally nailed the perfect role--which was in the innovation team there, working for the chief strategy officer to help every service line within the business to create new products and services for clients. Whilst it felt really uncomfortable to keep pursuing what I wanted because everyone just kept telling me that the answer was no, I just didn't take no for an answer. So I was really glad that I persisted because being in that role really set me up for success because it was my job to basically train the whole organization in design thinking. We brought the out from Stanford University. I got front row seat alongside all of the other partners in the business at a very young age on like how to do business and how to innovate. It was incredible. Another big inflection point was taking a risk and leaving that all behind and going to a niche consultancy. I then went to a boutique firm called Inventium that used organizational psychology, neuroscience, and management science that taught large companies like Deloitte and ASX 250-style to innovate and use those methodologies like lean startup methodology, Clayton Christensen's Disruptive Innovation dilemma, et cetera. But again, another big inflection point there, several years later, I was running our Silicon Valley tour where we would take out APAC exec clients over to the Valley and we'd show them what innovation looked like in practice. One of the rooms I was in was with Allen Blue. He's a co-founder of LinkedIn, former PayPal co-founder, part of the PayPal mafia. I was sitting there listening to him talk and the way that he talked about the world. His vision was so much bigger than anything I'd heard from any of my clients in the last five years. And I just thought I'm in the wrong place. I thought I could make the biggest impact at the biggest end of town, but actually, I've got it all wrong. It's actually at the bottom end of town where entrepreneurs and founders are achieving so much more with so much less. They're just exciting to be around. It's infectious--the energy and the progress, and how fast they moved. I was like, oh, I got to quit my job. I got to find where the founders are, how can I take everything I've learned in my corporate innovation career and apply that to the startup sector and help. That led me to Startup Vic. That was my previous role before teaming up with Dom to run Euphemia. Startup Victoria, which is now known as the Startup Network, is Australia's largest startup community with over 60,000 people in the network. My job for many years has been to help founders go from 'I've got a great new idea' to an 'exit and everything in between' -- bootstrapped, venture-backed, fast growth, slow growth, B2B, B2C. I've kind of seen it all and worked with thousands of founders, and I've definitely found my place. You can't kick me out of this sector. I love it so much.

Jason Atkins: No. Your passion, the fun, and the enjoyment that you take from your role is really obvious when working with you. Having the same realization since I got into innovation, just being around all the passion, positivity and drive to change the world is a very fortunate place to get to spend your working hours. So I totally get you there. Right. We're going to switch now and talk a bit about equity. You know, it's an equity-related podcast, and I'm I love with what we're going to do today because we haven't really talked equity for family offices on the podcast so far, and we've got some really unique and insightful things to talk about, which is great. So to kick us off, you were telling me earlier that you want to help create a lot of Euphemias. How do we do that? How do people make money from a family office? How are we going to do it?

Judy Anderson-Firth: Yeah, that's a great question. For us, we're investing a significant portion of funds under management into the venture sector, so startups and funds; and the reason why we're doing that--we're not actually setting out to create a multi-generational family office where future generations are inheriting a nice big pile of cash to do whatever they want with it. This is something where we're giving back to the next generation of the startup ecosystem in Australia, and we want to see more entrepreneurs successful, more employees, and early investors of these businesses successful because more begets more. The more success we have from the sector, the more companies that are created, the more technologies that get progressed, the more value that's created for society, and we can actually start to solve some of these big problems like climate tech, the financial sector and its inequality, like there are so many big problems to solve. We're totally biased towards the combination of technology and humans being used to solve those problems. Our goal beyond the actual work we're doing today is that by receiving investment from Euphemia, a company will succeed, they will become very wealthy, they can create their own family office, and they will in turn invest back into the Australian startup sector to help create more of the companies that they build. That's our goal. That's what we'd like to see.

Jason Atkins: Yeah, so cool. You're only going to continue to be successful if we're all successful. That seems ultra aligned.

Judy Anderson-Firth: Yeah, exactly. Money is a significant marker of value in our economy, and if no one's making money, then there's a pretty strong argument that we're not actually creating the value that we set out or we're not capturing it. So yeah, definitely. We want to see founders become wealthy off the back of the value that they're creating for society, and then do something good with that wealth.

