Guest Speakers:
- Adrian Bunter – Sydney Angels
- Matt Vitale – Birchal
- Shelli Trung – REACH
- Richard Lin – Airtree
AJ Chand:
Hi, everyone. Thank you for joining us for the Power PropTech Pathways webinar today. So, just to kick it off, this is one of the first PropTech investment panels that we’re doing through the PropTech Association. I’m very excited about it. So, really what does the future of PropTech look like through this pandemic? Today we’ll be discussing capital raising and investment options for technology startups. My name is AJ Chand and I’m the founder and CEO of Instarent. Also, part of the committee at the PropTech Association. I’d like to thank all our sponsors, especially Stone and Chalk for making this event possible. PropTech Association was formed to help PropTech founders launch, test and scale their startups. I’m excited to have our members join us today on this webinar. Funding is like oxygen to a startup. Through your journey as founders, you will bring to life great ideas going through all of the stages from idea to MVP, to testing, releasing, and scaling. Each step more important than the ones that follow. It has been great to be part of this industry.
AJ Chand:
They’re creative and brave founders, innovating and experimenting with technology to change a very outdated real estate and property landscape. I’m excited to invite today’s panellists to discuss PropTech investment options, pathways for founders looking to raise capital for their startups. I’m looking forward to learning from the experts. One of the most discussed topics amongst PropTech founders is capital raising and it is often confusing for a new founder to navigate the investment pathway. This expert panel hopes to simplify your capital raising journey. To discuss investment pathways, I’d like to introduce our expert panel. First, we have Adrian Bunter management committee member at Sydney Angels, also an experienced angel investor and an advisor working with both established and early stage businesses to assist them with key transactions, to sell the business, to acquire the business, to raise capital or to list onto ASX. Second, we have met the Matt Vitale, he’s a co-founder of Birchal, Australia’s leading equity crowdfunding platform.
AJ Chand:
Matt is an experienced financial services lawyer and entrepreneur having worked in the private sector at a top tier law firm and founded several successful businesses. A recognised expert in the regulation of financial services and crowd funding. Then we have Shelli Trung, managing partner at REACH Australia and Southeast Asia. She is very experienced in corporate venture capital investing and launching a global startup and scale up a [inaudible 00:02:47] of programmes across multiple industries. Then we have Richard Lin, investor at AirTree, also a very experienced investor across many tech projects. Thank you for our panel for joining us today. Adrian, let’s start with you. You have been very active in the investment space for a long time now. Thank you for joining us today. Can you tell us a bit about yourself and Sydney Angels please?
Adrian Bunter:
Sure. So, my original background is as a chartered accountant. I spent 16 years at PricewaterhouseCoopers. Through that time, very heavily working with a lot of private businesses and private business owners from the very, very early stages through to the exits of those businesses. I first got interested in the technology space in the original dot-com days, helping companies with business plans and raising capital and doing transactions at that particular point in time. So, that probably gave me my first taste of the tech sector. In the last 10 years, I’ve been focused in corporate advisory capacity. I’m partner at a small boutique investment bank called Venture Advisory that has a pure technology media telecommunications sector focus, which is a pretty broad cross-section now, given that technology pretty much covers all kinds of businesses. I’ve been investing in angel deals for a bit, I lost track of time, but 12 years now. I’ve done about 45 angel investments myself over that timeframe from super early stages through to multiple rounds of those.
Adrian Bunter:
I joined Sydney Angels back at the start when it started in 2008, and I’ve been on the executive committee since it formalised a couple of years later, over that period of time. Sydney Angels is a formal angel investment group, as it would suggest, based in Sydney. It started when there were no other formal angel groups in Sydney. There’d been a couple starting to form around Australia. And it was really designed to help people get interested in angel investing, but also to help companies actually rather than have to do multiple lots and lots of one-on-one meeting, go to a single place where they could actually meet a group of investors and try to make it easier for startups to actually raise capital.
Adrian Bunter:
Currently there’s over a 100 members who are active investors in Sydney Angels, and we also have a sidecar fund that co-invest alongside the members. So, once the members agree to do an investment, the sidecar fund will also make an investment at the same time. Sydney Angels has invested in 77 startups over that timeframe and it invests throughout the entire year. So, it’s got the six cycle approach each time at their members meeting. Three companies will actually pitch and we take applications throughout the full year. So, people can invest, put applications in at any particular time through that process.
AJ Chand:
Oh, that sounds great, Adrian. That’s a lot of exposure to a lot of startups. What do you look for in startups when you look at investing into and what are the things that stand out?
Adrian Bunter:
Yeah, so look, I think, especially the very early stages. The most critical component of a startup is actually the team that’s actually involved with it and making sure that they have relevant experience or a really deep understanding of the problem that they’re working out. So, you will see sometimes people coming from outside of a sector, putting a new lens on something, which is fine so long as they have a really deep understanding. There has to be a big market opportunity that is available to be addressed. And we need to think that the startup and that the team of building and we’re actually creating a good solution to that particular problem. We like to see some level of traction there. It’s not just about investing in purely an idea. And so you want to actually see something, ideally that’s been built in a better scenario, actual revenues being generated to actually show that there’s customers who are prepared to actually pay for the solution.
Adrian Bunter:
And also, I think I also look for a reasonable view about what the business could look like. Is it actually viable at scale? Can it actually make money? Because ultimately it’s very easy to sell something and it continually make a loss. That’s actually a great outcome for the customer who’s actually buying that, but it’s not a sustainable business model that comes partly from my background as an accountant originally as I am numbers guy. And you probably can’t get that out of me.
AJ Chand:
So, what should startups look for from angels as well? Not just dangers looking at startups, but what should startups look for when working with angels?
