Australian startups are upbeat about their prospects for the next year, despite a challenging fundraising climate.
According to a survey conducted by Angel Investment Network, the world’s largest online angel investment platform, 80% of startups polled in Australia revealed they are optimistic about the next year. 48% are very optimistic and 31% quite optimistic. This compares with just two thirds of UK startups (68%) in a separate survey.
The survey gauged the outlook for startups in the present climate, with the Australian network being one of AIN’s largest globally. Looking ahead, the survey reveals that securing investment is the biggest challenge for 71% of founders. This was followed by hiring the right talent (35%), product innovation and development (31%) and work/life balance (24%).
For those raising capital, the areas of focus for the forthcoming funding round include focusing on core product development (50%), expanding internationally (41%), growing the team by hiring the right talent (34%), and scaling marketing with ROI in mind (33%).
Gap in fundraising knowledge
The research also indicates a need for more support in understanding an increasingly complex early-stage funding process. Only just over half (55%) said they had a good understanding of what process to follow when dealing with investors and structuring a deal. 24% were neutral, while 24% had a quite weak understanding.
The survey highlights a big gap in fundraising expectations versus the current reality of the process against a backdrop of more challenging market conditions. Nearly 1 in 2 (49%) said it had taken longer than they thought. 33% said it was on track and just 18% said it was quicker than they thought.
Meanwhile less than half (49%) said the funds lasted as long as expected. 41% said they ran out sooner and 10% said they lasted longer. More than 6 in 10 saw the funds run out in less than a year. 20% said it was 0-6 months, 42% said it was 6-12 months, 23% said it was 1-2 years and 15% said it was 2+ years.
Perhaps unsurprisingly, dealing with these challenges can certainly take its toll. 54% said their mental health had been impacted through running a startup, with 16% it had been greatly impacted.
In terms of dealing with mental health challenges, going for walks was the solution favoured by 54% of respondents, 52% used mindfulness and meditation, 42% discussed challenges with friends and family, while 29% discussed challenges with other startup founders.
Profitability top factor in winning funding
Among those who had successfully raised funding, profitability was the top factor that led investors to back them (30%), followed by scalability (26%), the team (14%), and then revenues (8%).
In terms of what the government could do to support the startup ecosystem, easier access to grant funding came top (78%). 55% said making tax relief for investors backing startups more generous, while 35% believed R&D tax refunds should be more generous and 34% wanted more consistent/long-term policies.
According to Mike Lebus, co-founder of Angel Investment Network:
“The Australian network is one of our top performing sites with a host of exciting startups securing investment and scaling internationally. Our survey reveals a sunnier disposition, particularly in comparison to UK startups. However, it also reveals a gap between expectations and the reality of fundraising. A more complex global picture is leading to longer fundraising periods, cash shortages, and valuation reductions.”
He continues: “It is vital that startups have a good understanding of a process ahead of them. Over the next few months we will look to address this knowledge gap, with advice and guidance from investors and startups who have raised successfully.”
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