Jason Atkins: Yeah, I love it. We're already seeing some of that coming through, aren't we? I mean, setting up a family office requires a certain amount of wealth, so only the most successful exits are going to probably allow you to set up your own family office. But I think we're seeing it in Australia. Probably, the second and third wave. Second, maybe. Maybe some third wave coming through now from an investment standpoint. Certainly, some family offices. I think if you go back even 10 years, there wouldn't have even really been any tech family offices; maybe 15 years. But we're really starting to see them proliferate, and I think there's so much more opportunity in this space. Really exciting to see, I suppose. I'd never heard of anybody really trying to provide leadership in this space. I only found this out earlier when we were talking. I think it's just such a cool way to see the world.

Judy Anderson-Firth: Yeah. Thank you. I mean, it's by design. When Dom and I had our first sort workshopping strategy and talked about our mission, our vision, our values, what success looks like. We took a look at the competitive landscape as you do and and we just--having lived and worked in the sector for so long, typically a family office is opaque. By design, it is hard to find, you don't really know what they invest in, and if they do have a website, it might showcase some portfolio companies. It might tell you about its thesis, but it's kind of hard to find the front door.

Jason Atkins: They have a very small fraction of their wealth allocated to venture and they'll be coming in and out. That's right. I don't really understand it. They probably don't have any dedicated team members that even really know how to do it. So you've got property or fixed interest investors that will be making venture decisions. And of course, they're always too risk-averse to even invest. So I've definitely seen the wrong way to do it a couple of times in my career.

Judy Anderson-Firth: And look, let's be real. I'm not saying the way that we're doing it is the right way to do it. There are a lot of very wealthy people who would look at us and say, "You're crazy." Because, you know, we work with LGT Crestone; they're our wealth advisors, and in a normal pie chart of asset allocation, typically one of their clients would maybe have 20%. This little thin slice allocated to alternatives, which is like everything in venture, both, not just direct investments, but the funds, if you're investing in AirTree, Blackbird, Square Peg, any mid-market or early stage funds, it's all in that one bucket. And Euphemia's is like 80% plus. So they look at us like we're crazy because you have to have a high risk appetite, but it's also high return potential. But we believe that we would be wasting an absolute advantage that we have, which is our networks within the sector and access to unique deal flow, and our ability to do great due diligence because we've built companies before, we've managed companies before, and we know what it takes to build a great business. And we're playing in the fields where we think we have an unfair advantage: fintech, climate tech, women-led and startup infrastructure. So we're comfortable taking that risk. But yeah, others might call us crazy.

Jason Atkins: I can totally appreciate that. There's more than one way to do everything, and no one really knows the 'right way'. Yeah, awesome. Well, look, congrats! We're creating wealth from family offices and you're only creating wealth if the industry succeeds, your portfolio succeed. And I suppose the historical returns on good quality venture investing is really quite good. So as long as you keep yourself in the top quartile, everybody's winning, right?

Judy Anderson-Firth: Well, that's the thing. You have to be good. Lucky for me, Dom's been an active angel investor for over a decade, so whilst Euphemia is new, Dom's been investing, and some of his early investments include Afterpay, which was Australia's most successful exit, $39 billion, which was--that wasn't Dom's portion--that was the overall sale price. And even in other investments--he was in Twitter early, which was acquired by Elon Musk not too long ago. There are some like Spreedly, which is a US fintech unicorn. He's got some amazing early-stage investments and he's seen some great IRR from his earlier portfolio. Lucky for me, we're building on a really great stack to start with. And the other advantage of being a family office is we're not on the same time horizon for returns that a typical VC fund would be. We're not bound by a 10-year time scale. We can think in multiple decades, which gives us an advantage as well.

Judy Anderson-Firth: Yeah, cool. You'll have to let me in on these good deals when you're looking at them as well, OK?

Judy Anderson-Firth: Yeah, we're planning on one coming up next year. You might know the company.

Jason Atkins: All right, very good. Okay, just say people out there are looking to set up a family office, or maybe they already have a family office, and they're thinking about how to transition a proportion of their wealth into venture and or, I suppose, they could be looking to try and attract, retain and engage a really high quality team. At Cake, we're very passionate about employee equity or team equity--ESOP it's sometimes called. In a family office structure, the family office structure that I've seen previously, I don't know how I would have ever done it. So I'd love for you to share how you're tackling that at Euphemia because it's kind of about rewarding and incentivizing people, bringing them on the journey, keeping the team together over a long period, making sure that in startup land, you're all building this company together and you want to make sure that everybody's really winning at the end of the day. How are you tackling it at Euphemia?

Judy Anderson-Firth: Yeah. It's an interesting one because as I said before, we don't have just one company that we can offer some skin in the game for employees and advisors, but we definitely want people to share in the upside. If we're winning, we want the people that helped us win to win as well. Totally aligned with Cake's philosophy around making sure that everyone gets rewarded and recognized for the value that they're creating. So for us, we basically had to create our own version across the Euphemia group. We've got about a dozen entities... some of them are focused on venture, some of them are focused on property, some are focused on listed equities, and some are focused on foundation activities and some other personal activities. We had to look at where, across the group, is the most value being created and where does it make sense? We actually had to look at what asset classes do we want to include? Do we want to include property? Do we want to include equities? Do we want to include venture? What makes sense? We came to the conclusion that the answer is: it depends. It depends on who the person is and it depends on what they're working on. Right off the bat, whatever we build needs to be flexible enough to work for property and work for venture and work for listed equity. So it has to be super flexible. Then the question became, well, what about time? When is someone coming on board? We're a family office--we're thinking in decades. So if you're working with Euphemia, you're probably working with us for quite some time. It's not something where we're expecting tenure to be a few years. Dom and I have committed to each other for a decade at least. That's the time you need to really work this strategy to fruition and see if we can deliver on it. We need it to make sense over time. If we've got different people joining us along this multi-decade journey, how do we make it fair? How do we make it fair when someone comes in from day one? How do we make it fair when someone comes in in a couple years' time? How do we make it fair if someone comes in at year 10 and we still got 10 to go? How do we make that work? Because every person is sort of building on the shoulders of the person that came before, so it has to make sense in terms of when someone starts. Then the last part is it has to be generous--like some core principles. We want it to be generous and we wanted it also to reflect best practice because anything that we do, we want to be able to set an example for our portfolio companies and funds. Whatever we do, we want them to follow our lead. With those principles in mind, we basically scoured. What do other family offices do? What do other funds do? What do the best companies do? We just spent a lot of time researching to see if there was anything out there that would make sense for us. The bad news for us is that there wasn't, so we had to build something, but we were able to take the best bits of what we found in the market. We were able to take the best bits of what we see in great ESOP plans, right? Good labor provisions, bad labor provisions, what sort of commercials are typically right in terms of how much, as a percentage of overall, success makes sense to offer. What's generous is on top of those standards, we were able to take the best of partnership models from venture funds and what does carry look like? How is that carry earned or bought over time? So we could basically take the best of industry standards. It sort of looked like an ESOP, felt like an ESOP, but it's not an ESOP at all, so we called it the Euphemia incentive plan, which is a really boring name. It probably needs a better name. But the incentive plan is basically a loan structure. What we're trying to do is create or mimic actual ownership of an asset without creating any negative tax consequences for either party or any sort of cashflow consequences for either party. It's basically a loan structure where for every asset that it makes sense for you to have some ownership in, we, as a group, are loaning you a percentage. That percentage is on a case by case basis, but overall, we have a set percentage across the group. It's about 20%, and is allocated. Similar to an ESOP, you'd find anything from 10 to 25. We're at about 20% overall for that pool of incentive plan. Then what your percentage is as an employee will be representative of what your value is. Similar to an ESOP, right? You just choose what's right to allocate to that person. Then for each asset, a new loan is created. Let's say, for example, we invested in a company called Cake, and the Euphemia Group--this isn't the amount we invested in; this is just to give you a simple example. Now, let's say we invested $100,000 into Cake. That means 20% of that gets allocated in terms of that cost base to the incentive plan. A loan is created for lots of little micro --let's say we've got two people, for example. In that incentive plan, that means there are now two $10,000 loans sitting against that. If that asset goes to zero, it's a no-recourse loan. Euphemia is never going to come after an employee for 10 grand, right? Like if it goes to zero, then that loan is not recourse. If, however, that asset goes to, let's say, $100,000 turns, this would be an awesome result. But let's say $100,000 turns into a million, and now all of a sudden, that 10k loan that you had as part of your Euphemia incentive plan is now worth $100,000, you get the benefit of that asset going from 10 to 100. What happens with the cost base of the loan is dealt with at the time of the liquidity event. That's how it's structured. Then you basically have a whole register. This is why we need great accountants. We have a whole register of these sort of limited recourse loans set up across the group.