Adrian Bunter:
So, I think it’s really important that a startup gets the right kind of angels involved. There’s people always say they want smart money. Sometimes they don’t, sometimes they actually want dumb money, money that just gives them money and just gets out of the way. That can be good for startups as well. But I think ideally you want your startup investor to be passionate about the problem you’re trying to solve and actually be willing to help and have networks and connections if it is at all possible. Now, clearly not every investor can always help. Sometimes they do just provide money, but they do generally come with useful background and experience.
Adrian Bunter:
You’ll find that most angel investors, they’re investing their own personal money, which they’ve needed to earn over number of years. They come with some level of experience. Quite often that’s deep business experience, exposure to lots of companies that can be successful startup founders. So, they’ve actually been through that journey that their startup founder’s going through. So, I think you need to work out as a company, what you’re looking for and what assistance you’re looking for. And then try to find that within the angels that are going to back you as well.
AJ Chand:
I think that’s one of the biggest points when startups are looking at investors, most of the investors who are willing to just give money and sit on the sideline or investors who are actually looking at adding more strategic value to the startup itself. What do you think in terms of having strategic investors into a PropTech, for example, what do you think is the best place to look for them? Or how do you best approach, is it better to look for someone who is an angel investor in PropTech or is it someone who can compliment through previous sort of backgrounds?
Adrian Bunter:
Yeah. So, I think it’s a bit of both in some respects. So, if somebody has a specific desire to look for PropTech investments, I think that can actually be quite useful. There are a whole range of businesses where the problem is not super straightforward to somebody outside of an industry, but somebody who actually has expertise in the industry sees that pain point, sees the problem and actually gets it straight away. You don’t need to spend your time educating them about an industry, so to speak. So, that can be really useful in the property sector. There are components of the property sector that the general investor is not aware of. Strategic investors are actually quite interesting. And I think when you’re talking about strategic, you’re talking about large corporate strategic type investors can be useful, but sometimes can also be somewhat restrictive depending on what you’re trying to achieve from that investment.
Adrian Bunter:
So, if you have a large strategic investor who takes a large significant stake in the business, sometimes that will deter other strategic parties from getting involved if they actually think there’s going to be some kind of competitive disadvantage. So, I think all these things can be mitigated, but they just need to be taken into account. But yeah, if you can find somebody who’s actively interested in the PropTech sector, that makes a lot of sense. And then investors who don’t have as much experience will actually also be influenced by people who do have experience in that. It’s always hardest to find the first investor. Once you’ve actually got the first investor, other investors will actually start to come along as well with it, because they realise I’m not the only person who’s, there’s something wrong with me. No one else is involved. Other people starting to get involved. And therefore, as a result, the sort of the crowd goes behind that and gets involved.
AJ Chand:
That’s great. I think it is that chicken and egg thing, isn’t it? Like when you’re looking at your first investor, the first one that comes for the journey and then there’s followers. I guess, it’s always important to find the first one that really backs you and is willing to work with this startup.
Adrian Bunter:
Yeah. I think that’s right. So, Sydney Angels works on a collaborative investment approach. So, what normally happens is syndicates actually get behind it. So, you will always get a bit of a group forming right from the get-go. And that collaborative approach is designed to be multiple minds, make a better decision then a single person, because you can actually leverage different people’s expertise. So, you might have a person who’s really strong in finance and someone else is really strong in marketing. And somebody else is really strong from a technology perspective and companies need all those kind of resources. And therefore that syndicate coming together can be much more powerful. And there’s also a little bit that safety in numbers that people can actually help each other out knowing that they’re not the sole person who actually needs to do that.
AJ Chand:
Yeah, definitely. So, have you also seen cases being part of Sydney Angels that a lot of, or some of the investors and angel investors have done joined the startup as a co-founder as such, or as having an active role within the company?
Adrian Bunter:
Not so much as a co-founder. There’s been a couple of examples where investors have then got involved with the business on a, I’ll call it more executive level slash employee type basis, but you got to remember a lot of investors don’t want to be the operator of the business they actually want to invest in. So, yes, there’s a non-exec role in a lot of cases, just for someone to represent investors. And that can be a little bit more hands-on than a traditional non-exec role. But yeah, we generally don’t see a lot of people getting very heavily, deeply involved in the day-to-day operational type stuff of the business.
AJ Chand:
All right. Excellent. Thank you, Adrian. Great to find out about Sydney Angels. Is definitely being, I think when I started my journey as a founder, I think Sydney Angels was updated with doing a lot of research within Sydney Angels and yeah, it’s great for the startup community. We’ll go to Richard now, Richard, thank you for joining us today.
Richard Lin:
Thanks for having me on AJ.
AJ Chand:
According to Crunchbase, AirTree has made over 80 investments and led 35 of those investments. So, that’s quite impressive. Can you tell us a little bit about yourself and AirTree?
Richard Lin:
Yeah, sure. I guess I’ll start off with my own personal background. So, I started off as a tech founder myself. I founded and ran an online marketplace for home services for about four years. Went through the process of raising a seed round, scaling it across kind of states before selling the company towards the end of that. And then after that spent a couple of years in management consulting predominantly in the US where I focused on due diligence deals for later stage venture capital rounds in a lot of the Boston and New York tech scene companies. And then I joined the investment team at AirTree last year and have worked quite broadly across a lot of different sector and spaces. But a bit about AirTree overall. So, we’re an Australian based venture capital firm managing over half a billion dollars. And our strategy is really to be a long-term capital partner to our founders.
Richard Lin:
And what that means is looking to invest in the early stages. So, C series A and then doubling down in subsequent rounds as the business grows and scales. And in terms of the areas where we focus. So, I think the main thing we look for ambitious founders who are using technology to solve some of the world’s biggest issues. And I think previously our investments have clustered around quite a broad range of industries from enterprise software to FinTech and digital health, and of course PropTech as well, where we’ve made investments such as [Akistar 00:13:55] and Different.
