Reading time: 7 minutes

Why does Australia need seed capital that focuses on women-led businesses? Can’t we expect that investors will make investment decisions based on their industry knowledge, areas of interest, and potential return for their risk profile? Surely these decisions are gender neutral?

As a fierce supporter of Australian entrepreneurs, I wish this was true, but it is not. Women-led businesses historically receive a very small percentage of angel investor capital and venture capital funds in Australia.

In our three-part series, we look at what support is available for women-led businesses and sources of seed funding. Subsequent articles will look at the Scale Women’s Investment Fund, She Forming Circles Global angel investment and mentoring organisation, the Springboard Enterprises Australia business accelerator program, the Inspiring Rare Birds network and other support for women-led businesses.

What Does Supporting Women-Led Businesses Achieve?

There is considerable research on the success of women-led businesses. One recent analysis by United States analytics business Quantopia, compared the performance of Fortune 1000 companies that had women CEOs between 2002 and 2014, against the S&P 500 during that same period. The comparison showed that the 80 women CEOs during those 12 years produced equity returns 226% better than the S&P 500. This is a large scale study with significant results.

Why is there a lack of angel investment and venture capital investment in women-led businesses? It seems to be a combination of factors including a lack of communication channels between women-led businesses and potential investors. Potential investors are then not meeting many women-led businesses, and many women-led businesses are not asking potential investors to invest.

I have spoken to leaders in Australian venture capital firms who tell me that it’s not they would reject a woman-led business, or take less interest. Rather, the issue is that they are seeing them – few approach VCs to pitch and request investment. Scale Investors seek to change the early stage investment landscape, by introducing new investors to new businesses.

Who Founded and Manages Scale Investors?

Scale Investors is an Australian based female-focused angel investor network. Susan Oliver, a former Director of Transurban, Just Group and Programme Group and the current director of CNPR and Coffey International, founded Scale Investors in March 2014. She is the Chair of the Scale board and established Scale Investors with Annette Kimmitt, Ernst & Young managing director and Carol Schwartz, Bank of Melbourne and Stockland Director and Founding Chair of the Women’s Leadership Institute Australia. Laura McKenzie, former investment manager at venture capital firm Starfish Ventures, Investment Partnerships Director at Opportunity International Australia, and Assistant Director at PwC is the inaugural CEO.

How Does Scale Help Investors?

Scale Investors aims to increase the number of angel investors. It does this by equipping high-net-worth Australian women with the education and deal flow opportunities to invest in high-growth, female-led businesses.

All Scale investors, known as Scale Angels, must be sophisticated investors as defined in section 708 of the Corporations Act 2001 (Cth). Each Scale Angel must independently assess the merits of their early stage investment in a private or public unlisted company.

Scale Investors provides education programs to Scale Angels. This education includes addressing the risks and rewards of angel investing, company valuation, capital raising term sheets, capitalisation table requirements, leading a deal including negotiating the capital raising terms sheet, syndicating investment, and closing the deal. Scale Investors also provides education on preparing for an exit to realise your investment.

Scale Investors was inspired by Golden Seeds, a United States enterprise that has apparently tripled the number of investors in female-led startups in the United States. When discussing the problem that women-led businesses struggle to obtain early stage funding, Laura McKenzie, CEO of Scale Investors, notes that approx 96% of the investment community is male. These investors tend to know and invest in male-led businesses. Laura explains that “we think that encouraging more women to be more investors is part of the solution”.

What Steps do Entrepreneurs Take to Seek Funding From Scale Investors?

Scale provides an educational and well-laid out path for entrepreneurs seeking angel investment starting with free information sessions called ‘Open Office Hours’. The next step is an application for investment including a pitch video, a screening pitch and a question and answer session. The next step is direct meetings in an Applicant and Investor Forum.

I’m a Startup, How Can I Apply for Funding from Scale Investors?

If you are a startup seeking investment, then your first steps include to understand the Scale requirements and to contact Scale Investors to attend an Office Hours session.  

I’m a Startup Seeking Funding, What Advice do I Need?

Pitching for seed capital involves commercial, tax and legal negotiations. Many of the key discussions have commercial, tax and legal implications.

For example, what is the valuation of the company? What are the key terms of the investment? How is the intellectual property developed? Who owns the intellectual property? What have the founders’ contributed? What will the founders’ roles be going forward? What shares will the founders have at risk, if any? What decisions will the founders make alone compared to being required to seek investor input and possibly consent?

What are the terms of the investor’s investment? What percentage will the investor receive? Will the investor have a board seat? Will the investor have the right to veto a capital raising, or, at least, a first right of refusal to participate and not be diluted?

If there are difficulties and the company is sold, will the investors be paid back for their initial investment? Will the investors’ have priority compared to the founders? If so then the investors need preference shares.

These critical issues are generally negotiated and the proposed or agreed solutions are recorded in a Term Sheet. The Shareholders’ Agreement is drafted from the Term Sheet and is a detailed legal agreement. A good capital markets lawyer is very familiar with these issues and possible solutions.

What Are the Key Legal Issues to Solve Before Pitching for Capital?

First, do you have a company structure or are you a sole trader or running your business as a partnership?

Second, are your company secretarial matters in order? For example have shares been properly issued? Have the directors been properly appointed? Are the Company’s ASIC records up to date including director’s names and addresses, and shareholder shareholdings, names, addresses and other details?

Third, does the business own its intellectual property? Founders may need to assign this to the company. If third party developers or other contractors developed the intellectual property, then the relevant intellectual property needs to have been assigned to the company.

Fourth, you will benefit from a legal advisor familiar with seed capital expertise for the Term Sheet and Shareholders Agreement negotiations as well as subsequent legal agreements. 

Key Takeaways

Scale Investors is introducing a sizeable number of well-educated and well-resourced women to the world of angel investing. Scale Angels have invested over $3.5 million in 8 businesses to date. The Scale Investor application process is well set out on the website and in their information sessions.

We have considerable experience in angel investment and venture capital – we know the process because we have raised capital ourselves. We have direct and personal experience as entrepreneurs on preparing a pitch deck, pitching to investors, negotiating a Term Sheet and Shareholders’ Agreement. So, if you would like a legal review before pitching, or assistance through the process, get in touch with our startup lawyers on 1300 544 755.


COVID-19 Vaccines In The Workplace

Thursday 10 February | 11:00 - 11:45am

Can you compel employees to have a COVID-19 vaccine? Understand your rights and responsibilities as an employer. Register today for our free webinar.
Register Now

Preventing Wage Underpayment In Your Franchise

Wednesday 16 February | 11:00 - 11:45am

Learn how to identify and prevent wage underpayment in your franchise. Register today for our free webinar.
Register Now

How to Prevent and Manage Commercial Contract Disputes

Thursday 24 February | 11:00 - 11:45am

Learn how to prevent and manage common commercial contract disputes. Register today for our free webinar.
Register Now

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Need Legal Help? Get a Free Fixed-Fee Quote

If you would like to receive a free fixed-fee quote or get in touch with our team, fill out the form below.

Our Awards

  • 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Winner – Australasian Lawyer
  • 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year - Australasian Law Awards
  • 2019 Most Innovative Firm - Australasian Lawyer