Regtech startup Checkbox has closed its first ever funding round, securing $1.77 million from angel investors, and co-founder and chief executive Evan Wong says it’s just the beginning of an eventful year for the business.
The startup provides a web-based application to integrate regulatory and compliance processes into companies’ software applications, providing automated assessments and documentation.
Since it was founded two years ago, Checkbox has been bootstrapped entirely, Wong says. He and co-founders James Han and Paul Wenck have not been drawing salaries from the business, and have “collectively put in quite a lot of money”.
Now, Wong says the founders are preparing for a serious growth stage, and “our approach was just not keeping up”.
“That’s when we decided to reach outwards.”
The team met with several venture capital firms and had constructive conversations, Wong says, but they were running an “angel book” in parallel. Ultimately, they opted for the angels because of the greater flexibility they could offer.
The angel investors have not been named, but include senior executives and an ‘angel club’ operating out of Hong Kong and Singapore.
This is the first funding round Checkbox has undergone, although Paul Wenck says he came on board as the “first Checkbox angel investor turned co-founder” in 2016.
Checkbox won the annual pitching competition at last year’s StartCon conference in Sydney, winning $120,000 in IBM credits to spend on the business and the opportunity to travel to San Francisco to represent Australia in the Startup World Cup.
It also attracted attention as a winner of the 2017 Westpac Innovation Challenge and was named regtech of the year at the 2017 Australian FinTech Awards.
Bringing experience on board
Now, a key priority for Wong is to find new board members to help guide the company through its next growth phase. The angel investment route meant the team has “the benefit of not having a board member imposed on us”.
“We’re largely validated as a product in the market,” he adds.
“In terms of guidance, we still have a strong direction as to where we want to run the business.”
The founders are actively “shopping around” for board members at the moment, specifically seeking someone with experience of building and scaling a product; and someone who’s “really good at enterprise Software-as-a-Service growth”, specifically in a global context.
He says Checkbox has growth through the seed funding stage, but a Series A raise is still in Wong’s game plan; it will likely happen in another 12 months or so — a long time in startup land.
For now, the team is focusing on net sales growth, and Wong says they have a “very healthy sales pipeline”.
“We’re investing in product development, the business architecture and the infrastructure of the team. That’s what’s going to set us up for the next stage, which is scaling,” he says.
“If you scale prematurely, you can kill yourself scaling,” he adds.
Wong declines to share any of Checkbox’s recent valuation figures, but he does reveal the startup has around 30 customers, all of which are paying clients, as opposed to using the software on a beta, proof-of-concept basis. They are all tier-one, global enterprises based out of Australia, he says.
However, the company has global ambitions and is in the final stages of signing up its first overseas client — a large institution in Hong Kong.
Wong says, while the team always planned to enter new markets, and they’ve had their eye on Hong Kong, the deal has been turned around faster than expected.
“We’ve always known that we’re a global business, we’ve always been maximising opportunities,” he says.
“There has always been interest in those markets.”
However, he adds it would have been nice to have “a bit more breathing space”.
The pressure is on
Now Checkbox has outside money in the company for the first time, Wong says the pressure is on.
“It’s not only our money anymore,” he says.
“Now we have external investors, we as founders take investor money really personally … We want to justify the faith they put in us and get them a return.”
“We’re not playing around anymore.”
And for Wong personally, still only 25 and having built the company from scratch, he says it’s still “surreal to me what’s happened”.
For the most part, he puts his success with Checkbox down to luck, and support from family and friends.
“It doesn’t really sink in most of the time”, he says.
“I’m eternally grateful, I’ve had such a strong support network.”
For new startups, Wong’s advice is to not cling to a bad idea, but give it room to evolve into a good one.
“Almost everyone certainly starts with a crap idea,” he says.
“Be open enough, passionate enough about the problem you’re trying to solve. But be open about the actual idea so you have time to pivot and meet the market.”
Wong is speaking from experience here. Checkbox started life as ‘comployment’, a mobile app the helped small business owners keep track of their compliance requirements through monitoring government websites.
“No one wanted to buy it,” Wong says.
“SMEs don’t pay for risk mitigation.”
The idea changed a few times, and “got to the stage where it had pivoted so much, I didn’t know what the idea was anymore”.
“I felt so hopeless, I was just a guy with no idea. It was worse than when I started,” he says.
“It was sheer grit that got me through that stage.”
He vividly recalls a moment where he and one of his co-founders were sitting on a bench in a shopping centre “completely defeated, not knowing what we were doing with our lives”.
At that time, he told his colleague: “I’m really confident that if we keep sticking this out and talking to customers, we will succeed”.
And he sticks to that advice today, saying: “Learn what [customers] want and there’s no way you can’t succeed.”