When looking for future members of the rich list, it always pays to keep an eye on the fast-growth companies coming through the ranks. The top 50 from StartupSmart’s recent StartupSmart Awards looks like fertile ground to me, with half of the companies on the list hitting the $1 million revenue mark in their first four years of operation.

There are some great trends from the list, but one I picked up was a shift towards starting companies in partnership – 31 of the top 50 companies had more than one founder. Read more:

A recent analysis of the past 5 years gives some indication of investor behaviour on the platform. While several companies have gone from ASSOB to stock exchanges like the ASX and AIMS, and others have exited through trade sales, it is interesting to see what the stats tell us about investors.

Finding companies to list an opportunity on a website or a magazine is not difficult. But getting investors to invest via the website, magazine or platform is not easy.

The ASSOB sponsoring members have played a significant part in converting “followers” to “investors”.

Here is a look at the past 5 years of investment on ASSOB:

• Total number of individual investments in ASSOB listed companies 2328
• Total number of individual Investors 2005
• Average investment per investor $38,023
• 176 Companies received investment
• 152 are still operational
• Average invested per Company $503,305
• Highest individual company raise $3,540,000

For companies seeking growth capital who only focus on angel investing in Australia and Venture Capital– you are overlooking a significant source of funds available from company distributors/suppliers, foreign investors, SMSF and company followers. ASSOB sponsors structure a company effectively to capture this support in a smart and effective way.

Whilst startup capital is the hardest to raise. Many of the companies counted above were startups – but countered their startup status by attracting experienced personnel to their teams.

To check out the ASSOB site you will need to subscribe (it is free). Companies are listed on the primary board.

*****The writer – Kate Ingham is Senior Client Manager with equity capital and ASSOB sponsoring member firm Alchemy Equities which raises growth capital for businesses throughout Australia.

IP for innovators

An invention relates to the function of a device or machine, or to the process for making a product or to the method for carrying out business. In order to obtain a patent the invention must be new and different from what is already known.

To find out if your invention is novel you need to search the patent databases of patent offices all around the world since generally speaking, absolute world-wide novelty at the date of making the patent application is required. You can do this search on line through the European Patent Office which accesses most of the patent offices all around the world in the one search. You can also search individual patent office databases such as the US Patent database.

If your search does not uncover any anticipation of your invention in the patent databases you can then proceed to apply with some degree of optimism that patents will be granted. However patent searching is a sophisticated art usually carried out by experienced searchers and even then a patent examiner will sometimes find a prior art document which has not shown up in earlier searches.

At this point you should show us the closest patent documents you found describing inventions similar to your own. We can then advise whether it appears that you have carried out a thorough search and whether your invention appears to be novel.

There are two main types of patent granted in Australia – standard patents and innovation patents. There are a number of differences between the two patent types. These range from the cost of the patents, the length of protection they offer, the time they take to process and the type of invention they seek to cover.
There are a number of ways to commence the patenting process in Australia:

1. A Provisional Application is an optional step before filing a complete application. Provisional applications establish the priority date of your invention and give you 12 months in which to file the complete application.
2. A complete application can be filed and is required for the grant of a patent in Australia. The complete application can be either a standard patent or an innovation patent.
3. An international PCT application can also be filed in Australia and provides a first step for having patents granted in a number of different countries which and can protect your invention in important export markets.
4. National phase entry is the final step in the international application and involves filing the complete application in Australia.

The Provisional Application must be completed within 12 months of its filing and there are two different ways to complete. Either an International (PCT) Application can be filed which keeps open your options to apply for patents in nearly all countries of the world including Australia, for a further 18 months. Alternatively, you can file a Complete Application in Australia and in any overseas country of interest directly without going via the PCT route. In both cases the original filing date of your Provisional is preserved as the priority date of any application based on it.

The Innovation Patent can also be used like the Provisional as the basis of an International or overseas application. The path you choose will depend on your patenting strategy including the number of countries you want protection in and of course the comparative costs of the different paths. Costing the latter accurately is a complex matter of detailed calculation involving the anticipation of future costs but it is usually possible to make a simple qualitative decision if you know the markets you are really interested in.

If you simply want to keep your options open for a further 18 months the International (PCT) route is the most cost effective. The PCT authority also provides an International Search Report (ISR) usually within three months of applying, which is an indicator of the chances of obtaining the grant of patents around the world. If the ISR indicates prior art documents which completely anticipate your invention, you can save the high costs of attempting to obtain both Australian and overseas patents.

Nearly all countries now have a standard patent term of 20 years and annual fees must be paid, often during the application phase and then for the life of the patent. The fee usually increases with the age of the patent. Fees are also often incurred in overcoming objections during examination and in finally obtaining the grant of the patent in each country. There are European and other regional patent application routes which can reduce the cost of obtaining protection in a number of regional countries at the same time.

***************The writer – BILL POTTER, Principal at Varsity IP.  Bill has a degree in Aeronautical Engineering from Sydney University and more than 25 years experience in providing advice relating to patents, designs, trade marks, business and company names and domain names. He has also been involved in all aspects of the commercialisation of intellectual property from obtaining government grants and venture capital funding to licensing and marketing of new technology and products. 

Alchemy Equities undertakes Preliminary Patent Searches on behalf of its clients.

• Entrepreneur posts project including funding amount and time (1 to 90 days)
• Backers fund the project (money in escrow account)
• At project completion date, entrepreneur receives funds
• Often is “All or Nothing” – if project under-funded entrepreneur gets NOTHING, if over-funded gets the over funded amount

What Types Of Ventures Can You Get Funding For?

• For-profit ventures, non-profit ventures, creative ventures, ambitious ventures
• Restrictions placed by platforms
• - E.g., on Kickstarter.com, no ventures dealing in like pornography, violence,firearms, weapons, lotteries, raffles, etc
• - Kickstarter: project should achieve a goal (not pay (medical) bills, or go onvacation)

How Much Money Can You Raise Via Crowdfunding? Excluding Equity based Crowdfunding.  Review of sites worldwide:

• As little as $500 as much as $200,000 and more
• Possibilities
• “Sweet spot” seems to be $4000 to $25,000
• Note it doesn’t have to provide all the funding
• Can have other sources and followup sources too (e.g., bank loan)

Why Does the Crowd Donate or Invest?

• They like you (friends, family, acquaintances)
• The like your story (friends, family, acquaintances, others)
• Rewards (tangible and intangible rewards given to backers)

Why is Crowdfunding occurring now?

• Initial donation-based crowdfunding platforms weren’t even built until late 2009
• Key trends for crowdfunding growth
• Simplicity of posting content online
• Massive growth of social networking (MySpace, Facebook, Twitter) gives individuals massive reach that they didn’t previously have

Essentials for a good Crowdfunding campaign

1. A Compelling Story and Prize
2. A Passionate Individual or Team
3. Impressive Credibility
4. Lots of Suitable Followers
5. A Proven Process and Platform

What are the Fundamentals of a Crowdfunding Raise?

1. Choose your platform (e.g kickstarter, profounder, see Alchemy list)
2. Create an account
3. Create your funding project
4. Categorize your project
5. Create your project tagline
6. Create your project teaser text
7. Create your full text project summary
8. Determine the right fundraising amount
9. Determine the right donation time
10. Develop your list of rewards
11. Create your project visuals
12. Create your project video
13. Promote your project to your network
14. Maintain and update your project

Links to successful crowdfunding campaigns:

• http://www.pozible.com/index.php/archive/index/3701/description/0/0
• http://www.kickstarter.com/projects/1060514964/escapecapsule-waterproof-iphone-4-case
• http://www.pozible.com/index.php/archive/index/2454/description/0/0
• http://www.crowdcube.com/investment/kammerling-s-10425
• http://www.crowdcube.com/investment/bubble-balm-10394
• http://www.kickstarter.com/projects/revolights/revolights-join-the-revolution
• http://www.kickstarter.com/projects/1615737438/kammoktm-no-longer-bound-to-the-ground

If you have any questions or queries, or would like some assistance to implement a crowd funding raise pleas call 1300 308882 or send an email to admin@alchemyequities.com.au and someone from the Alchemy team will assist you.

You will be asked to complete 40 questions about your idea.

It is easy to get excited by the prospects of a new idea, so you need to be aware that your judgement might become distorted by your enthusiasm.

Your objective is to select the most accurate and honest response to each of the questions.

1.            For each section your answers will be plotted on a spider graph to enable you to review and interpret your responses.

2.            The answers will also be used to determine a number of diagnostic assessments that are presented as a series of graphs and text interpretations. These will help you to better understand the commercial feasibility of your idea, identify viable markets, anticipate risks, and find the right business model.

3.            An ‘Overall Assessment Summary’ is produced after you complete all 40 questions. It includes a Commercial Feasibility Rating, an interpretation of this and a ‘Next Steps’ area which contains a number of suggestions, contacts and ideas for you to consider to help you pursue your business idea.

Whatever the likelihood of your idea succeeding in the marketplace, you should seek advice from a professional adviser or contact the NSW Innovation Advisory Service – the initial consultation is free if you are from New South Wales.

Enter Ideas Online

The NSW Innovation Advisory Service is funded by the NSW government to support small business and innovators develop their ideas.  Go to www.ausinvent.com for more information or to book an appointment

Major cashflow boost for small companies from the new R&D Tax Credit

Alchemy Equities, an expert in small business finance, asked Gerry Frittmann – Managing Director of TCF Services, a leading industry specialist in R&D Tax Credit and government grants for small business, to update us on the changes to the Australian R&D Tax Credit program.

Tax Status ($1m)

While claimants with grouped turnover over $20m will receive a non-refundable Tax Credit equivalent to a 10% net benefit, up from 7.5% under the current scheme, the R&D Tax Credit has come down squarely aimed at fostering an increase in R&D for smaller companies. Of course, the king’s largesse is rarely extended without an increase in the complexity of the rules and regulations.

In this case, there is a change in the definition of R&D; a split between Core and Supporting R&D, and a dominant purpose test which will qualify or disqualify the Supporting activities and their cost.

Core R&D activities are defined as experimental activities:

•             whose outcome cannot be known or determined in advance on the basis of current knowledge, information or experience, but can only be determined by applying a systematic progression of work that:

–             is based on principles of established science; and                                                 –             proceeds from hypothesis to experiment, observation and evaluation, and leads to logical conclusions;  and

•             that are conducted for the purpose of acquiring new knowledge concerning the creation of new or improved materials, products, devices, processes or services.

New definition of Supporting R&D activities

This imposes a dominant purpose test whereby supporting activities whose dominant purpose is to support the Core R&D will be eligible, while activities undertaken for production purposes OR future commercial benefit will be excluded. The R&D Tax Credit is not intended to cross-subsidise commercial activities so the dominant purpose test is designed to reduce claims for expenditures that do not impose an additional cost on the company arising from R&D activities.

Intending claimants need to rigorously assess themselves against a new range of eligibility criteria and internal capabilities. These include their entity structure, ownership and grouped turnover; the division of their R&D activities between the newly defined Core and Supporting activities;  the application of the new dominant purpose test;  their ability to meet the new record keeping obligations and track labour and material expenses as they go, and their individual tax status. Those who can create a system that meets the new benchmark will be given the option of claiming their Tax Credits quarterly from January 2014. Companies who wish to maximise their return and ensure their compliance will adopt more reliable management processes than they have under the R&D Tax Concession, and forward looking claimants, will be setting themselves up to track as they go so they can claim early and reap the rewards.

Turnover $5-20mil

The biggest winners from the new R&D Tax Credit are R&D intensive companies with grouped turnover between $5 – 20m who are in tax loss.  For the past ten years they have been unable to claim the R&D Tax Offset and receive the 37.5% rebate because their turnover has been over $5m. Faced with the option of receiving the 7.5% Tax Concession and adding to their tax losses, most have declined to claim. Now under the new R&D Tax Credit they will receive a 45% refundable tax credit net of any other tax liabilities delivered in cash, creating new sources of cash-flow for R&D rather than marginal increases in tax loss.

For further information on how you can help maximise the return and minimise the fuss contact the NSW Innovation Advisory Service.

Research indicates that most new ideas in business come from three sources:

• the staff
• company networks and
• customers.

Think about your company’s situation.  Do ideas get lost ideas in day-to-day operations?  Does your company have a formal customer feedback process?  Do staff ideas get lost in emails and staff meetings?

As well, management often do not know how to assess which ideas they should implement.

You need a System

To cost-effectively assess and commercialise ideas within your workplace you first require a system to capture those ideas.

You need to assess the ideas as to whether they are:

• incremental (refer back to line management),
• strategic (consider licensing out or in-house development) or
• game-changing (spin-off).

Setting up an In-House Innovation Process

An in-house innovation process needs to be simple and easy to manage and incorporate these elements:

• Determine the rules/strategic objective of an innovation program
• Invite ideas (promote throughout the business networks and staff)
• Collect ideas (simple one-page submission)
• Assessment  (1-10 using key company indicators)
• Execute:

1. Pilot  (small amount of resources and team to develop)                    2. Venture (commit more resources and staff)

People Strategy

An innovation program is best for businesses that want to grow within a market.  It is in effect, a people strategy.

So what makes staff want to participate?  It might be time to work on the idea (Google does this), or an award-system( trophy – Atlassian has this), or a monetary incentive.  One company offered any team that created an idea into a business would attract 25% of net profits of the new idea income for 2 years.