AJ Chand:
That’s great. So, can you walk through a little bit of a process of what AirTree follows when they’re evaluating a startup for investment?
Richard Lin:
Sure. So, I think echoing a lot of what Adrian said, we, and I think for context, we really do like to be the first institutional investor in a startup. So, what that means is our first date, our first check is often quite written at the very early stages. Quite often, even before startups have any revenue. So, accordingly we place a huge amount of emphasis on the founding team. We focus on, what are their unique strengths, not so much on kind of absence of weaknesses. Do they have a unique insight into the problem or industry that they’re going after? And I think just as importantly as well, is this their life’s work. So, I’d say for us that would really be the top factor for the majority of our investments. And I think similarly we like asset and interesting markets that are undergoing structural change. And then we also factor in especially for kind of later stage companies and rounds. We think about the product and how it’s resonating, and then what’s the path to actually scale from a go to market and economic sustainability perspective.
AJ Chand:
So, you’d say that AirTree’s pretty hands-on at the early stages. Once you make an investment or then you try to help that startup say, bring a product to market or help them try to find pathways to getting the product to best use and to get it into the right hands. So, you play an active, AirTree plays an active part at the beginning stages.
Richard Lin:
Yeah. And I think just to clarify and expand on that, I think what we often say is help when you need us, clear when you don’t. I think all of that, I think one thing that’s stood out to me that was interesting about the AirTree team was that basically everyone on the investment team has had operational founding experience before. And the thing we really found frustrating during that time are investors who just barge in and really start telling you how you should run your own business. I think for us, we’re really focused on backing the founders and supporting them to figure out selves and providing specific help when we can.
AJ Chand:
So, what kind of startups are you attracted to, especially around the PropTech sector? Is there anything that stands out? Anything that you’re very excited about?
Richard Lin:
Yeah, that’s a good question. I think generally the two things we look for, one, fantastic team. Two, interesting part of the market you’re going after. I think those things will always be core to any investment that we write. And I think when we start thinking about kind of different sectors in different industries, we start to apply a bit more of a nuanced criteria based off what we know. So, for PropTech, I think overall it’s extremely broad. So, I think what we try to figure out is what part of the industry, or what part of the market the startup is playing within. And then what are the kind of unique characteristics?
Richard Lin:
So, I think a good example is our investment in Different, which is basically a software tool for homeowners and agents to better manage rental properties. And I need a key nuance there is that you have a fairly complex stakeholder and user interaction piece. So, really thinking about what does the product look like and what does it resonate with kind of every stake holder within that kind of interaction flow. So, I think that’s generally how we think about investments generally within the space in terms of nuances.
AJ Chand:
Excellent. That was a great overview. Thank you, Richard. I appreciate that. And definitely appreciate AirTree has been part of the Australian landscape for such a long time and have funded a lot of great companies. So, looking forward to seeing what AirTree does and congratulations on you as well in making the transition from being a founder to corporate advisory now, to working with AirTree. I guess you have a lot of knowledge about how this happens and how this goes. Yeah, that’s amazing that you’ve worked with so many startups and you’re still in this space, a wealth of knowledge there.
Richard Lin:
Thank you so much [crosstalk 00:17:55].
AJ Chand:
Matt, if we can get you.
Matt Vitale:
Hello.
AJ Chand:
Hello, how are you?
Matt Vitale:
I’m good.
AJ Chand:
Thank you for joining us today. I’ve had the pleasure of raising capital through Birchal twice now for Instarent. It’s such a great platform. You have such an amazing team and we’ve been working closely together for the past couple of years. Just tell us a little bit about yourself and Birchal if you can.
Matt Vitale:
Yeah, for sure. And yeah, thanks for having me. I think the PropTech Association is such an amazing initiative and we were really delighted to see that two funded companies, yourselves and Listing Loop coming together and starting this association, which I think is supremely positioned in an environment where Australians have made so much money through property as an asset class, that’s really been one of our most popular asset classes to date. I like to think that the next phase is we’re shifting towards looking at early stage businesses that are other opportunities. And PropTech really has the opportunity to straddle both of these realms. One that’s more familiar to Australian investors and the other that’s perhaps newer. So, it’s a great initiative and really delighted to be here today. So, Birchal is an equity crowdfunding platform. My background is in law. I worked in private practise. I’ve also been involved in business.
Matt Vitale:
The crowd funding regime in Australia is fairly new, although 2018 was when we launched. So, not so new, but Australia’s industry is definitely a lot more [inaudible 00:19:18] than some of the other industries around the world. The UK is probably the most mature and well-developed, and it’s really the go-to funding source over there for early stage businesses. 2011 was when platform started to emerge there. And this is partly why I’m glad to go third on this panel, but equity, crowd funding. And most people think it’s just about retail investment. And certainly that’s a game changer, but it’s a vehicle to arrange multiple types of investors. And that includes angel investors, funds from time to time and later stage professional investors. But the difference is you’re making a public offer of securities that previously was unavailable or impossible for early stage businesses, particularly proprietary limited businesses.
AJ Chand:
Yeah, that’s looking at how quickly it’s accelerated from 2018 to now. I remember when we launched 2018, I think Instarent did a capital raise with Birchal in 2019. And it was such a great experience, especially from a founder perspective because we’re a business to consumer platform. It brought us a lot of our consumers to our platform. A lot of them who were invested in us and from what our data shows from each of the people they invested into Instarent, if even if it was $200 have made at least six to seven referrals. And that has helped us scale our user base. And then what we did at again in 2021, and that had a similar effect. So, it just seems like it’s accelerating pretty fast. Can you share some numbers on how you’ve progressed since 2018?
