Find out what crowdfunding is in Australia and how to make your SME more attractive to investors. Get your business investor ready and get the bank off your back!

1. Crowdfunding: What is it and
how to I get started?

2. © Copyright Fat Hen Ventures Ltd. ABN 91 167 713 984
Accessing new sources of capital
to fund start-up’s, business growth and
succession plans

3. The presentation
This presentation looks at emerging trends in accessing capital
for Australian companies as well as investor access.
•Traditional funding landscape for businesses
•Emerging investment platforms
•How to get ready
•Overseas perspectives
•How can I tap into the junior capital market in an organised way?
Today’s session is focused on businesses looking for
capital + investors looking to invest into private
companies.
There are detailed notes available to support these summary
slides and can be sent to you or downloaded upon request

4. Fat Hen Ventures Ltd has
been established as a crowd
backed venture capital public
unlisted company operating
principally in funding up to $5m
for unlisted companies.

5. Traditional funding sources for businesses
Most businesses start small, often not in a corporate structure and rely on
funding from family, friends and banks to grow.
Businesses often outgrow funding capacity from such sources and the bank
whilst a cheap source of finance is restricted mostly to hard asset security
lending and PG’s secured on personal non-business property.
There comes a point where businesses, most likely by this stage, in a Pty Ltd
company form, need to access funding and mainly equity capital – private
equity / venture capital.
Such funding requirement may be for capex to handle a recently won contract
OR a start up business where banks are unable to fund OR a succession plan
(MBO) where the management team cannot fund the buy-out OR a business
acquisition etc. Where do you go for this funding?

6. Angels, VC’s…..
BUT the VC market in the <$5m capital
range has all but dried up …..
Some companies are forced to do a back
door listing on ASX simply to access $3m
or so BUT they are not really ASX ready +
compliance costs are high relative to MC

7. Later Stage firmsBigger pools for >>>SME’s need capitalSeed/Start-Up Stage
Risk
Founder, friends &
family
Equity Markets
$200K $2M $20M $200M+Avg. Raising
Return
30X
10x
5x
2x
$50K $100K $1M $5M $100M$500K $10M $50M
Accelerators
Where are the VC’s?
$
Private Equity
Commercial Banks
VC
Angel
Investors
Very few structured funding places for $1m to $5m, yet there is plenty of demand
Mind the Gap

8. Why don’t private equity firms cover this SME Funding requirement
Because the Australian Superannuation industry now has
over $2 trillion in assets
Allocation of funds to the private equity / venture capital
(VC) firms has halved over the past 4 years from 0.96% to
last year’s low of 0.48% (ref: AVACL report 31/3/15).
AVCAL’s research shows that the average PE-backed
business in Australia has an annual turnover of $195 million!
PE/VC’s have become bankers in reality, sitting alongside a
bank debt with a mezzanine debt facility into well
established, low risk, profitable companies.

9. Australians punt millions on horse races yet
won’t back our own people and home grown
ventures. It is concerning to think that on one
day of the year Australians bet more on the
Melbourne Cup ($200m in total or $9 per
capita) than the entire Australian venture
capital industry invests in start-ups in a year
(A$100 million or A$4.55 per capita).
we need to change this mindset!! Invest in
people NOT horses and poker machines.

10. What can we do to help our SME sector - how can we back
emerging technology companies and create jobs??
Other countries have responded to this funding
gap in a number of ways:
Changed corporations law re numbers of s/h
Introduced equity crowd funding legislation
Peer to peer lending platforms
Enhanced liquidity in private companies
Greater access to advice
Incubators and accelerators
SIV’s and PIV’s focus on business inv not bonds
More tax effective inv structures ESVCLP’s / VCLP’s
Build a mind set of “retail angels” and “risk”

11. The practice of funding a
project or a venture by
raising many small
amounts of capital from
a large amount of
people. Typically via the
internet.
Crowdfunding

12. Rewards based
(Indeogogo and Kickstarter)
How it works,
Example, Pebble Smartwatch case.
Objective to raise $100K on offer a Smart
watch that connect to your phone @ $99
instead of the eventual retail price of $150.
Raised $10M from 69,000 individuals.
Debt based Crowd funding
Zopa
(SocietyOne)
Peer to peer lending (P2P)
Pooled approach better return to
lenders than term deposits
Donation based
(Gofundme)
How it works.
Altruistic,
No expectation of financial
return.
Equity based Crowdfunding
www.crowdfunder.com USA
www.ourcrowd.com HQ Israel
www.crowdcube.com UK based
www.fathen.vc Australia
Capital raising for exchange of capital.
JOBS Act Title IV passed
Still rigorous discussions globally around
accredited versus non-accredited
investors and “protecting” by limiting
amounts of capital subscribed

13. As a business looking for funding what do I need to know ??
Current restrictions on fund raising – ie 20/12 / $2m pa /
S708 exemptions / 50 non-employee limit on private
companies (contrast to 2,000 in US and no upper limit in UK)
When the crowd funding legislation comes in for
Australia, it is likely to incorporate:
•Exempt public companies – some cost respite…possibly
•a cap of $2 million on CSEF in any 12-month period (excluding funds
raised under existing exemptions from the need to provide a prospectus to
certain wholesale investors),
•for investors: investment caps of $2,500 per investor per 12-month period
for any particular CSEF issuer and
•$10,000 per investor per 12-month period
•Read the CAMAC Report 21 5 2014!!!

14. What else may help SME’s and the depth
of VC in Australia?
Significant Investment Visa (SIV) and the new Premium
Investor Visa (PIV)
Significant Investor Visa
at least $5 million in complying investments to include:
• At least $500,000 in eligible Australian venture capital
or growth private equity fund(s) investing in start-up and
small private companies.
Minister Robb said the previous SIV framework had set
the bar too low, with investment largely directed into
passive investments such as government bonds and
residential real estate schemes – areas that already
attract large capital flows.
• At least $1.5 million in an eligible managed fund(s) or
Listed Investment Companies (LICs) that invest in
emerging companies listed on the Australian Securities
Exchange (ASX); and
• A ‘balancing investment’ of up to $3 million in
managed fund(s) or LICs that invest in a combination of
eligible assets that include other ASX listed companies,
eligible corporate bonds or notes, annuities and real
property (subject to a 10% limit on residential real
estate).

15. What else is noteworthy?
P2P lending such as Society One in Australia – biggest is Zopa.com who has lent
GBP926m
JOBS Act Title IV – does this solve the non-accredited crowd rush?
Progressing a liquidity solution for private companies as they grow under ECF
Our “1000 club” – mobilising small amounts from large number of retail angels
Matching boards (ASSOB) etc and WI per class order ASIC Class Order 02/273 - future?

17. If you want to raise capital you need to
think about:
Are you investor ready?
What is your risk profile
How much do we really need and will we need more?
Who do we want as a shareholder?
How do you match expectations?
•Risk
•Length of investment
•Return expectations – div versus cap growth
•Reporting
•Liquidity
•exit
Check out the 7 myths of
investing in the detailed notes

18. If you want to invest into a private
company you need to think about:
Where do I find such opportunities? Which platform/s?
Who is doing or done DD? I may only be investing $5k??
Reporting protocols
Any secondary market?
Rights attaching to shares (pre-emption etc)
Understand the risks – dependency on key person / key customer / competitor
threats

19. Inside the Hen House
Fat Hen’s mission is to facilitate organized Equity Crowdfunding in Australia by
reaching out to a large audience of “retail angels” to back ventures using
traditional VC style disciplines and advisory overlays in the $350k to $5m funding
space.
We are also moving to a providing a “stepping stone” platform and building liquidity
into unlisted companies.
Fat Hen is an unlisted public company and incorporates special class shares to enable investors
(both retail & wholesale) to spread their risk across the portfolio by investing in “nest egg”
shares OR staple their investment to a specific investment via a “one egg” share.
We are looking to bring together 1,000 interested people into “the Club” that would enable us
to mobilize meaningful amounts of capital for projects of interest to the Club – ie 1,000 people
at $1,000 each = $1m – back ten projects @ $1,000 and build your own portfolio and nest egg!

