There’s a cage fight-like quality to Employment Hero cofounder and CEO Ben Thompson’s campaign against one of his investors, Hostplus, but it appears the $100 billion industry super fund is not enjoying the show.
In fact, in Hostplus’ view, Thompson is lowering the tone of Australian corporate life and unless he brings back a bit of decorum, they want the $2 billion scaleup CEO red carded.
One of the most astonishing battles since a rogue Jaeger popped up in Sydney during Pacific Rim Uprising, is currently unfolding on social media, with the potential to damage institutional investment in the local startup sector.
Any resemblance to Employment Hero and Hostplus is purely coincidental. Image: Pacific Rim/Universal Pictures
To recap: for the past fortnight, Thompson’s waged a very public blitzkrieg against the fund over what he claims is a push to damage his business.
War broke out after Hostplus sent a submission to Treasury, responding to a consultation paper on superannuation and expressing concerns around “choice of fund, stapling and employee onboarding” – aka Employment Hero’s core business.
The $2bn startup is what’s known as a workforce management platform (WMP) and Hostplus said “we remain highly concerned by instances of WMPs automating the fund selection process and designing that automated system in a manner that distorts and sidesteps the critically important selection of an appropriate fund for consumers.”
The submission continues: “We are concerned that the way that many WMPs have operated to date, and we believe will continue to operate absent government intervention, proves that the software can and is being designed and implemented in a manner that undermines the superannuation system and harms employees.”
TL;DR: from the fund’s perspective, the platforms are making it too easy to switch funds and not providing appropriate advice. From Thompson’s pugilistic perspective, they’re feathering their own nest and trying to restrict choice.
But there’s another issue at play in this too – the ability to monetise the Employment Hero platform with advertising from super funds. More on that in a second.
Employment Hero CEO Ben Thompson. Photo: supplied
Ben Thompson launched his campaign in late Feb on the former Twitter, claiming “Hostplus wants to put us out of business for being too good for members” and accusing the fund of misleading the government.
Then last week, as public skirmishes on the issue flared up across the media, Thommo fired another salvo in his self-described “tin pot campaign” with a LinkedIn post offering Hostplus CEO David Elia $1 million worth of advertising on Employment Hero, while taking a dig at the $30 million+ the fund spends on sports sponsorships, including the Richmond Tigers.
But that’s not the path Hostplus went down. Instead, the super fund’s head of responsible investing, Kylie Molinaro, got on the blower to VC fund Airtree, which has also backed Employment Hero, on March 1, and followed up with a 4-page letter on March 5 about Thompson’s “erratic and unlawful conduct” and “various incoherent, inconsistent and sensationalised accusations” adding that any claim that they had “sought to prevent or limit consumer choice of superannuation funds, or has otherwise acted anticompetitively, are completely false”.
Thompson’s allegations were “bewildering… Not only are those claims inappropriate, false and defamatory, they lack any logical foundation”, the letter says.
Then Molinaro moved in for the kill.
“Unless Mr Thompson’s rantings are brought to an immediate and complete end in the timeframe specified in this letter, Hostplus will refer the matter to the regulators, including ASIC,” she wrote.
“Hostplus will also take all necessary private and public actions to ensure that all stakeholders are properly informed of the facts in relation to Mr Thompson’s conduct. Hostplus will produce a copy of Mr Thompson’s tweets, his private communications with Hostplus, as well as this letter.”
Unless his conduct is addressed, she continued, it will “inform our continuing investment in Employment Hero and our public response.”
Molinaro concluded by asking if Thompson can remain in charge of the company as a consequence of his campaign against them.
An excerpt from the Hostplus letter to Airtree.
If this was meant to calm the farm, Thompson’s view was more they let the fox lose in the henhouse.
On March 12, he jumped back on LinkedIn, decided to preempt what he saw as threats by Hostplus by publishing the letter, mocked his investor with South Park references to “not respecting Hostplus’ authoritah! ” and then started channeling his Darryl Kerrigan vibe in a people’s revolution against Big Super run amok.
He accused Hostplus of lying, but added that 250,000 users of Employment Hero have chosen it as their fund, adding “Hostplus is actually a pretty solid choice”.
But Thompson believes he has a silent majority on his side in this battle, and he’s prepared to be Saint Sebastian in this crusade.
“What’s been most enlightening is the number of people in Australia’s investment community who have expressed their support privately and warned me against speaking publicly,” he wrote, claiming “arguably Australia’s best private equity investment manager, sums up the situation perfectly” with this message:
“Everyone should see the consequences of contradicting the Hostplus agenda, advocating for Australians and calling a spade a spade,” Thompson wrote.
This is all so wild, it’s like the startup version of WWF.
It’s entertaining if you’re not in the room getting crushed, but what’s the end game here?
Is this a founder having a public meltdown? Is it about generating free publicity for Employment Hero?
Why this fight now? There’s no shortage of hills in Startuplandia to die on, so why this one?
Will Thompson singlehandedly change the way a sector predicted to be worth $7 trillion – double its current value – by 2030, operates, especially when workers sign on with a new boss?
Is a $100bn super fund using an elephant gun to kill a fly?
Do they really see an existential threat in platforms like Employment Hero amid an ongoing campaign against industry super funds?
What Thompson makes clear is that he’s only just begun.
Hostplus is a key player in Australian startup investment. Retail funds have not really gone there. Hostplus chief investment officer Sam Sicilia has been lauded as one of the pioneers of backing VCs and startups. But let’s be honest here, Hostplus is Melbourne Club-level institutional. You don’t do this stuff out loud, old chap.
While they’re prepared to take a risk, they put a lot of effort into managing risk. This is a $3.5 trillion industry that now has enough corporate clout through its investments that it’s like Moses on the mountain. The super industry’s institutional investments have the power to change boards and companies.
It’s a point Thompson makes on LinkedIn.
“Employment Hero is a privately held business with a (relatively) tiny investment from Hostplus and this is how they behave when I step out of line. Can you imagine being a public company CEO with a Gigafund directly on your share register or on your board?” he wrote.
“Protecting against this concentration of power and capital is just one reason why choice is so important, albeit it’s the most important by far.”
If this is a game of chicken, there’s a reasonable risk of roadkill.
And there’s a super fund driving the truck.
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