By James Eyers for the Financial Review
The chief executives of two fintech companies preparing to list on the ASX say the Australian public market remains an attractive funding option for young technology companies despite the botched float of music streaming service Guvera.
ChimpChange, a digital bank in the US, is set to list on the ASX this Thursday, after raising $15 million to help lift its profile to millennial customers in middle America, where it provides low-fee deposit accounts.
Avoka, a software developer working for global banks, has just completed a $16 million fund raising from private investors and is eyeing a listing on the ASX in around 18 months.
The bosses of both companies say the ASX’s decision earlier in June to block Guvera from listing reflects a rigour on forward-looking statements which is important to ensure retail investors understand the risks of investing in young tech companies.
“It is fantastic for Australia that in the ASX we have such a well run and governed market place,” said Phil Copeland, CEO of Avoka, whose software platform is used by banks to speed up signing on new customers over mobiles. “We are looking towards an ASX listing in due course but we are not going to rush.”
Companies like Avoka selling enterprise software to global companies should be placed in a different bucket by investors than consumer plays, he says. “There are fads and trends in the marketplace but we are in a different space, we have real revenue and blue chip customers, which is a very different space to something like Guvera. Businesses with solid products and revenue and delivering value to customers will always be in demand and Australia investors will understand that.”
More attention to junior tech companies
ChimpChange managing director Ash Shilkin said the ASX is paying more attention to junior tech companies and its scrutiny led ChimpChange to review and continue to beef up its prospectus as it was being prepared; the company was not asked to restate any information once it was issued.
“ASX wants to make sure there is nothing in there that could mislead a retail investor and give them a sense a company is definitely going to be the next Facebook. There is possibly a misconception that every tech company will becomes the next Linkedin or Uber, and the ASX is trying to make sure retail investors understand while rewards could be high there are also risks,” Mr Shilkin said.
ChimpChange, whose shareholders include Macquarie Group co-founder Allan Moss, is expecting to list on Thursday after raising funds at 80c per share; its indicative market cap will be $50 million. The company, which is not yet profitable, provides transaction accounts backed by an FDIC-insured US bank, the Central Bank of Kansas City, with an attaching debit Mastercard. The registration process that takes less than a few minutes and customers avoid the high fees charged by banks.
Mr Shilkin, a former CFO of CO2 Group, said ChimpChange, which has 87,000 users in the US, is looking to expand into Australia by establishing a partnership with a second-tier Australian bank. ChimpChange’s chairman is ex-Westpac chief operating officer Peter Clare while it recently hired as chief marketing officer Nick Roberts, who took spare change investing site Acorns from zero to a million customers.
Avoka, meanwhile, counts Westpac Banking Corp and Citi as among its global clients. Of the top ten banks in Australia, seven are customers and the company is working with one of the big UK banks. Its software tools allow banks to cut time to build mobile product sites by 70 to 80 per cent, the company says, while enhancing their ability to iterate and make improvements going forward.
Avoka has just under $20 million in annual revenue, with two-thirds of that earned offshore. It is targeting just under $30 million of revenue in FY17. The capital raising of $16 million provides enough funding for the next 18 months for expansion in Europe and Asia.
Previously boot-strapped by its founders and some of its 100 staff, the only previous external investor in the company was one of the fathers of tech industry in Australian, Roger Allen.
Both Avoka and ChimpChange are being advised by Moelis & Co.
Mr Shilkin said ChimpChange looked at venture capital options for funding but too many VCs were insisting on using preference shares to give them preferential treatment including clauses to give them control of the company if milestones were missed by just an inch.
“I don’t know many people really positive experience when deal with VCs,” Mr Shilkin. “But the ASX provides great access to capital and we remain captain of the ship. We have demonstrated we can attract customers at a rapid rate, and by raising public money this is the first time the public can invest in a digital bank like us at such an early stage.
“There is a history of building up value in private hands and then offloading it to retail markets when valuations are at a peak. But we are listing at a $50 million valuation. Now the public has the opportunity to get involved at the first stage.”