If you are an Australian start-up or early stage business seeking venture capital, you can approach government sources or private sector funds as prospective funding sources. Knowing where to source the most suitable funds, how to approach fund managers and understanding their expectations can help start-ups and early stage companies to succeed.
This page provides an overview and advice on how to go about sourcing venture capital.
Sources of venture capital
Those seeking venture capital can contact the following funds and programs:
- Funds registered as Venture Capital Limited Partnerships (VCLPs) or Early Stage Venture Capital Limited Partnerships (ESVCLPs) under the Australian Government's associated programs (see the lists of current VCLPs and ESVCLPs).
- Australian Venture Capital Fund of Funds (AFOFs), which facilitate investments in registered ESVCLP and VCLP funds (see the list of current AFOFs).
- Pooled Development Funds (PDFs), which facilitate equity investments in small and medium-sized enterprises to increase capital.
- The Biomedical Translation Fund (BTF), which helps fund managers develop and commercialise biomedical discoveries (see the list of BTF fund managers).
In addition, the Australian Government's Entrepreneurs' Programme offers support to businesses as part of the National Innovation and Science Agenda. The program helps businesses by accelerating commercialisation, improving business management, assisting incubators to Australian start-ups and facilitating innovation to boost business growth.
Businesses can also research the Tax incentives for early stage investors program administered by the Australian Taxation Office (ATO). These incentives are designed to connect early stage innovation businesses with investors specialising in this area (also known as 'angel investors') that have funds and business experience. A business can ask the ATO for a ruling on whether it qualifies as an early stage innovation company (ESIC). For more information, refer to the ATO.
How to pitch for venture capital
It is important to be well prepared before applying for venture capital. A capital provider will want to know why your proposal deserves support. If there is a genuine interest in moving forward, the fund manager or government funding body will also undertake due diligence on you, your organisation and any technology. This is usually a serious and time consuming exercise. “Under promise and over deliver” to prospective investors and only make assertions or representations that can be supported.
Before contacting a fund manager or government funding body, you should consider who it is, discover what it specialises in and understand what investments it has made and why. It helps to be introduced or referred.
Prepare well before your meeting by researching your audience and be clear about the problem you are solving and value of your idea.
Ask yourself why you are pitching and what are your desired outcomes. Also ask yourself who you are pitching to - are they the most appropriate people? This will help you develop the strongest key messages and determine the most suitable presentation format.
The fund manager or government group may want you to:
- explain the unique benefits of your idea and any associated technology
- have a robust and credible business model
- describe the strengths and weaknesses of your team
- provide customer and competitor analyses
- define the intellectual property strategy.
You will need to consider:
- the amount of capital you require
- what you will use the capital for
- what you expect to achieve
- what your vision is for the next five to seven years.
Ensure that you define the problem in terms the audience will understand. You must:
- quantify the problem you are solving (do the maths)
- explore the impact on the end user's business and on others in the value chain
- describe how your solution will be compelling to the end user in commercial terms that are relevant to the audience.
Create a toolbox
Include dynamic documents (to be updated and changed as you learn more in the market place) that cover compliance, intellectual property and legal issues, and create:
- a 60- to 90-second 'elevator' pitch
- a sales pitch targeted toward prospective customers
- an awareness pitch for a broader audience
- a concise one-page description, including the value of your idea and customer references
- follow-up documents
- a business plan, a proposal, a fact sheet and specifications.
Understand the target
While preparing, ask yourself the following:
- Who are you pitching to?
- Why should they care?
- Will they see you and your team as having the legitimacy to execute?
- How does their decision-making process work?
- How will you progress the discussion?
Pitching is about telling your story and starting a conversation. Your main goal should be to continue that conversation towards a positive outcome. Create a 'feedback loop' by asking questions. Don't let your material drive the discussion.
The Australian Private Equity and Venture Capital Association Limited (AVCAL) also provides information and guidance for entrepreneurs seeking investment from private investors. This includes relevant transaction documents.
Many successful Australian businesses began as start-ups or early stage firms with limited funds. Their access to venture capital and people with commercialisation skills helped them turn their ideas, research or innovation into commercial success. Venture capital funds and partnerships have also been able to grow and prosper as a result of government venture capital initiatives.
To see how Australian businesses and venture capital funds and partnerships have benefited, read our Customer stories.
Venture capital statistics
Find out more about venture capital in Australia.
The Australian Private Equity and Venture Capital Association Limited (AVCAL) also publishes statistics and research on the Australian venture capital industry
Registered venture capital funds
The following are lists of venture capital funds supported by Australian Government programs: