Startups contemplating an IPO must have all their ducks in a row and be willing to get their hands dirty, says Andrew Ward, founder and managing director of recently-listed fintech company SelfWealth.
Launched in 2012, the online, cloud-based share trading platform offers investors flat fee brokerage, regardless of the trade size, as well as access to SelfWealth PREMIUM, a social network where share portfolios can be compared and constructed.
“In an Australia-first, we’re allowing users to leverage the power and wisdom of the crowd when making investment decisions,” Ward told Dynamic Business. “Being the first to market in this space has created a powerful barrier to entry for other competitors, and we have yet to see another player offer what we do. Within our PREMIUM offering, users are given access to member data that generates tradeable insights to guide their investment decisions. They are also able to track a range of useful analytics, such as the top performing member’s portfolios, the top stock of the day, and the community sentiment of their portfolio.”
Discontentment with a broken model
Ward, formerly a private wealth director with CBA, said SelfWealth was born out his growing “discontentment” with the industry he had worked in for 25 years – in particular, a ‘broken’ stock market brokerage model.
“During my time in banking, I became increasingly frustrated with the high fees paid to fund managers, administration platforms and financial planners throughout the traditional value chain in brokerage,” he explained. “A contributing factor is that old-school F2F and over-the-phone brokers as well as non-cloud online brokers have had to contend with recovering expenditure on outdated, in-house legacy systems.
“Being housed in the cloud, and developing your solution from scratch in the cloud, is a significant competitive advantage when it comes to cost and scalability. In some cases, however, brokers have spent $500 million on developing, upgrading and maintaining their systems over many years… so, they don’t want to let go of their existing infrastructure any time soon. Add to this the cost of bricks and mortar and ballooning staff numbers and the reality is that existing brokers must charge high rates just to keep their business centres profitable.”
Believing that investors would be better served by a cloud-based platform that offered key services such as portfolio construction, administration, reporting and financial advice while switching out exorbitant fees for convenience, Ward left behind a “comfortable career in banking” to create SelfWealth.
Commenting on the peer-to-peer social network component of SelfWealth, he revealed his main sources of inspiration were LinkedIn and eToro, a social trading platform based out of Israel: “The concept of our community becoming ‘smarter’ as it grows, with members becoming more empowered and insight-rich as they connect with more people, was derived in part from platforms like LinkedIn and eToro. This has contributed to SelfWealth morphing into an increasingly powerful solution.”
A major decision not taken lightly
Ward said he had two main objectives for listing SelfWealth on the Australian Securities Exchange (ASX) in November last year. Firstly, he wanted to “raise enough funds to approach profitability”. Secondly, he sought to “generate significant awareness in and credibility for SelfWealth”.
Nevertheless, the decision to float SelfWealth was “not taken lightly” by Ward, who sees the company as his “baby”. Ultimately, the successful launch of SelfWealth’s TRADING and PREMIUM platforms, facilitated by $6.4 million in capital raised during FY16 and FY17, instilled Ward with the confidence necessary to list – as did a “record month” of KPIs leading up to the IPO announcement.
Of course, Ward and his team had to “get many ducks in a row” prior to listing SelfWealth, especially around ASX and ASIC requirements, including need for investors to have greater access to the company’s ongoing affairs.
“One factor that helped us enormously was that we were already a public business (albeit an unlisted one), meaning we were already conducting and monitoring many of the tasks required of a ‘listed ready’ business,” he said. “We also assembled an experienced team and due diligence committee who had been through the process many times before, including with smaller market cap businesses like SelfWealth.
“One of the big areas of education for the business, including our employees, has been around disclosure, market-sensitive information and the windows when stock can be bought or sold. Our CFO and I have also had to switch focus a little more towards Investor Relations (IR), as we now have over 800 shareholders.”
“I’m pleased with where we’re at”
For all the challenges, Ward said going public has provided SelfWealth with a platform to communicate with a broader audience of investors as well as greater credibility as a financial services provider and the capital to grow at a faster pace than previously possible. Critically, SelfWealth has continued to enjoy strong growth since the IPO, with Q3 FY18 revenue up 90% on the previous quarter and 759% on Q3 FY17, plus an increase in users by 50% from Q2 FY18.
Relevantly, Ward said no shareholder took any money off the table at the IPO; instead, the funding was reinvested SelfWealth to generate a larger user base and, in turn, additional revenue
“We’ve been using the IPO monies to fund key marketing and advertising initiatives as well as the optimisation of our user experience,” Ward said. “In January, we integrated with digital stockbroker OpenMarkets, which enhances the user experience by shortening onboarding and general processing times. Meanwhile, our partnership with Essendon Football Club, announced in February, is amplifying our national recognition.
“We continue to rapidly gain traction, with a customer base that ranges from Self-Managed Super Funds (SMSFs) to exchange-traded fund (ETF) providers and accountancy firms. SelfWealth is successfully penetrating a A$1.7billion + market opportunity and we anticipate this growth will continue alongside our strategic partnership with BGL, Australia’s largest SMSF administration and compliance software provider. Ultimately, while I certainly enjoyed our initial startup phase – and learned an incredible amount during this time – I am quite pleased with where SelfWealth is at in the company’s lifecycle.”
“Nothing escapes my better half”
Ward said there is “no doubt” in his mind that SelfWealth wouldn’t be where it is today without the dedication of his team, including his wife Louise Ward – the company’s operation’s manager.
“We have strong, supportive relationships with one another, having known each other for years,” he said. “The solution you see today has been coded, tweaked and refreshed many times over from the ideas in our heads. Now, I appreciate that not every startup has the luxury of a team with a history, but that shouldn’t stop founders from striving to assemble a team of talented people and fostering an environment that holds onto those people and their expertise. If there’s one thing I’ve learned, it’s that people will put in the hard yards when they value their company, the culture and their peers.
“In the case of my wife, I’m lucky to have her unwavering support. In the beginning, it was just the two of us taking a big risk from a family and financial point of view. Being at each other’s side, we had a shared understanding of the comings and goings of the business, so we didn’t need to try our best to explain them at the dinner table each night.
“Of course, having three kids together, it’s been important for us to maintain a work/life balance, otherwise it could become all-consuming. Ultimately, having a strong partnership with Louise has honed my values and morals as a business person – nothing escapes my better half, and I’ve always strived to treat my team with the same respect I afford her.”
“The float was all hands on deck”
Asked to provide advice for startups contemplating an IPO, Ward replied, “Listing as a public company can definitely be a sensible option for growth; however, you must have the right foundation in place, including the best possible team behind you, before you dive in. Having a strong support system, both internally and externally, is also helpful both in the stressful lead up to listing and post-IPO.
“In addition, you need to be willing to get your hands dirty. In our case, we had to continue building SelfWealth even as we prepared to float it. Not wanting to ‘sink the boat’ with too many IPO expenses, it was all ‘hands on deck’. Aside from engaging ‘the usual suspects’ such as lawyers and auditors, we didn’t outsource any of the work to float. Instead, many of us worked outside of our job titles to prepare background research and supporting information.”
Looking to the near future, Ward said SelfWealth will introduce an ETF consisting of 200 equally weighted securities sourced from the 200 best SMSFs in its community. In addition, there are plans to get into international share trading and launch an advisory portal, enabling financial planners to assist their clients through the platform. And further down the road?
“International markets beckon,” Ward said. “However, we will ensure we create a highly-profitable business on home soil before we commit any significant funds or resources to global expansion.”