While recent changes to the Significant Investor Visa have opened up more opportunities for entrepreneurs when it comes to seed investing, a reduction in the government’s accelerator grant from $5 million to a maximum $1 million is making life complicated for emerging companies in Australia.
When it comes to capital, emerging companies are having to do more with less, using their ingenuity to come up with creative ways of making small investments go far when it comes to spreading the word about their idea.
If entrepreneurs are successful in getting their business past the start-up stage, the challenge then becomes accessing investment funding that allows them to take advantage of opportunities in the market, without diluting their control over the company.
These were some of the issues discussed at Investec’s recent Financing Innovation event, where a panel of experts canvassed the current financing landscape for high-potential Australian companies.
More than 80 people attended the event to hear about the challenges facing emerging companies today.
Røde Microphones founder and managing director Peter Freedman built his company from the ground up using ‘credit cards and shoe leather’ to finance the business. As one of Australia’s most innovative manufacturers, Røde exports 95 per cent of all its products to more than 100 markets globally.
Mr Freedman maintained that starting an innovative business was all about learning how to do something with nothing, commenting that he learned in the early stages of setting up the company that a good attitude went a long way to helping you stand out from your competitors.
H2 Ventures founding partner and executive chairman Ben Heap acknowledged that often the innovative idea can be subordinate to the people.
Mr Heap maintained that he looks for street smarts and an ability to present, take ideas and have tenacity as much as academic and business experience in the start-ups he partners with.
In his previous role, Mr Heap selected eight companies from more than 100 applicants for an initial ‘Accelerator’ investment of $100,000.
Mr Heap explained that the firm’s approach was to create a ‘portfolio of possibilities’, helping companies to get past the first stage from a regulatory and organisational perspective and to avoid making rookie mistakes.
The next stage of development can be just as crucial, as companies look for larger scale investment to fund bigger actions such as international expansion.
The panel agreed that mainstream banks were often too cumbersome in terms of their credit policies to be able to jump on an opportunity with an innovative company, while private equity investors typically sought control, which results in business owners losing control of their company.
An early stage lender to companies that include Røde Microphones, Investec is able to provide more flexible capital solutions that meet the needs of the enterprise whilst still suiting their high-growth status.
With a focus on high-potential businesses that need expansion or change-of-control capital, we are more nimble than a bank and specialise in providing solutions that have a more debt-like behaviour than further equity raising rounds, giving companies the flexibility to take advantage of opportunities.
In the words of panellist Ben Heap, at the end of the day you have to be bold, a bit brave, and a bit courageous to build growth.
Simon Beissel is head of corporate and acquisition finance at Investec Australia.