A company must protect itself however with a simple agreement that outlines rights –that states the business owns all the intellectual property created.

Fed Ex Days

One award-winning company in Australia, Atlassian has an excellent model called ‘Fed Ex’ days.  Quarterly, staff get 24 hours to produce a one-page outline of their idea.  At 3pm the next day they pitch their idea to senior management and staff.  Their ideas are voted on.  One or two ideas get the green light for piloting.

These days innovation is not a luxury. It is about continuous improvement and keeping your company relevant. It is also about retaining staff and creating a dynamic workplace.

Dan Liszka is the CEO of Alchemy Equities, a business innovation consultancy firm which specialises in delivering in-house innovation programs to small and medium enterprises, as well as equity capital raising.  Alchemy is contracted by the state government to deliver the NSW Innovation Advisory Service and has recently conducted workshops nationally titled Capturing Innovation in the Workplace funded by the federal government’s Enterprise Connect program.

Choose the best path to market.

Many companies we see at the NSW Innovation Advisory Service are uncertain about which route to market is best for their product or service.  Much time and money is wasted pursing the wrong strategy.

A simple way to consider the best route to market is to ask the question:

Is it a sustaining technology or a game changer?

If sustaining (incremental improvement, better design, improved service function), that is a sustaining improvement – we suggest to our clients to resist going head-to-head with the incumbent competition, but rather to pursue a licensing strategy.  This is where as the owner of the intellectual property (patent, brand, design, trademark), you license the technology to another company to manufacture, market and distribute.

If it is a game-changing opportunity(as VOIP was to telephony)– then we suggest the company pursue a spinoff or startup strategy – which generally means capital raising.

We have clients that have come to us after spending three years pursuing a licensing strategy, unsuccessfully for a game-changing technology.  The product they were endeavoring to license – would have resulted in reduced sales to the target company’s existing product line.  If a product being pitched for licensing, makes an existing product line redundant – a company is unlikely to license in the new technology.

Three years on, management should have asked that simple question – is the innovation an incremental improvement or a game-changer?

So what are the skills required to bring new products and services to market?

This is a major area our innovation consultants discuss with clients. We regularly have the technology specialist seeking advice on commercialisation of the product they have designed.

At the NSW Innovation Advisory Service, our first response is – who is your team to deliver this product to market?  Successful commercialisation is about team.   We suggest to technical types – that they team up (and share the equity) with an entrepreneur who understands how to bring something to market and sell.  Days, weeks, years are lost with the wrong people attempting to bring products to market.

It is a major reason for the weakness in Australia’s track record in achieving successful commercialisation.  We are great inventors – but not great innovators – that is, when you commercialise that invention.

Technical-types spend many hours getting their product 100% perfect.  It’s in their DNA to do so.  Budgets get overrun and timelines extended as a result.  But when teamed up with an entrepreneur, who’s DNA is to get the deals and secure the cash-flow – a product is delivered to the market can be 75% ready.  By setting to market early and remaining flexible, the team can incorporate customer and distributor feedback to fine-tune the product and can start generating the sales to keep the show on the road.

Understanding the market can save time

At the NSW Innovation Advisory Service, an innovation consultancy service, we often see teams who have assumed they know their market and have not assessed if the market warrants the investment in time and money.  Wrongly pitched product launches can easily be the result.   We site an example of a kitchen manufacturing company which was about to launch a website for purchasing kitchen components.  A short focus group test market session indicated they needed to tweak their campaign and introduce a “touch and feel” element – women would not buy the kitchens without feeling/seeing the surfaces. They adjusted their service accordingly and went on to a successful launch.

Had they not undertaken that focus group session they would have launched and spent years reshaping their product offerings.

The focus group was cost effective and saved considerable time.

Successful commercialisation doesn’t have to be about trial and error. There are proven, cost-effective ways to bring products and services to market without wasted effort and heartache.

Start with assessing the opportunity correctly, build a team around the opportunity and understand the marketplace.  Seek out advice from those that have trodden the path before.

*****************************

Kate Ingham is the Senior Client Manager with Alchemy Equities, a Sydney-based business innovation consultancy firm which assists companies commercialise technologies and services.  Alchemy Equities is contracted by the NSW state government to deliver the NSW Innovation Advisory Service.

What is a micro business?

A micro business is classified as one that operates with four people or less.  Micro business is one of the fastest growing sectors in the NSW economy, making up 88% of the State’s small businesses.  (Source: ABS Cat No. 8165.0, Counts of Australian Businesses, Jun 2003 to Jun 2007).

