Tim Bennett has been around M&A and equity financing for a long time and believes there has never been a better time to be seeking early stage capital in Australia than now.
Bennett spent nearly 20 years with powerhouses EY and PwC in mergers and acquisitions. Today, he is the Director of Corporate Development and Capital at the Prime Financial Group, as well as assisting a host of both earlier and later stage businesses, including BUCKiTDREAM, Matter, Simple and Aspen Medical.
“There is a range of driving forces behind the current market.
Among them being a high profile, well-marketed US early stage market, the Australian Government’s support of the innovation sector, a host of new and existing venture capital groups raising and deploying funds, and not the least of which being Australian success stories such as Atlassian, Campaign Monitor, Canva, etc and their founders inspiring others such as Expert360 and Unlockd to follow.
“On the demand side we also have an environment where more and more people – whether by design or otherwise – have to start their own business. Everyone is being forced to rethink what their careers are going to look like, what gets them out of bed in the morning and what keeps them happy – this is even more pronounced as the rise of the Millennial demographic grows in its influence.
“Overlay this with the supply side and a wide range of investors, from high net worth individuals to institutions, who have capital to deploy and are looking for returns that are not being captured in traditional asset classes such as shares and property. They are increasingly looking for returns from alternative assets, including in particular venture capital.
“For all however, motivations can simply be the powerful romantic allure of founding or backing the one horse which becomes a unicorn and rides the rainbow to a promised pot of gold at the end.”
Bennett said certain sectors were attracting more attention than others – fintech in particular, “as you are disrupting a very large market of existing revenue and monetisation, rather than forging a new market from the ground up”.
This said, venture capital also takes in a large biotech and cleantech sectors which can sometimes be overlooked as more prominent verticals command media limelight.
IN TERMS OF CAPITAL-RAISING, WHAT DO YOU LOOK FOR?
“Whilst everyone will have a view, for me the biggest indicator of success is the personal attributes of the founders and/or the founding team – and whether they have the wherewithal to commence and stay the journey. “By that I mean are they self-aware, determined, resilient and retain the necessary perseverance – as well as, importantly, the ability to build and market their business model.
It is a bit like the layers of a cake –all this and much more, come together to provide that picture. And it’s important to know what that picture looks like – their DNA if you like – because we are all going on a journey together and almost without exception, it will be an extraordinarily difficult journey for founders and investors alike. “Capital-raising brings out the book ends in human traits, both the very worst and the very best.”
YOUR THOUGHTS ON SHARK TANK?
The program provides some interesting and worthwhile insights and obviously there is far more than what is represented on and packaged for TV. At one level, I greatly respect the people who put themselves out there – whether it be the judges or those going on the show to pitch something they are obviously very passionate about.
A huge factor in the success of any business is having the self confidence to take a risk and put yourself out there in front of two million people to be judged – if you are prepared to do that – I take my hat off. “It can be so easy to tear people down – which we can unfortunately have a tendency to do – rather than give people a pat on the back and say well done, keep going!
HOW DO YOU PROPERLY VALUE YOUR IDEA?
“There is no one answer. Each business is different with different metrics on which they are evaluated. Ultimately any investor is looking for – at some stage – sustainable financial performance and capital growth in their investment. “To underscore the subjectivity, one only has to consider the rise and rise of data – and the value of the same.
Many business models which capture data at their core, are challenging traditional valuation measures. Investors need to understand what data is being collected and the value of that data on how it may be monetised in the future.
TIM BENNETT, DIRECTOR OF CORPORATE DEVELOPMENT AND CAPITAL,PRIME FINANCIAL
“Even once you theoretically evolve where you think business value is pegged, at the end of the day it is largely the capital markets that will determine what they are going to pay and whether in turn that’s acceptable to the founder/owner.”
SHOULD YOU EVER GIVE AWAY MORE THAN 50%?
“This is a highly emotive area and a tug of war! Any sell down or dilution of founder ownership needs to be carefully considered – and typically minimised if possible. Equally, until such time as you don’t need to raise capital, then you are always raising capital and the only commodity you have to exchange (in the early stage) is equity.
“Raising capital is a huge psychological journey for founders and for investors alike. “It is a difficult balancing act and not surprisingly reflects who retains (respectfully) the balance of power. Losing a level of control of the business can be an uncomfortable realisation for many founders. But there is also a countervailing balance that most investors don’t want to disincentivise the owners/founders who still have the majority of the knowledge/IP which underpins the business longer term.
“Ultimately it is important to consider the marginal dollar in circumstances of control – am I better off having the smaller part of a much bigger pie and also considering carefully whether hanging on for that last marginal unit of control, or value is going to change your life, your wealth, your happiness.”