Think of Australia’s richest people and Gina Rinehart, Andrew ‘Twiggy’ Forest and Clive Palmer might come to mind. They are certainly in the mix at numbers one, two and seven on the Australian Financial Review’s 2021 Rich List, with Gina topping the bill at $31 billion.
But two relatively young business partners actually combine for even more – $40 billion. Mike Cannon-Brookes and Scott Farquhar were university mates in Sydney who in 2002 created a start-up called Atlassian.
Fast forward to 2021 and their $10,000 bootstrap startup is now a global software leader with over 6,000 staff worldwide and a market capitalisation of $89 billion. If reports in Wikipedia that the founders still own 30% each are correct, then at the time of writing they’re worth closer to $26 billion than $20 billion each, although of course, this figure fluctuates daily with the share price.
But whatever the number, the relevant point is that Scott Farquhar is a keen cyclist who has just made a significant investment in a bicycle company.
Factor Bikes and sister company Black Inc components are relatively small names in the bicycle industry. Once a contract manufacturer for others in the industry, Factor has morphed to become one of the few premium brands with in-house manufacturing facilities.
On 24th August, Factor/Black Inc announced three new investors: Chris Froome (who now rides for Israel Start-Up Nation which is sponsored by Factor Bikes), Scott Farquhar, and Farquhar’s business associate Sam McKay who, along with Froome, will sit on the board of directors.
Factor Bikes has not published details about the size of the funding round, but The Australian has suggested the figure is north of US$10 million (A$13.9 million). It’s the first cycling-related investment for both Froome and Farquhar.
Factor/Black Inc founder and CEO is American Rob Gitelis who is a long time racer, rider, manufacturer and previous visitor to Australia where he’s exhibited at the Tour Down Under.
“We started talking about it eight months ago,” Rob revealed. “But, yeah, it’s pretty cool having people like Scott and Chris involved.
“I’m still the majority shareholder while Chris and Scott are coming onboard as significant minority shareholders. And then there’s just a handful of other people with smaller shares.
“It’s all growth capital and it’s all about how to take the company to the next level.
“Scott will be participating at the board level (with Sam McKay as his nominee), but he is also sharing his vast network with us to help Factor open more doors and identify new opportunities.”
In explaining his investment, Scott Farquhar said, “I love cycling, so it’s a dream to be able to play a small part in one of the most innovative companies in this space.
“Rob is a wizard when it comes to building bicycles, and the team behind Factor are building something truly special.”
“In some countries, we very much value our distributor relationships and nothing is going to change there. However, in other countries such as the United States, Australia and the UK, we’re going to continue to push through on our direct-to-consumer level of business. So this capital raise provides us with some additional runway for these initiatives. It’s also going to help us enter some new product categories very soon.
“We want to have a few select retailers as well as direct-to-consumer. There will be some Factor partner dealers in the United States. We’re going to have a new Melbourne shop, and we’re going to look at having a few in the US as well.
“[The previous Melbourne-based Factor shop] was just a little too huge and it’s just being downsized. Being closer toward the CBD is the thought there. We feel like we don’t need an all-in-one bike shop; we need a showroom where we’re sort of warehousing and assembling bikes offsite and just having a very premium showroom. That’s what we’re going to do in Melbourne.
“We have manufacturing in Taiwan and in China. So right now in Taiwan, we’re making the Ostro VAM and 02 VAM, while in China we’re making the 02 and the LS. It became very difficult without being able to travel to the facility to do valid development work.
“I haven’t left Taiwan now in nearly two years; none of us have. And so we had a manufacturing facility here for doing development and we just flipped it into full-scale manufacturing.
“Part of the mandate of the investment is that we will no longer be focussing on contract manufacturing. We won’t be taking on any new customers or any new carbon (contract) projects moving forward.”
In relation to the current long lead times on OEM components, parts and accessories for the bike industry at present, Rob had an opinion that would be good news for Australian wholesalers and retailers if it proves to be correct.
“I have the personal belief that there’s a lot of what I call ghost orders in the system,” he explained. “I don’t believe the industry is growing at the same pace as people have placed orders for. And I think we’ll see by the end of the year a lot of cancellations and the lead times start to come back. This is my opinion.
“I would say our business has probably doubled over the past 12 months. Whether it be framesets or complete bikes.”
Most of this article including all of the interview was first published by Cycling Tips, where you can see a longer version of this interview. The Scott Farquhar quote was first published in The Australian.