Matt Vitale:
Yeah, absolutely. So, look, 2018 was a little bit slow in the first half because the regime was limited to public unlisted companies for a period of time. But the government saw that the regime really needed to be open to get traction. And there was some concessions available for companies that converted to a public structure, but they weren’t enough. And there are a few things probably don’t make sense for particularly early stage businesses to be subject to. So, there were some changes to the regime, to our proprietary limited companies in. That’s really what helped us achieve really strong growth through 2019, then coming into 2020, we’re again, expecting growth year on year, but obviously COVID happened. And we felt that effect like all parts of the economy, but then a really interesting thing happened. And we had one deal, it was large. We were terrified that all that investment activity was going to stop, but surprisingly it was still pretty active.
Matt Vitale:
And that gave confidence to the rest of the pipeline. That in fact, we could still get deals done in this environment. In a sense, I think crowd funding has been a beneficiary of this consumer shift, or basically people becoming more comfortable starting relationships and building trust in an online environment. The old way of raising capital has been coffees and in-person meetings as Sydney Angels and so on. I imagine Sydney Angels are probably doing online meetings now. A lot of it was really real-world in-person networking, which was displaced or impossible for most of last year. So, suddenly what we did became a lot more attractive to a lot of people and that’s been shown in the results. So, we released our funded report a few weeks ago with crowd source funding industry report, and just really showing that the industry is really gathering pace. From a platform perspective, Birchal, we’re just about to approach a hundred funded deal, which is really exciting.
Matt Vitale:
And we’ve raised close to 70 million. The majority of that has happened over the last 12 months, and that’s certainly consistent with our expectations for what the crowd funding industry can achieve over the next few years and really becoming this go-to funding source for businesses at the earliest stage. But the really interesting thing that we’re seeing is later stage or professional investors are really starting to look to crowdfunding platforms to source the deal flow and really participating alongside the other investors. And that’s consistent with what we’ve observed in the UK. I think some data out of Cambridge University shows that around 50% of all of the funds that are deployed through crowdfunding platforms over there come from professional type investors. So, that’s certainly consistent with our expectations here. And a couple of, if you’ll let me just get into it, a couple of the key benefits that I see of crowd funding for investors and companies, but the fact that companies need to produce a regulated disclosure document is a key benefit.
Matt Vitale:
Some people think that this is a deterrent or cumbersome. AJ, you’ve been through the process a couple of times. Some of the criticism of early stage funding is it can be opaque. It can be difficult to get information. And often there’s not a standardised form for preparing information memorandums and other types of documents to market the offers. But we have to take companies through what we call a gatekeeper process and they all have to produce a crowdsource funding offer document, which is essentially a cutdown version of a prospectus. It’s certainly not as cumbersome as preparing a prospectus and it’s a document that’s pretty achievable for most companies to produce. But one of the key benefits is just having this consistency of information out there when people are marketing their offers, but also getting companies comfortable with making a public offer of securities in a far more achievable and accommodating environment. And I think that’s a benefit that we will realise over time as these cohorts of businesses that have been through the process, execute their plans, become bigger businesses. And in my view are better businesses for it.
AJ Chand:
Yeah, definitely. I think running through the offer document process was eye-opening to say the least. I guess what we did put everything together into one place, which we need for investors in general, but I think it’s more so having startups and early stage startups, looking at things like that and putting offers together and being completely transparent to the investors when they go out to do equity crowd funds. And that is as transparent as you can get with all the information out there for an individual to buy shares into your company. Can you explain a little bit about that gatekeeper process? I know that we have a lot of startups that are very early stage. Can you explain what best suits the virtual platform? Is it business to business platform or business to consumer platforms that tend to do well?
Matt Vitale:
Yeah. We describe it as businesses that have a strong consumer proposition? And so it’s broader than B2C, because we have businesses that don’t have a product or service to an end consumer. CBM project is probably a great example of this. It’s a bean. It sits in the water, collects waste plastic. It’s a piece of public infrastructure. It’s like buying a street light for a consumer. You would never do it, but thousands of people invested in that, because they’re addressing a need that people can identify with and the people want them to succeed in their mission to clean up our oceans. Our process is really geared towards building an audience for an offer. And then in companies, some understanding of what demand is out there for their offer. So, they can accelerate into that demand, because historically companies would spend a lot of time working on their offer documents and often paying a lot to corporate advisors and things like that.
Matt Vitale:
And then really have no guarantee of an outcome. So, it is an intense period of work and an intense process, which it needs to be that way because we like to have pretty low barriers for companies to get out there to market their offers and then really use the crowd and the questions that are coming from the crowd to shape how the offer is presented. And an important point on this is companies often ask us to price their offer or give them feedback, or if we will price their offer. And the answer is no. And we’re probably a little bit different to the corporate advisors and others active in the early stage space on these. So, we’ll offer a view, but we see ourselves as just one data point, but marketing and expression of interest campaign, which is the marketing campaign before an offer, companies will identify investors that are interested in their offer.
Matt Vitale:
And we really think that they offer the most revealing feedback for where an offer sits and how it should be priced. Once you open an offer, you can’t change any of its terms. So, it’s really important to get that up and make sure that what you’re positioning the offer at is consistent with the support that you’ve got from the crowd. But in summary, it’s probably about a 12 to 12 week process that allows a few weeks to set up the company profile and agree on the marketing and PR plan for the offer. Two to three weeks to run that expression of interest campaign while a company’s working on its offer document. Usually they’ll share the offer document in draught with a selection of these AOIs just before opening the offer, which then runs for another two to three weeks. And then our settlements process. It can take up to six weeks to collect all of the funds, but usually we’re in a position to settle 70 to 80% of the funds within the first 10 days of the offer of the settlement process.
