Michael Fox, co-founder of Shoes of Prey, told SmartCompany the experience of raising $3 million for the online shoe business was “like herding cats”.
Shoes of Prey first started thinking about raising capital in December 2010. Fox pulled documentation together then, but the process was nowhere near straight forward and Shoes of Prey ended up talking to about 70 or 80 different investors over the next 18 months.
Fox says he talked to investors in Australia, Europe and the United States and “pretty much without fail” all the investors outside Australia said “we love what you are doing but for an investment of $2 to $3 million in size you are looking at we don’t do those investments outside of our home countries”.
“They want to be able to keep close tabs and use their networks and help out the business they are investing in,” Fox says.
The overseas investors told Shoes of Prey the business had to move to the US or Europe to secure the investment, but Fox says that because Shoes of Prey already has its team in Australia and he likes doing business in Australia he and his co-founder decided not to make the move.
Fox says there are not a huge number of investors in Australia looking to do technology investments around the size of Shoes of Prey so he ended up talking to “all of them” and got nine different investors to put money in.
Shoes of Prey found the investors through both founders’ networks and by talking to people in the investment community.
“It was like herding cats because none of the investors we were talking to wanted to do the whole$3 million so we had to get a group of them together all at the same time and all comfortable with the terms, although the investors did help out with it,” he says.
“Having to get everyone to say yes at the same time was a bit of a marathon process.”
Melbourne-based software company PageUp People managed to secure a $US10 million investment from a US private equity firm to drive its international expansion last month.
PageUp, which specialises in tracking the performance of workers, secured the investment from Accel-KKR after months of negotiations.
Chief executive Karen Cariss told SmartCompany she specifically targeted the United States to fund raise and didn’t seek to raise capital from the Australian market.
“My view was that because our predominant support that we were looking for was to underpin our global growth, we wanted to tap into the experience of the US investment market to deliver to that,” she says.
“We went out to the investment community in America…about six months ago and met with 20 firms and then shortlisted that to firms we had deeper conversations with.”
Cariss says the US investment community is well established and there was a wealth of experience there that Page Up could tap into.
She says it was not necessarily more difficult to raise funds in Australia, although Australia does offer a “far less travelled path with a smaller market”.
Cariss says PageUp went with Accel-KKR because of the firm’s experience and the partnership approach it offered.
“Accel-KKR have a good cultural fit to us and focuses solely on technology firms, so it has a lot of experience investing in our area and strong networks that will add a lot of value after the capital injection,” she says.
Cara Waters is the editor of SmartCompany. Cara was previously a senior reporter at the Financial Times website FT Adviser in London and has also worked for The Sunday Times.
