7 Ways to Secure Funding for your Tech Startup

Australian technology startups have certainly shone on the global stage in recent years. Brilliant minds across software, artificial intelligence, machine learning, automation, and other related fields have contributed major innovations within the tech space.

Getting any new business off the ground is no easy feat though. And in a hyper-competitive field such as technology, it can be particularly challenging.

If you’re embarking on a new venture, it’s likely that funding is weighing heavily on your mind. Whether you’ve only just begun or are almost ready to go to market, funding could be the ticket to get you to the next stage in your business journey.

Here are 7 ways to help you drum up cash so you can take those all-important next steps – be it testing new ideas, hiring new employees, or preparing to launch.

1. QUALIFY AS AN EARLY STAGE INNOVATION COMPANY

An early-stage innovation company (ESIC) is a company that meets the requirements of the early-stage test and a second innovation test.

These requirements include:

• being incorporated or registered in the last 3 income years (or last 6 income years if you meet additional criteria)
• having total expenses of $1million or less in the previous income year
• an assessable income of $200,000 or less in the previous income year
• not being publicly listed in Australia or overseas

When you qualify as an ESIC, you become more attractive to potential investors. This is because they receive a number of tax incentives when they purchase shares in your business, including a tax offset as well as a capital gains tax exemption under certain circumstances.

At RSM, we work with many startups to help them gain recognition as an ESIC so they can secure funding. To find out if you meet the requirements, simply get in touch.  

2. MAXIMISE TAX INCENTIVES AND GRANTS

The effective use of tax incentives and governments grants is an astute way to get more funds into your business.

For example, the R&D tax incentive allows you to claim back a portion of any amounts you have spent on research and development – which can be significant for a tech startup.

There are also local government grants, such as the NSW minimum viable product grant which provides financial support to new ventures that meet specific criteria. 

Often you need to have your business set up under a certain structure to be eligible for these grants. We can help you identify suitable grants, ensure you have the right structure and put together a compelling application.

3. JOIN AN INCUBATOR PROGRAM

There are several national and state-based incubator programs, and some of which are created exclusively for technology companies.

You’ll find many benefits to joining these programs in the early stages of starting your business. Not only can you get funding, but you can also connect with fellow entrepreneurs and secure mentoring from industry professionals which can go a long way towards building your networks. 

We can help you identify suitable incubator programs and put together your application. These programs are generally very competitive so you will want to stand out by knowing your numbers and having your finances and business structure in order.

4. CROWDFUNDING

Crowdfunding is a relatively new way to secure funding and has helped many startups get the money they need to move beyond the prototype stage.

There is a range of crowdfunding platforms, including some of which have been designed with tech companies in mind.  

Some incentives that companies use to attract crowdfunding are to offer their platform for free for a set time period to people who invest or to offer early access once a minimum viable product is ready to launch.

5. BOOTSTRAPPING

Bootstrapping is where you fund your innovation with your own money or with help from family and friends.

There are a number of ways to secure debt funding, such as using credit cards or obtaining lines of credit under the business. These may require personal collateral – such as your home – so there is a risk.

However future investors usually value companies where the founders have demonstrated a willingness to have their own “skin in the game”.

Just be careful when promising or allocating shares to family, friends, or other people who invest in the early stages. A $5,000 investment for 10% of your company might not seem like a big deal when you’re desperate for money, but it can be significant once the company gains traction.

6. FUNDING VIA EXCLUSIVE RIGHTS

We’ve seen some RSM clients who have developed a tech product exclusively for a company that has funded the development of the product.

The exclusivity arrangement might run for several years, but it allows the product to get fully developed and tested at minimal cost to the founders before it’s made available to the wider market.

7. ANGEL INVESTORS

Lastly, there may come a time when you seek a larger investment from an angel investor. Angel investors typically provide anywhere up to $100,000 (more in some cases) but generally in exchange for a large stake in the company.

If you do seek out an angel investor, it’s imperative to have your business finances and structure in place. You’ll also want to look for an investor who has an active interest in your field and can potentially open doors for you through their networks and other professional advice. 

Depending on the nature of your business, angel investments may be followed by seed funding (Series A, B, and C) where venture capitalists commit funds in exchange for an equity interest in your company.

If you arrive at this point, you’ll quickly appreciate any efforts you’ve made in the early days to get your business structure and any shareholdings properly established.

HOW RSM CAN HELP

While we don’t provide funding as a service, we can certainly help you get set up so you are more attractive to potential investors and other funding avenues.

This includes:

• Getting your books and numbers in order
• Knowing your financials
• Understanding an investor’s criteria
• Structuring your business
• Finding and applying for grants
• Applying for tax incentives
• Drawing on our global network and expertise

We’ll also help to ensure that you don’t burn out relationships at the wrong stage – such as seeking venture capital when you’re still in the prototype phase.  

Our skilled and passionate team has extensive experience in the technology space and has helped companies just like you grow to multi-million dollar enterprises. Read about how we partnered with xAmplify and Trellis Data to support them through their growth lifecycle.

To learn more about how we can help you secure funding for your tech startup, visit our Funding for Technology Companies webpage or contact your local RSM office.