Accessing finances in any economic climate can be challenging and, given the current volatile state of affairs, securing funds is as tough as ever. Startups and business development don’t just require funding anymore but also depend on organisations to provide them with expert guidance and access to a wealth of knowledge and connections.
With so many startups experiencing difficulty kicking things off and growing, there is significant room for support in terms of funding and guidance. From Angel investors to various foundations to Municipal councils, all these players are cutting themselves a generous slice of the largely appealing startup cake.
In this article, we provide you with a few key players fuelling startups today.
Many corporations are pinning their futures on their venture investment portfolios. They adopt the mindset that if you can’t beat startups at the innovation game, go into business with them as financial partners. While competition has a lot to do with corporations getting involved, talent and idea sourcing is yet another point of emphasis. Given that most startups address new and unresolved challenges, they are perfect in this regard.
For example, corporations such as Google utilise investment wings of their company to identify unique economic opportunities to be found in startups across the globe that could benefit their corporation’s goals and targets as well.
Google’s VP for search and Google assistant echoed the same sentiments when he highlighted how Google is “focused on fostering an open ecosystem for developers, device makers, and content partners to build new experiences”. To help promote this, Google is opening a new investment program for early-stage startups.
An angel investor is someone who puts their own finances into the growth and support of a small business at an early stage, in addition to potentially contributing their advice and business experience. According to research presented in The Globalization of Angel Investments, angels are an integral part of a startup’s growth, performance, and survival.
Australia plays hosts to many angel investors and groups but one that stands out is Sydneys Angels which is an organisation that brings together high-net-worth individuals who invest their money, expertise and time in helping entrepreneurs achieve their startup dreams. It’s Australia’s largest network of startup angel investors with around 115 members on its books. The group has also recently ticked over a total of $10 million invested. Along with Sydney Angels, there are other groups such as the Australian Angel Investment Network, Melbourne Angels, Business Angels, and Capital Angels.
Venture capitalism usually involves an entire firm, comprising investors, board members, and people whose job is to identify talent and new ideas. The ultimate goal here is to nurture the business in a manner that facilitates growth.
Australian venture capital firms are investing more now into Australian startups than ever before. According to KPMG’s Venture Pulse report on global VC trends, a record $848 million ($US630 million) was invested during the 2017-18 financial year. This trend is expected to continue in the years to come – a sentiment validated by StartupAus’ chief executive, Alex McCauley, who said he expects VC investment in Australia to continue to increase with no signs of slowing down.
When the Cystic Fibrosis Foundation started giving money to a small biotech firm back in 2000, its best-case scenario was that the company would discover a new treatment for the debilitating disease. It worked, and it came with an extra benefit – in November, the foundation sold its royalty rights to Vertex Pharmaceuticals cystic fibrosis drugs, including breakthrough Kalydeco, for a whopping $3.3 billion, returning 22 times what the foundation gave to Vertex.
This is spurring more nonprofits to adopt the controversial tactic of investing like venture capitalists. Organisations like the Bill & Melinda Gates Foundation, whose total venture budget has grown from $400 million to $1.5 billion.
Startup accelerators are fueling entrepreneurs and startups with supportive ecosystems and plenty of fresh funding opportunities. These programs support early-stage, growth-driven companies through education on mentorship and financing, and are generally based on a fixed period of time.
The accelerator experience is a process of intense, rapid, and immersive education aimed at accelerating the life cycle of young innovative companies, compressing years’ worth of learning-by-doing into just a few months depending on your needs and growth. Without the help of accelerators, companies such as Airbnb, Twitch, Stripe, Dropbox, Twilio, Simple, Pluto TV, and ClassPass might not have even seen the light of day.
Municipal Councils and other local government agencies have programs geared towards promoting entrepreneurship and start-up ecosystems in their locality. They facilitate a startups journey by providing them with a wide variety of valuable facilities – from coworking spaces to relevant guidance on the formalities of starting your business to other necessary materials a startup may need.
For example, last year the Melbourne Municipality released a Startup Action Plan, a series of recommendations aimed at bolstering Melbourne’s startup scene through funding, collaboration, and access to resources.
Among the recommendations are actions geared towards helping startups commercialise their intellectual property, harnessing international connections to help startups pivot globally, continued funding through small business grants, linking startups to training and mentorship programs, and holding annual learning events.
Having worked with many Municipal councils, it’s my firm belief that councils play one of the most important roles in business development.
For more information on the intricately extensive startup ecosystem visit JumpStartMe.
Nowadays, big companies and organisations are investing in business development initiatives and startups because they need fuel for innovation, they have a desire for top talent, and they need to maintain a competitive advantage. They are holding entrepreneurship contests, investing in startups, and bringing on entrepreneurs in-house. It’s for this reason that, in the war for talent and innovation, investing in startups is an avenue that many organisations leverage.
With this in mind, it can still be baffling to some that such corporations often promote a business strategy of actively seeking out and investing in promising startups. There are a variety of reasons as to why startups and business development initiatives can prove to be invaluable investments for large organisations – I’ve highlighted a few in the sections below.
Large companies are significantly accelerating their pace of growth-oriented innovation, augmenting internal ingenuity by aggressively tapping into a broader marketplace of ideas and business opportunities – innovative startups. These startups allow big companies to sample new technologies or product categories that might become a part of their businesses without the direct expense of staffing an in-house unit.
Investing in an existing startup or in initiatives that foster business development with a product/service that has already proved its value is often seen as a faster and more reliable source of innovation than traditional Research and Development teams. Corporations such as Google utilise investment wings of their company to identify unique economic opportunities and innovative startups across the globe.
Part of this trend is driven by economic necessity. When both profit margins and a corporation’s position in the global marketplace are endangered by Research and Development projects not fully blooming, providing funding and networking opportunities to existing technology is often a far more attractive solution. Typically, investment teams will seek out startups to complement their own niche within the industry and/or expand into an entirely new venture. Such a strategy ensures a corporation can maintain a focus on its brand while also extending upon the functionality of its services.
Everyone is looking for the next big thing. This is especially the case for any corporation looking to maintain its edge within the marketplace. However, as any entrepreneur knows, market disruption can come from a number of places. This is why corporate investment branches may also be on the lookout for potential competitors or market revolutionaries still in their early stages to get them on their team early on.
Identifying market game-changers in advance can be the best way to ensure a large corporation is able to get in on the game or successfully adapt if a market change is imminent. The best startups typically have products and services that have the critical edge to outperform existing groups within their respective industry.
Occasionally, it’s easier for a corporation to rely on the groundwork already provided by a startup when working within an unfamiliar region or locality. Rather than focusing on funnelling money into researching potential market entry points and understanding local trends and tastes, turning to a startup with a pre-existing foothold or an insightful outlook on an area can be a safer way to spend money.
By teaming with start-ups, large companies can take advantage of the smaller partner’s nimbleness to enter new regions, using newer channels of engagement. For example, Unilever recently backed seven innovative digital companies as part of its “Go Global” program, giving each company funds, mentoring, and a range of services in exchange for a customised digital marketing pilot for its brands. The campaigns will go live across Africa, Europe, and Asia.
A smaller company is more agile. Therefore, it’s easier to make decisions and implement plans without multiple layers of management having to sign off on each action item and being bogged down by various bureaucratic formalities.
This, of course, is just a few reasons as to why corporations often seem to take interest in startup investment. There are a plethora of other reasons why organisations may venture into adopting a startup into their investment portfolio, which we’ll explore in subsequent articles. Until then, for more information on the complex interactions between startups and larger corporations and how they shape the economic landscape of today visit JumpStartMe.