ActivePipe founder Ashley Farrugia. Source: Supplied.
Three-year-old startup and Smart50 finalist ActivePipe is confident it will be one of Australia’s next unicorns after closing a $5.9 million Series A round led by NAB Ventures.
This ends a long search for “strategic” money by the startup, which offers real estate agencies a predictive analytics and data-focused communication platform to help them identify and convert potential property buyers and sellers.
The company raised a “pre-series A” round of $1.8 million in August last year, and founder Ashley Farrugia says the two raises can essentially be viewed as one and the same, with the cash injection from August allowing the startup to “get cracking” on its expansion into the UK market.
Last year, the company reported a revenue of $2 million in the 2016-17 financial year, after growing its revenue by 92.7% over a three-year period.
“We’ve got staff on the ground in London now and we’ve been getting some amazing feedback and take up of the product. We’re also about to set up in Austin, Texas — we’ve just hired our head of country for the USA,” Farrugia tells StartupSmart.
“The UK market opportunity is two to three times Australia’s — they’ve got about 19,000 offices compared to our 8,200 here — but the US market is more like 15 times. They have about 1.2 million realtors.”
For Farrugia, who left school at the age of 14 to do a motor mechanic apprenticeship, the journey so far with ActivePipe has been “amazing”. But he attributes much of the company’s success to its culture.
“I put a massive amount of weight in culture. It can take a while to get to that sweet spot, but once you have a team that loves their jobs and believes in the product and puts everything on the line to make sure it succeeds, then you can build a product people love,” he says.
“But thinking back to when I left school, did I think I would have the former managing director of Optus’ consumer division on my board and NAB investing in my business? Shit no!”
“I did always have in my mind that one day I would build a billion-dollar company — we’re going to be the next Australian unicorn, we’re confident in that.”
NAB partnership a boon
ActivePipe’s raise was also contributed to by real estate-focused venture capital fund PieLab Venture Partners and a number of strategic individual investors. Farrugia says when the ActivePipe team set out to raise this time round, finding money was the easy part.
It was finding the right sort of “strategic money” to help broaden the company’s market penetration that was harder.
And while some in the startup space might wrinkle their nose at the prospect of a big four bank partnership, Farrugia is adamant the endorsement from NAB spells a massive opportunity for his startup, which is just beginning to branch into the finance space through mortgage broking.
“I’ve got nothing but amazing things to say about NAB. From day one, they were super impressed with our product and have gone above and beyond their promises,” he says.
While it’s common for companies to pour venture capital money into marketing their freshly minted products, the ActivePipe team will instead be using the funds to help its overseas expansion and continue development of its product.
“You see other companies pivot to a more sales-focused business and pour money into their sales team, but we believe if you build a good product to be even better, it will sell itself,” Farrugia says.
When it comes to the prospect of raising future funding, Farrugia says he’ll “never say never”, but is currently comfortable with ActivePipe position and not focused on going further down that path at this point. He says in the Australian market alone, ActivePipe is seeing 10% month-on-month sales growth.
And for now, at least, hitting the status of Australia’s next unicorn will be done while keeping the company private, with the founder seeing no need to pursue a stock market listing.
“Most of the tech companies who converted in the past few years have been a disaster, there’s a lot of trainwrecks in that space,” he says.
“I’m not focused on an exit, and I’m not in this for an exit. We believe in building a big global business and making it very profitable, that’s our goal.”
Investors won’t “throw millions of dollars at you”
In advice to other entrepreneurs, Farrugia emphasises that “people don’t just throw millions of dollars at you”. Rather, startups need to demonstrate they’ve got runs on the board.
“If you’re going to seek capital, you need proof of concept. You need paying customers and organic growth,” he says.
“People even hit me up with concepts for products, and I tell them while they might have a good product market fit, there’s nothing better than proof in the pudding with organic growth and paying customers.”