On the tech train: Cedarock Capital's unique approach to investment

From trading vegetables to founding a successful private equity firm, Joseph Nohra does things a little differently to most. Here he explains what makes Cedarock Capital’s approach to investment – particularly in the technology sector – so profitable and unique.

Joseph Nohra knows a thing or two about savvy investments.

Having dropped out of high school at 15, he went to work in his family’s businesses – predominantly fruit and veg markets and service stations. It was during this period he identified an opportunity to consolidate properties adjacent to the markets he was trading from, and at just 20 years of age, he sealed the deal – a transaction that resulted in a $23 million payout.

“I’d always had an interest in property and that deal made me realise that property was going to be such a big part of what I'd be doing from there on in,” he says.

“It really cemented for me that property was the cornerstone of any true wealth.” 

Joseph took his profits and established Cedarock Capital. At the same time, he enrolled to study real estate business brokering and strata management at university, and while completing his degree, went hard at the property market, initially flipping houses then turning his attention to property subdivisions.

While his property investments went to work – increasing in value year-on-year – Joseph began dabbling in small business investments, the property profits giving the businesses breathing space to grow.

But while wily property investments kick-started Cedarock Capital, it’s the technology sector that’s currently capturing Joseph’s attention.

“There’s a nostalgic notion that if you get involved in a tech business, six months later it’ll be worth $100 million dollars,” he says.

“It could not be further from the truth – and we learned that the hard way – but we knew for us that we had to get involved in tech.

“Initially we got involved in games because what we understood was that mobile games are the hardest thing to build in tech. They are very reliant on graphics, animations and so on, and if you can master that, you can pretty much build out any type of enterprise app.”

Cedarock’s first mobile game – Sloterrific – was a runaway success and the rest, as they say, is history. Here are Joseph’s views on what makes Cedarock’s approach to tech investment so successful and unique.

What separates Cedarock Capital from other private equity firms? 

Our investment approach. In a typical private equity firm, the strategy would generally be to buy, build, add value and then sell. Cedarock is very different from that traditional formula. Although the conventional procedure is proven and works well, we find that with our strengths and our ‘involved investment’, hanging around long term is our preference.

We're a creative firm and have a lot of "originals" here that can do remarkable things. We believe that if we can bring it out of the ground and turn it into something of value through innovative development, and enjoy working with the various teams in the business, there’s no urgency to exit a profitable business.

What industries does Cedarock Capital prefer to invest in?

Technology and real estate property development would be our two primaries.

Why do you see technology as an attractive investment sector?

If you don't have a technology plan, then you don't have a business plan. Every business that we bet on benefits from our involvements in the technology sector.

Business valuations in technology assets are substantially higher than a traditional brick and mortar business, purely for the ability to scale rapidly and hit global markets. Every business is now a technology business, regardless of what you're selling.

That's why we backed SavageApe Studios (a Sydney-based mobile application development studio) in 2019. Within the first year, the studio developed five gaming titles with one of the titles, Sloterrific – a mobile slots simulation game – going number one on debut in the casino gaming category in Australian and New Zealand app stores.

SavageApe has now set up a contract development division and we are seeing things progress rapidly there, which is adding value to the investment as well.

What factors make a technology investment attractive?

The team. It's all about the people now. You don't need to be an engineer to lead a tech business, although it helps. For us it comes down to the team's originality and the solution to the market gap they are trying to fill, but what makes it more interesting is if they believe they can create a whole new market.

It's in the "new market" space that we think we will find our first tech “unicorn” and we are working on some pretty exciting platforms behind closed doors.

What makes your investments into technology different from your competitors'?

We back our own original ideas, which is different from a traditional PE firm. PE firms get involved in "out of studio" ideas because they need someone to get some early day runs on the board. This is a great approach and it works most of the time.

However, we're ultra-original and creative here and work what we call our "involved investment" approach. Our teams will brainstorm or have a brain snap idea, and then we will drill it down, workshop it for weeks and then build a team out to start working on it.

We're very original when it comes to tech.

With so many different sorts of tech – AI, AR, social networking applications and VR for example – what is the most sustainable and attractive?

There is much buzz around AI, AR and VR, and for good reason. In the next 24-36 months we are going to become super dependent on it and the advancements are incredible. It's going to change everything we do.

Social networking applications are always a buzz, but they take a lot of energy to get off the ground. It’s best if you generally started with a niche demographic and build the platform out to include new demographics over time.

We regularly hear that no one can compete with Facebook, Snapchat and similarly established platforms, but then came tiktok, which is breaking records daily, and a heap of micro networks with up to 50 million monthly active users that no one has heard about, and might not even show up in the top 20 or 50 charts in some countries.

If you were to base that on a valuation of $25.00 per user, you could be talking about a $2.5 million to $125 million business.

With tech, there is value everywhere with the right strategy and persistence.

What technology investments is Cedarock Capital currently invested in and why?

We're putting more into Sloterrific, the chart topping mobile slots game developed by SavageApe. As players seek a more connected gaming experience, we’re starting to personalise it more.

In addition to our investment in Sloterrific, we are backing the revamp and relaunch of ChatChing, a mobile messenger where you get to earn and hold on to your chat dollars from in-app advertising.

And we are supporting the development of the FRNTRO exclusive content platform, which is set to launch in 2021 and will be a place for independent content creators to distribute paid-for content to their subscriber base of followers.