Startup set to revolutionise moving home chooses FCX
FCX, Australia’s first centralised platform for private company capital, today announced the latest innovative startup to join its cohort of growth businesses.
FCX, the world’s first centralised platform for private company capital, today announced the latest innovative startup to join its cohort of growth businesses.
Australian startup Happly went live under the leadership of Andrew Weinman and Jeremy Rosen, to transform the moving home experience
“Any private company considering a raise, or just managing their cap table, should look no further than FCX,” said Happly Founder and Co-CEO Andrew Weinman. “This technology makes what would have taken hundreds of man hours and waiting in the old world, take just seconds via automation. The FCX team couldn’t have been more helpful supporting our go live, and we look forward to kicking plenty of goals together in the future.”
FCX CEO Max Cunningham added “There’s lots of moving parts in a move. Studies show moving house is one of life’s most stressful experiences. Like FCX, Happly is using tech to work smarter for you to make arranging a move effortless. It’s great to see them launch ready to take the pain out of an archaic, painful process – just like us – and we are delighted to be able to help them get underway.”
Happly uses cutting-edge technology to consolidate moving related functions and providers on one seamless, integrated, platform that’s free to use. Happly is a curated marketplace that offers a comprehensive solution to the moving problem, in one frictionless journey. Users can instantly access pricing and availability for every step of the moving journey – from reliable removalists and efficient cleaners, to hassle-free utilities connections. Features also include often-forgotten tasks such as updating addresses on driver’s license, electoral roll, and banks. Learn more at happly.com.au
FCX takes managing securities to a new level with atomic transactions that are secure, seamless, transparent. Companies and their intermediaries can access and manage an automated, fully digital cap table; conduct primary and secondary transactions with total visibility; and manage employee share ownership plans on one secure, regulated platform. Companies use FCX to issue, transfer, or cancel digital securities at the touch of a button, in real time; increasing efficiency and security with one, automatically updated, immutable record.
FCX is partnering with Innovation Bay’s VC community, Aurora
Max Cunningham, FCX’s CEO, sat down with us to talk about the platform and how it can solve for our VC community (and beyond) to offer, transact and manage unlisted securities with the touch of a button!
We are delighted to announce FCX is partnering with Innovation Bay’s VC community, Aurora. VCs looking to support portfolio companies with their investors and unlisted securities will quickly see the benefits FCX brings.
Read more on CEO Max Cunnigham’s chat with them by clicking this link.
FCX nominated as a finalists for two categories at the Finnies Awards
FinTech Australia has announced the finalists for seventh annual fintech business awards. FCX has been nominated as a finalist in two categories.
FinTech Australia has announced the finalists for the seventh annual fintech business awards. The Finnies are known as Australia’s most prestigious fintech business awards.
We are very excited to announce that FCX has been named as a Finalist in two categories:
- Excellence in Blockchain/Distributed Ledger
- Excellence in Regtech
This is a great result for the business and reflects the great work of the FCX team Max Cunningham, Dean Jagger, Harriet Jackson, Tiffany Milliss, Peter Guirguis and Pawel Tryfon, and our great champion Steve McLean.
Thanks to the many companies who have already onboarded onto the FCX platform and special call outs to the companies that have transacted primary capital raises on the platform including Dimple Optics, givvable and CircleIn – the first Atomic equity settlements in the world. More deal flow in the coming months – watch this space! Special thanks to FinClear and David Ferrall for all the support you have given FCX to get this far.
Finally, we congratulate all Finalists, we are in great company and look forward to celebrating in Melbourne with you all.
The Winners of the Finnies 2023 Awards will be announced on the 31st of May at a gala event in Melbourne.
reDeFined Podcast – The future of equity markets with David Ferrall
ReDeFined podcast features David Ferrall discussing FinClear and the FCX platform for trading unlisted securities.
DF:
It was great to chat about DLT and how Blockchain tech transforms equity markets on @ReDeFined podcast. We discussed @FinClear and our @FCX platform for trading unlisted securities, as well as how DLT could transform the current financial infrastructure and bring real-time transactions and a single source of truth to investment and trading.
