Department ofPrimary Industries andRegional Development

A guide to sources of funds

The Investor Readiness Program is an initiative of the Department of Primary Industries and Regional Development delivered in collaboration with BDO Australia.

DisclaimerThe information contained in this document comprises general information only and is not intended as financial or investment advice. The information is provided in good faith but the Department of Primary Industries and Regional Development makes no representation or warranty as to its completeness or accuracy. You should not act or fail to act on the basis of any information in the document. Persons accessing this document should obtain independent professional advice before making any financial or investment decision based on information contained in it. The Department of Primary Industries and Regional Development accepts no liability whatsoever, including in negligence, for loss or damage caused by use of or reliance on this document and the information contained within it.

Contents

Business growth stages 1 Sources of funds 2

Bootstrapping 2

Personal savings and credit 2

Loans and lines of credit 2

Family and friends 3

Start-up competitions 3

Crowd funding 4 Angel investors and high net worth individuals 4

Government grants 5 Private equity and venture capital investors 5

Public markets 6

1. IDEA/CONCEPT

This is the very beginning of a business lifecycle as it involves the conception of the business idea. At this

stage, you are gathering advice and opinions

as to whether this is a viable idea.

2. DEVELOPMENT

The business is focusing on research

and development, market research and

product design and testing.

3. START-UP

The business now exists in legal terms. The

products and services are in production and the business has its first customers. This is usually a risky and stressful period in the

business cycle.

4. GROWTH

At this stage, the business is now

generating revenue and growing its client

base. Now is the time to fine-tune the business model by

identifying operational inefficiencies and

improve profitability.

5. EXPANSION

This stage is characterised by a new season of growth and increasing distribution channels. Businesses

are faced with the need to gain a bigger market

share, as well as a way to stream in new revenues and profits.

6. GOING PUBLIC

This stage is the final and highest stage of a business’ growth. It

involves the initial public offering (IPO) to become

a publicly traded and owned entity.

Business growth stages

1

Bootstrapping This refers to building a company from the ground up with nothing but existing resources. This can include things like, personal computing equipment, garage space to start and grow the company, or using your own skills to develop legal documents. Bootstrapping can be very challenging and the limited resources can inhibit growth.

Personal savings and credit Personal savings are the funds you have saved up to commence and fund the business. This may include long term savings, personal credit cards and similar.

Loans or lines of credit Loans can offer a fast, flexible solution to growth requirements. Many lenders have certain requirements and processes to be completed prior to the funds being received. In finding a lender, you will need to review the terms and conditions, along with interest rates to ensure they align with the strategic plan of the business.

Type of finance Common growth stages

Debt 1 - Idea/Concept

Type of finance Common growth stages

Debt 1 - Idea/Concept

Type of finance Common growth stages

DebtStage 3 – Start-up Stage 4 – Growth

Sources of funds

2

Family and friends Family and friends are usually the first source for additional investment funds. They can be a good source, as they are personally invested in you and may require less due diligence than external investors.

To ensure there no misunderstandings or damage to relationships, you should approach the capital the same way you would an external investor, which includes:

• being clear on expectations of the funds and repayment terms • ensuring there is a formal written agreement• spelling out clearly the share and profit entitlements.

Start-up competitions Start-up competitions are platforms where businesses can pitch their start-up in front of several investors in the hope to gain funds to launch and scale up.

Some of the available start-up competitions in Australia are:

• CeBIT Australia Pitchfest - NSW• Curtinnnovation Awards - WA• Launch Festival - NSW• Perth Angels Pitch Nights - WA• QUT Creative3 Pitch - QLD• RiverPitch• StartCon Australasian Startup Awards - NSW• SproutX - Vic• Tech23• Young Starters Competition - QLD

Type of finance Common growth stages

Debt or equity options

1 - Idea/Concept2 – Development 3 – Start-up 4 – Growth

Type of finance Common growth stages

Usually equity, but can be debt, or a mixture of both

1 - Idea/Concept2 – Development

3

Crowdfunding If your business has a social impact that could benefit the community, crowdfunding could be the platform to leverage small investments from a large number of investors to fund your business proposal.

Some potential crowdfunding companies are:

• Equitise • Kickstarter • ReadyFundGo• VentureCrowd.

Angel investors and high net worth individuals These investors tend to seek smaller deals than venture capitalists and typically desire a smaller amount of control in invested firms. Angel investors typically have spare cash available and are looking for a higher return than would be given by more traditional investments.

There are various networking organizations tailored to angel investors and those seeking this type of investment. Some examples include:

• Angel Investors Australia • Australian Investment Network • Perth Angels.

Type of finance Common growth stages

Source of income

1 – Idea/Concept2 – Development 3 – Start-up 4 – Growth

Type of finance Common growth stages

Usually equity, but can be debt, or a mixture of both

1 – Idea/Concept2 – Development 3 – Start-up 4 – Growth

4

Government grants Grants tend to be extremely competitive. Proposals must set out detailed business models and proposed use of funds. Investors should be prepared to manage regulations around the grant and understand it is often a long process.

Grants may be available for:

• business skill development• business growth and capital expansion• research and development• export market.

Australian government grants include:

• Austrade• Lotterywest - WA• National Indigenous Australians Agency• Department of Foreign Affairs and Trade• Department of Industry, Science, Energy and

Resources Entrepreneurs’ Programme - Growth Grants

• Department of Jobs, Tourism, Science and Innovation New Industries Fund - WA

• Small Business Development Commission - WA• Department of Primary Industries and Regional

Development Value Add Investment Grants - WA

Private equity and venture capital investorsPrivate equity firms tend to invest in established operating businesses, while venture capital firms invest in start-ups in technology, biotechnology and clean technology.

Attracting investment demands a strong reliance on public relations and marketing. Neither party will consider investing unless you can tick all boxes on a detailed list of criteria, including a clearly defined and formalised exit strategy.

Type of finance Common growth stages

Source of income, however, there are compliance requirements to receiving grants.

1 – Idea/Concept2 – Development 3 – Start-up 4 – Growth

Type of finance Common growth stages

Usually equity, but can be debt, or a mixture of both.

4 – Growth5 – Expansion

5

Public Markets Entering the public markets is done through an initial public offering (IPO). This usually requires a minimum amount of shares for investors to purchase. The company launching the IPO in Australia must lodge a prospectus with ASIC which contains important information investors need to know about the company and the offer.

Going public can be an effective means of raising cash for corporate ventures, however, undertaking this successfully is usually a complex, expensive and time consuming process. This is why public markets are considered the final growth stage of a business and are usually out of reach for typical small to medium sized enterprise.

The Australian Stock Exchange is the public market in Australia.

Type of finance Common growth stages

Equity 6 – Going Public

Going public can be an effective means of raising cash for corporate ventures, however undertaking this successfully is usually a complex, expensive

and time consuming process.

6

The Department of Primary Industries and Regional Development is ready to assist you

For further information please contact:

e investorreadiness@dpird.wa.gov.au

p 1300 374 731 (1300 DPIRD1)

w dpird.wa.gov.au/investorreadiness

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