Corporate Advisors

Raising Capital in Australia (in GFC-like conditions)

(in earlier stage businesses)

Rob AntulovMarch 2012

Corporate Advisors

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Australian Financial Markets (post GFC)

Raising Capital (post GFC)

Earlier Stage Funding (post GFC)

Example Transactions

Corporate Advisors

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GFC in retrospect

From mid-2007, significant destruction of capital and equity value

Systematic failure of risk analysis, particularly derivative asset classes

Government intervention and nationalisation (but less so in Australia)

Australia emerges as one of the leading international banking systems

and

We’re still here!

Corporate Advisors

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Australia has a Strong, Profitable and Sophisticated Financial Services Sector

Banking systems remain strong and competitive

Well regulated

Engaged with regional and global markets

Ranked in world’s top financial systems

Foreign banks represented locally

Concentrated, with four large banks, but with over 20 institutions proving banking services

Competition is now lower than pre-GFC (Bankwest, GE Money, RAMS)

Funding costs are generally higher

Source: Navigating Reform: Australia and the GFC, FINSIA

Corporate Advisors

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Impact on Australia was Relatively Benign

Strong financial institutions,

Well capitalised,

AA ranking maintained;

Underlying economic strength,

Raw materials, mining,

Low unemployment (3.8% in 2008),

Housing prices held;

Sound financial regulation,

Lessons learnt from prior collapses (HIH in late 90’s),

Key recommendations in international reviews already in place in Australia (liquidity, governance, etc),

Source: Navigating Reform: Australia and the GFC, FINSIA

Corporate Advisors

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Equity Capital Raising in the GFC was Significant

Equity capital markets remained healthy in Australia during the GFC;

Over $100 billion of new equity capital was raised in CY09, with over half of ASX companies raising additional capital;

Most of capital raised was generated in the secondary capital market, with IPOs almost non-existent during the peak of the GFC; and,

Accessing capital via the secondary capital market allowed companies to reduce debt/strengthen balance sheets, at a time when debt capital was less available and more expensive.

Corporate Advisors

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Capital Availability for Earlier Stage Businesses - Never Easy

Developing companies often require access to capital

Banks reluctant to lend (risk, lack of collateral and cash flow)

VC firms move to later stage, with lower risks

Angel investors increasingly important source of seed and early stage capital

Corporate Advisors

Later StageSeed/Start-Up Stage

Early Expansion Expansion StageR

isk

Founder, friends & family

Seed Accelerators

Angel Investors

Venture Capital

Private Equity &

non-financial corporations

Equity Markets

Commercial Banks

$200K $2M $20M $200M+Avg. Raising

# Employees

5-7

yr

Retu

rn

10x

5x

3x

2x

$50K $100K $1M $5M $100M$500K $10M $50M

Source: Jeremy Colless, Sydney Angels Sidecar Fund presentation

Sources of Capital Vary by Company Stage

Corporate Advisors

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Funding Options Available for Start-Ups in Australia Have Increased in Recent Years

FFFF

Seed Funds

Startmate, Pushstart

Founder Institute

Angel Investor Groups

Innovation Bay

Sydney Angels (and Melbourne, Canberra, Hunter Angels)

Venture Capital

Starfish

SXVP

ESVCLP (Yuuwa, OneVentures, Parallel, Carnegie, Constant Innovation, SA Sidecar Fund)

Corporate Advisors

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Angel Investors are a Key Part of Funding Ecosystem for Early-Stage Businesses

An Angel invests their own money and time in an unlisted growth company as a personal decision with the objective of realising a capital return in the foreseeable future

Angel investors provide

Capital

Strategic and operational expertise

Social capital

Popularised in US tech scene in past few decades

Angel investors tend to be less sensitive to market cycles (relative to institutional investors), but personal wealth levels do impact Angel willingness to invest

Corporate Advisors

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Angel Investing in Australia is a Small but Important Source of Capital

The investment market is tough – but Angel investors still active and deals are still being done

Formal angel investment is a small, but growing part of the landscape

Over 15,000 Angels in Australia, who have …

… invested over $1.7b in over 5,000 companies, and

generated over 35,000 jobs

At a co-investment ratio of 1:5, they have delivered a

… leveraged investment in Australian innovation over $5b

Source: AAAI Report - Angel Investing in Australia

Corporate Advisors

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Venture Capital Represents a Small Class in Australia

Main difference funds invest “other people’s money”

Focus on the financial return

Dedicated skills in the investment team

Tighter investment criteria

More aggressive terms (upside and downside)

Typically invest a minimum of $2m (up to $5m - $15m over the life of the investment)

Corporate Advisors

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Recent (Early-Stage) Capital Raising Examples

Acted as Corporate Advisors to Brandscreen

May 2011

for the sum of$1,200,000

Capital raising

Global online advertising exchange

Acted as Corporate Advisors to Live Connected

June 2011

Capital raising

for the sum of$250,000

Online mobile phone plan seller

Acted as Corporate Advisors to DriveMyCarRentals

April 2011

Capital raising

for the sum of$1,300,000

Peer2Peer car rentals

Corporate Advisors

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Development Capital Raise Transaction – Current Example

• Australian e-commerce start-up

• Operational ~18mths

• Already raised over $6m in two earlier rounds

– ~$4m raised from Euro investors

– ~$2m raised from Australia corporate (venture arm)

• Now seeking to raise $10-15m

• Terms agreed with Aust VC

• Two Asian funds looked closely, submitted Terms Sheets, but both felt valuation was high and they could see better (value) opportunities in China and other developing markets

Corporate Advisors

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Raising VC Funds in Australia post GFC - OneVentures Example

Raised $20m of investment capital (March 2010, after three years of pitching);

Matched with $20m from Aust Govt (IIF – Innovation Investment Fund Scheme);

Focus on biotech, IT and life sciences;

Delivers cash and business expertise (operations, market advice, business networks);

In first year:

300+ opportunities

30 DD

1 investment.

Corporate Advisors

Corporate Advisors

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Summary

The markets are operating

Capital is available

Deal flow is there

Establishing the market is not straightforward

Matching risk, reward and desire is (as always) the challenge

Corporate Advisors

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Thank you

Rob Antulov

Director, Hall Capital

+61 404 872 242

rob@hallcapital.com.au

www.hallcapital.com.au

Level 4, 66 Hunter St, Sydney, NSW 2000, Australia

Corporate Advisors

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Hall Capital StrategiesDirectorMedianextExecutive Director, 3eep Ventures Pty LtdAdvisory Board Member, Nearmap/Ipernica LtdAdvisory Board Member, Araya Pictures Pty LtdFairfax MediaDirector of Strategy (incl M&A)PeakhourChief Commercial OfficerCoca-Cola Director, Strategy (Central Europe Region)Marketing Director, UkraineBooz & Company (formerly Booz Allen & Hamilton) Strategy ConsultantSydney Film Festival; Juvenile Diabetes Research Foundation; ChoiceDirectorEducationMBA, AGSM and Kellogg (Northwestern University, Chicago)Bachelor of Engineering (Hons), University of WA

Rob Antulov

Corporate Advisors

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Hall Capital Services Summary

1. Capital Strategy Advice– Conduct strategic review– Identify optimal growth strategy

2. Transactional Services– Project manage transactions:

• Divestments (Trade Sale, LBO, MBO)• Private capital raising• Mergers & Acquisitions• Public capital raising

3. Advisory & Consulting Services