20. Thank you from the
Chief Chook
Jeff Broun FCA, CEO
Fat Hen Ventures Ltd
Email: jeff@fathen.vc
Mobile: 041 993 4623

21. Attracting Private Equity Capital

22. Unclear
strategy
Common issues facing SMEs

23. Outcomes

24. My background

25. Banksia Capital provides equity finance for private SMEs
—“To fund business expansion, acquisitions, or will purchase from existing owners their
equity (all or partial)”
Formed in Perth 2008 by partners with 50+ years private equity
experience
—Team members responsible for $100M+ invested into 10 WA businesses valued at
over $250M since 2003
Banksia addresses a funding gap in WA
—Set up to provide $3M to $15M in equity
—Targeting private, profitable business between $5M and $50M (enterprise value)
—Typically revenues >$5M and employees >20
Deep experience in building value in WA SMEs
—Established tools and networks to add value and mitigate risks
—Well practiced in programs to address succession and realise business value
What we do

26. Investments by Banksia Team
Current Investments Previous Investments

27. Approach
NOT about buying assets cheap with leverage
We select good businesses & market leaders (or potential to be)
—Evidenced by earnings and cashflow that are growing and demonstrably sustainable
Back good management with aligned incentives
—May require Banksia team and/or network to strengthen team & capabilities
Develop and implement strategic growth options
—Focus on impact on exit value, plus risk and time to implement
—May be “prototyped” as blue sky for next owner vs organic growth during our ownership
Be clear and creative on exit options
—Understand why multiple trade players will want to own the business and work to improve
attractiveness of the business to them
—More basically “tidy up” corporately to be exit ready (can be a 2-3 year process)

28. What we look for
Likes Dislikes
Organic growth (5 % + pa in revenues) ×Customer concentrations (l/term relationship or
contracts can offset this negative)
M&A opportunities, particularly if that builds
WA market share & leadership
×One-off or lumpy revenue relationships (eg
rarely attracted to contracting businesses)
Businesses with pricing power and where
customer relationship not just about the price (e.g.
brand, OH&S driven, meeting regulatory or
compliance needs, key locations, exclusive
agencies or IP, or unique assets)
×Dependence upon personal relationships to
“retain” business (addressable though through
Banksia achieving shareholder alignment with the
“keyman”)
Niche service, rental or distribution models
Recurring customer/revenue models

29. Case Study –
Cool Clear Water
Situation
 WA provider of point-of-use installed water filters with 30-40% of WA market
 Disparate shareholding base with different goals and time horizons
 2 significant competitors and a new CEO trying to set strategic objectives
Value Creation Strategies Implemented
 $7 million to buy out some founders and support a “bolt on” acquisition strategy
 Developed clear go-forward strategy for the business and exit framework
 Management team upgraded with founder in a non-executive role
— ESOP scheme put in place to keep key people aligned and in the business

30. Value Creation Strategies Implemented (cont.)
 Scrapped costly ($ and time) be-spoke IT system development in favour of off the
shelf solution
— Allowed for simpler, streamlined integrations of 8 bolt-on acquisitions
 Audited accounts and detailed tax planning implemented
 Formal exit process run (achieved 33% increase over initial ‘best’ offer)
The business achieved a 3X+ increase in size and 5X+ increase in profits
Banksia subsequently led the sale of the business to a UK based trade player for
$60M+
Case Study –
Cool Clear Water

31. Q & A Panel Discussion