For small and medium companies there are a range of alternatives to raising capital outside from banks. There are more than 30 platforms globally that offer up to $1 million of funding that target higher risk startup companies that sit outside a bank’s risk appetite. However, what is lacking is a focus on established mid-market companies, with one in six attributing poor growth patterns to a lack of finance.
Sydney fintech startup Neu.Capital is one of the first global marketplaces for established mid-market companies to source alternative capital. The startup opens these companies to a wide range of investment offers from both Australian and overseas investors.
“Neu.Capital ensures companies anonymously generate a wide range of offers from Australian and overseas investors in order to secure the best deal fast,” explained Joshua Khoddami, cofounder of Neu.Capital.
The mid-market contributes $425 billion to the global economy each year, with thousands of these companies in Australia lacking the access to funding they need to grow and innovate. With Neu.Capital’s online marketplace, deals and negotiations work much like they would at a roundtable where companies can select investors they see fit and work with them to find the best deal possible. Unlike a face-to-face board room meeting, these online replications give access to global investors and endless pools of wealth.
These mid-market companies that are looking for investment must be looking for a minimum of $5 million, sourcing either equity or debt for growth, transition, refinance or distress. Neu.Capital has a three step process to help these companies acquire investment fast so they can focus on the other important aspects of running their business.
Neu.Capital is built on the Microsoft Azure platform to provide both companies and investors with a safe and secure marketplace. Companies list themselves on the platform initially as invisible entities and show up to potential investors as anonymised investment opportunities. Debt, equity and hybrid investors browse through the list of anonymous companies and can declare their interest in any invisible entity.
For the mid-market company, once a range of investors have expressed interest, each potential investor is shortlisted, which then moves the process into the ‘Dealroom’ category. On this part of the platform companies give their shortlisted investors access to their personal information to allow selected investors to submit indicative offers based on independent due diligence.
For the final round of the process selected investors can negotiate face-to-face by setting up a meeting time to sign a minimum deal of $5 million and a maximum deal of $100 million.
Throughout the process companies have access to online third party trusted advisors. For the second round of negotiation Neu.Capital provides companies with core due diligence packs that have been prepared by leading independent accountants to avoid repeated disruption.
Khoddami believes that competition equals the best deals, which is why multiple investors can simultaneously compete for the business. Different investors propose a range of solutions, which can be easily received and compared on the platform.
For investors a simple sign in process gives them a preview to a range of investment opportunities, which they can access via their phone, tablet or desktop. Expressions of interest can be completed with one single click.
Khoddami explained, “Investors such as private equity, family offices and mezzanine debt funds gain instant access at no cost to a broad range of pre-diligenced opportunities across both debt and equity. Investors have total flexibility to propose their best solution to a given funding target.”
Once shortlisted investors are given access to the ‘Dealroom’ where they can use the provided due diligence packs to provide an indicative offer, where once achieved deals can be made through the platform or face-to-face.
The founders of Neu.Capital come from banking and mid-market growth backgrounds and together have spent 15 months building the technology needed for the platform.
The startup is launching next month and is so far fully self-funded. Khoddami said the team is looking to raise capital for expansion, however that figure is still under negotiation. The team’s main focus is the Australian market and preliminary discussions are taking place for expansion into the UK and Asia markets, where they see great opportunities in the near future.
Neu.Capital has offices in Stone & Chalk and Tyro Fintech Hubs, though Khoddami said the platform has been build to close deals globally, with investors from Australia, UK, Singapore and North America.
Cofounder Cyrus Church said it has been an exciting time to create an online marketplace that allows hard working companies from anywhere in Australia to get the funds they need to grow and innovate.
“A lot of them are great family owned businesses that have been around for generations and deserve to be able to access capital via a competitive process.”
Image: Neu.Captial Team. Source: Supplied