AJ Chand:
Yeah, definitely. It was a great experience going through it as a founder. And I’m sure you get a lot of queries from the prospects that we have on here too, to look at.
Matt Vitale:
Maybe I can ask you a question on your experience with how has your engagement been with investors that you’ve had through the process?
AJ Chand:
I think it has been great a lot of days. A lot of sophisticated investors within Birchal and who bring a lot of value to a startup. A lot of those startups, a lot of those sophisticated investors have brought on not only just property stock, which is crucial for Instarent, but they have brought on a lot of advisors and ideas and we have a advisory board now made up of a lot of our sophisticated investors, also through all our Slack channels. And what we do is we communicate constantly as to how we can evolve the product. So, this is about more so getting more minds than just the executive team or just my team. It’s about having the broader community, because this product is getting built for the community at the end of the day. And that was one of the sparring things for us to go for equity crowdfund, but also what that did was brought us a lot of press.
AJ Chand:
At that time we were with AFR, we were with most Channel Nine news. A lot of press was driven to Instarent through the process, and that was spurred on because we were doing equity crowdfunding. And that’s what happens when you put yourself in front of the public, the more they want to find out about you. They want to know what you’re doing, how you’re making a difference. And yeah, I’m just, I’m so grateful for all of the sophisticated investors. I mean, some of the high ticket investors that we have within Birchal, they have invested into Instarent.
AJ Chand:
They’ve really just brought on a lot of ideas that now are coming to fruition, which is something as a side effect. I didn’t think that it would go like that, but it did. And I’m very grateful that you started Birchal. It’s really good. Okay, thank you for that, Matt. We’ll come back to you a little bit later and thank you, Shelli. Shelli, thank you for joining us. I’m a big fan of NAR REACH. Thank you for being part of this panel. Can you tell us a little bit about NAR REACH and how you work with PropTechs?
Shelli Trung:
Sure, definitely. And thanks for … I’ve been actually busy taking notes. I’m sure as all the attendees have been. Great to see some fellow investors, we’ve already done deals with AirTree. I know for me in the past, as well as Sydney Angels. Birchal, we have yet to do a deal together, but I’m sure it is ready and waiting soon. Have fingers crossed. Perhaps I’ll just kick off with a bit of my background. I actually spent the first 10 years in corporate innovation back then it was called change management. So, not as sexy as innovation, I think, the wording certainly is a lot better now. I was basically the gatekeeper for a lot of technology. And so I suppose I have a slightly different lens in that environment. I worked in public transport. I’ll tell you when customers and commuters are not happy about a train not showing up and you would hear about it.
Shelli Trung:
And so I worked in a medical organisations. I worked in public transport. I also worked in banking. So, a lot of change management, a lot of implementing new technology. But while I was doing that, I was actually buying real estate. And when the GFC happened in the states, I actually moved over to buy real estate. So, I do have a very call real estate background combined with innovation technology, a lot of B2B deals. And then in the state similar actually to Richard, I was in Boston, in New York buying real estate and then really starting my own media company. I was actually raising my first round of funding, because I’d done okay out of the GFC and was able to bootstrap my business. So, bootstrapping businesses are a great idea if you don’t need to raise, certainly it makes sense to do that, to hold off if it makes sense for your model.
Shelli Trung:
But I ran my business for three years and then I actually got an offer to purchase. I actually, I’ve had a couple offers to exit my business when I was raising my first round, which I wasn’t really expecting, but yet exited the business. Didn’t really have a reason to be in New York anymore after many blizzards. And again, Richard probably knows all too well about those. Came back home to Australia. Didn’t know really what to do with myself. I started really helping startup companies frankly just pro bono mentoring for a lot of accelerators and programmes and teaching fundraising. Bringing in frankly, my network, as I certainly didn’t do it on my own. And bringing that network and angel investing, actually. I started angel investing. So, I’ve gone through some of this cycle, angel investing, and losing some of my own money.
Shelli Trung:
I certainly lost money in real estate as well when I started and then really got asked to manage our QTs investment fund with creative enterprise. So, I managed a creative tech fund before I moved into REACH, managing the REACH accelerator programme. And look REACH itself is backed by Second Century Ventures, which is one of the largest global real estate technology funds. We specialise in real estate relevant technology, not necessarily PropTech, technology that is relevant to the real estate sector and adjacent sectors such as banking, insurance construction. We’ve got companies like DocuSign, actually our very first investment. DocuSign, legal tech company, notarize on which we did 130 million series D for earlier this year, I think it was. A notary services, marketing services, but obviously including property management, construction, ESG into smart buildings, urban development services as well. Brings a lot of, I guess, my own expertise in the B2B area.
Shelli Trung:
But for me, when I came back from New York, I’d actually be really being very well behaved and didn’t do much in the PropTech sector for three years and then watching how there’s so much buzz about in FinTech. And what about PropTech? What about PropTech? Why is the sectors one of the biggest employers? Why is it getting overlooked? And so I picked up the phone and I called the NAR REACH guys and convinced them to move to probably the furthest point from Chicago to expand out to Asia Pacific. First, like I said, they’re one of the largest global funds in real estate technology. They’ve done 150 deals, I think, in total, something like 14 exits. We do about 40 deals a year now, because we’ve actually got five global programmes, 40 deals a year, 22 follow on rounds per year.
Shelli Trung:
And really the idea is helping companies access to real estate vertical. So, we’re not just a fund. We are attached obviously to Second Century Ventures. Second Century Ventures is the venture arm for the National Association of Realtors, NAR for short. And we’ve got a lot of acronyms, NAR, SCV, Second Century Ventures, and then REACH. So, really NAR is the parent company. So, it is a, I suppose, in very similar ways, sort of a corporate venture fund, but it is an evergreen fund. So, we don’t have a fixed size. It’s just through our exits over the years, we’ve actually been able to just to self-fund a lot of our activities, but NAR is the corporate entity. It’s actually a not for profit. A lot of people aren’t aware of that. So, not for profit actually has a venture arm, which is for profit, runs like any other venture arm.
