More and more Australian startups are closing huge international funding rounds, with the recent $15 million raise by Canva highlighting the enormous potential in this space.
But is international investment a best fit for all startups? And if so, what are the steps to make it happen?
Here are seven tips for smart investment, both on and offshore.
Early stage startups need not apply.
International investment is (generally speaking) more suitable to later stage startups that have already undertaken a seed round or started a series A round in Australia and are now ready to scale into new markets.
It’s advisable that local startups establish themselves, to a degree, in Australia to prove that there is indeed a market and to iron out any kinks in the business technology or service.
It’s much better to beta test your product on home turf before tackling other markets like the US or Europe, who are less tolerant to buggy products and not to mention, significantly competitive.
If you believe that you’re ready to take your startup global, be very sure of your corporate structure.
In the US, for example, a lot of investors will want to support an entity that is within their jurisdiction, such as a Delaware Corporation.
So consider whether you have a foreign entity to take money into, and if so, where does the Intellectual Property go?
Most importantly, consider whether your startup is actually going to be a foreign business or not to avoid dual company issues.
Pitch events and hackathons are an amazing way to fast-track a startup’s growth, and I would recommend seeking out offshore events – if that’s the way you want to go.
A great example is Australian social media startup, Storyboard, which just represented Australia at this year’s Creative Business Cup in Copenhagen following its win at CEA’s Creative3 Pitch.
By attending the Creative Business Cup event, Storyboard gained exposure to 60 countries worldwide and hundreds of investment specialists throughout Europe.
This is exposure that money can’t buy – it would take around 12 to 18 months to reach that many investors through regular channels.
Pitch events also provide an invaluable learning opportunity, as you get to see how other startups perform during pitching and measure your own performance as a result.
If you’re completely set on an off-shore market and have identified players already established in the space, then a strategic partnership might be something you want to consider.
Storyboard, for example, as a social media platform playing into the lucrative youth travel market, could connect with international giants in its space, such as Virgin.
Occasionally these partnerships can arise, especially if other brands contribute investment to support their own product suite.
No matter the location, if you’re looking to access funding from angel groups, accelerators, incubators or VC funds, what’s really important is that you get smart money on board.
Essentially, this is money that can help grow your business with investors that understand startups are high risk, take time to grow, and might not be cash positive for a few years.
A pitfall to avoid when seeking investment on any continent is money from investors that are not across the startup industry and expect immediate returns like you’d get from stocks or bonds.
Smart money is critical as you want to attract investors that understand the startup journey and are able to be patient and offer more hands on support.
Starting local with the aim of getting investors on board is a great way to build brand credibility in advance of pursuing international outreach.
Successful creative-tech examples choosing this route include Canva, who were very smart to attract a high profile international board, which helped open the door to those global markets.
Remember, foreign investment is about much more than the funding, it’s also a huge opportunity to scale your product using an international network with channels that offshore investors will have access to.
Some products just aren’t built for Australian customers, perhaps because the industry vertical does not exist or is too small.
In this situation, seeking off-shore investment from the get-go is a wise move. In fact, there is nothing wrong with building products for other markets, providing you have a clear idea of who that market is, and how you’re going to access those customers.
This is becoming common in the agtech space, especially since Australia doesn’t have any local agriculture manufacturing, meaning some local startups may have an immediate market in, for example, South or North America, where they can launch straight into their established manufacturing industries.
Mark Gustowski is the Executive Manager, Startups & Business Incubation at Creative Enterprise Australia (CEA).
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