The Australian Guide To Startup Investment
Developing a great business takes commitment, diligence, patience and in most cases, quite a great deal of money. Navigating the tricky waters of dialing in your MVP or finding product/market fit is one thing, finding and securing the resources that will allow you to focus and grow is another.
Finding financing for your start-up and fuelling the fire of your scale-up with new capital are necessary rites of passage for every entrepreneur, but they can prove to be a huge headache if you don’t know where to look. When you’re in the thick of it, and your runway has a ticking countdown, it can seem that getting funded is more of a full-time job than running your company.
Luckily, there are many ways to solve the problem of access to capital. Also, more and more solutions are popping up every year, helping you put your company out there to attract investment and leverage your assets for loans. Since the dot com boom in the 90s, there has never been such a huge influx of investment capital, such a wide variety of debt funding sources or government incentives for small and medium enterprises.
We’ve created this guide to serve as a starting point on your journey. It includes the low down on every form of financing we could think of, who to talk to, where to go, useful links, and more resources from an army of ultra-smart people than you could read in a lifetime.
Startup Funding From Friends and Family
Borrowing from friends or family is often flexible, cheaper and easier to arrange. The downside is that any problems or misunderstandings, regarding repayment, can potentially damage the relationship. Written agreements can reduce the risk of problems and also clarify who remains in charge of the business on a day to day basis.
The Bank Can Help With Startup Investment
It would be a good idea to speak to a Business Advisor at a local bank. This will clarify what support and help is available to you. To obtain a bank loan, you would almost certainly need to have some money available of your own to invest. You do not need to have a business plan available for your initial discussions but one would be required if you were to subsequently apply for a business loan.
Government Start-Up Loan
Enterprise for London is part of a network of official Start Up Loans delivery partners across Australia who administer the government funded Start-Up Loan scheme. As a referral partner, we can help you get your business ready for finance. We will work with you to create a business plan to apply for a Start-Up Loan.
Crowd Funding Your Startup Funding
Crowd funding is fast becoming a popular route to secure business finance. There are tree popular types of crowdfunding.
Reward – investors are given something in return for their investment,. For example a bakery may promise a free loaf of bread every week for a year in return for the investment
Equity – investors would get a percentage of the business in return for their investment
Debt – effectively loan funding whereby investors are repaid their investment at an agreed interest rate
Grant Funding For Startups
The advantage of Grant Funding is that, as long as certain terms are not breached the money does not have to be paid back. Grant funding is usually only available for specific purposes and criteria. It is always worth checking to see what is available and if there is anyway your business can meet the terms of the grant.
Equity funding is where private companies sell shares in their business to outside investors in exchange for investment capital.
For Australian startups, this equity investment is generally provided by Angels; wealthy individuals who invest their own money, and Venture Capitalists; firms who leverage personal and institutional capital to purchase stakes in high-growth businesses.
While both Angels and VC firms invest in seed and venture-stage businesses, they are very different when it comes to how much they are willing to allocate, the level of due diligence they perform, and the kinds of companies they choose to back. We explore these differences between Angels and VCs in more detail below.
We also cover two government schemes that provide tax relief to investors that back early-stage companies. If you’re hoping to secure equity investment for your startup, applying to these schemes is a great way to sweeten the pot for investors.