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Do Australian investors keep a close eye on start-ups?

Wednesday, 30 November 2011 | By Steve Torso
Do Australian investors keep a close eye on start-ups? It seems that a lot of investment is coming from the US at the moment, rather than Aussie investors.


Australian investors do keep a close eye on starts-ups, just like American investors do.


The challenge is not whether investors are following start-ups. The real challenge is: are the start-ups communicating their progress to potential investors?


From our research, investors are pitched anywhere between five to 20 opportunities every month.


Entrepreneurs should not expect that they would remember every one of those and track them closely. It is best that the entrepreneur take control of this process.


As an example, one of our Wholesale Investor clients, Myguestlist.com.au had presented to Domenic Carosa 12 months prior to utilising our service.


At that time, they were pre-revenue. Now the company was generating revenue and was experiencing small, but healthy growth.


They reconnected, and within two months a deal was finalised. Since receiving the money, the monthly revenue for the company has now increase by over 500%.


The other interesting thing we have observed is that investment habits change from sector to sector. They also vary from state to state.


Internet/tech investors tend to be proactive and aggressive in their search for deals.


Investors like Phil Weinman, Domenic Carosa, Mick Luibinskas and Simon Baker each have stakes in more than 10 companies through their different vehicles and are very proactive with the media. Other investors tend to be more private about their investments.


Here are some of the investor characteristics we have observed:


Professional investors:


•                Tend to have a fund or a holding company as their main vehicle.

•                Are generally founded by high net worths or family offices.

•                Will actively seek investment opportunities for that fund.

•                Have very specific criteria and tend to be very active with their investments.

•                Due diligence timeframe can be two to six months.

•                Place companies which they particularly like (but may be too early) on a watch list.


Corporate investors:

•                Will be either seeking strategic investment or acquisition opportunities.

•                Have people employed, who are actively seeking opportunities for the investment arm or the main entity.

•                Have very specific criteria and tend to be very active with their investments.

•                Due diligence timeframe can be two to four months.


Private investors:

•                Tend to be more private about their investments.

•                Can track companies from three months to two years before investing.

•                Often are working in or own a professional service firm.

•                Want to invest in sectors that they understand and management teams they trust and respect.



Tips for communicating with potential investors

1) Assume investors have ADD (Attention Deficit Disorder)

Investors are busy and looking at many things and handling multiple tasks on multiple fronts. In your communication you need to be precise, articulate and to the point. It is very frustrating for investors to receive pages and pages of text with no structure. They simply cast it aside and move on to their next opportunity.


2) Be proactive

It is your task to keep them informed with your progress, not their task to follow you. Create a list of people in which have expressed interest in your company. Seek their permission to provide them with updates on your progress.


At a minimum, seek to provide them with a quarterly progress update. If the business is growing rapidly, than you may look to provide the updates more frequently and base it on announcements.


If you were an ASX Listed company, you would be making an announcement each time you had news flow, which could potentially impact the share price. As a private company, you should seek to do this also so investors can get a feeling for the management teams ability to execute.


3) Ensure your updates are relevant

Information you want to communicate to potential investors is...


•                High quality additions to the board or management.

•                New contracts, MOU’s or major clients signed.

•                High growth in sales, customers or web traffic (if relevant for your model).

•                Capital raised.

•                New product, app or website releases.

•                Awards which you have won.


In all your communications with investors, you need to maintain a high level of respect in your conversation.


While your company is the most incredible opportunity in your eyes, they have already met with 50 other people who believe the exact same thing.


If you believe they did not quite fully understand your company, your value or your offer, that is your fault. Not theirs.