Democratising Equity Investment: Equitise’s Chris Gilbert on the changing landscape of investment in Australia.

Chris Gilbert is building a business to change the way average Australians invest. Co-founder of Equitise, Chris and his partner Jonny Wilkinson created an equity crowdfunding platform so novel that they couldn’t initially launch it under Australian lending regulations.  In his latest interview for Techboard Robin Block from MitchelLake sat down with Chris to understand the inspiration for Equitise and gain insight into how digital platforms are changing the relationship between investors and entrepreneurs.

Chris was a speaker at the recent Sydney conference put on by our Partners B2BRocks. Techboard has brought you more interviews with some of the great presenters who presented at the Conference such as Bridget Loudon from Expert360 and Nicholas Chu from Sinorbis 

Chris: “After we built the first iteration of the platform we were forced to relocate to New Zealand. We thought that the market would evolve — allowing us to launch in Australia sooner than we have. We spent the last three years lobbying the government and working with the Treasury to first make the regulators understand the need for crowdfunded equity, and then work in consultation to write the legislation. This was a setback from our initial plan, but it allowed us to go away and gain experience running the kind of operation that we are now able to introduce to the Australian market.

Robin: This is essentially a brand new industry in Australia — what kind of companies are you working with and how do you see your role in the Australian market developing?

Chris: Our baseline for investment are companies that have a product and have received at least limited traction. The risk is just too high when it comes to firms in the conceptual stage. Some people have an appetite for that kind of risk, but we are going for the mass market. We look for companies that are in a stage of development anywhere between having a completed product with good traction all the way up to those turning over several million dollars a year. There are a couple of projects we are about to launch with well-known brands that will accelerate the generation of our investor base. That is one of the tricky things about crowdfunding — the investor base is generated by deal flow, not the other way around.

Building quality deals on a quality platform are the key ingredients in this business. It’s one thing to copy a company like Crowdcube, and try to mirror what they have done. But, without physically running data through your platform, it's hard to create a service that is transactional and fluid to use. We have had a lot of feedback from our customers. The nearly three years of experience we have operating our platform is something I think is going to be quite important in making us a market leader in Australia.

The one systemic risk I perceive presents itself in some of the less experienced firms that have launched in this space. Dealing with corporate law, insuring securities and going through the due-diligence needed in investments are all complicated undertakings. Some of the companies that are getting licenced are questionable intermediaries — to put it nicely. It only takes one platform losing a lot of people’s money to wreck the whole industry in its infancy. That has been a significant focus of our discussions with the ASIC — making sure that intermediaries are licensed properly with the goal of growing the industry in the long-term.

Robin: Do you see Equitise becoming a substantially disruptive force in the lending market?

Chris: I don’t think we are going to take a huge amount of business away from anyone. I think that we are going to act as an enabler for companies that have traditionally found it hard to raise capital. Matt Berry talks about a ‘Valley of Death’ in Australia between $2-10 million in which it becomes difficult to continue to raise the capital requirements needed to grow. VC firms have started investing in that space — writing checks for $5-20 million. We are going to enable more investment in a democratised manner for companies that want to raise capital but don’t necessarily want to give up a huge chunk of their business to private equity — bringing a new revenue source to companies struggling to make it through that middle stage.

I think that our biggest disruptive contribution will come in the long-term through making the market more efficient. This will impact inherently inefficient entities like brokers who do a lot of their work manually. Being able to publish on a platform that sends a request to 30 thousand people and then leaves the initiative to invest with them — rather than picking up the phone and doing everything by hand — is a method of conducting business that will come to impact a lot of actors within the industry. To do crowdfunding successfully, you have to be able to do it at scale, and close a lot of transactions quickly. You can’t do that if onboarding takes a long time. We have invested heavily in automating those systems. Everyone goes through an onboarding questionnaire before we will even spend five minutes with them on the phone. That filter generally cuts through about 95% of applicants by assessing them on criteria that we know they need to hit in order for crowdfunding to be successful.

That system then connects into an automated due-diligence portal. We built that system ourselves and it makes the whole process of engaging with clients very efficient. We initially took our tech development to Eastern Europe. It was great getting a first version of our product built out there, but it eventually became evident that we needed to bring technology in-house. We are now in the final stages of re-building the code for our entire platform in a version that is easily scalable. Doing the projects in-house not only means we have developed the skills to dynamically edit our platform, but we could build it to the exact specifications needed to meet the objectives of the company. We have built a big machine — we are ready to scale.

Robin: What have been the main challenges in getting to this point and is there an ‘end-game’ for the business?

Chris: Jonny and I can get caught up in our own day-to-day tasks. Remembering that our real role in the business is to make sure that the whole operation is headed in the right direction can be a challenge. From the businesses perspective, the biggest challenge is making sure that we bring the right companies onboard. Creating success stories with recognisable brands is what builds the narrative needed to grow.

We have 8 people and are actively looking to expand a couple of positions. I think we will be at around 20 people by the end of the year. It’s a critical period in building our team and retaining a coherent company culture through growth requires planning. We make efforts to keep a fun, family culture. We like to say that if you aren’t busy, you should just go home. We don’t put a lot of emphasis on how or where people get their job done — it’s about results and what works for them. All of our hires so far have been achieved through personal networks. I was surprised that we did not need to utilise a recruiter — but it is something that may become important moving forward. Finding top-tier technology people can be a challenge in Australia.  

I think the biggest lesson I have learned in building Equitise is that you shouldn’t take anything for granted. The small wins are sometimes the best ones. There can be a lot of things that knock you back, and make the task seem impossible. You just have to keep positive and push through. Every person who has built a business has faced problems. Many businesses are built on the back of multiple credit cards. I think we have been lucky in some regards given the number of funding mechanisms on offer in the current market. But, you can never lose sight of the bigger picture.

We are looking to expand further internationally. Singapore, specifically, is a likely place for development. They have match funding incentives for investment and similar corporate and lending laws to Australia and New Zealand. Being there simply makes sense. Expansion into Hong Kong is another move that will eventually become necessary to really access the Asian capital and investment markets. I think that after five years, our investors will expect some sort of substantial return — making good on that is the medium-term goal. For me, personally, I want to build a self-sustaining and profitable business. However, that is also the point at which I will want to move on and try to do it again.

See the website for Equitise.

Read more Techboard Interviews

Robin Block is Head of Engagement at the MitchelLake Group in Sydney. Robin explores the human stories behind digital transformation and how they are changing the future of business.