Shelli Trung:
But NAR is an association, a real estate and members association, actually the largest member association globally. It just happens to be a real estate. It’s got 1.4 million real estate industry members. Most of them are real estate agents are residential agents in the US, but it does include a large selection of commercial real estate agents. This is one of the really key differences of what we do. We are experts in real estate. Every one of the senior partners have been owners, operators of real estate. Developers in real estate. We know it front to back, back to front. And most of us have spent 10 years in the sector doing a lot of the hard work of selling, buying and selling. So, we do know the problems intimately. We know the network very intimately as well. This is one of the things about the real estate sector.
Shelli Trung:
You don’t really ever leave it. It is such a big sector, but also very relationship driven one. And I’m sure AJ, you know this very well. And so this is one of the unique things about REACH itself. REACH is a scale-up programme, but it does come with an investment that’s roughly about 150K on a [inaudible 00:36:43]. We focus on mostly series A series B companies. And the reason for that is that if you think about the fact that we have so many members, if you’re really early stage, you probably aren’t really to focus on 10X your revenue. So, this is where the key point for us is really the questions we tend to ask is, are you ready for the scale-up phase? Are you ready for 10X your revenue into the real estate sector? Do you have a team in place?
Shelli Trung:
Do you have some sort of customer onboarding process that kind of works? So, it doesn’t have to be perfect, but this is some of the background with NAR REACH and what we can actually do to 10X your revenue, bottom line, very much a sales and marketing programme. So, for us, our sort of diagnosis of the right companies are really, are you at the right stage for us to help you? And can we actually help you? And can we help you 10X your revenue? If we can’t anyway, then we’ll just put you into other directions. Like AirTree, like Birchal, like Sydney Angels. And for us, it’s very much more than just cash, but obviously for us, we do want to do follow on deals. And I’ve already mentioned we do 22 follow on deals, about 50% of our follow on deals.
Shelli Trung:
Actually we’ve never turned away any of our portfolio companies follow on deals. The only ones we didn’t do were the ones that actually had their rounds already filled. So, that’s obviously a great result for the companies, but we ended up not following on, I think, two or three of them in the last 30 years. So, this is a very, I suppose, the key difference between us, we’re very real estate focused, but we don’t just look at real estate PropTech. We look at technology that is relevant to the real estate sector. So, that, for example, if a CRM system is working in a completely different sector, but it wants to start accessing more real estate customers. This is where we can provide a sort of a plug and play type role. So, like a DocuSign, like I said, DocuSign’s legal technology has relevance and very critical to the success of a real estate transaction. But that’s a very long intro. There are a lot of moving bits and pieces with that, but you’re dealing with three separate brands there.
AJ Chand:
What makes a PropTech suitable for REACH APAC?
Shelli Trung:
Yeah, there’s five REACH regions. So, I manage the Australia Southeast Asia region. There’s a UK programme as well as a US programme and a Canada programme. So, all of us actually take companies anywhere in the world. We’re a global group. I’ve invested in companies in Singapore, New Zealand and Australia. Mainly we have every year companies. I had a $3 million evaluation company from India actually apply last year. I actually didn’t feel right about taking them, given the time zone difference in front of the programme.
Shelli Trung:
When it goes back to the live programming, we’ll be able to take those international companies again, but all of us accept applications from anywhere in the world. One of the key criteria is do you want to expand in the region that you’re applying to? So, if you’re an Australian company you’ve already saturated the 90% of the real estate market in Australia, and you want to go to the UK next, you should apply for the REACH UK programme. By the same token, if you’re a UK company and you’ve fully saturated that market, and you want some help accessing the Asia Pacific and Australia Southeast Asia market, then you should apply for my programme.
Shelli Trung:
And that’s really where I suppose your next 12 months of sales and marketing efforts should be focused on, again as a sales and marketing programme. And again, the key questions are really, are you ready to 10X your revenue? Do you have a team built? Do you have technology that can actually scale to that rapid growth? And when I say 10X, roughly three to five years time. Mind you, we’ve had one of our very first cohort get to tech. They’ve graduated in December and obviously it’s August now. They’re already doing 10X through REACH from all of our connections. So, sometimes it can happen very quickly, but this is one of the core questions. Are you ready to 10X your revenue? Do you have a team in place, in my region, obviously, because you’re writing or you’re applying for my regional programme.
Shelli Trung:
So, 10X the revenue. Are you ready for it? Is your team ready? Do you have some sort of understanding of your sales and marketing process and your customers and the problem’s perhaps in your sales and marketing process, but PR as well, stepping all that up. And then for us, can we help you? If we don’t feel like we’ve got … for example, it would be helping a [inaudible 00:41:04] solution. Do we have potential customers and mentors and pilot customers who would be interested who are already mentors in our programme, or we have to bring them in. Do we feel like we already have that network to very easily do help you 10X? Obviously we can’t do it for you. We act as advisors, mentors and bring in the network, but we need you to feel like you you’re coming on this journey with us.
Shelli Trung:
So, you need to be able to have your team ready and we feel like we can help you this as well. And we work as partners together. And obviously as you grow and graduate from the programme, we’re looking to follow on that investment. In terms of follow on check sizes, they do tend to start about a million US and that’s sort of, again, series A series B territory. We have led a hundred million dollar rounds as well, very global business. And I think one of the really great things for Australia to bring from my time in the US to bring it back to Australia, bringing a very top tier global fund that’s done so many exits and being able to help actually just make the journey a little bit easier for PropTech companies, because I had to do it myself and figure it out.