You can listen to the full episode below. Thanks to @Jeremy Almond and @Megan Guy for having me.
MAX CUNNINGHAM APPOINTED CEO OF FCX
Appointment of former ASX executive comes as FCX sees significant demand from private companies looking to ‘list’ on FCX
Appointment of former ASX executive comes as FCX sees significant demand from private companies looking to ‘list’ on FCX
Sydney, 30 January 2023 – FCX, Australia’s first unlisted company securities platform built on distributed ledger technology, is pleased to announce the appointment of Max Cunningham as the company’s first CEO, effective 1 February 2023.
Max Cunningham brings an exceptional track record in equity capital markets and is highly regarded with institutional and corporate organisations in Australia and globally. Most recently, Max was Group Executive of Listings at the ASX, responsible for the origination of listed equity and investment products on the Exchange.
During his nine years at the ASX, Max oversaw significant growth in companies listing on the bourse and was instrumental in the ASX’s success attracting a record number of tech companies onto the Exchange. He left the business with a record $90.3 billion in capital raised over the first half of FY22 and the ASX welcoming 150 new listings in the same period.
Prior to the ASX, Max was Partner & Head of Syndication with Goldman Sachs Equity Capital Markets in Australia. He previously spent time with Goldman Sachs in New York and with Macquarie Bank in London and Sydney.
Max Cunningham’s appointment as CEO comes as FCX sees significant demand from private companies looking to ‘list’ on the platform. Max will work closely with FinClear’s CEO, David Ferrall and the current head of FCX, Dean Jagger who will continue to build out FCX’s tech offering and company on-boarding. FCX is a 100% owned subsidiary of FinClear, Australia’s largest independent tech and infrastructure provider for market access.
David Ferrall, CEO of FinClear, said: “We are delighted to welcome Max Cunningham to FCX. Max brings considerable experience in global financial markets and listings and is incredibly well regarded across the market. Importantly for our business, Max is recognised as a strong supporter of entrepreneurialism and innovation.
“The FCX platform is combining technological and regulatory expertise and rigour to tokenise securities in a secure way. We are applying our extensive experience in highly regulated, listed markets to give unlisted companies and investors the security they deserve.”
Commenting on his appointment, Max said: “It is a privilege to have been chosen to lead FCX. I am excited to be joining this dynamic business at what is a pivotal time in private markets. FCX is ideally suited to the current market dynamics – companies are staying private for longer, and their founders and management teams are looking for public market capabilities, without the associated costs and complexities. FCX is providing exactly that, through a unique combination of DLT backed technology, distribution and the regulatory framework which this opportunity demands.”
Dean Jagger commented “Max’s appointment as CEO is a fantastic endorsement of FCX and recognition of the future opportunities the platform will realise for private companies and their stakeholders, as well as for FCX itself. FCX mirrors what FinClear offers in listed shares and what the future standard of markets infrastructure should be.”
FCX is a leading centralised platform for unlisted company securities, providing unlisted companies with automated investor engagement and capital raising capabilities on a DLT-based registry, and private investors with seamless digital access to unlisted assets.
FCX is the future of unlisted asset platforms – a suitably regulated and permissioned investment world of direct securities that are all in the client’s own name, own wallet and held directly on a DLT based register.
In November 2022, FCX introduced tech facilities enabling automated equity raising for unlisted companies and capabilities with a Big 4 Bank for investors to make instantaneous, secure investments through digital ledger technology.
HOW DISTRIBUTED LEDGER COULD TAKE YOU FROM STARTUP TO IPO
It costs a $50mn company about $1.5mn a year to sit on the ASX. FCX offers a holistic lifecycle for companies to go from very early stage through to maturing, with liquidity for shareholders, before they ever have to list.
Forbes
How distributed ledger could take you from startup to IPO
By Elise Shaw
January 17, 2023
The FCX platform combines technological and regulatory expertise and rigour to tokenise securities securely.
