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Aussie Start Up Hits Local Bank With $40 Million From US

When Brad Couper, the chief executive of Brisbane-based software-as-a-service company simPRO, was toasting a $40 million capital raising from New York venture capital firm Level Equity earlier this month, he couldn’t help but shake his head at the lack of support from his local bank.

After one of the year’s largest startup funding rounds, the maker of cloud-based software tools for tradies is valued at north of $100 million, but back in February the local bank it has used for 14 years had refused its application for a $2 million business expansion loan.

“We’d rather not give away equity if we don’t have to, and a $2 million loan would have been enough to continue our growth,”  Mr Couper said.

simPRO had been a customer of the same “big four” bank – which he declined to name – since 2002, when electrical contractor Stephen Bradshaw founded the business in his Brisbane garage.

ts estimating and scheduling platform for tradespeople turned over $20 million in 2015/16 and claims nearly 100,000 users worldwide.

Nervous banks

He said the bank was nervous about simPRO’s intention to use the loan to expand its Boulder and London offices, and did not understand its software-as-a-service (SaaS) model.

“We even sat down with them and explained how SaaS works, that our recurring revenue could service a $2 million loan, and that in fact if I didn’t increase spending for just one month we’d be below their serviceability threshold forever,” Mr Couper said.

“They just said ‘yeah, looks good, but no’. The only way we were going to get the $2 million was if every one of our 12 shareholders signed a personal guarantee and put their house on the line. It’s not that the banks wouldn’t like to back us but their systems just don’t allow it.”

Mr Couper’s next stop was Australian venture capitalists, where he was also out of luck.

While he said local VCs could value SaaS companies, they could not a write a cheque of the size required by simPRO after 14 years of bootstrapping.

“And the handful that are big enough just want to value you at two or three times last year’s earnings, and that doesn’t fly in a fast growth SaaS company.”

Finding VC support

It was only when simPRO talked to US venture capitalists, as part of a delegation organised by KPMG/Advance program Elevate61, that it found the necessary support for its SaaS “scale-up” plans.

Mr Couper and three other simPRO executives paid $4000 each plus expenses to join Elevate61, but he said the investment was worth it because it taught them precisely where to look for funding.

“It’s a generalisation but we found the east coast VCs understood established SaaS businesses like ours, and were prepared to pay a multiple of forward earnings for them, anywhere from three to eight times,” he said.

“The west coast VCs are all coming out of technology successes and are more interested in taking a punt on the shiny new thing.”

SimPRO banked a $40 million investment from New York’s Level Equity earlier this month, struck at a “comfortably nine-figure valuation”, Mr Couper said.

The chief executive just signed off on hiring 41 more people, which will take simPRO’s total head count to 210. Thirty of those will be for product development in Brisbane, with the balance additional support staff in the Boulder and London offices.

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Government Steered By Electric Trucks

The government yesterday released an additional £4m of funding support for electric trucks in an attempt to bolster efforts to green the country’s haulage fleet.

Businesses purchasing electric trucks above 3.5 tonnes will now be eligible for grants of up to £20,000, thanks to extra funding made available through the Plug-In Van grant scheme.

The Plug-In Van grant scheme was established in 2012 to help firms switch their commercial cars and vans to electric alternatives.

But adoption rates have been slower than hoped, despite evidence that electric vans help to cut corporate fleet running costs. The government is now keen to accelerate the rollout of commercial electric vehicles (EVs), as most commercial vehicles are diesel powered and are therefore a major contributor to poor air quality in city centres.

“The electric car revolution is well under way with consumers and this funding will encourage more businesses to consider switching to cleaner vans and trucks,” business and energy secretary Greg Clark said in a statement. “Our automotive sector is thriving, with the world’s most popular electric car already made in the UK and we are forging ahead to deploy new engine technology to make low-carbon vehicles mainstream, and leading the way in driverless car technology.”

 The Plug-In Van grant will be available for vans weighing between 3.5 and 12 tonnes, alongside existing grants for smaller commercial EVs.

The government said the extension will be “reviewed” once 5,000 grants have been processed, or in March 2018, whichever is earlier.

The government is under increasing pressure to clean up the air in the UK’s towns and cities. Last week the Department for Environment, Food and Rural Affairs (Defra) was back in court with ClientEarth as part of the environmental law firm’s long-running legal battle over the legality of the government’s plan to improve air quality.

Meanwhile, pressure is growing from the government’s own backbenchers. Official statistics obtained by Conservative MP for Tiverton and Honiton Neil Parish revealed last week that 40 per cent of UK local authorities breached legal limits on air quality last year.

The government figures show 169 out of 418 local authorities were in breach of annual nitrogen dioxide limits in 2015. Nitrogen dioxide pollution is linked to lung disease and cardiovascular problems such as heart attacks and strokes.

“These are shocking statistics,” Parish said in a statement. “When we think of areas breaking air quality laws, we usually think of a handful of areas in our busiest towns and cities. These figures show just how widespread the problem is across the UK. It requires a comprehensive solution – urgently.”

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Banking On it?

William Hague, the former leader of the UK Conservative Party, has warned the policies of central banks are pumping up stock markets and house prices, threatening an “almighty crash”.

In a column for the UK’s Telegraph Hague said the accumulating effects of loose monetary policy globally was intensely political.

“When pension funds renege on promises, or inequality widens further, or savers become desperate, huge public and political anger is going to burst over the heads of the world’s central banks,” he wrote.

“The only way out is for the US Fed to summon the courage to lead the way to higher interest rates, and others to follow slowly but surely. If they fail to do so, the era of their much-vaunted independence will come, possibly quite dramatically, to its end.”

In 2008 central banks had reacted to crisis by cutting rates to record lows and embarking on quantitative easing, pumping trillions of dollars into their economies, Hague wrote in his column in the Telegraph.

“The trouble is that eight years later they are, to varying degrees, still doing it.
Like doctors keeping their patients on a drip many years after an operation, they are losing credibility and producing very dangerous side effects.”

Hague listed a number of drawbacks to this policy including savers finding it impossible to earn a worthwhile return, “which drives them into riskier assets thus causing the price of houses and shares to be inflated ever higher”.

“Higher asset prices make people who own them much richer, while leaving out many others, seriously exacerbating social and political divides and fuelling the anger behind “populist” campaigns,” he wrote.

Pumping up the prices of stock markets and houses without an underlying improvement in economic performance would become increasingly difficult to unwind “and ultimately threatens an almighty crash whenever it does come to an end – wiping out business and home buyers who got used to ultra-low rates for too long”.

The purpose of independence for central bankers was so that they could be brave enough to make people confront reality, Hague wrote.

“Yet in reality they are blowing up a bubble of make-believe money to avoid immediate pain, except for penalising the poor and the prudent.


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Valuations Up?