Shelli Trung:
It’s nice to be able to serve the community by bringing this sort of this major fund out to this region, but those are the basic questions. In terms of themes, look again, residential commercial, construction, banking, finance, insurance. There’s no really key theme. I think for us is most of the time people are just too early. They’re just too early, but we do encourage companies to actually apply early so that we don’t take your competitor. Apply early, let us know you’re actually here and you’re working on something cool. It’s okay to apply early. We’ve got so many examples of companies who’ve applied twice and still had to come back. We always offer a feedback session at the end, those who’ve taken it up on board improved what they’re doing. Actually I’m actually reset two early offers for my 2022 class. I only opened the applications last week, but those folks actually get access to an early application channel. So, a bit of a tip for the PropTech Association members. Apply early. Okay if you’re early. Get some feedback and figure out and maybe next year come back for REACH.
AJ Chand:
Excellent. Thank you for that, Shelli. You’re definitely very experienced and I do ask all the PropTech founders that we’ve got on here to see if you fit into that programme and to reach out and more feedback is better when you’re trying to scale. Thank you everyone for the panel today. I hope for the people that are on the call, that it better explains how startups should approach capital raising and what kind of different investment options are out there. I’d like to go out and ask general questions now too, while I’ve got you guys here. Have you noticed any changes in investment and capital raising since COVID? If we can kick this off with Adrian, if you don’t mind.
Adrian Bunter:
Yeah, probably the one key change is that people have become comfortable investing in people they haven’t actually met face-to-face. So, if you had have asked me three years ago, what did I think if you had to do an investment in somebody with a team is such a critical component to the investment that you’ve never met them and don’t get to spend time with them in the physical room. I would have said, look on a really rare circumstance, possibly. That’s proven to be completely false. People are doing multiple investments and have become quite comfortable with getting to know people and interact with people over Zoom. And that actually creates a greater opportunity for both companies to raise capital from people that ordinarily wouldn’t be able to get to and for investors to invest in people they never would have ordinarily met.
AJ Chand:
Yeah. Yeah. That’s definitely a lot more reach with wifi, right? It’s incredible. And do you, Matt, I think obviously crowd funding has been booming through this pandemic and it was that a surprise to you? Or is this something you …
Matt Vitale:
Both. I think surprise because I think March last year we just assumed the worst, like everyone and just needed to put the shoulder to the wheel and keep going and echoing what Richard said that, that being consistent with our experience, sorry, Adrian said it’s consistent with our experiences that people are more comfortable to start relationships in an online environment and I think that’s really good for the efficiency of raising capital, but also just to get out there and expanding the potential universe of investors, which really bodes well for crowdfunding.
AJ Chand:
Excellent. And Shelli, have you seen an influx of more applications or less applications during COVID, do you think? You probably have a lot of data on PropTech and international real estate PropTech deals as such as well?
Shelli Trung:
We’re certainly application-wise, it’s not more or less really. It’s pretty much about the same, but I think one of the things that I have been speaking to a lot of the VCs about, certainly during March when everyone was like, how do we function digitally? How do we do deals without meeting people? I think a lot of office workers would have went through that transition of like, how do we actually function and continue with our lives? And there was that pause for about two or three months before we figured out how to homeschool, how to do all these things. For me, work with my cat at home all the time. And these are sort of things that I think just the BC community hit a bit of a pause just to figure out how do we do all this?
Shelli Trung:
And some BCs, other I spoke to, have just basically said, look, we’re going to just top up our investments or just focus on topping up on existing investments in our portfolio, just so they can survive the pandemic. And that was certainly a bit of a dialogue. So, you might’ve seen a bit of a pullback through for several months last year, but I think once we figured ourself out … Some people’s lives have been severely disrupted and I don’t want to take that very lightly. Certain people are doing it very tough. I think for the PropTech sector and it’s actually been a fantastic time, because if your innovation is digital first, it hasn’t really impacted the access to venture capital. Again, I think the tap has certainly turned back on again, perhaps alluding back to what Adrian said, and we just figured out how to actually do deals without actually meeting people.
Shelli Trung:
And again, going back to one of our companies, UbiPark, they’ve been stuck out in Melbourne lockdown, celebrating 200 days of lockdown for Melbourne recently and they’ve been able to convert global customers without going anywhere. So, I think venture capital has certainly just had to adapt a little bit, but were pretty much a digital community obviously. And I think the access to capital is certainly a lot more than it was, but perhaps very much A series B level, not so much still, I think the seed stage, we’ve seen a lot of early accelerators, just corporate accelerators no longer around like [Rudy 00:47:32], like the [blue chilies 00:47:32]. And so that’s been challenging, I think, for founders. I think a lot of angel investors have also stepped up as well, which is great to see. I think there’s just a couple of different things that founders need to be aware of.
AJ Chand:
Yeah, definitely. I’d like to go through a couple of questions now. This is from Lev for Adrian, “Do you only focus on projects targeting AU market or do you look at projects internationally as well?”
Adrian Bunter:
No. And in fact, probably the target market is probably less relevant. In fact, we actually look for things that have global application. For angels, and historically you used to invest in a local area where someone you could drive to. Again, Zoom has actually changed that, but traditionally Sydney Angels members looked for people who have located on the east coast of Australia. There’s the first one. But we actually have applications from everywhere, including from New Zealand. And you’ll find that actually investors will invest across different sectors, but actually a global application is much, much better for something than just a pure local application.
AJ Chand:
Yeah. Okay. Yeah. I think that is in sync with a lot of tech startups, the way I think the founders are building the tech startups now. It needs to be scalable globally. It needs to be something that could reach global markets.
Adrian Bunter:
There are some that are focused more on the Australian market generally, and that’s completely fine if it’s a big sector around that. And you can do very well by doing a very good solution, just focused on the Australian market. But if you can then also replicate that elsewhere, even better.
