By Paul Smith
Pay.com.au, the Melbourne platform that lets companies earn reward points for regular business purchases, has raised $53 million from investors to fund an expansion into the US.
Managing director Ed Alder said the company was seriously considering listing on the ASX after the latest investment round more than doubled its value in a year to over $630 million.
Pay.com.au allows customers to make payments for expenses such as tax, suppliers, and wages, and earn points that can be converted into rewards points from a growing range of airlines, hotels and other businesses.
The latest funding round included a $25 million equity raise and a $28 million secondary sale, where early investors sold some of their holdings. The deal, first flagged by The Australian Financial Review’s Street Talk column, was backed by Wilson Asset Management, Thorney Investment Group and Ophir Asset Management. Other investors include the billionaire Gandel family and Luxury Escapes co-founder Adam Schwab.
“We ran the capital raising as not necessarily a pre-IPO round, but a pre-capital event round because we continue to look at all the options, including an IPO,” Alder said, adding a float would allow investors exposure to a pure-play rewards program, rather than a scheme often buried inside a bigger company.
“If you wanted to buy into Qantas Frequent Flyers, you would have to buy into Qantas, with all its freight business, or if you liked the look of FlyBuys you would have to buy into the whole of Wesfarmers,” he said.
“We continue to assess both capital event strategies, but an IPO is definitely something that is on the board’s mind.”
Plenty of scope to invest
Like most start-ups, Pay.com.au is making losses as it invests for international growth. Documents filed with the corporate regulator show the company booked an $8.5 million loss in the past financial year, compared to $4 million the year before. Revenue grew from $33.2 million to $73 million and the company said it had recorded annualised gross revenues of $246 million in the three months to the end of September.
It also sees plenty of opportunity in the US, where it set up a subsidiary this year, and where it has signed agreements with American Express, Visa, Mastercard and Air Canada. It has also partnered with the world’s three biggest hotel chains Marriott, IHG and Accor.
The company has an agreement for its points to be converted into United Airlines MileagePlus miles in Australia, and is hoping to finalise a deal to offer this to US customers soon. Before co-founding Pay.com.au, Alder had run an online venture called Point Hacks, which provides tips and offers for maximising frequent flyer points and credit card bonus offers.
The capital raised gives the company plenty of scope to invest in building its technology, and hiring to fuel its international aspirations.
“Capital is a funny thing for companies where it is like dessert, where you always want more, but we have actually got enough.”
Most of its staff are based in Melbourne, where there are about 100 employees, with another 20 in Vietnam and the Philippines. It recently opened its US base in Dallas, and has employees based in San Francisco.
“Capital is a funny thing for companies where it is like dessert, where you always want more, but we have actually got enough,” Alder said. “We’ve got a nice amount of capital, and are very capital light with low operating expenses … we could probably run the business for the next 10 years.”
Secondary share sales are increasingly common in Australian private technology companies, and are often seen as a way of letting early employees crystallise some of the paper wealth they have earned through their share plans. Alder said most of the secondary sales in this transaction were for early external investors, who sold down to recover their initial investment, take a little profit and retain significant holdings.
Since accepting its first payment in 2019, the company says it has processed more than $10 billion in business expenses.
“From the beginning, we saw immense potential in Pay.com.au’s vision and the exceptional value proposition PayRewards brings for SMEs,” Wilson Asset Management senior investment analyst Sam Koch said.
“Their disruptive model offers uncapped rewards on previously unrewarded expenses, giving them a powerful competitive advantage.”
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