4.4 Commercialisation funding for companies
Funding rarely comes in a single lump forventures; multiple funding sources and/or rounds are usually required. Potential funding sources for companies engaged in commercialisation of include government, angel investors, venture capitalists and crowdfunding.
Government grants, loans and incentives
Available from state and federal governments, these usually suit small-to-medium ventures. Typically, they provide cash subject to the recipient contributing matching funding and meeting agreed project milestones. Governments do not require any equity or on-going control of the venture, but the paperwork can be onerous for inexperienced applicants.
Individuals (‘business angels’)
‘Business angels’ are affluent individuals who provide capital for start-ups in exchange for equity or a ‘convertible note’, i.e. as a loan where the debt may be converted to equity at a specified date and price, usually at a subsequent funding round. This option is a relatively uncomplicated funding choice for small-to-medium ventures.
Some angel investors are organised into groups or networks that pool their capital and expertise to attract more investment opportunities. Many angels invest because they hope to benefit society by fostering innovative ventures, as well as seeking financial gain.
Private venture capital (VC)
VC companies generally seek opportunities with high growth potential and require significant equity and control in return for investment. During commercialisation, they contribute their managerial skills. Some universities are associated with or co-own a VC funding group which provides investment in early stage commercialisation, e.g UniSeed, IP Group, MRCF).
This raises capital from a large number of small cash contributions from members of the general public. Historically, crowdfunding has occurred through mail-order subscriptions, benefit events and other offline methods. It has exploded in popularity with the recent availability of online registries. Worldwide, in 2015, over USD34 billion was raised this way.
Crowd-sourced equity funding
New Australian legislation allows entrepreneurs to raise up to $5 million per year from a large number of individuals in return for equity in their company, with lower disclosure costs than traditional public equity offers. Crowd-sourced equity funding is already available to Australian public (ASX-listed) companies with turnover and gross assets of less than $25 million. Extension to proprietary (private) companies is imminent.