Lived experience can be a creative catalyst for an entrepreneur.
In 2015, David Ferrall founded FinClear, the parent company of FCX, Australia’s first securities platform for unlisted companies built on distributed ledger technology. When he built FinClear, he realised there was nothing similar for unlisted companies.
“We saw, as an early-stage startup company ourselves, that there was nothing like in our world in the unlisted world,” he tells Forbes Australia in an interview.
He founded FinClear in 2015 with the idea that clearing and settlement in Australia needed more competition. Now, the business services one in every two listed product transactions flow through ASX and Chi-X every day.
Since its launch in November, around 30 companies have joined the FCX platform, from startups to the largest being FinClear, which was valued at around $500 million when they raised $20 million about a year ago, Ferrall says.
“We’re applying our knowledge, expertise, capability and highly-trusted position because there’s been a lot of noise in the past five months about crypto and some of those exchanges and the fact that they were not regulated.
“We’re regulated by ASIC and by the ASX. We’re highly regulated. We hold large amounts of capital and liquidity as part of our business. We’re highly trusted; we clear and settle for most of the big stockbrokers in Australia, a lot of the big banks. We’re a highly trusted counterparty. We’re applying that capability, that expertise, that trusted counterparty status into unlisted securities.
“The FCX platform combines technological and regulatory expertise and rigour to tokenise securities securely, which is a totally different proposition to a cryptocurrency,” he says.
Individuals, superfunds, corporates and advisors can open an FCX wallet and deposit cash into a bank account, generating a cash token in their FCX wallet. The cash token can be used to buy and sell shares, and unlisted companies can use the platform to raise funds.
The last time they raised capital, Ferrall says, he had one person working on it shuffling paper for three months.
“I take ourselves [FinClear] as an example. We’re a seven-year-old company. We’ve been a pretty high-growth company, literally from being nothing to being quite dominant in our space. And we’ve been through three or four capital raises ourselves, and they’re just horrible.
“Our background and expertise has been in public markets. We provide execution, clearing services, and clearing settlement for listed securities, and we provide access, and capability for those capital raisings as well. Listed markets run very, very efficiently. But we think there are some things that we do on the tech side that we can provide improvement for unlisted companies, particularly early growth companies. There’s no centralised platform capability for them to sit on.
“There’s nothing like the sort of automated tools that we are providing. There’s nothing like the sort of portal for the cap table management registry that we are providing. If I’d had the capability seven years ago to go on to something like FCX, I would have been there in a flash, and that’s what we’re seeing with unlisted companies.”
Distributed ledger is ‘the future’
He says the platform automates everything and uses distributed ledger, which Ferrall believes will be “the foundation of new capabilities for capital markets”.
“The great thing about distributed ledger technology, and the reason why you’re starting to see it being employed by some of the biggest exchanges and clearing and settlement firms globally, is that not only is it a secure database in real time that anyone can have access to, but what it lets you do is start to put smart contract capability around that ledger.
“That’s where you can start to automate functions. As a shareholder, your shares are now tokenised and sitting on the ledger; you have the capability within your digital wallet to bring cash in and tokenise it now. You can then automate that process around buying shares.”
The cash is already sitting in a digital wallet to buy secondary or primary shares in a company on the FCX platform. To facilitate the transaction, the cash moves from your digital wallet into trust automatically and then is moved into the corporate – a singular automated transaction performed by a smart contract.
Companies are charged a nominal fee for using the platform – depending on their valuation, anything from $500 to $1500 a year – and 1% to trade shares, whether it’s a buy or sell.
“We believe that distributed ledger is the future for financial markets,” says Ferrall. “Some smaller counterparts are doing part of what we’re doing, but they’re not providing the full platform capability. They’re not highly regulated as we are, and they’re not using distributed ledger.”
Ultimately, Ferrall says he expects to have 100 companies on the platform within the next six months and around 200 within 12 months.
