Looking for venture capital for your startup? Start here.

Feb 02, 2021
Dirk Steller

Is 2021 the year your startup will go from big idea to fully fledged company? One of the first hurdles you and all startups face is how to fund your early development and growth.

Finding the right funding option for your startup is one of the most important decisions an early stage company can make. The choices are many — bootstrapping; friends and family; angel investors; loans; accelerator funding; grants; crowdfunding and, of course, venture capital.

Venture capital may be the right choice for you if your company is already established, with a few early runs on the board or strong signs of success to come. The benefit of VC involvement is that it will typically provide you and your company not only funding, but access to a network of contacts, mentoring and the experience of the VC team.

The current supply and demand relationship between early stage Australian companies and VC funds is not balanced. Unlike other technology hubs like London, Israel and even Singapore, the Australian ecosystem remains fragmented and many VCs will only look at companies that are well established. The Government provides some incentives for investors to fund early stage companies but the environment remains challenging for both startups and investors alike.

What do VCs look for?

As a founder wanting to raise money, it’s essential to understand a potential investor’s return and timeline expectations.

Early stage VC investors are interested in startups with highly scalable businesses that can grow fast and become leaders in their market segments, with a view to a successful exit (typically IPO or buyout).

Below are some key metrics that define our evaluation approach:

1. Company & Project:

  • Young and innovative
  • High startup costs to grow operation and scale
  • Able to grow quickly and change an industry
  • Brand new ideas
  • Product/service with potential to be patented or trademarked
  • Interested in scaling to global markets
  • Flexibility to a changing environment
  • Opportunities for exiting

2. Founding Team:

  • Skilled and experienced
  • Founders who really know their own business: key metrics, principal risks and challenges, sales pipeline, others
  • Capable of growing the company
  • Leadership ability
  • Committed, focused and actioned

3. Market:

  • Large
  • Companies with a competitive advantage in the market
  • Customers — either existing, or well-defined target segment
  • Does the company serve market critical needs and/or solve problems?
  • Could competitors enter its space?

4. Business Model:

  • Clear goals
  • Solid strategy
  • Scalable with clear pathway to profitability

5. Profitability:

  • Revenue growth — potential or actual
  • Profit margin — potential or actual
  • Reasonable cash burn rate
  • Financial viability

How to get noticed by VCs

Getting noticed is key to get VC investment. Some tips to succeed in the long and complex process of raising money are:

  1. Choose the right early-stage investor for you and your business: experienced in your industry, lifecycle stage and location.
  2. Create a great pitch deck.
  3. Find someone in your network who can introduce you to a VC.
  4. A meeting is preferable to a cold-emailing pitch deck. However, if you don’t have contacts and your only option is to email, do it and try to score a meeting.
  5. Try to approach VCs ahead of a funding round and state your purpose clearly.
  6. Approach VCs 12 months before you need the money.

The right VC partnership has the ability to completely transform your startup. If your business could be a fit, go for it — you have little to lose!