It's been seven years since the Turnbull government enacted the ESIC regime with quite some change to the venture industry in Australia.
ESIC investors have contributed over $190 million in early-stage investment clearing $25m and growing year on year. Over 1,615 companies have raised capital with the help of these measures.
We are aware of several companies that are now listed on the ASX thanks in part to the early stage backing, and strong interest in the markets, until recently.
Speaking to founders, ESIC was most helpful with
- closing a round, and
- building interest in the business, and
- increasing shareholder loyalty
What's hidden is the dual benefit that the ESIC assessment process has, focusing founders and investors on key growth metrics and milestones that help build a foundation for later rounds.
Many founders use the same core docs they used for ESIC through subsequent raises and negotiations.
Investors are clearly attracted to the tax incentives, though frequently use Self Managed Superannuation Funds that may well be in pension phase at the time of exit anyway.
So its unclear if its simply the tax advantage or a wider pool of benefits driving the decision making.
Many startups and investors point out that mirror legislation in the UK, US and Singapore is more attractive and note the current downturn presents an opportunity to expand the regime to include more deep and Bio tech businesses.
In any case, keep the yearend in mind and remember to lodge your ESIC statements before your June BAS.
Cheers,
Matthew