Technology sector accelerator Scalare Partners is planning to list on the ASX to give retail investors direct exposure to its investment portfolio of start-up and scale-up businesses alongside its business operations.
Sydney-based Scalare is seeking to raise $4 million to $8 million through an IPO and plans to list on the ASX via a reverse takeover of Candy Club Holdings (ASX: CLB).
Scalare chief executive Carolyn Breeze said the nearly five-year-old business has a different business model to most technology accelerators in that it eschews the conventional investment fund manager 2-and-20 model (2% annual management fee and then 20% performance fee on returns above a hurdle rate).
Scalare does not operate as a fund manager, instead investing off its own balance sheet.
The firm gains introductions to very early-stage businesses through two established programs: the Australian Technologies Competition, which is sponsored by AusIndustry and Investment NSW and Tech Ready Women Academy, an education platform and network that provides women with digital training programs for technology and business. Tech Ready Women has partnered with the NSW Government to deliver its female founders program.
Scalare gains close engagement with very early-stage businesses through providing commercial services such as capital raising advice, book-keeping and marketing.
Through these services, Breeze says, Scalare has access to deep operational knowledge of many of the businesses in its network. The firm’s involvement in the Australian Technologies Competition and Tech Ready Women programs boost its interaction with very early-stage businesses to around 700-800 a year, an unusually high dealflow rate.
As Scalare does not manage an investment fund, it does not take stakes in businesses as a condition of including them in training programs, nor does it raise sidecar funds from individual investors to invest in the businesses it identifies as the most promising in training program cohorts.
This, Breeze says, means capital raised in Scalare’s IPO will be partly allocated to fund management fees but will instead provide investors with a direct stake in the overall business including current and future investments.
Scalare has so far made around eight investments a year of up to $250,000 on valuations of $3-$5% million, investing overseas as well as in Australia.
The total of 30 investments include Melbourne-based reg-tech business Frankie1 and UK business-to-business fitness app company WithU.
Breeze said she believed Scalare’s high volume dealflow and its deep knowledge of many early-stage businesses as a service provider, materially de-risks its investments which, as typically first external investments, have maximum potential to achieve high multiple returns.
Scalare is currently owned by its investment team and a small number of individual high-net-worth investors.
Image: Scalare chief executive Carolyn Breeze.