Should I try to raise money off-shore?

There are plenty of examples of Australian companies raising money from off-shore strategic and financial investors.

It’s important to understand that most early stage investors have a similar attitude to making investments:

• They prefer investments that are close to home – this makes them easier to manage.
• They prefer corporate structures that they understand.

If you direct your search for equity partners outside the domestic market, these two qualifications typically mean that you should be prepared to move and you should be prepared to adopt a corporate structure that makes your prospective investor comfortable.

If you are prepared to make the move then you will need a good story…simply to get funded won’t cut the mustard.

The most common reason for moving to an off-shore jurisdiction is that it presents an opportunity to scale your business into a larger addressable market. Often having proven a proposition in the domestic market, companies raise capital to cross over into major global markets (US, Asia, Europe) to rapidly grow their business and position themselves for an exit.

Provided you can build your business to the point where such a strategy makes sense, then this is often a desirable growth path. If you need funding to get to that point, off-shore investors are not really an option.

An off-shore investor may invest directly into an Australian business, but because of the distances involved, they would most likely be looking for a local investor (that they know and trust) acting as the lead, and would also expect that part of the growth strategy would be a flip-up into a recognisable corporate structure (Pty Ltd doesn’t mean much to a US investor).

It’s exceedingly rare to find a local Australian business exclusively funded by an off-shore investor.

Finally, you need to know how to get an audience with off-shore investors. Invariably this means you either need an introduction from a trusted third party or you will have achieved sufficient penetration of the off-shore market that you have appeared on the radar of relevant sources of funding (for example, strategic investors focused on your sector and so on).

There are industry associations, such as ANZA Technology Network, that assist local firms with networking and mentoring services for entry into the US market. ANZA also provides showcase events so that Australian businesses can pitch to US investors.

If you don’t know where to start, visit www.anzatechnet.com and participate in one or more of their programs.

Doron Ben-Meir has been an active venture capital manager for the last eight years. He founded Prescient Venture Capital and prior to that was a consulting investment director of Momentum Funds Management. He was a serial entrepreneur over a 12 year period, co-founding five new technology based businesses.

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