Jason Atkins: Cake isn't currently set up for that kind of thing, but it's innovative and maybe one day.

Judy Anderson-Firth: It's a gigantic accounting legal workaround to try and create best practice principles in a system that's ultimately flexible because it still also gives us enough control and flexibility, as a Euphemia group, to change circumstances. For example, one of the things we needed to cater for was how we facilitate our own internal secondaries? A lot of the assets that we're buying are seven to 15-year time horizon liquidity assets. They're not very liquid. What if we have an employee who wants to put a deposit down for a house or maybe there's a family emergency and they need to liquidate? On paper, they're worth a million bucks, but they've got to wait at least another five or seven years until there's a liquidity event. This gives us the ability to do internal secondary. Euphemia could actually buy back that asset and do an internal price purchase of that asset. It's super flexible. It's pretty awesome. But those contracts will have the same "good labor, bad labor" provisions that you would expect.

Jason Atkins: Awesome. Love it. Oh, well, look, congratulations on solving that! It sounds like a bit of work, but based on what we do at Cake, we're so grateful when we hear of people working hard to reward, incentivize, and build great teams over the long term. So yeah, nice work. I think that's the most complicated system. Don't take that the wrong way. Like it was a complicated situation and you built an awesome outcome. So that's really great. Love it.

Judy Anderson-Firth: Yeah. The only other little asterisk I put under it is how we think about what's included. Because the group has so many different things, this is where time really came into it. For example, if there was an asset that existed before your time, let's say, you become a part of Euphemia team in the future and there's already an asset, which doesn't really require much servicing--capital's already been called, maybe we do some things with the portfolio success activities from time to time. But if there's not too much value being created ongoing, then that would be excluded. But if it's something that happened within your time, then it would be included. So each employer, each advisor, each person that has a plan has a different plan to the person next to them based on when they started and based on what they work on. It's all a little bit unique. It's definitely a lot of admin work, but it gives us the things that we want around generosity and flexibility.

Jason Atkins: Yeah. It sounds like you need to update the details, you a little bit from time to time.

Judy Anderson-Firth: That's right. Yep. Definitely required. It's just part of our bookkeeping process at this point.

Jason Atkins: Awesome. Very innovative. Well done. Moving on to our next really interesting piece--and thanks for doing this work, by the way. Having a chat with your portfolio and some of the founders, bringing some insights from, their journey on co-founder splits and co-founder equity and how that's worked, and employee equity at the various startups. Yeah, super keen to hear a bit about what you learned.

Judy Anderson-Firth: Yeah. I mean, like what I was telling you earlier. One of the reasons why I wanted to speak to a handful of our portfolio founders was just to get a read on: are we starting to see best practice emerge in Australia yet? Are we starting to see how consistent will these answers be? Even the exercise alone was interesting because for the most part, everyone had a total different story, which I think in itself is telling, right? That we haven't yet hit saturation on ESOP being normal, being standard, being market within Australia. We're not there yet. I thought that was interesting. We've got everything from founders who started their companies by going through an accelerator. Everything was really easy like that's an accelerator that pumps out dozens of companies a year. They've got templates, they've got standards, they've got rules, so they just had to follow the masses. It was easy. I really didn't really have to think about it too much. Then you've got companies that are more bootstrapped or independent for the majority of their early days. There's also a lot more painful circumstances. where they kind of had to spend a lot more on legals and weren't sure exactly what was right, or they tried to get a little bit creative with certain terms, but then they ended up biting them in the back later. There was no consistent theme. But in terms of co-founder equity, the one consistent thing I will say came out was most founders still have equal equity at the start. But there was a great insight from one of these companies around reverse vesting of that equity and making sure you have your buybacks in place for when co-founder relationships dissolve and when a co-founder is no longer adding the value promised because you don't want to have a gigantic portion of vested equity sitting in a founder who's no longer building the business.