“In phase one, we want to deliver these automated tools over the next month. And that allows the companies sitting on our platform to have a much more holistic and seamless, frictionless process for them to raise capital and go through liquidity. Once we do that, we think that the floodgates will open.
“Within a half year, I think we’ll have 100 plus companies. Within a year, I think we’ll have 200 plus companies on the platform.”
He says the other key initiative involves a licence application with ASIC to become an exchange.
“Not a tier-one exchange; it’s not being a competitor to the ASX. What we’re trying to do is build out a holistic lifecycle for companies to go from very early stage through to maturing, being able to provide liquidity for the shareholders. Then if they want to, as they get going, they might want to go to a public listing on the ASX.
“Our exchange capability will be a tier two exchange. It will be a liquidity venue for those companies to schedule liquidity events, either secondary or primary events, again, in a very automated fashion.”
FCX aims to provide a full lifecycle capability to go from a very early stage with all the efficiencies of sitting on a platform. Then, if a company gets really big and successful and wants to go to a public market, they will have done a lot of the heavy lifting, Ferrall says.
“If you look at the ASX, it’s got more than 2,000 companies listed on it. About 50% of those companies probably have a market cap of less than $50 million or $100 million. From a compliance and legal perspective, it could cost a $50 million company about $1.5 million a year. The costs are significantly lower for those companies to sit on something like FCX.”
Oz clearing firm FinClear launches FCX blockchain for unlisted stocks
Today FinClear, one of Australia’s largest settlement firms for listed securities, has gone live with a blockchain-based platform for tokenized unlisted securities, FCX.
Ledger Insights – 25 November 2022
Today FinClear, one of Australia’s largest settlement firms for listed securities, has gone live with a blockchain-based platform for tokenized unlisted securities, FCX. It uses Digital Asset’s Daml smart contract language, the same used in the stalled ASX CHESS replacement.
One of Australia’s big four banks provides a facility to automate money movement between a bank account and cash tokens in an FCX wallet. The tokenized cash is then used to settle equity purchases instantly and atomically. We don’t know which bank is involved with FCX, but ANZ was involved in a stablecoin project earlier this year.
Stepping back, FCX enables private firms to use the platform to issue new tokenized stock to investors. Underpinned by distributed ledger, a company can manage the entire process, including the offer information, documents and settlement, providing permissioned access to potential investors. Once an investor pays for the stock, it appears instantly in their FCX wallet. The issuer can keep tabs on the entire process.
The solution enables companies to easily manage the list of investors, the cap table. And FCX plans to enable secondary trading of private equities next year.
“The FCX platform is combining technological and regulatory expertise and rigour to tokenise securities in a secure way, which is a totally different proposition to a cryptocurrency,” said David Ferrall, Founder & CEO of FinClear. “We are applying our extensive experience in highly regulated, listed markets to give unlisted companies and investors the security they deserve.”
Three companies are using the platform so far, including FinClear itself, givvable and Circle In.
While blockchain is often seen as democratizing finance, as with many other jurisdictions, Australia restricts access to private company offerings to ‘sophisticated’ investors, the equivalent of accredited investors.
Some see unlisted securities as low-hanging fruit for distributed ledger applications. That’s because of the efficiencies in the public markets and the increasing number of unicorns staying private. In the United States, the DTC is progressing with its Project Whitney with plans to launch a private stock and digital assets solution, the Digital Securities Management (DSM) Platform, subject to SEC approval.
Some of the more institutional offerings include Switzerland’s daura, which has collaborated with the SIX Digital Exchange, ADDX in Singapore and France’s LiquidShare, which also uses Daml. There are several public blockchain security platforms, such as iStox, Securitize and Tokeny.
KYC & AML for Unlisted Companies
Learn about KYC & AML and how FCX makes staying compliant easy.
Are KYC & AML controls needed for Investors in Unlisted Companies?
In short, yes.
Like other countries, Australia has its own legally mandated KYC procedures, which companies such as banks and financial service providers must follow. These companies must verify the identity of their customers that are beneficial owners of an entity. For example, this requirement applies to companies that list on markets like the ASX and customers that subsequently invest in them.
