Are you an early stage female-led business? Do you have ambitious plans? Do you have the capital you need to grow your business nationally and internationally? If you are female founder, the research would suggest that you do not have the same access to angel investment and venture capital investment as your male-led business peers.
A recent United States study by PricewaterhouseCoopers and the National Venture Capital Association, based on data from Thomson Reuters, found that of the approximately $48 billion invested by venture capitalists in 2014, only 7% was invested in women-led businesses.
Is this due to lack of talent or lack of investment returns? No. Research by the Kauffman Foundation shows that female-led companies have a better return on investment, achieving on average 12 percent higher revenue than male-owned tech companies.
We earlier looked at the Scale Investors Angel Network. This is the second article in our series on seed capital and the support available for women-led businesses in Australia where we turn our attention to the Scale Women’s Fund (the Fund), founded by Scale Investors. Our final article will look at the Springboard Enterprises Australia business accelerator program, the Forming Circles Global angel investment and mentoring organisation, the Inspiring Rare Birds network and other support.
Why Invest in Female-Led Companies?
Why should an investor specifically consider investing in a female led business? The Fund materials reference research saying that female-led businesses are efficient users of capital and achieve 12% more revenue and earn 35% higher returns than comparable alternatives.
Scale Women’s Fund Essentials
The Fund is a closed-end fund raising $20 to 25 million to invest in 15 to 20 early stage female-led, high-growth companies.
The AusIndustry board have approved the conditional registration of the Fund as an Early Stage Venture Capital Limited Partnership (ESVCLP), which will ensure distributions by the Fund are tax-free (once the Fund raises a minimum of $10m).
What are the Fund’s Investment Parameters?
The Fund’s investment objective is an average return of 2.5 times per portfolio company. It aims to invest in companies that display disruptive innovation with proprietary features and channels to market that provides barriers to entry. Potential targets need to be leveraging a business model with the potential to generate $20m in revenue in five years and realise five to ten times return on exit via a trade sale, private equity exit, management buy-out or an initial public offering. Scale Investors have relationships with bankers and advisers, to assist investee companies with exit.
What Size and Type of Investment Will the Fund Make?
The Fund intends to make non-controlling minority investments of $500,000 in businesses with valuations of less than $2 million. The Fund may join syndicates for later, larger rounds at higher valuations. The Fund will have board representation and a board observer role.
Who Makes the Investment Decisions?
The Fund’s Investment Committee is led by Chair Susan Oliver, CEO Laura McKenzie and Investment Director Lynne Thomton, and includes Scale Angels.
Susan Oliver is the Scale Investors founder and Chair. Susan is a former director of Transurban, Just Group and Programmed Group, current director of CNPR, Coffey International and deputy chair of Simonds Homes.
Laura McKenzie was the former investment manager at venture capital firm Starfish Ventures, Investment Partnerships Director at Opportunity International Australia, and Assistant Director at PwC.
Lynne Thomton is a serial entrepreneur who has founded businesses including Aubrey Capital Management, a specialist investment manager with a particular focus on global growth equity funds, and Yellowtrack Limited.
If you are considering investing in the Fund, you need to review the Fund Information Memorandum. An Information Memorandum is a detailed document, including, for example, fund structure, key terms, application information and a Subscription Deed. The Information Memorandum will set out guidance on the rate of investment per year, and when the majority of the investment is likely to happen. It will also include management fees and management practices. You will also need to consider your personal investment entity as well as other documents.
LegalVision is well placed to assist you to set up a discretionary trust investment vehicle and to review all investment documents from a legal perspective. We also have considerable experience in seed capital and venture capital. Not only have we assisted many small and large businesses to raise capital, but we are one of the very few law firms which have raised capital – so we have direct and personal experience as entrepreneurs. If you have any questions, let our startup lawyers know on 1300 544 755.