Raising Capital For Startups

By Author: Kate Ingham
Total Articles: 162
Comment this article

When it comes to startup company funding, there are a number of challenges. Paul Niederer, Managing Director of the Australian Small Scale Offerings Board (ASSOB), says that “early stage private equity funding people invest more on emotion rather than analytical reasoning - mostly because the numbers simply aren't there at this stage.” He goes on to suggest that there are keys to a successful startup matter: 
 
1) A Great Story 

When you explain your opportunity to people they say 'Wow", I like that, let me know when you get it moving. Building an "elevator pitch" is a great discipline as it gets you focusing on building a great jargon-free story. 
 
2) A Great Team 

In the beginning there may be just you. However start building a team of people that support you in legals, accounts, IP, marketing and any areas you need support in. Find a grey hair to mentor you. If you are a grey hair find another! 
 
3) Great Credibility 

The innovation or idea is one part, the other part is actually having the capability to bring the product successfully to market. Meaning ...
... ... you will use investor’s funds well and responsibly. This involves building distribution, showing your track record, getting your IP secure, good advisory board or directors, milestones achieved etc. 
 
4) Storytelling: Lots of compliant ways to tell your story 

An Elevator Pitch is a good start. A two page summary helps. A short business plan. An offer document eventually. A video script. If you are seeking capital you cannot blog about this fact to the public but you can blog so people get engaged in your story as you move from an idea to prototype to market. Along the way you will attract followers. If you don’t believe this works go to kickstarter.com and put nano in the search field! 
 
5) Followers: Lots of suitable people to tell your story to 

You can have a great story but you need people to tell it to. Startup funds, Commercialisation Australia, ASSOB or the AAAI. At ASSOB we work with you on building lists of networks and then expanding and nurturing this through six degrees of separation. By this stage sufficient funds should have been raised to venture further to ASSOB's investor list and then to ASSOB Sponsors contacts and Private Equity connections and followers as your raising is shepherded through the capital raising platform," says Paul Neiderer.

From our experience with over 26 capital raisings for small business, Alchemy’s observation is that private equity fundraising is not for the faint hearted. Emotional intelligence of the team, to manage through the highs and lows is essential. A willingness to take guidance from your corporate advisor, who has done it all before, is essential. And your team requires patience – startups often don’t get the miracle angel investor who takes out the entire offer. Keep delivering on the milestones and communicating your wins. This builds proof in the team and confidence in your capacity to deliver. Some private equity funding investors are early entrants, others are ‘wait and see’. We have had investors buy into the 2nd and 3rd rounds upon the strength of the communication from the team. The sophisticated investors often wait until the first 2 rounds are filled.

Kate Ingham is a Partner with Alchemy Equities, a boutique corporate advisory firm specialising private equity funding in high growth businesses in Australia.For more information on private equity fundraising and raise venture capital please visit: http://alchemyequities.com.au/