Jason Atkins: Big red flag. Yeah.

Judy Anderson-Firth: Yeah. So a lesson learned there.

Jason Atkins: Yeah. Sweet. What about on the employee equity side? Any sort of key insights? Obviously, a fair bit of different stuff going on, but I guess anything that stands out that's worth sharing?

Judy Anderson-Firth: Yeah, the consistent theme for employee equity or lesson from a lot of these--and I spoke to about half a dozen, so it's not the single source of truth, but it was a good representative sample of a typical Australian early-stage company. The insight was, basically, they started their journey with their ESOPs being designed super employee-friendly. They made it incredibly important because they want to attract the best talent. They're an early stage startup. They don't have enough money to really offer highly competitive salaries, so ESOP is a great way to get people on board. Typically, these are employees that have never really had an ESOP before, so they thought they were doing the right thing--like being super employee friendly. But a lot of those things were either wasted because no one even knew that they were so employee-friendly. They didn't really understand what a win they were getting you know with these ESOP plans, or it came back to bite them later when they would have levers and they weren't good levers. Then all of a sudden they had no legal mechanism through which to take back that equity. It was equity walking out the door, not just with value not received, and in some instances, it is being eroded. That's the consistent theme. There is that sort of trying to find the balance between being company-friendly and employee-friendly and off the back of having like the worst case scenario happen with an employee, which eventually happens with scale. You can make a bad hire. It's only a matter of time. Yeah, making sure your ESOP does have the right protections, so those founders now who are at later stages do typically lean more towards having a company-friendly policy.

Jason Atkins: Yeah, makes sense. We have the standardized version in Cake, and we've built it over years. I remember early on, the more complexity and the more variability in the plan created so many problems for the founder, the company, more legal fees--employees never understood any of it anyway. Now, we have the highly standardized one, which is employee-friendly to a degree, but still protects the company. You need to navigate that nice and in-the-middle-there somewhere. I must say, even at Cake, we have become a little bit more on the Cake-protection side with the ESOP over the years, even though we 100% have our team in mind. Yeah. I think you can be a little bit friendly with those terms and it doesn't necessarily help anybody. Interesting insight there. Yeah.

Judy Anderson-Firth: But I think Cake's right to do that because at the end of the day, I've been waiting for the right moment to sneak in a Cake pun, but do you want a bigger slice as an individual employee or as someone who is still remaining in the business after someone leaves? Do you want a big slice of a small pie or do you want a small slice of a gigantic pie? At the end of the day, like as companies scale as one person, there's only so much you can contribute to the end outcome of having a successful exit, a liquidity event. At the end of the day, the company having all the tools at its disposal to achieve that goal, including having equity up its sleeve to give to new supporters, to new investors, to new partners, to new value creating employees just makes sense. I would rather see that equity get put back into the pool to have those who are still on the train, who still believe in the mission, who are still working hard at the goal, help us all win. It makes sense.

Jason Atkins: Yeah, 100%. Yeah, hey, look, we've only run out of time, unfortunately, but that was really cool. Coming from a family office perspective and investor portfolio perspective, I think we unpacked some elements of creating wealth from startups that we haven't yet done on the podcast, so really grateful for that, Judy, thanks heaps. We almost always finish with health and mental health and our creative, healthy lifestyle at Cake we believe is a huge part of why we're building a great company based on our great team. You actually have a bit of experience in this space, so it'd be great to hear your insights on health and mental health as it helps innovators.

