Tech vets lead new direction for deals

21/12/2015 - 09:29

Experienced investors such as Gavin Rezos and Tony Grist have shone brightly as the technology sector has attracted growing interest.

Tech vets lead new direction for deals
DEPARTMENT HEAD: Gavin Rezos (left) is working on the backdoor listing of Department 13, led by US-based executive Jonathan Hunter. Photos: Attila Csaszar

Experienced investors such as Gavin Rezos and Tony Grist have shone brightly as the technology sector has attracted growing interest.

One of the most notable investment trends in Western Australia during the past two years has been the increasing number and prominence of tech stocks.

Companies such as Alexium International Group, migme, BrainChip, Norwood Systems, iWebGate, and rent.com.au either were not listed a year ago, or attracted much less investor interest.

Behind most of these companies are serial entrepreneurs and investors who have lived through a few business cycles and learned lessons along the way.

They include local entrepreneurs Paul Ostergaard and Mark Woschnak, who are building up their Perth-based companies – Norwood Systems and rent.com.au respectively – after completing backdoor listings and capital raisings.

The sector’s revival has also been aided by the likes of Gavin Rezos, Tony Grist and Steven Goh, who bring a more international dimension to the sector.

Mr Rezos has carved a unique niche in the tech space, by getting ASX investors to fund the commercial development of intellectual property developed by the US and UK militaries.

Mr Rezos told Business News he pursued opportunities out of the military sector because it traditionally had been leading-edge technology, and therefore provided an easier entry to the commercial market.

“Necessity is the mother of invention, and in the current geopolitical climate there are strong needs in cyber security and new advanced materials,” he said.

Mr Rezos believes Australian investors have a risk appetite suited to technology development, given the historical high-risk, high-reward nature of funding exploration companies.

“The risk appreciation and awareness of Australian retail investors has grown significantly from the naïve early tech-boom days,” he said.

“The tech market and the biotech markets are now much more mature, with many lessons learned both here and overseas.

“Investors now look for patented technology or software, clear markets, experienced management, barriers to entry and existing customers as indicators of potential success.”

Mr Rezos is also a big supporter of reverse takeovers, or backdoor listings, saying it’s a cost effective and timely way to raise capital.

His current roles include being executive chairman of ASX-listed Alexium International, currently valued at $230 million.

Alexium, which runs its operations from South Carolina, specialises in developing chemical solutions for the military and commercial sectors, with its lead products being fire retardant clothing and bedding.

It has secured 45 customers for $US18.5 million of earnings with a potential order book from these customers of $US44.7 million for 2016.

Mr Rezos’s latest deal, through his corporate advisory firm Viaticus Capital, is the backdoor listing of an intriguing business called Department 13 International.

Virginia-based Department 13 is a software communications company with cyber security and network applications.

Its lead application is used to counter attacks by drones, a technology the company says is rapidly becoming a major security risk.

Mr Rezos, who is also a non-executive director of mineral sands miner Iluka Resources, keeps tabs on these and other ventures by spreading his time between Washington, London, and Perth.

He noted that established businesses, such as banking group Barclays, increasingly recognised the threat posed by disruptive technologies.

“Barclays sponsors tech incubator programs in London, New York and Israel on the premise that, in 2014 alone, 33 companies in the fintech space achieved market caps exceeding £1billion, which combined exceeded Barclays’ market cap,” Mr Rezos said.

Mr Grist, whose interests include a major stake in national telco Vocus Communications, is also active at the small end of the tech market.

He was an early investor in geospatial company Spookfish, which completed a backdoor listing last year, is an investor in Silicon Valley company 4DS Memory, which completed an ASX listing last week, and recently invested in local company Decimal Software.

ANOTHER DIMENSION: Tony Grist’s latest deal involves 3D printing. 

His latest deal, involving 3D printing company Robo 3D, is another example of Australian capital being used to fund US technology.

Robo 3D was founded in 2012 by a group of students from San Diego State University and generated sales of $US1.9 million in the nine months to September this year.

Mr Grist has agreed to invest $US2.5 million to acquire a 51 per cent stake in Robo 3D through investment vehicle Albion 3D, which is in the process of undertaking a backdoor listing through Falcon Minerals.

Falcon announced last week it had secured funding commitments of $5 million.

Mr Goh came to prominence during the 1990s dot.com boom, as one of the founders of Perth-based online brokerage Sanford.

The demise of that business was followed by personal bankruptcy, but Mr Goh bounced back in 2004, raising $500,000 of seed capital to kick-start the social media venture that morphed into migme – a company now valued at more than $200 million.

The early investors included company director and venture capitalist Charlie Morgan, who famously resigned as chair of the Barnett government’s Technology and Industry Advisory Council in 2011 because of perceived ministerial disinterest.

In 2007, Mr Goh appeared to be on the path to international success after raising $US10 million from venture capital funds in Silicon Valley.

However, he was forced to dramatically revise his business strategy after the US plans didn’t work out, moving instead to Singapore to focus on the Asian market.

The Asian strategy underpinned the backdoor listing of migme on the ASX in July last year.

The ASX listing has enabled migme to raise $25 million from investors to support the rapid rollout of its social media products through Asia.

 

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