Sydney based fintech startup Simply Wall St has recently raised $2.4 million dollars in funding but the investment came from an unconventional source: the startup’s own users.
The funding was raised from a group of 11 investors, who are all part of the startup’s growing user base. At the start of 2016, Simply Wall St had 20,000 users on its books and that figure has now grown to just under 130,000 users across five global markets.
After media reports announced Simply Wall St was looking to raise funds, the founders received numerous offers from their customers.
“[The enquiries] kept growing and growing until we realised: we don’t need a VC,” co-founder Alistair Bentley told StartupSmart.
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“The amount that some of the investors put in was the same that a VC would put in,” he says.
The startup, which uses simple visualisations of stocks to help users make informed decisions about their investments, raised $600,000 in seed funding in mid-2015, which enabled it to acquire Atlanta startup Capp.io.
Bentley found raising funds from existing users was “really pleasant” when compared with approaching venture capital firms.
“They’re already using the product — you don’t need to pitch them,” he says.
Bentley and his co-founder Nick van den Berg had approached a number of venture capital firms seeking investment, but were frustrated by the lack of understanding of their business model.
“With so many VCs we talked to, halfway through the pitch there’s this realisation,” Bentley says.
“We ask them [if] they’ve even spent 5 minutes using this platform, and they haven’t.
“The VC industry in Australia is still quite young — these new funds cropping up are run by people who have a private equity background. A lot of them didn’t understand our method of growth, or customer acquisition, which is extremely successful,” he says.
Simply Wall St now boasts close to $500,000 recurring yearly revenue, and Bentley sees the traditional investment industry as ripe for disruption.
“Traditional methods of investing are changing,” he says. “Barriers like cost and accessibility [are] getting lower…brokerage and cost to access different products is going down,”
For startup founders looking to raise, Bentley recommends adopting a strategic approach that identifies key industry players, not just venture capital firms.
“There are so many other sources of capital, especially in Australia,” he says.
He encourages founders to ask themselves, “who else has done really well in the space that I’m in?” and then seek these industry figures out not. The goal should be not just “from a raising money point of view, but also from a strategic point of view,” he says.