business advice - macquarie university · this will form the basis of your business’s valuation....
TRANSCRIPT
November 2018
Business AdviceStartup Strong, Finish Stronger.
There are many reasons why people choose to start their own businesses. It may be the inherent need to be your own boss and work independently. It may be financially motivated. Or perhaps it is the thrill of sharing something that you have created, or a problem that you have solved, with the rest of the world. To those of you who have chosen to start your own business, congratulations! But now comes the hard part – how to start your venture to give it the best chance of becoming a succesful business.
Find your ‘Oprah’
Finding yourself a good mentor should be one of the first steps you take on your journey to starting your business. A mentor is an experienced and trusted adviser who can guide you to entrepreneurial enlightenment. They could be a friend, family member, experienced public figure, accountant, or business consultant, or someone in a relevant industry that can provide insight. Another option would be to get in touch with one of the many organisations in Australia that offer accelerator programs and incubator support. Such as:
Most Active Australian Accelerators
Source: artesianinvest.com
Obtaining access to effective mentorship and advice early on is crucial. Mentors can assist with building your business plan, introducing you to the right contacts for funding, design and
4
6
6
77
9
1010
11
11
20
20
20
24
25
32
3452
65
70
7475
103
118
24. Bluebox Accelerator23. SPARK Deakin22. Edugrowth21. Unearthed20. Runway Geelong19. energylab18. CSIRO ON17. Techstars Adelaide16. Rocket Seeder15. SproutX14. Curtin Accelerator13. STC12. Gri�n Accelerator11. Cicada10. UTS Hatchery9. H2 Accelerator8. MAP7. Startmate6. iaccerlerate5. Incubate4. MuruD3. iLab2. Blue Chilli1. Slingshot
0 20 40 60 80 100 120118
production, and perhaps most importantly, providing you with a reality check. How much time and effort will it take to get your idea off the ground? How committed to it are you? Can your idea be commercialised?
“It takes real planning to organise this kind of chaos” - Mel Odom
For those of you who need a refresher on what to include in a business plan, the Australian government have provided a handy guide and template here. It is important to revisit this plan regularly; to continually remind yourself of your core purpose, and don’t be afraid to refine or adjust the plan as you go.
In addition, and particularly where you are hoping to attract external funding, you should also develop a ‘pitch deck’ which is a document or presentation that you would present to potential investors. Many venture capital firms provide resources online to assist with this process, a simple google will help you find some templates that will assist. If you do not already have an account with Canva, sign up immediately and check out their sample pitch deck presentations.
Along with an appropriate presentation, you should provide a financial forecast, revenue pipeline, and expected cash ‘burn’ of capital and operating expenditure for at least a 3 year period. This will form the basis of your business’s valuation. Get your accountant involved to help with this component.
Structure & Ride or Dies
It is important to take into consideration a multitude of factors when determining the best structure for your business including personal liability and asset protection, taxes, scalability and concessions available.
It is not just your businesses legal structure you should be thinking about but also the people you are bringing along for the ride. You should be looking to surround yourself with co-founders, business partners, board members, investors and key stakeholders that are willing to contribute to the businesses success as they would to a marriage. Those that have the same priorities, possess a mutual drive to be successful, those that operate ethically and effectively and who are open and respectful communicators.
In addition, look for business partners that offer complimentary skillsets to your own and leverage off them at all times so you can support your project holistically, whilst cultivating what you are best at.
Warning:
Sometimes having too many geniuses at the table becomes too hard to manage. You should only take people with you that will add real value to your business. Be clear about managerial and decision making roles and ensure that ‘silent investors’ remain so!
Protecting your baby
If you don’t already have a good lawyer, now is the time to find one that is suitably skilled in your business’ area. Look for a legal representative who understands the nature of your business and industry to help you with:
• Ownership agreements
• Confidentiality agreements (NDA’s)
• Intellectual property protection
• Employment & contractor agreements
• Navigating the regulatory environment
• Data protection, T & Cs & privacy policies
Legal advice is particularly important where you are outsourcing the development or manufacturing of your product to third party contractors - just in case they’re less than loyal and decide to steal your concept .
Even though the startup world moves quickly, you must spend the time and money up front to insure your business against future legal action. If you need some assistance with finding a decent lawyer, your Nexia reps can give you a suitable referral.
Raising Capital
If revenue funding (bootstrapping) is not an option and you have exhausted your personal finance options, it’s now time to start thinking bigger. Be prepared, attracting external investment comes with compromise as the following sources will look to take an ownership interest in your venture in exchange for their funding.
An option you may wish to consider are Startup Accelerators (Incubators). Accelerators can not only offer mentorship and support but also an initial capital injection to get you through to the next phase where you would be looking for funds in excess of $100,000.
Another funding route are angel investors. Angel Investors are typically high net worth individuals or families who, unless
philanthropic in their mission, are looking to generate wealth through investment in early-stage startups and are in it to make a large return on investment within a 12-18 month period. There are a couple of organisations in Australia that can connect entrepreneurs with angel Investors, including the ‘Angel Investment Network’ and ‘Sydney Angels’.
If your business plan and cash flow model indicates that you are going to require in excess of $500,000, you need seed funding and should be starting to work your network to find the right early-stage venture capital fund with access to institutional investment.
