The Dry Season of Innovation Funding

Whilst I am a complete advocate for the new Tax Incentives for Innovation Bill 2016 for early stage investors, it actually has one very large problem...

It has created an immediate absolute dry season of funding. A complete drought!

To be eligible for the tax incentives (for early stage investors such as capital gains tax exemption and a 20% tax offset), the purchase of newly issued shares must occur after the 1st of July 2016 or Royal Assent, whichever comes later.

Even if the bill passes quickly, everyone has to at least wait till the 1st July 2016.

I am aware of one investment group on a project who understandably no longer wants to invest in April, but now wants to wait till at the bill comes into effect.

The interesting thing is, admittedly, almost all the tax amendments over the last 10 years have been closing down holes and usually are dated back to the announcement date. Why in this case did we create the funding gap and put the effective date into the future? Even deals that are on the table and haven't been signed are highly likely to be postponed due to the generous effect of the bill for investors. Even existing open channels are likely to dry up.

So....

Where will ESIC's (Early Stage Innovation Companies) get funding between now and 1st July 2016 / Royal Assent?

How many ESIC's will now fall over with no access to funding for at least 3-4 months?

Lets hope for an amendment to back date the effective date and that existing funding will sustain you until the wet season!

The first 12 months

Well, it has been just over 12 months ago since I started my own business and I have learnt a lot in that time. Perhaps one of these may help you.


1) Before you start, take a break
I don't know how long you can afford to do this, but I took two months off without a phone. After 6 weeks, the stress and pressure had completely dissipated and I felt like a university student again. I came to understand what makes me happy and consider appropriate business models.

2) Create a business that makes you happy
I am truly happy when I am:

• Helping people; or
• Creating stuff from scratch

3) Create your model
I considered many and created 4

• Board roles (helping people)
• Business transformation (helping people)
• Creating a disruptive startup (creating stuff)
• The CIO Hub. CIO's part time for small to medium business (helping people)

4) Recurring revenue, not selling your hours.
Jumping into consulting would have been easy. My hourly rate would have been good and I have enough connections. The issue was that I would have been trapped into constantly finding the next gig or holding onto a cornerstone client. Over 12 months, I have steered clear of selling my time and focused on building low risk, lasting business models that do not require my time, but trickle in growing EBIT.

5) Set a budget
We had set a budgeted loss for the first 12 months and I am happy to say we did much better than budget although we still lost some money. This year we are cash flow positive.

6) Focus on helping people and the money will follow
If you are truly helping people with integrity, the money will follow. It is a slower way to build a business, but it builds lasting relationships and creates a great reputation in the small market of Brisbane.

7) Stick to your skills.
I have a lot of years experience in business transformation, financials and technology and that is very helpful to small to medium businesses who are bombarded with technology messaging every day. It is very easy to be extremely knowledgeable in an area you have specialized in for 25 years. You might need to tweak the model/s to match your core skills and what makes you happy.

8) Diversify your risks.
By creating 4 models, I didn't have all my eggs in the one basket. In fact the business transformation model has took off very quickly with a number of businesses loving the low cost transformation all managed by the highest quality local freelancers. This allowed me to put a little more effort into the disruptive start up.
The CIO Hub in comparison was slower to launch due all the enormity of setting up all aspects of a complete business.

So overall, the last 12 months have been a great experience. The business continues to grow successfully and I have loved the journey. There has been a dramatic increase in family time and being there for my 2, 3 and 4 year old children is priceless.

I say, have a go and enjoy the journey!

Have a great day!


Ross.