These procedures are instrumental for AML purposes but are not necessarily legal obligations for people who buy or sell shares of unlisted companies. However, just like you don’t need anti-virus software to surf the internet or need sunscreen applied if you’re heading to the beach, you’d be silly to take on those risks, considering the known and proven consequences of those actions. The same sentiment applies to accepting investments in your unlisted company without implementing KYC & AML controls. You are doing so at your own risk and whilst it may seem okay to do so in the short term, in the long term chances are very high it’s going to be detrimental to your company’s ability to operate, raise further capital, meet industry /government requirements or become publicly listed.
What is KYC?
Know Your Customer (KYC) is the process a company goes through to verify the identity of its customers (i.e. investors) and better understand them and their financial position. As well as helping a company to establish the legitimacy of any new customer, by taking all of this personal information into account, companies can start to assess and control the risks a customer might potentially pose.
In the simplest of terms, KYC is a significant tool used in the fight against financial crime and money laundering and helps ensure that you (the company) are reasonably satisfied that the customer is who they say they are and actually exists.
What is AML?
Anti-Money Laundering (AML) is a set of policies, procedures, and technologies that prevents money laundering.
There are three major steps in money laundering (placement, layering, and integration), and various controls are put in place to monitor suspicious activity that could be involved in money laundering. KYC (explained above) is one of the most common controls implemented.
Why is it important for my Unlisted Company?
It’s true that unlisted companies don’t need to adhere to the same levels of scrutiny or regulations that listed companies do but that’s not a reason to be as vigilant. For some companies, their ultimate goal is to become a publicly listed company, so why wouldn’t you start being as compliant as you can from the start? Nonetheless, we believe the most important reason unlisted companies should take compliance seriously, especially in regard to their KYC and AML control measures is that it gives investors peace of mind and can increase the attractiveness of your company. A compliant company creates trust with investors.
FCX makes staying compliant easy. We offer integrated KYC and AML compliance checks as part of our Customer Due Diligence (CDD) process. This enables FCX to better understand our customers, serve them better, manage risks, security and combat financial crimes. FCX uses GreenID and Refinitiv’s World Check, market-leading digital identity verification and screening services that are fast, accurate and ensure that your details are kept secure.
This article is designed and intended to provide general information in summary form on general topics. The material may not apply to all jurisdictions. The contents do not constitute legal, financial or tax advice. The contents are not intended to be a substitute for such advice and should not be relied upon as such.
Asset Tokenisation: 101
Learn about asset tokenisation and how it will revolutionise the way we invest and trade assets, especially in unlisted markets.
What is Asset Tokenisation?
Asset tokenisation is the process by which an issuer creates digital tokens on a distributed ledger (e.g. blockchain), which represent either digital or physical assets. Distributed Ledger Technology (DLT) guarantees that once you buy tokens representing an asset, no single authority can erase or change your ownership — your ownership of that asset remains entirely immutable.
Why Asset Tokenisation for Unlisted Markets?
Did you know people questioned why mobile phones included cameras… imagine one without one now. Just like many innovations or early-stage technologies that have come before it the “why” will be strengthened in hindsight. That is not to suggest that this is a gamble or wild prediction, asset tokenisation is the future. Many industries are at varying levels of adaptation of asset tokenisation and thanks to FCX, unlisted markets can now count themselves amongst those sectors embracing the technology of the future. The benefits of tokenisation have been broken down further below.
Benefits of Asset Tokenisation
- Increased liquidity and shorter lock-up periods
By converting assets to tokens, issuers can secure greater liquidity. For example, private securities are typically illiquid, which affects the trading process on secondary markets. Thanks to tokenisation, this problem can be addressed to give investors more freedom to implement various strategies on scarcer assets.
Lock-up periods restrict investors from selling their assets. Sometimes this is due to the asset being large and illiquid. Tokenisation of assets can shorten the lock-period, due to investors being able to sell their tokens easily through a liquidity venue. Investors, in this scenario, no longer have to wait for a public listing or buyout to take profits or losses.
- Fair prices and fractional ownership
Assets that can’t be liquidated often have an unestablished market price. In this case, asset owners typically provide buyers with incentives like illiquidity discounts, which reduce the asset’s price. Tokenisation of assets would increase an asset’s liquidity, as it facilitates fractional ownership, which eliminates illiquidity discounts and opens up investment opportunities to a broader investor base (by enabling those previously without the required means for full ownership to take fractional ownership in an asset).
- Reduced management costs and settlement time
If you transfer ownership of an asset today, it requires intermediaries to handle things such as paperwork – this results in extra time and cost. If you choose to tokenise the very same asset and utilise smart contracts it will automate many parts of this process, saving time and cost. Furthermore, tokenising assets and implementing smart contracts can reduce settlement times from the current listed market durations of T+2, to essentially real-time, atomic transactions.
- Transparency
Since the underlying technology behind asset tokenisation (DLT), is immutable, owners are unable to change an asset’s history to make it appear more attractive. This allows investors to see the true history of a holding and make more informed decisions.
- Secure identity and better compliance
FCX ensures all platform users go through the KYC / AML verification process. This means any tokens connected with a wallet can be traced with ownership details kept on DLT.
How do you store Tokenised Assets?
On FCX you will store your tokens in a digital wallet. A digital wallet allows direct ownership of assets.
In Summary
Tokenisation is revolutionising the way we invest and trade assets, especially in unlisted markets. Asset tokenisation through Distributed Ledger Technology (DLT) helps to facilitate transparency, liquidity, and convenience that has not previously been available for the unlisted market.
Not only that, companies going through a capital raise or secondary transaction via traditional methods encounter problems such as the regular maintenance of books, slow settlement times and the manual task of issuing and signing stock certificates. Through tokenisation, companies can manage their investors and responsibilities from a digital interface, reach a new breed of investor and automate compliance obligations.
A platform that can do all this sounds like a no brainer doesn’t it? Contact us to find out how FCX can help you better manage your investors and securities.
This article is designed and intended to provide general information in summary form on general topics. The material may not apply to all jurisdictions. The contents do not constitute legal, financial or tax advice. The contents are not intended to be a substitute for such advice and should not be relied upon as such.
What is a Cap Table?
Learn about a Cap Table and why it is critical for a company's success and growth.
What is a Cap Table?
A cap table (or capitalisation table) is a detailed record of who has ownership in a company.
A cap table isn’t a legal document but it is just as important as one. A cap table will include things such as the name or groups of investors, ownership stakes, types of shares, issue dates, the share price and option pools.
A cap table will change and grow as your business does.
How is a Cap Table created?
Traditionally cap tables have been captured in the form of an excel spreadsheet or table. However, an increasing number of companies are turning to cap table management software providers to create and manage their cap tables and replace these old-world methods of record keeping.
Cap table management is one of the key features of FCX and what makes us different to other providers is that we are the only platform that’s designed exclusively for private companies and utilises distributed ledger technology, meaning your cap table becomes immutable – no more worrying about inaccurate, damaged, or lost files stored on somebody’s hard drive.
Here is an example of a cap table on FCX:
Why is a Cap Table critical for your company?
- Discuss initial equity distributions
When creating a new company, the cap table is where you put the company breakdown in writing (or on screen). Discussing initial equity distributions is difficult and sometimes emotional, but it’s a conversation that needs to happen at the formation of every business. Outline distributions between Co-founders and use the cap table to facilitate this conversation from day one.
- Understand your equity
At first, keeping track of equity might seem like a simple task. In the early stages, perhaps equity was only distributed amongst cofounders. But imagine an investor comes along offering you X dollars for 10% of your company. This is going to dilute everyone’s equity by 10%. Without a detailed and well-organised cap table, you won’t be able to quickly determine the result of the dilution nor be able to communicate it to other shareholders.
