When it comes to Australia’s ecosystem for raising capital, few participants are better qualified to offer commentary than Steve Torso – co-founder of investment platform Wholesale Investor.
Stockhead caught up with Torso in the leadup to Christmas to get an update on what key trends he’s focused on from his vantage point matching companies with potential investors.
By sector, Torso said deep tech was one area seeing plenty of activity and he also highlighted a shift in sentiment towards renewable energy and clean tech.
“I think there’ll be a theme for 2020 where more cleantech companies are looking to raise capital and weigh up overseas opportunities,” he said.
In terms of Australia’s startup ecosystem, Torso said Wholesale Investor remained focused on facilitating opportunities for Australia’s network of high net-worth (HNW) investors – a cohort which would continue to play a crucial role in the years ahead.
“There’s a few myths we work with, and one is that it only takes two or three months for a company to raise money,” he said.
“This idea typically gets pushed on from investors and advisors, and companies feel like they’re failing if they don’t. But there’s actually very few companies in Australia that can raise money that fast.”
Despite the undoubted growth of Australia’s venture capital industry over the past decade, Torso said VCs alone only make up part of the funding puzzle.
“One thing to highlight is that when people think of VCs, the larger funds will typically invest in about one out of 100 companies,” he said.
“And it’s often less – the lowest I’ve heard is one in 818; they looked at 818 companies and invested in one.”
“So you’ve got to ask yourself the question; companies out there are getting funding so where’s it coming from? And I think that’s where HNWs and family offices have played a massive role in Australia.”
That same theme ties in with Wholesale Investor’s strategic focus – to build a more streamlined and efficient environment where companies can be matched with the right investors.
“The entire ecosystem is pretty fragmented — you find there’s no real end-to-end processes, and if participants are doing that they’re sort of competing with the industry, not enabling it,” Torso said.
“So our focus is on how we can bring the ecosystem together and create an end-to-end process that makes it simpler for investors to access info they want.”
The evident gap in the market was the main catalyst for the development of CRIISP, the SaaS platform that gives companies a more direct portal to raise from Wholesale Investor’s investor network.
And a key focus of the business heading into 2020 is to make early-stage funding as much of a “science” as possible.
“That lack of connectivity is tough, and there’s very little analytics about the process of a deal,” Torso said.
Over time, Wholesale Investor will then build a proprietary dataset that streamlines the capital raising process, matching companies with investors that are likely to be a good fit and, ideally, reducing the number of potential meetings.
“Founders don’t always think about the fact that in order to get one investor, you often need to speak to anywhere from 10 to 40 investors,” Torso said.
“It’s a business development exercise – you don’t speak to one investor, they hand you money and it’s a done deal.
“So then the question for us is – say the average conversion rate is one in 20, how can we improve that so it becomes one in five? And what difference that could make to a company with the changes they can implement.”
“If you think about early stage investment, sometimes a sophisticated investor can make a significant difference because of strategic value they add — networks and so forth,” Torso said.
“So that’s the role I want to play – where a company in Australia can be matched with a relevant investor in the UK or Singapore, and either facilitate a move into that market or create new trade opportunities.”