A very good summary Steve! The only thing that we would like to add is that under the ASSOB model, a company can raise $5 million every 12 months, but you can only have 20 retail investors every 12 months. This is subtly different from what you have written.

In practice, investors come in to the process as a mixture of retail and sophisticated, and crucially, issuers can say ‘no’ to a retail investor in favour of including a sophisticated investor into the mix. As the ASSOB sponsor, it is our job to keep an eye on the investor mix.

However if you assume only retail investors proceed in the early stages, 20 parcels at $50K each still gets you to $1 million, which is a pretty good start! At that point the business has money in the bank and increased bargaining power when it comes to dealing with the bigger fish.

Also your comments on the costs of an ASX listing are dead accurate. They usually run close to $1 million even for a very small IPO, which makes it an incredibly expensive option.

Since the GFC the ASX are now making it even more difficult for smaller companies to IPO and now require that most are profitable – which makes it unsuitable for companies that need funding for R&D, working capital or further development expenditure.

Simon Ward
Managin Director
Tauro Capital Partners
E: sward@taurocapital.com.au
P: 0422 380 810

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Steve Sherlock Reply:
February 3rd, 2010 at 4:15 pm

@simon.

good point about getting some funding in to increase bargaining power.

though i guess the game breaker for many cash strapped start-ups is that ‘ironically’, they’d need to ‘raise money’ so that they can afford to ‘raise money’. Perhaps that’s where friends, family and fools come in (oh or lotto

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Love the concept of ASSOB (unfortunate acronym though) but on checking the offers of some of the companies I was a bit perplexed that their financial data (history) wasn’t available. I understand small company’s need for non-disclosure, but…. I need data!

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Ian many of the companies are pure start ups and don’t have historicals. Where they exist we always include them. We also require clients include a balance sheet as well.

Check out 2 new listings by way of example:

[Editor's note: text deleted at the request of commenter.]

It’s important to realise that there are a number of different ASSOB sponsors and opportunities listed on the board and they do vary in quality in my opinion. Our strategy has been to restrict our listings to high quality business opportunities. We get approached by many groups who try to enlist our aid in the capital raising process.

A very real problem for many customers is that they are not investor ready. Being investor ready requires (among other things):

1. All IP residing in the entity being used for the capital raising
2. 3 way driver based financial forecasts need to be prepared
3. Proper corporate governance principles need to be used in setting up CEO delegations, Board reporting and decision making processes
4. All necessary approvals to do the raising must be obtained
5. There must be a high quality independent board in place
6. Founders need to clean up any shareholder loans that are sitting on the balance sheet

Also agree on the acronym not being sensational, a small price to pay for us.

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I was just reading this article and the relative feedback and beeing very familiar with the ASIC Class Order 02-273 (The exemption that ASSOB operate under as a Matching Service). I am a little perplexed as to how the names and identities of 2 companies seeking investment have been revealed prior to anyone accepting the ASIC warnings as dictated by the ASIC Class Order 02-273.

It’s all well and good to send someone to ASSOB’s site to register as a member, but the cat has already been let out of the bag by mentioning the indentities of the companies seeking capital?

I have watched ASSOB over the years, and they themselves have gone from a licensing model, to an accredited agent model and from everything in between.

ASSOB does not really enjoy a a particularly good reputation in the industry, and nor does the man behind ASSOB pulling the marketeering strings “Mr. Adam Hudson” a former Henry Kaye associate and known mareteer and spruiker. A man much maligned by a Mr. Neil Jenman.

There were mention of the ASSOB fees in this article, and it eluded to the fact that an accredited ASSOB agent needed to be appointed. But at the end of the day, this works out to about a total of $10,000 up front, and close to 10% in success fees on capital raised, be it introduced or other and if you speak to other ASSOB Accredited agents like Stepping Stone Equity, they say (when asked directly) it is likely that only 10% of the investment sought might come from ASSOB’s database. I am no mathematician, but it sounds like that if you seeking to raise $1,000,000 and it cost you $10,000 (Before legals and everything else) and lets just assume that you can actually raise the $1,000,000 and ASSOB mngaed to introduce $100,000 of this capital, then effectively a $100,000 success fee would be pyable back to ASSOB and the Accredited Agent collectively.

ASSOB I believe have also listed on the NSX (The Old Newcastele Stock Exchange) have they not? A lot of ASSOB’s database apparantly invested in ASSOB themselves and the last I heard, the share price was many times lower than that of the offer price and it was strugling to stay afloat? We good on them if they have managed to keep the boat afloat. But don’t quote me, take a look at http://www.nsxa.com.au/charts_nsx.asp?tradingcode=AOB for further research.

In any case good people, there are quite a few alternatives to ASSOB out there and often far more affordable ones for early stage and start up companies. Checking Google.com.au is a good start. I am just about to board a plane for the USA so I hope this doesn’t create too much of a stir in my absence.

