Tech accelerator and early-stage investor Scalare Partners targets $8m backdoor listing on ASX

Founded in 2020, Scalare has more than $10 million worth of investments in its portfolio including regulatory-tech scale-up FrankieOne, walking tour platform FreeGuides, retail-tech Brauz, ag-tech Zondii, worker access pass tech MyPass, and many more. 

The group's investments are not just in Australia but internationally, with its largest holding of $2.25 million in UK-based audio-led fitness app WithU.

Scalare has invested in 27 companies over the course of its short existence and aims to invest in eight startups per year at an average of $150,000 and a maximum of $250,000, with three full exits to date including the sale of fintech Cape to the UK's Anna Money with Scalare's consideration paid in equity shares in the parent company.

But in FY24 Scalare's investment gains of $1.19 million were less than half its total revenue, with another $1.99 million coming from its support services division that spans advisory work, Tech Ready Women, the Australian Technologies Competition, and its four-week founder problem-solving sprints on the Ascend platform.

"Scalare isn’t a fund, so we write early-stage investment cheques off our own balance sheet," says Scalare Partner chief executive officer Carolyn Breeze, who assumed the role in early 2023.

"We don’t have a separate fund structure so we don't charge a 2 per cent management fee, and we don't charge a 20 per cent carry.

"In addition to that we offer services to startups; a base of fractional services to help startups grow, whether they be in our ecosystem and portfolio, or whether they're just generally in the Australian landscape and some overseas."

Breeze believes this makes Scalare different to other investment firms in the Australian startup ecosystem, particularly at the early-stage end of deals, and helps differentiate it from other listed investment vehicles on the ASX that invest in startups such as Bailador Technology Investments (ASX: BTI) and Touch Ventures (ASX: TVL).

To begin with, Scalare has a more modest market capitalisation target than these two companies, which at the time of writing are worth $173 million (Bailador) and $48 million (Touch Ventures) respectively.

Scalare will offer shares at $0.25 each to raise between $4-8 million, implying a market capitalisation of $22.8-26.8 million depending on the take-up.

If the group achieves the upper limit of its ambitions, $2.4 million of the proceeds will go towards investments in new and existing portfolio companies, more than $3.6 million will be for working capital, while Scalare is also budgeting for R&D to fast-track its current digitisation products, expand Tech Ready Women nationally and in the USA, where it also plans to set up an office.

The Tech Ready Women initiative, which has supported 3,000 female founders in NSW in the last seven years, recently expanded to Queensland with support from the state government's Accelerating Female Founders Program.

Scalare estimates the cost of the RTO offer will be at least $642,000.

"I believe there are two big misunderstandings in the ecosystem – one is that being a listed entity is such a different and foreign way to access capital. It’s simply just another way to access capital," Breeze explains.

"It'll still be similar people that will be investing in Scalare; it’ll still be high net worth and family office and retail investors, they'll just have a better way to access Scalare for investment in a liquid environment.

"Early-stage investing has been something that I don't think is really commonly understood, particularly by retail investors. It's kind of been a black box, so it's reserved for sophisticated investors who can become part of a syndicate or a VC (venture capital) fund, and it ties up their liquidity for five to 10 years."

A key selling point for Breeze is that the listed model means investors don't need to be tied up for such lengthy timeframes, and can gain access to a range of diversified investments.

"There's no ring fencing, so some of our earlier cheques from four-and-a-half years ago, those businesses are profitable, they’re scaling globally, they’re heading into Series A, Series B," she says.

"We think it's a really valuable investment asset with a huge upside, and we want to make it accessible to all types of investors - not just those that are engaged with VC funds."

The CEO also touts the cross-over benefits from the services business, which provides "immense deal flow".

"More often than not, we've known these companies and worked with them in some capacity before we make these investment decisions," she says.

It must be noted that Scalare ran at a loss of almost $351,000 in FY24, much of which can be explained by increased expenses and investment gains that were down by roughly $1 million on the average of the two prior years. Scalare has not provided a forecast for FY25 in its prospectus.

The offer opens later this week on 29 August and Candy Club shareholders will need to vote on the deal as well on 23 September. The prospectus offer closes four days later, and if all goes to plan Scalare Partners shares will start trading on 10 October under the code SCP.