Corporate Advisors Raising Capital in Australia (in GFC-like conditions) (in earlier stage businesses) Rob Antulov March 2012
Oct 21, 2014
Corporate Advisors
Raising Capital in Australia (in GFC-like conditions)
(in earlier stage businesses)
Rob AntulovMarch 2012
Corporate Advisors
2
Australian Financial Markets (post GFC)
Raising Capital (post GFC)
Earlier Stage Funding (post GFC)
Example Transactions
Corporate Advisors
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GFC in retrospect
From mid-2007, significant destruction of capital and equity value
Systematic failure of risk analysis, particularly derivative asset classes
Government intervention and nationalisation (but less so in Australia)
Australia emerges as one of the leading international banking systems
and
We’re still here!
Corporate Advisors
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Australia has a Strong, Profitable and Sophisticated Financial Services Sector
Banking systems remain strong and competitive
Well regulated
Engaged with regional and global markets
Ranked in world’s top financial systems
Foreign banks represented locally
Concentrated, with four large banks, but with over 20 institutions proving banking services
Competition is now lower than pre-GFC (Bankwest, GE Money, RAMS)
Funding costs are generally higher
Source: Navigating Reform: Australia and the GFC, FINSIA
Corporate Advisors
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Impact on Australia was Relatively Benign
Strong financial institutions,
Well capitalised,
AA ranking maintained;
Underlying economic strength,
Raw materials, mining,
Low unemployment (3.8% in 2008),
Housing prices held;
Sound financial regulation,
Lessons learnt from prior collapses (HIH in late 90’s),
Key recommendations in international reviews already in place in Australia (liquidity, governance, etc),
Source: Navigating Reform: Australia and the GFC, FINSIA
Corporate Advisors
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Equity Capital Raising in the GFC was Significant
Equity capital markets remained healthy in Australia during the GFC;
Over $100 billion of new equity capital was raised in CY09, with over half of ASX companies raising additional capital;
Most of capital raised was generated in the secondary capital market, with IPOs almost non-existent during the peak of the GFC; and,
Accessing capital via the secondary capital market allowed companies to reduce debt/strengthen balance sheets, at a time when debt capital was less available and more expensive.
Corporate Advisors
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Capital Availability for Earlier Stage Businesses - Never Easy
Developing companies often require access to capital
Banks reluctant to lend (risk, lack of collateral and cash flow)
VC firms move to later stage, with lower risks
Angel investors increasingly important source of seed and early stage capital
Corporate Advisors
Later StageSeed/Start-Up Stage
Early Expansion Expansion StageR
isk
Founder, friends & family
Seed Accelerators
Angel Investors
Venture Capital
Private Equity &
non-financial corporations
Equity Markets
Commercial Banks
$200K $2M $20M $200M+Avg. Raising
# Employees
5-7
yr
Retu
rn
10x
5x
3x
2x
$50K $100K $1M $5M $100M$500K $10M $50M
Source: Jeremy Colless, Sydney Angels Sidecar Fund presentation
Sources of Capital Vary by Company Stage
Corporate Advisors
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Funding Options Available for Start-Ups in Australia Have Increased in Recent Years
FFFF
Seed Funds
Startmate, Pushstart
Founder Institute
Angel Investor Groups
Innovation Bay
Sydney Angels (and Melbourne, Canberra, Hunter Angels)
Venture Capital
Starfish
SXVP
ESVCLP (Yuuwa, OneVentures, Parallel, Carnegie, Constant Innovation, SA Sidecar Fund)
Corporate Advisors
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Angel Investors are a Key Part of Funding Ecosystem for Early-Stage Businesses
An Angel invests their own money and time in an unlisted growth company as a personal decision with the objective of realising a capital return in the foreseeable future
Angel investors provide
Capital
Strategic and operational expertise
Social capital
Popularised in US tech scene in past few decades
Angel investors tend to be less sensitive to market cycles (relative to institutional investors), but personal wealth levels do impact Angel willingness to invest
Corporate Advisors
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Angel Investing in Australia is a Small but Important Source of Capital
The investment market is tough – but Angel investors still active and deals are still being done
Formal angel investment is a small, but growing part of the landscape
Over 15,000 Angels in Australia, who have …
… invested over $1.7b in over 5,000 companies, and
generated over 35,000 jobs
At a co-investment ratio of 1:5, they have delivered a
… leveraged investment in Australian innovation over $5b
Source: AAAI Report - Angel Investing in Australia
Corporate Advisors
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Venture Capital Represents a Small Class in Australia
Main difference funds invest “other people’s money”
Focus on the financial return
Dedicated skills in the investment team
Tighter investment criteria
More aggressive terms (upside and downside)
Typically invest a minimum of $2m (up to $5m - $15m over the life of the investment)
Corporate Advisors
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Recent (Early-Stage) Capital Raising Examples
Acted as Corporate Advisors to Brandscreen
May 2011
for the sum of$1,200,000
Capital raising
Global online advertising exchange
Acted as Corporate Advisors to Live Connected
June 2011
Capital raising
for the sum of$250,000
Online mobile phone plan seller
Acted as Corporate Advisors to DriveMyCarRentals
April 2011
Capital raising
for the sum of$1,300,000
Peer2Peer car rentals
Corporate Advisors
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Development Capital Raise Transaction – Current Example
• Australian e-commerce start-up
• Operational ~18mths
• Already raised over $6m in two earlier rounds
– ~$4m raised from Euro investors
– ~$2m raised from Australia corporate (venture arm)
• Now seeking to raise $10-15m
• Terms agreed with Aust VC
• Two Asian funds looked closely, submitted Terms Sheets, but both felt valuation was high and they could see better (value) opportunities in China and other developing markets
Corporate Advisors
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Raising VC Funds in Australia post GFC - OneVentures Example
Raised $20m of investment capital (March 2010, after three years of pitching);
Matched with $20m from Aust Govt (IIF – Innovation Investment Fund Scheme);
Focus on biotech, IT and life sciences;
Delivers cash and business expertise (operations, market advice, business networks);
In first year:
300+ opportunities
30 DD
1 investment.
Corporate Advisors
Corporate Advisors
Corporate Advisors
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Corporate Advisors
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Summary
The markets are operating
Capital is available
Deal flow is there
Establishing the market is not straightforward
Matching risk, reward and desire is (as always) the challenge
Corporate Advisors
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Thank you
Rob Antulov
Director, Hall Capital
+61 404 872 242
www.hallcapital.com.au
Level 4, 66 Hunter St, Sydney, NSW 2000, Australia
Corporate Advisors
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Hall Capital StrategiesDirectorMedianextExecutive Director, 3eep Ventures Pty LtdAdvisory Board Member, Nearmap/Ipernica LtdAdvisory Board Member, Araya Pictures Pty LtdFairfax MediaDirector of Strategy (incl M&A)PeakhourChief Commercial OfficerCoca-Cola Director, Strategy (Central Europe Region)Marketing Director, UkraineBooz & Company (formerly Booz Allen & Hamilton) Strategy ConsultantSydney Film Festival; Juvenile Diabetes Research Foundation; ChoiceDirectorEducationMBA, AGSM and Kellogg (Northwestern University, Chicago)Bachelor of Engineering (Hons), University of WA
Rob Antulov
Corporate Advisors
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Hall Capital Services Summary
1. Capital Strategy Advice– Conduct strategic review– Identify optimal growth strategy
2. Transactional Services– Project manage transactions:
• Divestments (Trade Sale, LBO, MBO)• Private capital raising• Mergers & Acquisitions• Public capital raising
3. Advisory & Consulting Services