Stockhead: Retail investors can get their hands on private tech startups through these two ASX stocks
- Retail investors can invest in private tech through these two ASX stocks
- Scalare drives growth with hands-on support and services
- Bailador focuses on capital gains and steady dividends
For years, retail investors – those who aren’t super-wealthy or institutional – found it nearly impossible to get into private tech startups.
The entry barriers were high: big minimum investments, limited access, and complex structures.
If you wanted to invest in these fast-growing companies, you either needed to know someone inside the industry, be part of a venture fund, or just buy when these companies went public (which, let’s face it, is often too late to catch the really big baggers).
But two emerging players on the ASX are offering fresh alternatives to traditional venture capital – Scalare Partners (ASX:SCP) and Bailador Technology Investments (ASX:BTI).
Both provide unique ways to access the fast-paced world of investing in private tech companies.
Scalare offers alternative to VC
Unlike traditional VC firms that raise large funds and charge management fees, newly listed Scalare Partners takes a different approach.
“We’re not structured like a fund. We write early-stage checks off our own balance sheet,” said Scalare CEO Carolyn Breeze.
“We don’t take a management fee, and we don’t take a carry. This is different from the traditional two-in-20 model you see with many venture capital firms.”
At present, Scalare has invested in over 30 companies across various sectors, including regtech, agtech, and retail tech.
The company puts in no more than $250,000 (historically averaged $122,000) in each company, and makes between 5 and 8 new investments per year.
Scalare generates immediate revenue by offering a wide range of value-added services to the companies in its portfolio.
“We don’t just invest and walk away—we actively support our companies with services that help them scale,” said Breeze.
“In fact, a big part of our revenue comes from these services, which we provide to our investee companies in exchange for equity or fees.”
These services include fractional roles like CFO support, sales strategy, marketing expertise, and operations management. This creates a steady revenue stream that supports Scalare’s continued investments.
“It’s a win-win,” Breeze adds. “We help the companies thrive, and we generate the revenue we need to make additional investments.”
Some of Scalare’s more prominent investments to date include FrankieOne, FreeGuides, Brauz, and Zondii – all companies in sectors poised for growth.
“This is a great opportunity to get involved in early-stage tech companies at a time when they’re still growing but have already demonstrated potential.”
Scalare is also focused on supporting diverse entrepreneurs. “That means women, culturally diverse founders, and anyone who faces additional challenges in accessing capital.”
But like all investments, Breeze acknowledged tech investments come with their own risks.
“Investing in early-stage tech in particular is speculative. It’s a long-term play,” she said.
“But because of the way we work with our startups and the services we provide, we believe Scalare is the most de-risked model for early-stage tech in the market.”
“We’ve already had three exits, and we’re expecting more in the next 18 to 24 months as our bigger investments mature.”
Bailador provides access to private tech, and dividends
If Scalare offers hands-on growth and risk management, Bailador provides an alternative with a focus on capital appreciation and consistent dividends.
Bailador could be an attractive option for those looking to access high-growth private companies, with the added bonus of a steady dividend yield.
The fund is known for backing companies that have already established a solid business model and are ready for expansion, rather than purely focusing on seed-stage or very early startups.
Because of that strategy, Bailador boasts $43 million in cash and franking credits for over six years from its portfolio of companies, offering investors a reliable stream of income.
The firm pays a regular 4% dividend of net tangible assets (NTA) per year, with dividends fully franked.
“Our dividend policy is designed to smooth returns and improve reliability of returns for investors, while also releasing valuable franking credits,” said co-founders David Kirk and Paul Wilson, explaining their strategy.
Bailador also has a solid track record of growth, with its portfolio companies generating $457 million in revenue and expanding at 47% annually.
Recently, Bailador realised $20 million from its investment in SiteMinder (ASX:SDR), while retaining 82% of its holding.
The fund is also deploying capital into exciting new opportunities, including $10 million in DASH Technology, $3 million in Rosterfy, and $7.7 million in Hapana.
“These are the types of characteristics we aim to drive as our portfolio businesses grow, and that attract premium valuations when we look to realise our investments.”
“We believe the next few years are going to be even more exciting as some of our bigger investments start to scale even further,” Wilson added.