Here’s Steve Torso from Wholesale Investor on how to attract capital for your startup
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As co-founder of Wholesale Investor, Steve Torso has a good idea of what it takes to get an investment deal over the line.
The platform has been matching companies with potential investors via a mix of online deals and networking events for over a decade, after it was established in 2008.
Around five years ago, it added an Asian focus after spotting an opportunity to strengthen existing ties with the investment communities in Singapore and Hong Kong.
Torso says the company got more interest from Singapore than it expected, where the turnout at networking events often now exceeds that of Australia.
“There’s a really strong connection there. A lot of people in Singapore studied in Australia, including government ministers — some of whom now have kids studying here,” he said.
While it’s market isn’t now just confined to Australia, the broader vision of Wholesale Investor remains the same — to foster an ecosystem of capital investment in private markets to help companies expand their business.
Speaking with Stockhead, Torso leaned on his years of experience to highlight what companies need to do to land the best chance of securing a deal.
As with any partnership, investments are about trust. And in order to build it, it helps to have your information in order.
“It’s more than just, ‘here’s my information memorandum’. Financials are one thing, then it’s your board materials and evidence of work related to intellectual property (IP),” Torso said.
“Every company’s a little different in terms of what they need to show, but you have to be ready because if you’re not ready when a sophisticated investor asks for it, the challenge you’ve got then is their time.”
On that front, he highlighted a familiar refrain when potential investors show interest in a project.
“Time can kill all deals. And our responsibility as a network is, we’ve got to make their job of making a decision whether to invest or not invest as fast as possible.”
What other Is need to be dotted and Ts crossed?
“Share registry is another important one. So one thing investors like to see is the capitalisation table (the summary of a company’s ownership structure and equity dilution).
“And just as importantly, what is the movement in the cap table? So they’ll want to understand what price the last transactions were done at, and what is the current transaction value.
“If they’re a very significant investor, they’ll literally be asking for activity statements and other documents submitted to the tax office — drilling quite deep.
“HR is another one – employment policies, staff salaries. This is stuff that sounds like it’s simple, but actually collecting that information and collating it neatly can be difficult.”
One of the reasons information is so important is that most investors play devil’s advocate in the first instance.
In other words, “they’re looking for reasons not to invest”, Torso says.
“So if it’s a B2C business for example, straight away they’re going to the board and management, looking for been-there-done-that experience.”
“Who are the existing investors? What do the numbers show about the company’s track record and what’s their growth rate? They’ll go through that and decide if they’re investing — often in a very short space of time.”
And since Wholesale Investor has ramped up its operations in the Asian market, Torso’s noted that investors from the region often go one step further.
“When you’re dealing with ASEAN investors not only do they assess all that, but they’ll be emailing people in their network to find out extra info about the CEO before they even start. They’ll often be following a company long before they actually make contact,” he says.
From the company side, it leaves founders navigating a tricky balancing act to both gauge interest and bring on the right partner.
“What we try and highlight is, yes — private investors can make decisions a bit faster. They can make a call within 1-3 months of actually knowing a company,” Torso said.
“But if they’re dealing with an institutional investor or VC for example, that conversation is often a lot longer. And sometimes you hear about these deals being done where the parties initially met 18 months beforehand.”
In that sense, it pays to stay ready for the next opportunity and “always be raising”. Drumming up some media attention can also help, because it’s a simple way of building familiarity.
“A lot more interesting conversations come about when there’s a potential capital raising, whether it’s for strategic purposes or whatever the case may be,” he said.
“Companies can go down that path with existing investors, but sometimes those deals fall through. So it’s a balancing act to maintain those partnerships but also monitor your network for other would-be investors.”