Venture Capital
Issue No. 2 - September/October 2001
Capital Categories
by Peter Vroom
Adelaide venture capitalist, Peter Vroom, observes there are several distinct levels of funding that entrepreneurs can tap in to — given the right idea, and enough commitment to managing their enterprise well.
Most start—up funding, Peter says, comes from the basic stage, “friends, family and fools”; people who know and trust the entrepreneur. Effectively, these subscribers support the business without necessarily expecting large returns. This informal investment typically totals no more than $50,000.
The next level often involves government support, if the idea fits government business development priorities. The federal government offers help under programs such as Commercialisation of Emerging Technology (COMET), which can grant $50,000—$100,000 to fund the start—up phase of leading—edge technology enterprises – generally involving one or two founders. The grant amount depends on growth potential.
At State level, assistance from The Business Centre is invaluable. “Education is every bit as important as money at the start—up stage,” Peter says. “It’s one thing to have money, but it’s another to use it effectively in a business situation.”
As well as providing advice through client managers which is “very helpful”, The Business Centre can help entrepreneurs attend conferences, build websites or develop vital skills. (Read on to venture capitalisation to see how important managerial skills are.)
“Mentoring programs can also help by steering entrepreneurs away from known pitfalls and make more of the opportunities available, in a shorter period of time,” Peter says.
Seed money for more ambitious projects, $200,000 to $500,000, commonly comes from the “business angel” level of private investment. Business angels – who are not necessarily angelic – are people who have done well in business themselves and understand the issues involved in the early stages of bu...
