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Are you a startup founder looking to raise funding? If so, you're in the right place. In this blog post, we will walk you through the step-by-step process of getting funding for your Australian startup. We will cover everything from finding the right sources of funding to preparing your pitch deck.
The different sources of Funding
There are many different sources of funding available to startups. Some of the most common include:
Friends and family
This is often the first source of funding for startups. Friends and family are often willing to invest in your business because they believe in you and your idea. There are likely more downsides than upsides here, as friends and family are less likely to understand your vision or be bought into the business and are more likely to fund you as a favour. In addition, having too many unsophisticated investors can create messy cap tables, creating complexities, legal uncertainties, and challenges for future funding rounds.
Crowdfunding
Crowdfunding platforms like Kickstarter and Indiegogo allow you to raise money from a large group of people. It's a great way to get your startup off the ground, but it's also vital to set realistic goals and have a strong marketing plan. These platforms can offer enticing opportunities for startup businesses to raise funds and gain exposure, but they also come with several downsides that entrepreneurs should consider:
- All-or-Nothing Model: If a project doesn't meet its fundraising goal within the specified timeframe, it receives no funds. This can be a significant risk, as a startup may invest time, effort, and resources in creating a campaign, only to fall short of the goal and receive no funding whatsoever.
- High Competition: Crowdfunding platforms have become increasingly popular, leading to high competition among projects seeking funds. With numerous campaigns vying for backers' attention, it can be challenging for a startup's campaign to stand out and attract sufficient support.
- Cost and Effort: Running a crowdfunding campaign requires significant effort and resources. Creating an appealing campaign, producing quality visuals and videos, and managing communication with backers can be time-consuming and costly. Moreover, fees are associated with crowdfunding platforms, and fulfilling rewards can also incur expenses.
- Limited Investor Engagement: Crowdfunding backers are typically more interested in the product or reward they'll receive rather than becoming long-term investors in your business. This can limit your access to a network of potential supporters, advisors, or partners that traditional venture capital or angel investment might provide.
In summary, while crowdfunding platforms offer a unique way to secure initial funding and engage with potential customers, they also present challenges and risks that entrepreneurs should carefully weigh against the benefits. Proper planning, realistic expectations, and a thorough understanding of the platform's dynamics are essential for a successful crowdfunding campaign. There are agencies that you can work with who specialise in giving you the best chance to ace a crowdfunding campaign.
Government grants
There are a number of government grants available to startups. These grants can provide the financial resources you need to develop your product or service. Grants can be a great way to fund a startup as they are often non-dilutive - meaning the body giving you the funds is not taking any equity.
Here are some of the top grants available in Australia:
The R&D Tax Incentive
This is probably the number 1 incentive all tech start-ups should consider. The incentive offers tax credits between 18.5 per cent to 43.5 per cent, a cash-back benefit on companies with losses (most early-stage tech companies have losses). Make sure to be an incorporated Australian entity and pay for your R&D through the company.
The Export Market Development Grant
Whether expanding your technology infrastructure or venturing into international markets, this grant caters to tech enterprises in various stages of growth and expansion. Get a 50% cash reimbursement on your expenditures related to marketing activities conducted overseas alongside other activities. This encompasses a wide array of online advertising expenditures, such as those on platforms like Google, Facebook, Instagram, and investments in content marketing, among other possibilities. The scope of covered expenses extends extensively, offering support across multiple avenues.
Business loans
Banks and other financial institutions can provide business loans to startups. These loans can be a good option if you have a strong credit history and a solid business plan. However, there are many business loan risks, and you should probably consider other options unless you have a proven strategy that helps you repay the loan.
Bootstrapping
If you are not aiming for the moon and wish to maintain a larger equity position in your company as well as more control, Bootstrapping might be the solution you've been seeking. In a competitive market like Australia, where securing external funding can be challenging, bootstrapping empowers entrepreneurs to cultivate their ventures independently. Embrace lean methodologies to streamline your operations, keeping costs low while delivering value to customers. This approach not only ensures your startup's sustainability but also demonstrates your commitment to potential investors. Crafting a compelling narrative around your journey of self-sufficiency can pique the interest of angel investors and certain venture capitalists who appreciate resourcefulness and determination.
Venture capital
Venture capital firms invest in startups with the potential for high growth. This is a harder source of funding to obtain, but it provides you with the capital you need to scale your business. Beyond self-funding or traditional loans, venture capital offers a range of benefits that can propel businesses to new heights:
- It injects substantial capital into your business, providing the resources needed to scale rapidly, enhance product development, and explore new markets;
- VCs such as Antler bring invaluable expertise, mentorship, and industry connections to the table, aiding startups in navigating challenges and seizing opportunities. Unlike loans, venture capital doesn't require immediate repayment, allowing entrepreneurs to allocate funds strategically without the burden of fixed debt payments.
- The endorsement of a reputable venture capital firm can confer a seal of credibility, attracting further interest from customers, partners, and even future investors.
While venture capital does involve relinquishing a portion of ownership, the potential for exponential growth and shared success makes it an enticing option for startups eager to have a profound impact on the Australian business landscape.
How to Prepare Your Pitch Deck
Once you have identified your sources of funding, you will need to prepare your pitch deck. Your pitch deck is a presentation that you will use to convince investors to fund your startup. It should include the following information:
- The problem you are solving.
- How you will solve it.
- Your target market.
- Your competitive advantage.
- Your financial projections.
- Why you are the right person for the business.
- Why the right time for your business is now.
However there are many other things you can add to a pitch deck, you should aim to bring your own unique style and flair to the feel of the deck and the pitch. Be genuine in your approach and practice your pitch as much as possible. Before approaching professional investors, get feedback from trusted friends and advisors. You can also attend industry pitch nights or idea validation sessions which can be invaluable for growing your network and getting feedback on your idea.
Raising funding for a startup is a challenging but essential task. By following the tips in this blog post, you can increase your chances of success.
Here are a few other tips for those interested in Entrepreneurship:
The most driven founders are joining Antler - the world's day zero investor - to solve important problems. Apply to join Antler in Australia, or sign up here to access insights and resources to help you on your founder journey.
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