OCTOBER 7 2021

Published in the Australian Financial Review

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Tech entrepreneur and start-up mentor David Shein shares his secrets of his success in a new book - The Dumbest Guy at the Table.

David Shein, one of the best-connected venture capitalists in Australia, is living proof that you don’t have to be proficient in technology to build a tech unicorn.

Shein was a chartered accountant when he migrated to Australia from South Africa in 1986 with his wife, Colleen, and eight-month-old son Jarrod to take up the job as national sales manager at gaming software company Ozisoft.

Within seven months of hitting Sydney, Shein had left Ozisoft – a job he hated – and established ComTech Communications. He figured he only had to make more than his measly salary of $2000 a month to make a success of a business that he controlled.

He solved the problem of lacking any technical knowledge of computer networking by hiring an expert, Nathan Cher, who he still regards as the smartest person he has ever met.

The idea of entrepreneurs surrounding themselves with people smarter than themselves and delegating responsibility for technical matters is one of the abiding themes in Shein’s newly released book about his career, The Dumbest Guy at the Table.

Most of the book is devoted to passing on the lessons learned from building ComTech into the largest network integration company in Australia with 1400 staff.

Shein sold ComTech to South African tech firm Dimension Data in 2000 with an enterprise value of $1.1 billion making it the country’s first unicorn.

The book pulls together all the lessons he learned at Com Tech as well as those learned at Our Innovation Fund, an early-stage venture capital fund he co-founded with former prominent investment banker, Geoff Levy.‍

Five key indicators‍

Shein measured the success of ComTech against five key performance indicators, and he advises the start-ups he invests in to do the same.

These are: market standing, innovative performance, digital transformation, profitability and cash flow.

He was passionate about ensuring ComTech was a place people really enjoyed working at and ensured that the “superstars” were well rewarded including bonuses of two or three times annual salary.

Shein happily put aside 15 per cent of the company’s equity for staff and went out of his way to develop a stock options plan that provided incentives for high performance.

One of the strongest messages that Shein passes on to owners of start-up companies is about the importance of sales growth. Its importance was brought home to him when he visited the head of the IBM office in Canberra who had a sign on the wall: “Nothing happens until you sell something”.‍

Dump the ‘brilliant jerks’‍

Shein has advice for start-ups on how to pitch for venture capital, the need to focus on global total addressable markets and the importance of sacking poor performers and “brilliant jerks”.

Above all, Shein says he was helped in his career by a fair amount of good luck, including the fact that his first two competitors in network integration had appalling customer service.

The book’s highlights are the anecdotes including Shein’s dreadful experience as a non-executive director of John Fairfax Holdings, turning around a wealth management company at the request of CHAMP’s Bill Ferris and his wise advice to entrepreneurs who sought his counsel.

Shein’s career as a venture capitalist has been as impressive as his achievements at Com Tech. He expects the first fund managed by OIF to return four times the investors’ original money.

Shein has a rolled gold network of contacts in business and technology as shown by the fact that he invested in ZipMoney, the precursor to Zip Co, at a valuation of $2 million. It is now worth $4.2 billion.‍

Missed out on Afterpay‍

One of his biggest regrets is not backing Anthony Eisen and Nick Molnar when they approached him to invest in Afterpay with a valuation of $20 million. It was sold last month to Square for $39 billion.

Shein has been an investor and mentor of many start-ups including CalReply, Latam Autos, RangeMe, Pocketbook, BizCover, Centric Wealth, MacromatiX, earnd, Instaclustr, Go1, Clear Dynamics, Enboarder and Holly Connects.

Shein is optimistic about Australia’s future as the “scale-up nation”. He says the success achieved by Canva, Atlassian and Afterpay means Australia is now arguably performing better than the start-up nation, Israel.

“I have been unbelievably surprised at how quick Australia has emerged as an innovation powerhouse,” he says.

Shein says the venture capital tax reforms instituted by the Turnbull government were a good example of smart government intervention because they lifted VC investment from $100 million to $2 billion.

His book is dedicated to Dan Jarzin, who worked with Shein for many years before moving to the United States. Jarzin suffered from mental illness and died in August 2005.

The Dumbest Guy at the Table is self-published by David Shein. Available on Amazon from next week. All the $29.95 purchase price of each book goes to Black Dog Institute.