AJ Chand:
Yeah. Excellent. Thanks for that. And then I’ve got Kylie as well, Kylie’s got a question, “How much money do you need to invest to qualify as an angel?”
Adrian Bunter:
This is an interesting question, because it’s a lot less than what people think. So, you’ll find that most people’s first round investments are probably in the round of sort of 10 to $20,000 in a particular company. The key thing is though is you need to be highly diversified, because a large number of them you’ll lose money on. So, you have to have a fully diversified portfolio. Sydney Angels encourages people to have a desire to invest about $50,000 a year. And to be able to do that for multiple years through that, but there’s no forcing of an investment. Some people invest as small as $5,000 in multiple deals and then others invest 25, 30, 40, $50,000 in transactions, but it’s generally 10 to 20 is the sort of the normal range.
AJ Chand:
Yeah. Yeah. I think that’s part of angel, I think. And it’s also about building relationships at the early stages. So, if they do invest a little bit, you show progress with that. You show that the product is accelerating due to that. And then you get them better buy-in for further rounds. Same question for you, Matt as well. How much does an individual need to invest in a crowd fund? What’s the minimum?
Matt Vitale:
This is usually decided by the company. As a platform we’ll host offers with a minimum parcel size of as low as $50. So, that’s the absolute floor. Some companies might choose to set that minimum parcel size. A retail investor and a retail investor is basically everyone, unless they’re not, can invest up to $10,000 per company per year. We can accept investments for greater than that amount, but we need to determine the investor’s status as a wholesale client, which has a specific definition under the co-ops act. The way that we, our default option for doing this is with an accountant certificate, showing that they’ve basically got more than two and a half mil in investible assets or greater than 250,000 in gross income for the last two financial years, which most people in that category and who have invested before would be familiar with, because they’re certificates that they would have had for other investments, but essentially it’s ranges for retail investment between 50 to $10,000.
Matt Vitale:
And it’s an interesting point, just picking up on what Adrian’s just mentioned. Diversification is key. This is a very risky asset class as people know. And the way that you can cover that and stay in the game is by making lots of smaller type investments. But in the old world, the $5,000 minimum investment or $50,000 minimum investment, you can see that pretty quickly you need a fair amount of capital to have a sufficiently diversified portfolio. This is probably one of the key benefits for investors of the crowdfunding regime is making these opportunities available to everyone and enabling them to invest smaller amounts. So, it’s far more affordable to have a diversified portfolio in this world than perhaps in the old world, but that’s on the assumption that platforms like us can serve quality companies and have sufficient deal flow for investors to invest in. And that’s what we focus on as a platform is just bringing great opportunities to market.
AJ Chand:
That’s great. And also I have a question from Abby for what kind of technical readiness does REACH look for. I MVP for a building envelope access robot cleaning … window cleaning and facade inspection. I guess that’s what they do, but definitely pre-revenue. So, what kind of technical readiness does REACH …
Shelli Trung:
You don’t take companies pre-revenue. Again, mostly series A series B companies. 80% of the companies that come through REACH are in that series A series B territory. We do take late seed stage companies as well. Certainly very rarely. I’m not going to say never, but like very rarely we will take a pre-revenue company because given again, we’re focused on 10X the revenue. If you don’t have any customers, then you can’t really tell us the customer journey. You can’t really tell us how you onboard them, because our goal from the programme is actually to improve the sales and marketing, the PR, the exposure and the access to the real estate network. So, if you don’t already have that sort of ready to go and have, say like a five customers or a handful, like at the bare minimum, it’s really difficult for us to really help or for you to convince us that you’re ready to 10X your revenue, because you don’t have a working product and you don’t have some customers.
Shelli Trung:
You can’t tell me some of the current onboarding process. So, I think that’s really key. But mind you, in saying that though. I still think that anyone at that stage should apply, because you’ll get a free feedback session from us. And we’ll be able to tell you where are some of the things you might want to fill in to come back next year and where you need to get to, but then this is quite a critical thing that we just want to give back to the community. Because we’re backed by a not-for-profit industry fund and this is us serving the market as well. So, really important. But if you’re really early, you’re probably not really going to get through the shortlist process, but still apply. See how far you get, get some feedback, come back next year. And so that you’re a lot more ready to pitch us next year.
AJ Chand:
All right. Thank you. Thank you, Shelli. Ladies and gentlemen, we could discuss this all day, but I’m afraid we’re going to have to wrap it up. Thank you to our panellists. Adrian Bunter, Matt Vitale, Shelli Trung and Richard Lin. I’d also like to thank PropTech Association committee, Kylie Davis, Jennifer Harrison, Marie-Anne Lampotang, Simon Hayes, Kylie Dillon, and John Minns for the help with this event. I also like to thank my team at Instarent for being amazing. We’ll be holding more events over the next few months. So, stay tuned while we discuss more capital raising pathways for founders and help them get better clarity as to how they should approach this. A big thank you for Stone and Chalk for getting behind us for this event. Thank you everyone. Thank you to our panellists, again. This is AJ signing off. Thank you guys. It was a pleasure. Opened my mind to a lot of different thoughts.
AJ Chand:
And I think one piece of advice I’ll give to startups out there. Keep interacting with companies like Birchal, like Sydney Angels, like REACH. Although you might not be a good fit right now, you will eventually be a good fit. So, just start getting feedback, start working together, start looking at options for how you could scale your startup and it will eventually come together. And for anything else, PropTech Association is here to answer any questions that you guys have. So, I thank you very much. Have a good one. And hopefully we have this locked down soon. So, thank you very much.
Matt Vitale:
Thank you. [crosstalk 00:55:23] later.
Adrian Bunter:
Bye.
AJ Chand:
Bye.
