The Achilles heel to any great invention is obtaining sufficient levels of capital to fund different phases of commercialisation. With medical devices and therapeutics, costs can skyrocket as regulatory fees, legal fees and the most costly of all – running clinical trials, build up. How you finance your business can be the difference between success and failure. These are the most common sources of funding for entrepreneurs:
This is the most obvious source for inventors, but very few of us have unlimited cash reserves. Using excessive amounts of personal funds can cause financial stress to yourself and your family. Personal funds can quickly dry up and is the least feasible long-term option. Family and friends are another option, but be prepared for tensions in relationships, if the business doesn’t go to plan.
Another obvious source of financing is obtaining a bank loan. This is easier if your company has been set up as a partnership and borrowing capacity is increased. This is particularly helpful during the startup phase.
Check your state and federal government for a diverse range of government grants designed to support start-ups and SMEs. For example, in Victoria, grants range from the Accelerating Commercialisation Grant designed to support the development and implementation of new technologies, to manufacturing and travel grants. Grants are also available from many esteemed research organisations, but these may be more difficult to obtain. Inner Maven can guide you through this process and assist in grant writing.
R&D (Research and Development) Tax Incentive
At the federal level, tax incentives can be accessed if your business is conducting activities that fit the ATO’s definition of Research and Development. For eligible activities, companies that have an aggregated turnover of less than $20 million may receive a 45% refundable tax offset. If you are unsure of whether certain activities are eligible, it is best to seek the advice of an R&D tax accountant, Inner Maven can recommend people we trust.
Angel investing is a type of equity financing where an individual investor will invest in your company in return for a percentage of ownership. This can be a good option for inventors looking to offset their risks, but you need to be very certain to attract the right angel investor.
This is another type of equity financing, where venture capital firms provide seed funding to companies at the early stage with a high potential to grow.
Inner Maven has experience with resourcing many different sources of funding to raise capital and can guide you through this process.