Vancouver's Kabuni is leveraging ASX to get to Nasdaq

Listing on the Australian Securities Exchange (ASX) is the first step for client-designer matching app Kabuni, with the end goal to list on one of the New York-based exchanges.

According to Neil Patel, CEO and founder of Vancouver-based Kabuni, a company needs to have a lot more money behind them before going public in the United States than they do listing on the ASX.

"You need to be $100 million plus to really be a good Nasdaq story in order to compete with the likes of Google or Facebook," Patel said.

"Our project is currently called Project Nasdaq with our ultimate goal to get the valuation of the company to the right levels, build momentum in North America, and when we're looking at raising that next level of significant capital we'll be looking at the New York exchanges as our next move."

Patel said he is unsure if this would be a dual listing and listing Kabuni in the US might result in seeing it disappear from ASX as quickly as it arrived.

The Pinterest-like Kabuni application connects users with a designer which is determined by the styling choices the user has made whilst setting up their account. According to Patel, Kabuni's designer matching algorithm is built on dating and very much like Tinder.

The app though is not available in Australia.

Kabuni popped up on the ASX in September following a AU$7 million reverse takeover of Magnolia Resources, a mineral exploration company based in Perth. At the time the company traded as PDT Technologies with a reinstatement under its new moniker Whole New Home a few days later.

As of Wednesday, Whole New Home had its name officially changed to Kabuni following shareholder approval earlier this month.

Patel said the reason for listing via reverse takeover boiled down to it being a faster process.

"The initial public offering (IPO) is a lot longer to do and basically being the pre-revenue company that we are, it was certainly the preferred choice for time," he said. "I don't think we had any advantages by not doing an IPO."

The reverse takeover process began for Kabuni about six months ago when Patel met a man by the name of Steve via LinkedIn. Although based in Singapore, Steve was closely connected with two boutique bankers in Perth who had an association with Magnolia Resources. According to Patel, he received an email at 3am Vancouver time and within an hour he was giving a presentation.

"[They] didn't have the concept of time and were a young, cashed up company looking for capital so at 4am I went downstairs in my townhouse with my wife telling me not to be loud, and gave them a presentation," Patel said.

"Literally from that moment, four weeks in, we had closed an initial seed round of AU$2.2 million. In between I had flown to Australia, too."

Patel said that an IPO can take anywhere up to a year but Kabuni went from start to finish in six months.

According to Patel, Kabuni was the perfect platform for a Perth-based resources company to make a quick exit from the current mining and exploration climate in Western Australia.

He said the majority of shell companies that are built to perform a reverse takeover are currently interested in the technology space.

"I think the problem isn't just here; Canada has the same problem too. Built on resources, oil, and gas it's a natural step," Patel said.

"I think there's an army of investors who keep hearing these great Silicon Valley stories and there seems to be a rich vein of investors who are supporting tech companies.

"When gas, oil, and resources are down, the natural organic segue now seems to be tech."

According to Patel, the biggest motivation for Magnolia Resources was the ability to invest in a business that had 300 million internet users in North America, adding the scale and possibility of return for a business is simply larger based on population and internet usage size.

"If you're investing in an Australian company with a population of 20 to 25 million, you don't know how many of them are online and actually using it online," he said. "There are many numerical and logistical issues in Australia in getting product shipped and delivered here as well; there's not really 25 million homes you can access.

"Canadian investors and Australian investors have two different mentalities. I certainly found the Australian investor a lot more knowledgeable and a lot more understanding that it takes time to monetise online."

According to Rory Cunningham ASX business development manager, 45 percent of all investment in Australian-listed stock comes from overseas investors.

Speaking at Sydney's 2015 SydStart conference in October, Cunningham said ASX is the tenth-largest exchange by market cap in the world and consistently finds itself listed in the top five in the world for raising capital.

"Market structure around the world in each individual country plays an important role in how companies access finance. In Australia we're a little bit different and this goes back to our history of the Australian markets," he said. "For the past 100 years mining explorers have been accessing capital from the public via the ASX and over the past few years we've seen the emergence of tech companies access this capital.

"Over the last two years there's been close to AU$2 billion of IPO capital raised by technology companies on the exchange -- it's very encouraging to see," he said.

Patel said this simply makes sense.

"The types of businesses that are listing here are a lot more global than they are just Australian which naturally brings overseas investment. In Whole New Home we had just under 50 founding shareholders that were out of North America that are now effectively investors here," he said. "Any company that does that brings a number of investors and it brings attention to the platform because a lot of our investors didn't know how good the ASX platform really was."

Kabuni is not the first international tech-based company to get involved with ASX, nor the first to do so via a backdoor listing.

North American cloud-based education software provider LiveTiles performed a reverse takeover in April of Perth-based Modun Resources, a company which was previously involved in the acquisition, development, and mining of thermal and coking coal deposits in Mongolia.

Headquartered in New York's Times Square, LiveTiles' ASX debut was a strategic business move. According to non-executive chairman Mike Hill, listing in Australia has set the company up to expand into its next stage of development.

In a similar tale, Hong Kong-based mobile games developer Animoca Brands found itself publicly listed in Australia in January following a reverse takeover of another Perth-based mineral exploration company Black Fire Minerals. Black Fire raised AU$2.4 million to fund the acquisition, and recommenced trading as Animoca Brands Corporation Limited.

At the time of listing, CEO Robby Yung said his company chose the reverse takeover path because it allowed for the continued growth of the business and the potential for further IPO raising for the licensing of more intellectual property for games.

Australian tech businesses are also getting involved in the reverse takeover of companies previously interested in the resources and mining sector.

Posting an FY15 net operating cash flow of AU$4.4 million, Australian cloud services provider Bulletproof is the poster child for how to use a reverse takeover opportunity to a business' advantage.

In January, Bulletproof listed via a reverse takeover of Western Australian-based mining company Spencer Resources.

"The opportunity in the Australian market, a lot of it is untapped from our perspective. We feel there's really a lot more to do in the Australian market that's worth pursuing and customers absolutely value, when you're talking about managed services of their critical data in the hands of an outside party, having that organisation on the ground in Australia," Bulletproof co-founder and CEO Anthony Woodward told ZDNet at the time.

"The listing lets us execute our longer-range strategy and we're also in a good position at the moment because of the opportunities in the rapidly growing cloud services market in Australia."

Cloud-based digital identification firm Tikforce is expecting to be publicly listed before the year is over. The company has raised AU$6.5 million to finalise the reverse takeover of Palace Resources Limited, a fellow West Australian company which was previously involved in the exploration of resources in the Southeast Asia region, particularly Indonesia.

IoT Group, an Australian startup with a focus on the Internet of Things (IoT) entered into an agreement to perform a backdoor ASX listing with exploration company Ardent Resources set to acquire 100 percent of IoT Group for AU$18.5 million. The company will be known as Ardent IoT after the takeover is finalised in December.

Perth e-learning startup Velpic announced the reverse takeover of International Coal in July, in a deal valued at AU$5.2 million. Velpic was admitted to exchange in November.

Australian healthcare informatics provider Alcidion said it will also list on ASX before Christmas with mining shell company Naracoota Resources in a AU$12 million deal aimed at launching the business into the US.

In June last year, Digital X, formerly bitcoin mining firm Digital BTC, popped up on ASX when it performed a reverse takeover of investment firm Macro Energy. And Australian software security startup Cocoon Data listed as Covata Limited in September last year after entering a AU$57 million binding agreement to merge with mining company Prime Minerals.