FINANCE
CROWDFUNDING NEW PRODUCT DEVELOPMENT I n our interconnected world, there’s no shortage of great ideas for new and better products, yet many struggle to raise the funds needed to develop, manufacture, market and distribute them. This is particularly true when the inventor wants to retain ownership of their intellectual property, rather than hand it over to investors. The internet has helped solve the problem it’s helped create crowdfunding. Rather than raising capital from a few large investors in exchange for equity in the company, hundreds, or even thousands of individuals back your project in exchange for a perk - usually the
promise of a finished product, after you’ve achieved your funding goal, organised production, and are ready to ship. Effectively, backers are prepurchasing your product well in advance of receiving it. It’s both a leap of faith and vote of confidence - a truly modern phenomenon that wouldn’t be possible without the internet and the sharing economy.
Crowdfunding is democratising the way niche goods get to market – it’s people power amplified, and a startup’s dream come true. Most successfully funded projects tend to be cool and techy, and pitched by entrepreneurs or small groups. But it’s big business. The largest
platform, www.kickstarter.com has raised nearly $US 2.5 billion since 2009. “If you think crowdfunding might be a good fit for you, be ready for two things. First, you must have a very sophisticated working prototype to demonstrate that your idea is feasible. Second, be prepared for a huge marketing effort, before you even have product,” advised Sergei Plishka, Senior marketing Manager at Outerspace Design. www.outerspace.co
Venture capital supporting innovation and investment
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any products we use on a daily basis come from well-known companies such as Apple, Intel, Google and Microsoft. A common feature in the history of all of these organisations is that they were originally backed by venture capital investment. These companies, and many others like Skype, Uber and Airbnb, have had a profound impact on society and provided amazing returns to stakeholders.
differentiated and disruptive ideas/ technologies that, with investment, are well positioned for rapid and scalable growth.
The link between venture capital and high value companies is no coincidence. Venture managers seek out potentially transformative opportunities with
The venture industry is dominated by the United States, where it has had a significant influence on the diversification of its economy and thriving culture of
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Venture capital investors are generally specialists in a field of investment. Therefore, the benefits to a company of a venture investment should be twofold: capital in exchange for equity and the shared knowledge/advice of an active venture investor.
entrepreneurship. However, while still in its infancy, Australia’s venture industry is developing and there are a number of new and established funds operating in a more supportive policy environment. “If you are a high risk/reward business that needs substantial investment and expert advice, then venture capital may be your best option. Seek investors whose expertise and interest aligns with your business model and goals. Then understand their drivers, prepare for due diligence and seek a personal introduction” advises Michael Bettess, Investment Manager at Brandon Capital Partners. www.brandoncapital.com.au