Regards

John Michaels “Angel Investor”

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Sorry for the typos, I didn’t run a spell check and was sitting in a crowded boarding lounge.

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I have met with an Assob sponsor and was presented with the promotional material outlined by Steve and Simon.

The questions I could not get answered are – How much money has been raised because of the investors from Assobs networks? In my meeting I understood that i had to raise the money from my networks, with the Assob members assistance.

How did “over 80 percent of companies listing on ASSOB did get funded”? This seems high. How is this measured?

I was quoted was a fee 10% not 5%. Why the difference? In your post you mentioned about the staggered share price “The ASSOB platform itself has an inbuilt incentive for early birds, with shares being offered in three rounds at staggered values.” When I was demonstrated this for my company, I could not justify to potential investors the valuations I was being shown.

My capital has now been raised and I did so through my own networks (which is what the Assob sponsor was going to do) and it did not cost me the 1/4 of the upfront fees nor the 10% commission. Best of all, I was not forced to beg for the Assob sponsor to take me on.

I noticed a previous post was removed. Why was that?

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James Tuckerman Reply:
February 8th, 2010 at 7:52 pm

Hi Matt – Indeed the previous TWO posts were removed. It’s rare that we resort to moderating comments… extremely rare. In fact, out of all the thousands of comments we receive each month, I could count on my fingers and toes the number of times that we have needed to jump in and moderate a comment. We don’t have too many rules. But it seems that this debate has opened a legal can of worms, involving the issue of soliciting capital without a prospectus (among other things). So, we made the collective decision (at about 5pm today) to err on the side of caution and put both posts into ‘pending moderation’ until we could decide ‘what next?’ To check out our online ‘enagagement policy’, visit http://anthillonline.com/terms-conditions/.

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Matt
As with most services, not all providers are the same. By this I mean, different levels of service, networks and dare I say competence will invariably be displayed by service providers supposedly offering the same service.

Each ASSOB sponsor have their own model for fee generation.
We use a retainer model and success fee on amount raised to, but have a range in the success fee based on level of work/hours anticipated and amount raised. Therefore the higher the value raised, the lower the percentage and vice versa (ranging from 5-10%).

The staggered value of shares should have no effect on the value of the company – its a way to engineer additional value for early investors. In other words if round 1 raised $100k at 5cents per share, then 2 million shares are issued, and if round 2 raises $100k at 10cents per share then 1 million shares are issued (you raise the same amount in each round and give up less shareholding in round 2).
A company valuation is usually a subjective exercise arrived at by using a few market accepted methodologies. Even then, 2 qualified persons using the same methodology may come up with different answers. It should be an iterative process between vendor (you), advisor and investor.

I hope that helps explain a couple of things.

Andrew Lorking
Polaris Capital
m: 0434142624
e: andrew@polariscapital.com.au

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Andrew, you may want to check this comment “The staggered value of shares should have no effect on the value of the company – its a way to engineer additional value for early investors.”

It is wrong!

If the price of a share goes up, so does the value of the company. The reason the early investors receive additional value, is because the value of the company has increased, due to the price of the share increasing.

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Matt, firstly well done raising your capital through your own networks. For those that are able to do it, have the time and skills and the ability to do it in a compliant manner this is the way to go. An article I recently wrote sets out the steps for someone to do this.
http://digg.com/d31GoZf However many businesses dont have the time, knowledge or preparation ability to raise their capital in the $300k to $5 million area.

In regard to your questions … How much money has been raised because of the investors from ASSOB’s networks? This always depends on what I call “The Story” and how it is communicated. I have been at ASSOB organised Investor Meetings where attendees afterwards have invested up to $150,000. What usually happens though for an attractive matter with a good story, is that Round One funding (around $300k) is usually Friends, Family and Fans. Round Two is a mix of this and contacts obtained during the Pre-launch and VIP stages of the ASSOB Capital Raising Process and Round Three is usually beyond Friends, Family and Fans. For a successful matter 70% of funding happens in Round Three which means the Capital Raising needs to stretch well beyond Friends, Families and Fans at this stage. A short answer to your question would be some matters are not attractive outside of friends, family and fans and raise no money form ASSOB’s 12,500 investor base and the Sponsors and issuers marketing endeavours. Others raise a good percentage of their capital through “new” contacts obtained and matched while listed on the ASSOB Capital Raising Platform.

How did “over 80 percent of companies listing on ASSOB did get funded”? We are probably one of the few Capital Raising Platforms in the world that show exactly how much capital has been raised for an issuer. Every Red Square on an ASSOB Issuers page shows that around $30,000 has been raised. That is money banked through the Trust Account attached to the Capital Raising. That is how it is precisely measured. The funding was achieved by progressing set by step through the Capital Raising Process.