At this point, you will be selling your prototype and proof of concept plus demonstrated access to a customer base. Investors will be looking for a solid valuation and entrepreneurial leadership. If you have previously hooked up with an Angel Investor, they will likely have existing contacts and referrals into appropriate VC firms, alternatively you can find a list of these at Artesian Invest or on the ‘Australian Private Equity & Venture Capital Association’s website.
Most Active Australian VC firms: No. statup dealsct
0223
77
9910101011111111121515161717
192020
2323242425
28293032
3741
131
37. Main Sequence (CSIRO)36. Giant Leap Fund35. Mai Capital34. Full Circle33. NAB Ventures32. Our Innovation Fund31. QUT Creative Enterprise30. Five V Capital29. Sydney Seed Fund28. BlueSky27. Bailador26. Follow the Seed25. Tempus Partners24. Ellerston23. Rampersand22. Exto Partners21. Grok Ventures20. OneVentures19. Tankstream Ventures18. Reinventure16. Right Click Capital15. Black Citrus14. Perle Ventures13. Black Sheep Capital12. Equity Venture Partners11. MH Carnegie10. Airtree9. Brandon Capital8. Uniseed7. Blackbird6. Carthona Capital5. SquarePeg4. GBS Venture Partners3. HS Ventures2. Telstra Ventures1. Artesian
0 30 60 90 120 150
0
Source: artesianinvest.com
Once you have a market ready product and access to a customer base that is generating revenue, the next round of funding would be called a ‘Series A’ and with increased growth and the requirement to scale, you would progress to ‘Series B, C’ and beyond.
Warning: As you are diluting your ownership in the venture each time you raise money, make sure that appropriate legal consultants are involved in negotiations. Always be careful of the fine print when dealing with potential investors early-on, some may negotiate terms which can be unfavourable to future investors and others may expect to obtain some level of control over the decision making. Lesson: ‘Bootstrap’ for as long as you can.
Getting a leg up
There are a multitude of government & industry bodies that provide support to startup businesses through expert support, grants, low-interest loans and tax concessions. Here are a few, however a search tool is available at business.gov.au.
Grants
1. The Entrepreneurs’ Programme
2. Research & Development Incentive
3. Export Market Development Grant
4. CSIRO Kick-start
5. Minimum Viable Product Grant (NSW specific)
6. Building Partnerships Grant (NSW specific)
7. Small Business Grant (NSW specific)
If you need support or further information in relation to any of the above, Nexia has a qualified team that can assist.
Final words of wisdom
Firstly, Cash is King. So control it and monitor it like a queen. Establish a cashflow budget and stick to it by controlling your spending. Maintain a rolling short term and long term cash flow projection and update it often, so you know where the funding gaps are. Do not bankroll your customers in the beginning as they will expect it forevermore, so have tight terms and move towards automated payments as soon as you can.
Secondly, Culture is so important. At the employment stage, surround yourself with dynamic, capable individuals and ensure they have clear direction and are aligned with your vision. Make them part of the journey by sharing the wins and investigating start up concessions for employee share schemes. Respect them and reward good performance, and success will follow.
Finally, when you’re building a business there is no such thing as a stupid question. Asking questions upfront will help you to understand your business better and develop you into a better business owner. If you have any questions about any aspect of your startup feel free to reach out to one of our advisors for a complimentary discussion.
AustraliaAdelaide Office Level 3, 153 Flinders Street Adelaide SA 5000GPO Box 2163, Adelaide SA 5001p +61 8 8139 1111, f +61 8 8139 [email protected]
Brisbane Office Level 28, 10 Eagle Street Brisbane QLD 4000 GPO Box 1189 Brisbane QLD 4001 p +61 7 3229 2022, f +61 7 3229 3277 [email protected]
Brisbane South Office 1187 Logan Road, Holland Park QLD 4121 PO Box 63, Mount Gravatt QLD 4122 p +61 7 3343 6333, f +61 7 3849 8598 [email protected]
Canberra Office Level 7, St George Centre, 60 Marcus Clarke StreetGPO Box 500, Canberra ACT 2601p +61 2 6279 5400, f +61 2 6279 5444 [email protected]
Darwin Office Level 2, 62 Cavenagh Street Darwin NT 0800GPO Box 3770, Darwn NT 0801p +61 8 8981 5585, f +61 8 8981 5586 [email protected]
Melbourne Level 12, 31 Queen Street Melbourne VIC 3000p +61 3 8613 8888, f +61 3 8613 8800 [email protected]
Perth Level 3, 88 William Street, Perth WA 6000GPO Box 2570, Perth WA 6001p +61 8 9463 2463, f +61 8 9463 [email protected]
Sydney Level 16, 1 Market Street, Sydney NSW 2000PO Box H195, Australia Square, NSW 1215p +61 2 9251 4600, f +61 2 9251 [email protected]
New ZealandChristchurch Level 4, 123 Victoria Street, ChristchurchPO Box 4160, Christchurchp +64 3 379 0829, f +64 3 366 [email protected]
www.nexia.com.au
The material contained in this publication is for general information purposes only and does not constitute professional advice or recommendation from Nexia Australia. Regarding any situation or circumstance, specific professional advice should be sought on any particular matter by contacting your Nexia Advisor. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omission of financial services licensees.
Jane Fenner
Associate Directort 02 8264 0670 e [email protected] nexia.com.au
Advisory Specialist