An up-to-date and readily available cap enables clear, detailed and smart decision-making. This only becomes more important as your business grows and your company’s equity position becomes more complicated.
- Manage ESOP
As discussed in this article, offering equity to employees is a powerful and effective strategy used to attract, maintain and incentivise staff. This equity distribution (via an ESOP) needs to be recorded accurately. Without numbers correctly recorded, it will likely be hard to know exactly how much equity is remaining for future employees.
- Investor negotiation tool
For potential investors, the cap table will be a key resource. Before investing in a company, investors will want to become familiar with current shareholders and the equity that each one possesses. The transparency of a well-managed cap table will help increase investor confidence. During rounds of funding and negotiations, the cap table can be used (by both parties) to see what happens to the company’s equity structure at different valuation levels.
- Shareholder management
Once the company has received investments from investors, managing shareholders will also become an important task, which can be done in the cap table. The cap table will typically include investor information, such as who they are, their voting rights, and the number of shares that they own. With this information in one centralised place, if voting was to take place, the cap table ensures that all investors would be included as necessary.
In Summary
Cap tables are a detailed record of who owns what in a company. Having an accurate cap table is essential for all companies but especially for startups and growth companies as they are likely to have evolving capital structures, and a large appetite for investment to fund early stages. An up-to-date cap table can be a particularly useful tool for companies to test future capital raise scenarios and keep track of key investors and shareholdings.
FCX’s cap table management functionality has been specifically designed and tailored for private companies.
This article is designed and intended to provide general information in summary form on general topics. The material may not apply to all jurisdictions. The contents do not constitute legal, financial or tax advice. The contents are not intended to be a substitute for such advice and should not be relied upon as such.
Capital Raising: An Explainer
Learn about capital raising, equity raising and the different types based on a company's funding lifecycle.
What is Capital Raising?
Capital raising refers to the process when a company approaches existing and/ or potential investors to ask for additional capital (money) in the form of either equity or debt.
Companies typically raise capital to achieve their strategic goals. These are usually for the purposes of acquisition, re-balancing the capital mix and/ or growth
What is Equity Raising?
Equity raising is the process of raising capital by issuing new shares in a company. This allows the investor to take partial ownership in the business. Generally, the equity investors will need to have comfort with the company’s growth strategy and their valuation. Ultimately, an investor wants a return on their investment.
Investors can participate in a capital raise for a listed company or an unlisted (private) company. Anyone can purchase shares in a listed company via an exchange but investing in a private company has different requirements and risks.
Generally, as a rule, regulations allow a sophisticated investor to invest in private companies with the main exception of Equity Crowdfunding, which is open to all investors.
Equity Raising Examples
There are several kinds of raising equity, with the big differentiator between them being the stage of a company. Below are the different types of equity raising from early companies to mature companies:
- Seed financing (Friends & family quite often participate)
- Crowdfunding (Retail investors can participate)
- Angel financing
- Venture Capital
- Private Equity
- Public Capital Markets (Retail investors can participate)
The Capital Raising Process and FCX
The capital raising process can be complex, arduous, and onerous, especially if it’s your first time. When unlisted companies raise money, there are quite a few manual tasks to finalise the round and ensure it is compliant. Below is an example of that process:
- Before you begin the process you’ll need to provide a business plan with financial projections, an Offer document, and/or a pitch deck.
- Once a company has all its documents in order, the process of raising funds can begin.
- You have finished your roadshow, told your story a million times, taken on board the “helpful feedback” and closed your raise, some of the hard work is done! Now you need to arrange the settlement of the raise – the exchange of cash for shares.
- You will need to arrange for your new investors to pay for their shares. Typically, you will contact them (by email usually but sometimes snail mail) explaining the process, informing them of your bank account details, how much they need to pay, by when, their shareholding information,
- You will also need to follow up with the sophisticated investors to ensure they have provided their sophisticated investor certificates.
- You need to arrange for some form of share ownership documentation for your investors… could be a paper share certificate or registration on a registry with a digital certificate.
