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ProcurePro co-founder Alastair Blenkin.
In the two years since, ProcurePro has powered more than $30 billion in construction value across 1000-plus projects for contractors including Roberts Co, Hutchinson Builders, Hansen Yuncken, Richard Crookes Constructions, Kane Construction and McNab.
The start-up has raised a $6.15 million funding round led by AirTree Ventures and Aconex co-founder Leigh Jasper’s Saniel Ventures to fuel an expansion into the UK. Local angel investors also poured into the round.
The local start-up sector is up in arms about a proposed overhaul by the federal government to the significant investor test, which would mean only people with more than $4.5 million in net assets could invest in unlisted assets such as tech start-ups.
Currently, an investor is deemed “sophisticated” if they have more than $2.5 million in net assets or earn more than $250,000 gross income in two consecutive years.
Angel investors had been key to ProcurePro’s growth to date, Blenkin said, and had been instrumental in providing introductions, advice and assistance during the company’s early days. ProcurePro has posted 300 per cent growth year-on-year, bucking the tech downturn.
“We intentionally raised a lot of our capital from angel investors, who are basically people in and around the construction industry. Having people in the industry to be our supporters has helped shape our products and drive that initial traction. Angel investors contributed the first couple of million,” Blenkin said.
“I actually said no to AirTree a couple of times through the course of raising the funding round, because I didn’t think we could make it work with the size of the round, but we did and that’s been a really positive move.”
Blenkin said the potential changes to the sophisticated investor test, while designed to stop retirees from losing their life savings to investments they don’t fully understand, would have unintended negative consequences.
AirTree Ventures investment partners John Henderson and Jackie Vullinghs.Credit: Ryan Stuart
“It seems like the government wants to introduce a change to deal with some adverse outcomes in a minority of situations, rather than looking at the holistic picture,” he said. “Angel investing has been undoubtedly helpful for our business, and if we were forced down a route where we could only raise from professional investment funds, our business would look very different.”
AirTree Ventures partner John Henderson said the proposed changes are ill-conceived at best and a threat to the start-up ecosystem at worst.
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“Wealth alone is a very sloppy test of investor sophistication, and I worry that increasing the financial bar to participate will diminish the diversity of investors and, by extension, the diversity of teams funded,” he said.
“ProcurePro’s cap table is a great example of what we should all strive for; government included: underrepresented groups having the opportunity to share in the wealth creation from Australia’s best start-ups.”
A senior government source unauthorised to speak publicly said the government was aware of the reliance on sophisticated investors by early-stage start-ups, and would be taking that into consideration with any changes.
“In the October 2022 budget, the government announced a review of the regulatory framework for managed investment schemes, which is looking at, among other things, whether the thresholds that determine whether an investor is a retail or wholesale client remain appropriate,” a spokesman for Assistant Treasurer Stephen Jones said.
“Treasury is due to provide its advice to government in early 2024. The government has not made a decision regarding these thresholds or other aspects of the review.”
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