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IS THERE SUCH A THING AS FREE MONEY?
Recently I attended an event run by Danielle from She Will Shine – all about Funding Options. It is this kind of information and guidance I wish I had three years ago when I was muddling my way through those early days.
But it is never too late to learn so I attended this with interest – as you just never know where you business will go and I like to know my options prior to jumping into bed with any kind of bank or investor. Call me cautious, call me sensible, call me boring… but you certainly can’t call me uninformed!
Four speakers from various Funding Options presented on the day; Laura McKenzie from Scale Investors, Jenny Turner from Bendigo Bank, Claire Merquita from Pozible and Matthew Fletcher from Grant Guru.
The Angel Investor: Laura McKenzie, Scale Investors
I was very interested to hear Laura – I mean who hasn’t watched Shark Tank and thought… ”That could be me?” Laura emphasised that the angel investor relationship is based on trust, patience, collaboration, win/win and having a very resilient mindset and approach. The “angels” that you are trying to woo are ultimately taking on a big risk and most times know nothing about your business and how you operate, so there is a huge training and education process to get it right. Ultimately only 1 in every 3 business ideas invested in, will get a huge return for the investor so not everyone makes the cut (hence why resilience is needed!). Ultimately your business needs to solve a problem that people are willing to pay for, otherwise you will find it very hard to get an angel on your side.
The Bank: Jenny Turner, The Bendigo Bank
Banks come from a very different perspective to angel investors as heavy regulations have set in from APRA and ASIC. What was music to my ears is that banks look at how closely you work with your accountant and if you don’t have three years of actual financials to produce (that you can explain) then you are not starting off the journey on the right foot. Whilst banks do have a more flexible array of products to offer business owners, generally the main criteria for lending is that the business must be making a profit. Future forecasts of a minimum of 12 months are vital to show that repayments will be made and the chance of default on the loan is minimal. Risk is something the banks rarely like.
The level of detail, the explanation of trends in your financial data and a thorough understanding of your assumptions is critical in getting the funding over the line (once again – music to my ears). So whilst a bank can seem like a scary option, it all comes back to cash flow and business planning – something you should not be doing on your own if you want the answer to be yes.
The Crowd Funding Platform: Claire Merquita, Pozible
Well reverse time 3 years when I started my business and I really had no clue what crowd funding even was. Thankfully now I am a lot more savvy, but it was nice to get a greater understanding of the platform and how the expectations of a successful campaign come about (no, it is not just create and hope).
Successful crowdfunding campaigns focus on 4 areas – Target (so $$), Time Frame, All or Nothing and the Reward at the end. So first you need to determine the project that you need the funding for and come up with a monetary goal (often the hardest part). Are you trying to build awareness, presale of products, build up a portfolio or is it a skills building exercise? However Claire’s rule that you should be able to raise 30% of the total in the first week of a 4 week campaign really helps you narrow down that number. The first and last week tend to be when everyone is really gung ho about your venture and likely to donate. Time frame – normally 90 days is maximum, however 4 weeks tends to be more manageable. And remember, that if you don’t reach your project goal – no money exchanges hands and you end up with nothing. The rewards that you provide to people in exchange for their hard earned cash can be in the form of recognition, tangible products or experiences – all based on the level of donation. There have been some amazing success stories so it might be time to start thinking outside the box.
The Grant Expert: Matthew Fletcher, Grant Guru
Established in 2006, Grant Guru helps business owners find out what grants are out there that potentially could bring in some funds for their business, idea, concept or growth. But there is no such thing as free money, and normally attached to each grant is a list of clauses as to how the money is to be used (can be quite specific), what you need to do reporting wise to access the funds, and often quite a lengthy process to even apply for the grant in the first place. To be successul in obtaining grants you need to understand how your business can align with the grant provider as it really needs to be a win-win situation. Think about your “grant strategy” and this should align with your business strategy. If your business is trying to achieve the same outcome as the grant provider then you are half way there… now to write that convincing application.
So funding for startups is out there – but from all 4 speakers there were common themes – know your business (inside out), know your financials (inside out), and understand that however you obtain funding – it is never free money.
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About Stacey Price
Stacey Price is a qualified Chartered Accountant and Registered BAS Agent and self confessed numbers nerd – specialising in helping business owners to understand their financial information.
With over 16 years experience as an accountant Stacey has the skills, experience and training to deliver complex financial information in an easy to understand manner. She loves dealing with business owners and is passionate about financial training and education. Find out more at Healthy Business Finances.