Judy Anderson-Firth: Totally, happy to talk about it. Before I get on my soapbox about mental health and wellbeing. One last quick thing I wanna share from the Euphemia portfolio that I thought was quite useful is how founders thought about advisor equity. It's really common to have advisors pitch for equity. The theme that came through was that it very rarely was something that founders would look to do because your business changes so quickly that it's quite rare. By the time you're finished negotiating an advisor equity agreement, that problem is no longer relevant. You've probably already solved it or you've pivoted out of it. It's pretty rare to find an advisor that will be relevant to you for seven years and actually earn that equity, even if it's being invested. So, it' s very expensive in the long run to pay for advice, especially when there's a lot of free advice out there from peer-to-peer support programs, the startup network, other founders, and investors. There's a bit of a cautionary tale there on advisor equity coming out of the portfolio, so I just thought I'd share that. But on the founder health and wellbeing side of it, during my time at Startup Victoria, LaunchVic, the state government startup agency, commissioned us to write a report sort of detailing the state of affairs of founder mental health and wellbeing in the Victorian startup economy. I got to sit down and interview all sorts of founders from all sorts of walks of life and understand their journey. One of the main things that has still stuck with me from that piece of research is how lonely it is to be a founder. It's a really hard job. You're so alone. Seriously though, you'll understand it. Even if you have co-founders, the type of problems that you're solving are massive, are complicated, are probably something you've never solved before and have massive consequences. It's a huge burden to be the person who has to find the answer, believe in the answer, communicate the answer, deal with the fallout. It's a huge burden. Often those kinds of problems, like the confidential ones in nature, you can't talk to your partner, your wife, or your friends about them.

Jason Atkins: You've got to know who to talk to. Even still from my experience, no one understands what you're doing. They just look at you like you're an alien when you say you're a startup founder. Then every month, every three months, all the problems are brand new. You're almost never solving the same problem twice. That's another big part of it.

Judy Anderson-Firth: Exactly. What I would like to see more in the culture of this sector is, and founder to founder stuff, because that's a cohort that gets it, right? So find your little group, whether it's on Zoom, whether it's down at the local pub, or whatever it might be. Just find three to four other founders at a similar growth stage to you solving similar kind of problems or maybe one or two stages ahead that you can in a confidential environment. They don't even actually have to help you solve the problem. You just need to listen, you just need to process. A lot of people think by processing and talking, so it'd be great to see a bit more of that founder to founder stuff happen in Australia. The second thing that really stuck with me on this topic is how we approach failure in the startup sector. I know this isn't a new topic, lots of people talk about it, how we're not cool with failure, etc. But for founders in particular, there's so much of your personal identity wrapped up in your business, and so when your business fails, it feels like a personal failure. What I'd like to see more, and I think there's also a bit of a narrative sometimes that comes from the venture landscape that goes like, "This must be your everything. You're not investable unless this is your life's work." I don't believe that. I believe that there is a rising subculture to that style of thinking about building startups, which is like this maniacal obsession with racing and winning. It's healthy for founders to have parts of their identity that are outside of their business, whatever it is. Just to take the edge off of that feeling of, "I have failed." There are so many other parts of you beyond your startup identity and nurturing those as best you can whilst you're on this crazy ride would be my wish for founders.

Jason Atkins: Amazing insights. I could talk about both those things at length, but I'll leave it at that. Really appreciative of your time. Let's get a buddy system in place for founders with a buddy like a few years ahead. I reckon that'd be amazing. Find a friend. Look, thank you so much for coming. Wonderful insights. One of the great leaders of the community and friend of mine now, I think we can say, I hope we get to work together for a long time, doing our best to build the Australian ecosystem and the global ecosystem. Let's go big. A lot of Aussie startups are going big, going global. We should all be thinking that way. W e're a global community. Thanks for joining today. Really appreciate your time. Incredible insights. Absolutely love what you and Euphemia are doing--having a huge impact on the ecosystem and the planet. Thanks so much and thanks everyone for listening.

Judy Anderson-Firth: Thank you, Jason. If people want to learn more about Euphemia, they can just go to or they can look for us on socials. Most of our handles are @euphemiainvest.

Jason Atkins: Yes. Good. Thanks for that. Good point. Forgot to do that.

Judy Anderson-Firth: Thanks Jason.

Jason Atkins: All right. Nice one. Thanks everyone. Bye.

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