Tuesday, April 14, 2009

Wholesale Investor

Last week I was in Melbourne and went to a WholeSale Investor briefing, presented by Steve Torsoand it was very useful, but a little dis-heartening at the same time. There were many gems of information from the evening, the important ones for RooCube were

1) It's normal to work with advisors to raise finance, these advisors take between 5% and 10% of the money raised, the less you raise the more they want. The advisors also work on a monthly retainer. The upshot of that is raising $500K, can cost >$50K.

2) When raising money as well as a strong business plan you also need an Information Memorandum, this pitches your company strongly to investors and outlines the exact nature of the offer. As such it contains a lot of legals and that means there are further professional expenses - ideally from a big end of town law firm.

3) Software is different, not in terms of the preparation we have to put in, but in the amount of money/risk investors are prepared to take.

4) The IM is a marketing/selling document, investors love a video, press coverage, and existing customers. We can deliver all three, but getting customers at this stage will take time. Our approach will be a closed beta with some industry players involved early.

Wholesale Investor will get our IM infront of 4000 potential investors and help out with getting the IM looking good. It's an incredibly useful service and a great idea. They're approach could be described as good value, especially in comparison with raising funds any other way, but it does come with a serious price tag.

The upshot of this situation is we need yet more professional input to get the submission we need to raise the cash that we need and so on. I'd like to be asking for money as soon as we can demo the software, but that's now unlikely. OTOH the extra time will give us space to get a good beta team together and more coverage in the press.

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