A previous post answered your question about fees. Some Issuers come to an ASSOB sponsor with an IM and all the paper work done. The fee they are charged will be a lot less than someone that needs everything prepared. In regard to percentages. ASSOB charges 1.5%. The rest is negotiated arms length with the company managing the capital raising. ASSOB is not party to this agreement.

In regard to staggered share prices. As each tranch of investment is received (Round One, Round Two, Round Three) the value to the new investor increases. Perhaps in Round One a new machine was purchased that improved productivity and profitability. The Directors must be comfortable with the value and share price uplift. Some companies may have the same price through all three rounds. At the end of the day it is the Director’s Offer Document, they sign it and take responsibility for it. ASSOB just provides the process and the platform. Both of which are well proven to raise capital in a difficult and often thankless segment of the market.

Trust the above answers your questions, if not please feel free to email me ay
paul(at) assob.com.au

Paul Niederer
C.E.O
Australian Small Scale Offerings Board

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Murray Hallam Reply:
March 9th, 2010 at 5:55 pm

I am very impressed with the ASSOB model and it would appear to be an excellent way for very small companies to get funded.
Just a housekeeping question. When are the investor funds paid over to the company seeking funding ? When and as they come to hand, as each little square is filled, or when the entire round or group of rounds are finished ?

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Paul Niederer Reply:
March 10th, 2010 at 4:18 pm

Murray
The handling of funds are in an independent trust account not managed by ASSOB but under instructions from the company raising funds. Normally though there is a minimum subscription amount that must be reached before any funds are paid out. This amount usually reflects an amount that has a specific purpose and is in the “Use of Funds” schedule. After the minimum subscription amount is reached the trust account usually pays out amounts as they are received.
Rgds
Paul

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Raising capital at an early stage of any business is a challenging process. The main reason that 80% of small companies fail to last longer than 3 years is the lack of sound cashflow. Of course other resons are also contibutory such as business fundamentals, management structure and market forces. Keeping in mind that all investments carry a certain amount of risk, I think ASSOB is a cost-effective and transparent platform for raising equity capital. Of course, honesty on the part of the company raining the capital and due diligence on the part of the investor can lead to a win-win situation.

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@paul (&others) thanks for contributing.

i figured this was a good opportunity to put the Assob model to be tested in a social media setting. i.e. everyone’s got an opinion and its great that they share it, some more colourfully than others, but all contributes to a good debate.

i think it’s also a good example of the importance of keeping track of what and where things are being said about a company/brand.

If any company missed a conversation like this one, they’d risk not having their brand’s voice heard in real time, and thereby allowing a conversation to go off on a potentially damaging tangent.

I’ve started to trial some “social media monitoring tools” so that our brand can join the conversation, like you’ve demonstrated here.

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@Paul that is helpful.

I could see how it could be of use for the first 2 rounds, however at a rate of 10% it did not seem viable when they were to come from my friends, family and fans. The Assob rate of 1.5% is very reasonable.

How much has been raised from your network of 12,500 investors? I still dont understand the 80% success rate. In looking at your website, there is more then 20% without their funding.

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Paul Niederer Reply:
February 9th, 2010 at 6:06 pm

Matt, Once companies have raised funds they either stay to be part of the Secondary Sales Board or go. That alters the stats for those that are left and are visible. Also just as many companies are not yet visible as they are in various stages of pre-live and in most cases have already raised capital.

However when you consider every red square is around $30,000 it’s a pretty good run rate for businesses that in many cases came to ASSOB after trying many other avenues and were turned away.

I’d like to give you the figure that you are seeking but it is not possibe. In my previous post I used the words “in a difficult and often thankless segment of the market”. What I mean here is if the money is raised the company moves on and grows and where the funds came from isn’t often attributed to ASSOB nor recorded as such. Money raised is money raised. If the money is not raised then the blame is easily laid at the door of ASSOB. I’ve seen cases where Friends and Family were totally against investing until they saw the transparency and legitimacy of the ASSOB process and the resultant support materials. I’ve only been with ASSOB just over a year and I can say that in some capital raisings as much as 70% of the funds come from our lists and other promotional avenues however up front we always say dont rely on our list. In reality it is the engagement of the Founders and Management with their Sponsors in the full capital raising process that delivers value. It’s “Teamwork” and “Mentoring” in action that works. Just writing an Offer Document and putting it up on ASSOB seldom works. Like anything else good teamwork, focus and integrity work best. To me focussing on mentoring people on their journey through the ASSOB Capital Raising Platform capital is very rewarding but like anything else in life it has its ups and downs.
Rgds
Paul Niederer
C.E.O
Australian Small Scale Offerings Board
paul@assob.com.au
M: 0411 968 362

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