Ecocentric takes alternative route

18/12/2019 - 14:43

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Perth-based tech startup Ecocentric Energy completed a successful round of equity crowdfunding last week, exceeding its stated minimum target to raise $500,000.

Ecocentric takes alternative route
Tim Bray says equity crowdfunding has helped Ecocentric Energy build on its base of professional investors. Photo: Monica Cugnier

Perth-based tech startup Ecocentric Energy completed a successful round of equity crowdfunding last week, exceeding its stated minimum target to raise $500,000.

That adds to $3.2 million raised from sophisticated and professional investors by the company.

Ecocentric is best known for its Numen system, which uses AI developed alongside CSIRO to ensure efficient use of energy in buildings.

Chief executive Tim Bray told Business News that equity crowdfunding was appealing because it allowed the business to engage with a broader array of investors.

“Rather than investing through traditional, institutional raising approaches … we’ve been also able to leverage that in a way that gives retail investors through this mechanism an opportunity to invest in us,” Mr Bray said.

By allowing a greater number of smaller investors to own a stake in the business, Mr Bray said equity crowdfunding had helped provide a path for the company to build on its base of professional investors in Australia and the UK, while also building public awareness for the business overall.

“Where we’ve focused is working hard to find connections with particularly high net worth [investors] who have an experience in the sector we’re working in and understand the process of monetising technology,” he said.

“Where crowdfunding probably really resonates on its own is where you’ve got a relatively simple proposition that hits a button and can appeal to a mass audience quite quickly.”

Mr Bray, who spent two and a half years with the Chamber of Commerce and Industry of WA as general manager of corporate communication, said he had never been involved with capital raises before joining Ecocentric Energy in 2015.

At that time, he said, it was difficult for cutting-edge tech companies to seek public funding, given how difficult it could be to communicate the value of IP to institutions with more conservative approaches to due diligence.

“What we’ve been able to do is use the confidence that’s gained from those high net worth investors who are experienced from investing in tech and [are] savvy in that sense, and have them already in and come up with something that is really communicable,” Mr Bray said.

“[Retail investors] can draw confidence that the underlying business fundamentals and technology fundamentals are there because of the funding we’ve already secured.”

The Ecocentric crowd funding was conducted via OnMarket, an online platform that advertises 140 successful capital raises totalling $86 million since its founding in 2015.

Similar platforms in Australia include Equitise, which hosted The West Wind Gin’s $932,000 raising from 293 investors, as well as two rounds from Rhinohide totalling $660,000 from 310 investors.

Crowdfunding also allows companies to engage customers as investors, with WA-based startup Tiller Rides, which recently completed $1 million raising from 226 investors via online platform Birchal, using the platform to further incentivise the sale of equity by providing discounts and free bikes to customers that invested certain amounts.

Despite those successes, the equity crowdfunding option still carries risk, as Urbotanica managing director Ray Hart learned when he sought to raise a minimum $300,000 via Equitise by last month.

Having scrapped the failed capital raising, Mr Hart told Business News that though he had positive takeaways from the experience and wouldn’t rule out pursuing equity crowdfunding in the future, startups across all sectors still had to be aware of the pitfalls of the alternative investment path.

“I would counsel people … to go into it understanding the market, understanding the process in its entirety, rather than thinking [they can] do a bid, run up a couple of social media posts, and there you have it,” he said.

“There is a fundamental difference in the Australian culture to other crowdfunding markets around the world.

“We are very conservative in our investing in startups … we invest in the ASX, we invest in property, but not in startups.

“The uptake in the crowd is not as strong as you get in other countries [but] that’s just a learning experience, that’ll just develop over time.”

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