Micro businesses may operate as a single operator or multiple employee business from either home, mobile, shared offices or commercial premises.

Lifestyle Factors

Operating a business from home has become increasingly common because of the digital revolution, outsourcing, the trend to self-employment and the growth of service industries.

This accelerated emergence of micro business operating in recent years can also be linked to better technology and trends toward more flexible lifestyles. Apart from the economic value this growth entails, local communities also gain with social and environmental benefits of those working from home.

Developing Your Products

Many micro-businesses are developing unique products and business services to bring to the market.  They are also developing unique brands and trademarks.

To check on the commercial viability of your product we suggest you seek an innovation consultant which specialises in commercialising products or services. The first port of call can be the NSW Innovation Advisory Service, which provides an initial free consultation to assist you get on the right path. They are specialists in product commercialisation and will assist with streamlining your product development process and refer you to the appropriate expertise for each step of the way.

Also, consider securing your trademarks, patents and copyright for manuals and written material. The Innovation Advisor will again assist with this process. They are also business strategy consultants and will discuss the best business model for bringing the innovation to market via licensing or capital raising.

Product development is not for the faint hearted, but can be enormously rewarding.  Seeking advice at the correct stages can save much time, heart-ache and money.

You may wish to check out the viability of your product before meeting an innovation advisor. The NSW state government has developed a resource, called Ideas Online, where you can self-assess the idea, its protection, the business case and options for reaching the market place.  You will be asked over 40 questions and it is valuable to be brutally honest when answering those questions. Enter Ideas Online.

The NSW Innovation Advisory Service is funded by the NSW state government to support innovators and small business commercialize their ideas, products and services.  Services include preliminary patent search, technical assessment and market reviews through to licensing and capital raising. See www.ausinvent.com for more information.

Dan Liszka is the Managing Director of Alchemy Equities, the firm which is contracted by the state government to deliver the NSW Innovation Advisory Service.

In his article – ‘The Top 10 Angel Investor Groups’ Jason Fell looks at the largest groups that fund startups, ranked by number of investors.

In the United States, the Angel Capital Association is the “trade association” of investment groups.  Angel investing in Australia are represented through the Australasian Angel Investors Association.

It is useful as an Australian startup, to assess if there is value in establishing early, a US presence for your company and attracting Angel support there. Some Angel groups syndicate support across 2 or 3 groups, capitalizing on the other group’s research and due diligence processes.  Jason Fell lists the following groups as the largest in the US to support startups:

Ohio TechAngel Funds, Columbus, Ohio
Number of angels: 282
Who it helps: Supports early-stage Ohio-based information technology, advanced materials, and medical technology companies.

Tech Coast Angels, Los Angeles
Number of angels: 263
Who it helps: Provides connections, knowledge, mentoring and operational assistance to early-stage entrepreneurs in the tech, biotech, consumer products, Internet, information technology, life sciences, media, software and environmental markets.

Investors’ Circle, San Francisco
Number of angels: 225
Who it helps: Uses private capital to promote businesses that address social and environmental issues. The group has invested almost $150 million in 225 companies, it says.

Golden Seeds LLC, New York City
Number of angels: 190
Who it helps: Members invest directly, or through a managed fund, in companies that are founded by or led by women. Sectors include consumer products, technology, software and life sciences.

North Coast Angel Fund, Cleveland, Ohio
Number of angels: 180
Who it helps: Invests in Ohio-based technology startups.

Band of Angels, Menlo Park, Calif.
Number of angels: 136
Who it helps: Group of former and current high-tech executives that has invested almost $200 million in early-stage technology companies.

Hyde Park Angel Network, Chicago
Number of angels: 133
Who it helps: Members invest in seed and early stage businesses, primarily located in the Midwest. Industries include: information technology, business services, industrial technology, financial services, consumer or industrial products and healthcare services.

Alliance of Angels, Seattle
Number of angels: 100
Who it helps: Early-stage investors in startups based in the Northwest region of the country.

Pasadena Angels, Altadena, Calif.
Number of angels: 100
Who it helps: Provides up to $750,000 in early-stage and seed financing to startups in southern California.

New York Angels Inc, New York City
Number of angels: 99
Who it helps: Made up of entrepreneurs, CEOs, venture capitalists and other business leaders, the group invests between $250,000 and $750,000 in early-stage technology companies generally located in the Northeast.

+++++++

Kate Ingham is a partner at Alchemy Equities, a boutique corporate advisory firm that specializes in private equity capital raising for growth companies in Australia. See www.alchemyequities.com.au