If you are an entrepreneur looking to raise capital for your new venture, you need to position your company for the upswing in the market and be aware that investors in this climate are looking for great value. So what do you need to consider when raising equity capital in Australia?
- Write a good business plan ‐ with realistic financial projections.
- Establish a Public Limited Company ‐ it is illegal for Pty Ltd companies to offer shares to the general public without a prospectus.
- Appoint a minimum of 3 knowledgeable, well‐networked and experienced board of directors.
- Explore all avenues of capital‐raising ‐ VC and Angel Investors are not the only way to raise capital in Australia. Believing that all you need is one large investor is a fallacy, when many smaller ones will often achieve the same outcome.
- Create an investor‐friendly environment. Use facilities such as trust accounts, cooling off periods, minimum subscription amounts, professionally prepared offer documents and share certificates, all of which give investors confidence.
- Structure the offer correctly to make it attractive to early and later‐stage investors. Don’t get greedy, but at the same time don’t give away too much equity in your business.
- Articulate your offer to investors correctly. They want to see the potential for the investment.
- Set clear milestones for your business over the next 3 years and provide an exit strategy. Investors want to be able to track and access your progress towards an exit strategy in the foreseeable future.
- Create and practice a professional pitch presentation. This will be an essential tool in presenting and selling your opportunity to potential investors. Remember – what’s in it for the investor?
- Correctly market the offer and ensure that you are compliant with ASIC’s rules and regulations. Most entrepreneurs don’t realise the legal minefield and potential issues associated with capital raising.
– Dan Liszka is Managing Director of Alchemy Innovation Development www.alchemyequities.com.au