- When payments come in, you must identify individual payments appropriately and match them to the correct investor. Investments could be in the name of a company, an SMSF or a trust and payments could come in with a different payment reference or source code. This all needs to be manually reconciled.
- Once the payments have been verified with their corresponding investor, the share documentation will need to be issued/ disseminated.
- It’s important to update your share registry and cap table (hopefully not a spreadsheet) and formally inform ASIC of the changes to your shareholding
Note: There is a fair chance that this process takes longer and is more painful than the actual raise of capital itself!
FCX has developed a centralised platform that provides capital raising tools and a digital cap table/share registry that allows companies to raise capital and manage their investors in a simple, seamless, and compliant manner.
Watch this demo video to learn more:
This article is designed and intended to provide general information in summary form on general topics. The material may not apply to all jurisdictions. The contents do not constitute legal, financial or tax advice. The contents are not intended to be a substitute for such advice and should not be relied upon as such.
Employee Share Option Plan (ESOP): 101
Many companies that use FCX will either have an ESOP in place or they’ll be thinking about implementing one. Here is a quick 101 about all things ESOP.
Many companies that use FCX will either have an ESOP in place or they’ll be thinking about implementing one. Here is a quick 101 about all things ESOP.
What is an ESOP?
An employee share option plan (ESOP) is a formal arrangement that provides employees with an ownership interest in the company through share (equity) ownership.
Typically, an ESOP is part of a compensation package, where shares will vest over a period of time. ESOPs are designed so that employees’ motivations and interests are aligned with those of the company’s shareholders. Having skin in the game for staff can make a significant difference in delivering on the company’s vision.
ESOPs are particularly popular in start-ups and scale-ups but this isn’t exclusively the case.
How does an ESOP work?
In its simplest form, an employee receives options (or rights) to be granted shares in the company, as long as they comply with the rules (e.g. vesting periods) of the ESOP.
Types of ESOP
There are different types of employee share ownership plans which will vary depending on the size of the company, number of employees and purpose of introducing the scheme. Below are two of the more common types of ESOP:
Employee stock options (ESO)
Employee stock options (ESO) is an offer by a company that gives employees the right to purchase a specified number of shares in the company at an agreed upon price by a specific date. The employee is under no obligation to purchase all or part of the number of shares noted in the option. The choice is theirs and they can normally purchase stock at any point during the time period between the offer and last exercise date. Vesting conditions typically include duration of service and can incorporate KPIs based on individual performance.
Loan to purchase
A loan to purchase scheme will typically be used to ‘sell’ ownership of shares to employees at market value. Usually, the company will offer a zero interest loan to employees to fund the purchase of the shares. Loans will often not require repayment until such time as an eventual liquidity event in the company.
Benefits of an ESOP
ESOPs are generally a win-win for employers and employees, encouraging greater effort and commitment in exchange for bigger financial rewards. Further benefits for each party can include:
Employer
- Attract and retain talent
- Align employees’ interests with those of shareholders
- Alleviate pressure on cash flow
- Strengthen employee loyalty, motivation and innovation
- Increase shareholder value
Employee
- Financial rewards
- Improved awareness about the ‘big picture’ decisions; directions and corporate plans of the company
- Improved job satisfaction and happiness
- Reduction in employee supervision as they have a more vested interest in taking more responsibility for their work duties
- Promotes engagement and innovation when solving key problems
FCX and ESOPs
FCX can maintain any security class, from ordinary shares to loan shares, and of course employee plan options. FCX will enable you to issue and manage lifecycle events such as vesting and expiry all on platform. FCX also has secure document storage functionality for personal employee documents, plan rules and whatever other documents you deem to be relevant.
The big advantage of our offering is that your ESOP program can be fully automated via the power of Distributed Ledger Technology.
FCX can help you manage most aspects of your ESOP, but not all. We recommend enlisting the services of professionals (e.g. Lawyer, Accountant) who can independently understand and advise on your company’s ESOP requirements. FCX has a large community of partners and we are happy to make recommendations.
