Playing catch-up in the start-up funding race
Tuesday, November 1, 2011/
Over the past year, the Australian start-up sector has been sprinkled by some much-needed funding stardust.
Start-ups were previously saddled with uninterested VCs, conservative angels and banks that required a house and a first-born in return for a modest loan.
Of course, there were Australian investors that took risks. But the past 12 months has seen a welcome influx of “Silicon Valley thinking” – small seed funds which back nimble, innovative ventures with a low start-up cost base.
This boom in “cool”, tech-orientated seed funds and incubators has shaken up Australia’s start-up industry. But where does this leave our more traditional funding providers?
The Australian Small Scale Offerings Board is one player that is attempting to revamp its rather staid, corporate image in order to keep pace with the new arrivals when it comes to snapping up the best start-up talent.
ASSOB is Australia’s largest capital-raising platform for high-growth unlisted companies. It has raised more than $120 million to date.
More than 200 companies have raised equity funds via the ASSOB platform, which matches entrepreneurs with investors.
ASSOB uses many of the techniques used by listed companies to enable unlisted companies to raise anywhere between $250,000 and $5 million.
“We are like a turtle, progressively funding start-ups at $1 million to $2 million a month, which is not as flashy or newsworthy as… incubators, angels, etc,” ASSOB chief executive Paul Niederer says.
“[However,] we have a number of listings doing well at the moment – one to ASX, another second-best IPO on AIM and of course iPowWow; an awesome Australian technology.”
According to Niederer, there are a number of benefits associated with the ASSOB platform, including its own legal department and a close relationship with ASIC.
StartupSmart recently attended an ASSOB breakfast, where nine innovative companies pitched to investors. Every company that attended is currently raising funds on the ASSOB platform.
“These companies are seeking funds, typically $600,000 to $2 million, to accelerate their national and international growth,” Niederer says.
“All of them have a story… They have got something they want to take into the world, but they also want to employ people, grow, move forward and develop.”
“What we’re noticing more and more is that people can come on and invest, and have some form of mentoring role in the company.”
“As baby boomers get out of mainstream businesses, they’re looking for some form of start-up in which active investment is what’s going to happen. It wasn’t like that a few years ago.”
Niederer admits that a perception shift is needed.
“We’re not good at the marketing – everything comes via word of mouth,” he says. “There’s very little advertising we do.”
“We’re moving away from being associated with the traditional end of business to actually being part of that incubator scene, perhaps as the next funding platform after incubators.”
So can organisations like ASSOB remain viable in a market where investors are looking ever earlier for their best prospects?
StartupSmart spoke to three of the pitching standouts about their ideas and how they plan to attract funding to build their businesses.