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10. Identify grants and funding opportunities

A number of funding options now exist to help startups fund their overseas expansion. Banks and export credit agencies remain the easiest and most approachable sources of funding, but other options exist, including various grants, venture capital and equity sharing deals. Depending on your overseas market, there may be specific financial incentives available in-country. For example, Singapore has been regarded as a top city for startups for many years and offers multiple schemes and grants to boost innovation within the country.

Adequate funding will be critical to your success - so having a detailed financial plan is crucial. You may be eligible for financing from a variety of sources in Australia, with your options varying depending on the intended activity, and whether or not you are exporting or setting up in market. As mentioned previously, there are a number of costs associated with taking your product or service overseas, some of which you may be able to recover through certain grants and funding opportunities.

Venture capital

If you are comfortable with a third party taking an equity stake in your business, and a share of the profits, then venture capital can be a way to finance your international expansion.

Changes to legislation has made investing in Australian startups easier through crowed-sourced funding (CSF) platforms. Typically, in this scenario, Australian startups will raise small amounts of money from a large number of investors. Investors can invest up to $10,000 a year in a company. Eligible Australian startups can raise up to $5 million a year using CSF, however they must have less than $25 million in assets and annual revenue.

Corporate venturing is another form of venture capital and involves the direct investment of corporate funds into a startup. This is usually done by large companies who wish to invest in small but innovative businesses. This is typically done through joint venture agreements and acquisition of equity stake. In this scenario, the investing company may also provide the startup with management and marketing expertise, strategic direction, and/or a line of credit.

It should be noted that many Australian startups seek and receive funding once they have already set-up in market and are operational.

Typically, funding is split up into four distinct rounds:

  • Seed funding: an early stage investment used to support a company until it is able to generate its own cash flow.
  • Series A: funding intended to capitalise the company for 6 months to 2 years as it develops its products, performs initial marketing and branding, hires its initial employees, and undertakes early stage business operations.
  • Series B: funding to help a company move past the development stage and begin growing to meet market demand. Series B funding is usually used to further invest in business development, sales, advertising, tech, and employees. 
  • Series C: additional funding typically used to scale the company by developing new products and/or expand into new markets.

Investors looking to invest in startups are taking on more risk, therefore are likely to be seeking greater returns when compared with investing in well-established SMEs.

There are a number of advantages and disadvantages associated with receiving venture capital.

Advantages:

  • VCs can be a great source of information, providing guidance around business decisions, including financial management and international expansion.
  • In some instances, VCs can provide additional resources and active support during key growth stages of your business.
  • VCs are typically well-connected and may be able to support you in identifying and securing additional funding.
  • Investments from well-established VCs will likely improve your brand and reputation in-market. 

Disadvantages:

  • VCs may want to be actively involved in decision making, resulting in less control and autonomy over the strategic direction of your business.
  • VCs may wish to conduct due diligence on your company. This will involve legal, accounting and operational assessments that are likely to be costly. All or a portion of these costs may be passed on to your business.
  • VCs will usually request protective provisions on certain actions by your business that could adversely affect their investment or projected return. This may impact on your ability to make strategic decisions.
  • VCs may, in some instances, be slow when making a decision to invest. This may be an issue if you require capital fast.
  • VCs may wish to sell their investment and exit your business. This is likely to cause disruption if there is not a mutually agreed upon exit strategy in place to have the investor bought out. 

It is important that you prepare adequately before seeking to raise funds both domestically and offshore. Before taking your idea to an investor, consider the following:

  • Do you have a compelling product offering and value proposition?
  • Do you have a business plan and presentation to deliver to your potential investor?
  • Can you defend all facts, assumptions and projections included in your business plan and presentation?
  • Do you have demonstrable results and a customer base?
  • Have you registered your IP?
  • Do you have a sound management team in place?
  • Does your target investor have a market and sector speciality aligned with your vision, product or service?
  • Does your target investor have a comprehensive network of investors that you can leverage for future funding?
  • Have you considered the cultural nuances of doing business in your overseas market and how that may affect the way you form relationships and pitch your product or service to local investors?

The Australian Private Equity and Venture Capital Association Limited (AVCAL) is a national association which represents the private equity and venture capital industries. AVCAL's members comprise most of the active private equity and venture capital firms in Australia. These firms provide capital for early stage companies, later stage expansion capital, and capital for management buyouts of established companies.  

Australian Government grants and funding opportunities

The Department of Industry, Innovation and Science has created a grants, funding and support programs search tool to help Australian startups identify assistance programs.

Export Market Development Grants (EMDG)

The Export Market Development Grants (EMDG) scheme, administered by Austrade, offers financial assistance to aspiring and current exporters. Benefits of the scheme include:

  • Up to 50 per cent of expenses incurred on eligible export promotion activities above a $5,000 threshold to be claimed back in the year they were incurred, provided that the total expenses are at least $15,000 and on one or more eligible export promotional activities during the last financial year, or, if a first-time applicant, the last two financial years.
  • Each applicant may receive a grant of up to $150,000 per application, to a maximum of eight annual grants.

Landing Pads program

Another valuable resource to consider is Austrade’s Landing Pads program. This program helps Australian startups land and expand into major global innovations hubs around the world. Five Landing Pads have been established in San Francisco, Tel Aviv, Shanghai, Berlin and Singapore. The program provides market-ready Australian startups with the following:

  • a residency up to 90 days in a co-working space to help them grow their business by facilitating in-market business development, introductions to customers, investors, mentor networks and strategic partnership opportunities
  • business services and in-market learnings from local and international experts
  • access to a curated community that supports Australian entrepreneurs who want to go global via shared insights and collaboration opportunities, and assistance post residency with business advice to help them continue to grow their business

Export Finance Australia

The Export Finance Australia, the Australian Government’s export credit agency, is a specialised financier that delivers simple and creative solutions for Australian companies to enable them to win business, grow internationally and achieve export success. Dealing directly with exporters or their banks, Export Finance Australia provides loans, guarantees, bonds and insurance – all of which can be tailored to meet exporters’ needs. 

Offshore grants and funding opportunities

A number of overseas grants and funding opportunities exist and may be available to you.

United Kingdom

The Department of Business, Energy and Industrial Strategy, provides finance, equity, grants, loans, and expertise and advice for business. To find a scheme that’s right for you, visit the finance and support for your business search tool.

United States

The United States Government does not offer grants for starting or growing a business, however it does offer grants for non-commercial organisations (nonprofits and educational institutions) in medicine, technology development, and related fields. Some business grants are available through state or local programs and there are Government loan programs offered for financial support.

Fundera, a company that provides an online platform to connect would-be borrowers seeking capital with potential lending sources, has put together a list of Small Business Grants in the United States for 2019.

India

Startup India is a flagship initiative of the Government of India, intended to build a strong ecosystem that is conducive for the growth of startup businesses and to drive sustainable economic growth. Grants and funding opportunities may exist through a number of Government Schemes offered by the various Government Ministries. To find a scheme that fits your needs, visit the Government Schemes search tool.

South Korea

Startup Radar is a startup news and opinion website that was formed in 2018 with the help of 500v2, the Ministry of SMEs and Startups, and Korea Foundation for the Advancement of Science and Creativity (KOFAC). The site offers startup news, articles related to the startup ecosystem, original content from guest contributors from the leading tech sectors, event/conference coverage and a network of VCs. Startup Radar has put together a list of the Top 7 Government Programs in South Korea, some of which include opportunities to receive grants and funding.

Singapore

Startup Decisions provides a platform for startups to manage all of their regulatory tasks, including company registration, taxes, licenses and compliance, whilst also providing access to professional advisors. Startup Decisions also provides information on government incentives, tax benefits, and other grants and funding schemes available. For more information on government incentives, visit the Startup Decisions website.