Australian payments and rewards startup Cashrewards has successfully locked in a $5.25 million capital raise from Silicon Valley fund Partners for Growth after running bootstrapped for four years.
Cashrewards operates as an online coupons and cash rewards platform, which allows shoppers to receive a percentage of their bill back as cash, providing they shop via the Cashrewards platform.
The business was founded in 2014 by Andrew Clarke, and he told StartupSmart the business is just about to celebrate its fourth birthday. During its life, Cashrewards has enlisted 50 employees and secured the fourth position in last year’s Smart50 awards.
The business’ annual turnover is currently sitting around $12 million, says Clarke, a bump from the $9.8 million it recorded last financial year. While Clarke says he would have liked the number to be higher, it’s still a strong result for a company that last year posted a three-year annual revenue growth rate of more than 500%.
Cashrewards has been entirely bootstrapped up until now, with the funding from Partners for Growth marking the first time the company has accepted external investment. Staying bootstrapped for so long was thanks to the company’s profitability in the early days, something that has since dropped off due to further expansion, says Clarke.
He also puts the ability to bootstrap down to Australia’s R&D tax incentive scheme, calling it an “absolute godsend” for the startup and admitting he’s not a fan of the proposed caps that may feature in the upcoming budget. However despite the years of bootstrapping, Clarke recognised it was time to move.
“We can now well and truly see the opportunity to build a major brand in this space. We see how far we’ve managed to get with just organic growth and people who’ve heard about us just through word-of-mouth, and we want to take that out to market,” Clarke says.
“With bootstrapping the company to date, we haven’t been able to do much marketing, and virtually no paid marketing.”
That’s the plan for the startup’s $5.25 million war chest of funds, which is being provided as a tailored debt funding facility by Partners for Growth. Cashrewards has hired a chief marketing officer to help the company with paid digital and landline campaigns to further build its brand awareness and trust.
Receiving the funds through a debt facility, rather than alternate fundraising options such as venture capital or private equity, was a conscious choice by Clarke who strongly believes in his business, and has no desire to give away too much equity in it.
Fundraising hit by slight hitch
Process for securing the funding from Partners for Growth was fairly straightforward with all the usual due diligence sessions, says Clarke. However, he says there was one slight (but also potentially major) hitch.
“Before we could finalise the deal we had to go and find our original share certificates because we couldn’t locate those for a little while,” Clarke laughs.
“We had to run around and find which advisor had those, so that created a bit of a hitch last minute.”
In a statement, Partners for Growth director Karthi Sepulohniam said the fund’s focus is on supporting companies with rapid growth opportunities, and Cashrewards “fit the bill”.
“They have achieved multiple successes with no outside funding to date, which is impressive, and we believe there is significant growth to come. We particularly appreciate their demonstrated ability to innovate and execute swiftly, maximising growth and revenue with efficiency and agility,” Sepulohniam said.
“We’re looking forward to seeing a further boost in Cashrewards’ growth and market position as the opportunities in this relatively new local market expand.”
Clarke says his company is now looking to invest “ahead of the curve”, and begin to add further categories into the Cashrewards platform, including home loans, electricity bills, and retail “in the high street”.
“We see this as the next stage of the business cycle: connecting the digital world with the offline world,” he says.
But as a word of warning to fellow founders, Clarke says to never underestimate the work needed to get a business to where Cashrewards is.
“It’s so much work getting a business to this point, and as we’re ramping up, there’s even more and more work to be done. It’s taken such a commitment, and I’ve never worked harder in my life than I have in the past four years,” he says.
“You’ve got to be prepared to ride the ups and downs, a startup is a rollercoaster ride.”