The Australian Funding Landscape
In each startup ecosystem around the world, there is a similar infrastructure that can perhaps best be illustrated (see below). To simplify, it is a set of people and organisations that surround the entrepreneurs or startup companies in order to support them on their journey.
If you were to look at the ecosystem through the lens of 'how can I obtain funding' or 'which ways can I raise funding' there are four main avenues. This also becomes important in instances like government grants which can allow you to keep innovating without the need to give away an equity in exchange.
Is a great source of funding for innovative businesses, which usually takes the form of grants and major networking opportunities through such programs as 'landing pads' and trade missions designed to give you either funding for creating unique intellectual property or to help you with international expansion through top-level introductions.
2) Investment and Funding
This includes everything from angel investors through to major venture capital firms and just about everything in between. This can include; raising funds from friends and family all the way through to relatively new modes of funding such as equity crowdfunding and ICOs [initial coin offerings (usually reserved for blockchain startups)]. You would also include incubators and accelerator programs in this category.
University funding opportunities are usually reserved for their students or alumni and is usually conducted through accelerator programs.
4) Service Providers / Large Corporates
In this article, I bundle these together because they are often, one and the same and usually result in either corporate accelerator programs or if you are lucky down the track - acquisition offers.
In looking at each of these subsets of the funding component of Australian startup ecosystem, I start to identify each of the main players in each of the subsets, which in turn becomes quite a handy resource. So we decided to share it with you.
Government Funding Options
In each scenario below, please click on the link to find out more about the offer in detail.
If you've been developing a new product, process, equipment or service you may be entitled to have over 40% of your development expenses refunded. If you are time poor we suggest you look at services like PwC's Nifty Grants that for a flat rate will manage the entire process for you
'Landing Pads help market-ready startups and scaleups take their business global'.
The Landing Pads program provides market-ready startups and scaleups the opportunity to land and expand in global innovation hubs.
Some of the perks include:
• a 90-day residency in a co-working space
• introductions to networks of investors, mentors and strategic partners
• access to a community that supports Australian entrepreneurs
• business advice to help grow your business.
Landing pads are a brilliant way to test the waters with a new market before you make the commitment to set up an office in that region.
Tax incentives for eligible investors include:
• A 20 per cent non-refundable carry-forward tax offset on investment, capped at $200,000 per investor, per year.
• A 10 year capital gains tax exemption for qualifying investments held for at least twelve months.
This grant provides projects up to 50% of the expenditure to a maximum of:
• $250,000 for commercialisation offices and eligible partner entities
• $1 million for all other applicants.
Matched funding of up to $1 million to cover eligible commercialisation costs to help them to take novel products, processes and services to market.
If your business is a little further along this is a brilliant funding option.
This is a relatively new scheme and it is by far the most under-utilised given its value to sophisticated investors.
It offers a non-refundable carry forward tax offset equal to 20% of the amount paid for their qualifying investments. This is capped at a maximum tax offset amount of $200,000 for the investor and their affiliates combined in each income year modified capital gains tax (CGT) treatment, under which capital gains on qualifying shares that are continuously held for at least 12 months and less than ten years may be disregarded. Capital losses on shares held less than ten years must be disregarded.
Offer matched funding of up to $20,000 for the cost of hiring an expert to help with implementing the advice and strategies recommended through the Business Evaluation, Growth Services, Supply Chain Facilitation or Tourism Partnerships programmes.
The Export Market Development Grants (EMDG) scheme is a key Australian Government financial assistance program for aspiring and current exporters. Administered by Austrade, the scheme supports a wide range of industries.
The EMDG scheme:
• encourages small- and medium-sized Australian businesses to develop export markets
• reimburses up to 50 per cent of eligible export promotion expenses above $5,000 provided that the total expenses are at least $15,000
• provides up to eight grants to each eligible applicant.
'Hot DesQ is a competitive application process with international and interstate entrepreneurs vying to receive $50,000 - $100,000 in funding to relocate their ideas and business ventures to Queensland'.
Offers matched funding grant of up to 50% of approval total development costs is available to eligible NSW startups, to a maximum of $25,000.
Offers grants of up to $250,000 (excluding GST) to support activities that will test and implement commercialisation plans for a product, process or service that is at or beyond minimum viable product or market ready stage.
Angel Investor Groups
Angel / Founder Dinners which have raised over $25m for the companies that have attended (currently hosting events across Australia).
The Sydney Angels Sidecar Fund (SASF) is an AUD $10 million investment fund that invests 50/50 alongside Sydney Angels’ members in early-stage businesses they have selected.
Angels in the Melbourne Angels group typically invest between $10,000 and $100,000 per transaction individually and from $100,000 to $500,000 collectively as a group.
Pitch your company in front of investors for a fee. The beauty of Wholesale Investor is that you can take your company on a roadshow because they have investors across Australia and Asia.
Traditional crowdfunding platforms are also a great way of raising money for your project without giving up an equity stake. They also allow you to quickly validate the need for your product and whether you have a market. If people are willing to support your project at the idea stage, by putting money down, this gives you a pretty clear indication that there is a market to pursue.
The World's #1 crowdfunding platform.
Australia's leading crowdfunding platform.
Leading crowdfunding platform with a social twist.
Equity Crowdfunding Platforms
Is a brand-focused equity crowdfunding platform brought to you by the team that created Pozible.
A well-known Australian equity crowdfunding platform with some serious partners, including: Investec, AWI Ventures, H2 Ventures, Tank Stream Ventures and Bridgelane Capital.
The Artesian backed equity crowdfunding platform that has already raised over $20m for its companies.
If your business already has some serious traction than venture capital is of course, a great option. Having the right investors means access to leading industry expertise and connections.
It might also add that there is a couple of great resources from AirTree Ventures (found on an open source Google Doc), which includes an incredible investor list, featuring the names of all of the prominent Investors across Australia and a tab which covers most of Australia's accelerator programs with all of their terms.
Investment Funding Accelerator Focused
The above list presented by Artesian Venture Partners showcases the most active accelerator programs (including those from universities and large scale corporations) across Australia.
The Rise of Corporate Innovation Labs and Accelerators
Corporate venture arms are becoming more prevalent as corporates test the waters of innovation with everything from hackathons through to branded accelerator programs. These programs are predominately executed using specialist third parties, namely Slingshot and Collective Campus.
Companies that are heavily invested in emerging technologies have their own 'labs' and/or dedicated venture funds to invest in complimentary businesses and possible disruption. They are away that a small competitor with a unique proposition could become a real threat in future, so it is smart to make them partners early on.
The beauty of these types of programs is the strategic investment that can come major customers as a result.
As a sub-segment of corporate accelerators, I would also add the introduction of scaleup programs namely Microsoft. Which offers an 'immersive program providing sales, marketing and technical support for qualified startups'. If you get into this program, they will literally team you up with a group of sales executives that are charged with helping you to get more customers. Microsoft customers! The best part, they don't take an equity.