At our innovation and technology commercialisation workshops, participants always want to know where to get investment.
That’s hardly surprising – the Office of the Chief Economist reports that access to additional funding is cited by Australian businesses as the biggest barrier to innovation.
Did you know that:
- Advance Queensland has allocated $420M of competitive grant funding for businesses to help them bring innovative ideas to market?
- Private equity-backed firms, on average, grow their workforces at a compound annual growth rate of 27.6% over a five-year ownership period?
- In the last five years, venture capital funds have invested over $650M into tech startups based in Australia?
- And just recently, crowd funding of up to $5M a year has just become a possibility for unlisted Australian SMEs?
Collectively, Impact Innovation Group experts have raised tens of millions of dollars for clients, via grants, crowd funding campaigns, seed and other rounds with angel investors and venture capital firms.
Here’s an overview of some common investment options, to help you decide which ones are best for backing your innovative ideas and innovation-led growth plans.
People within your own organisation could invest their time, reputation, and other resources, even if they’re not the opener of the purse strings.
Before you start the conversation about the money, garner support for the concept and its potential value from the people who own the company, board members, senior executives, divisional managers, colleagues and other employees.
These are individuals and organisations that can also provide more than just monetary support, if what you want to develop aligns with their interests and capabilities.
They might be shareholders in your company, potential buyers of the business, customers and supply chain partners, government departments offering grants, or charitable/philanthropic/community funding bodies.
FOUNDERS, FAMILY, FRIENDS
They’re often your first investors – they already have some idea about your passion and whether they can trust you with their money.
When founders back themselves, it tells other investors how committed they are to exploring every avenue for the idea to become a successful commodity or service.
Family and friends may support you with a flat sum, in-kind support, a low-interest loan or going guarantor.
ANGEL INVESTORS & HIGH NET WORTHS (HNWs)
Affluent individuals who invest capital (~$25K+) in early stage enterprises are known as ‘angels’. If they invest in your project, they’ll want a convertible debt or ownership equity, like what’s offered on television shows like Shark Tank.
Angels and HNWs tend to favour investment opportunities where they can provide value-added mentorship as well – industries or technologies they have worked with previously, personal experiences with health conditions, geographic familiarity, etc.
Angels often belong to angel groups or networks to compound the investment. You discover them via personal connections or meet them at pitch events (but you may not spot them because they don’t flutter their wings or hold their halos up in public).
You can learn more about them on the Australian Association of Australian Angels website.
‘VC’ firms invest other entities’ money in early stage enterprises (~$50K+), such as superannuation funds. Like angels, they like convertible debt or ownership equity, and sometimes board representation or a management role.
VCs share the risk and their expertise to accelerate development and optimise ROI. You can connect with them directly or meet them at networking and pitch events.
Private equity companies also invest other entities’ money as capital, but usually for mature enterprises to expand or change, often due to innovation.
This is another funding source where you’ll need to bring to the negotiating table a willingness to offer a convertible debt, ownership equity, board representation or a management role, if you want them to share the risk and their expertise to grow your business from innovation. You can connect with these firms directly or via networks.
Find out more about private equity and venture capital options from AVCAL’s website.
Crowd funding campaigns raise varying amounts of money from a large number of people for a specific need in a short time frame. Campaigns are predominately online, often with no prior connection between parties.
The ROI that crowd funding investors seek varies from goodwill to early-release products and equity. They contribute money only, share none of the risks, and have no company involvement.
We’ve summarised the key points of the new Corporations Amendment (Crowd-Sourced Funding) Act 2017 in this recent blog post.
Grants are usually the domain of dedicated foundations, government departments, charitable organisations or other public bodies. They invest allocated funds for specific purposes.
Grants tend to be offered in ‘rounds’ and may involve staged/stepped application processes. Stringent criteria and reporting are common features – it’s public money so accountability is critical.
Even though there’s rarely an obligation to pay it back like a loan, a grant is not a hand-out; it’s a hand-up so you can produce a ‘public good’ outcome for the economy, the environment, cultural enrichment, health improvement, etc.
Grant funders give your venture a cash injection; reputation is the only risk shared (you’re expected to act responsibly with the funds and not create a scandal from misuse or abuse); and usually there’s no direct involvement once the grant has been awarded.
Your innovative idea may also qualify for philanthropic grants, so check out this website: www.philanthropy.org.au.
After researching which investors might be interested in your project, contact us on 61 +7 3041 1128 to help you get it ready for proposing it to them.
– Brian Ruddle, Managing Director