Frequently Asked Questions

Does Momentum lend money to companies?
No. Momentum is a conventional venture capital fund. It makes equity investments in companies with high growth potential. In return for its funding, Momentum becomes a shareholder in the company.

When do I meet Momentum staff face-to-face to explain my business?
In general, meetings will not take place until Stage 2 of the investment process, that is when Momentum has formed a view that, in principle, it is interested in pursuing an investment opportunity.

Will Momentum sign Confidentiality Agreements?
Momentum's general policy, which is line with standard venture capital practice, is to not sign confidentiality agreements since it is excessively onerous for Momentum to recall the precise terms of the hundreds of such agreements that it would be a party to. In some cases however, Momentum is prepared to sign highly focused confidentiality agreements that specify particular intellectual property to be kept confidential.

Does Momentum invest in start-up businesses?
Yes. Momentum invests in seed, start-up and early expansion businesses. Momentum is comfortable with the risks inherent in very young companies. Each investment opportunity is considered strictly on its merits.

Does Momentum Invest in service businesses?
Momentum will only invest in service businesses that are based on proprietary technology owned by the company and that are readily scaleable.

Will Momentum help me address shortcomings in my business?
Yes. Momentum plays an active, hands on role in assisting the growth of each investee. In this, Momentum draws on its excellent network of contacts in Australia and overseas. Momentum staff also have direct experience in strategic planning, recruitment, contract negotiation, R&D, financial controls and strategies, etc.

What is the maximum amount that Momentum would invest?
The maximum amount that Momentum would commit initially to one company is around A$1.5 million. This is part of the risk management procedures adopted by Momentum in the management of its investment portfolio.

What is the minimum amount that Momentum would invest?
Momentum is unlikely to commit to an investment of less than A$500,000.

What if my business needs more money than Momentum is prepared to commit?
Momentum has co-invested with other venture capital funds in the past. Co-investments are considered on a case-by-case basis, depending on the fit with the other investors as well as the needs of the business being funded.

What if my business turns out to need less capital than I requested and was committed to by Momentum?
If the funding committed by Momentum in agreement with the investee company is more than is actually required, Momentum retains the right to inject the remainder of any undrawn capital at a point prior to its exit. What valuation does Momentum place on my business? Momentum will only invest in companies with reasonable valuations where it can play the role of an active shareholder. It is vital to Momentum that both it, and an investee's founding shareholders and key personnel, have a substantial stake in the company so that all stakeholders stand to benefit handsomely from the venture.

Ultimately, the valuation placed on the business will be a negotiated one, and will take into account such factors as the stage of development of the business, the amount already invested by the founders and the value and risk inherent in the opportunity.

Will Momentum take control of my business?
In general, Momentum wishes to be a substantial but minority shareholder. However, if an investee company performs grossly below expectations, Momentum maintains the right to assume control of the company in order to try to return it to successful operation.

Who will need to be on the company's Board of Directors?
It is Momentum's belief that a strong and experienced Board of Directors plays a crucial role in the development of a high growth business. Momentum will therefore always require a Board seat as a condition of its investment. In addition, the composition of the Board should include representatives of the founder group (typically some of the founders themselves) as well as independent non-executive directors that are chosen unanimously by all shareholders.

Why should I seek venture capital instead of moving directly to an ASX or other stock exchange listing?
Venture capital is a form of investment that can offer businesses a wide range of support including assistance with strategy development, product development, recruitment of key personnel or directors as well as access to networks of contacts both domestically and abroad. Because venture capitalists are patient investors, they are willing to support their investees through difficult times, provided the underlying business remains sound. Once the business is stable and has a track record of achievement, a stock exchange listing may be an appropriate mechanism to take the company to the next stage of its development.

A premature listing on the stock exchange adds significant strain on a business and may cause the company to fail before it has had a chance to prove itself. Firstly, raising an Initial Public Offering places great demands in terms of financial and management resources required. If and when the business does list, the ongoing reporting and compliance requirements are far more stringent and onerous compared with those of a private company. Finally, the company must be able to ride out swings in market sentiment, particularly when there are hiccups in the company's growth, which are common for early stage businesses.

My company is an Australian business looking to expand globally.
Should I seek venture capital here or abroad?

As a general rule, Australian companies find it difficult to obtain venture backing from overseas venture funds until they are headquartered and incorporated in the region local to the investor and have a credible customer base in that region. Often, the role of Australian venture capital is to provide capital for establishing an overseas presence as well as to provide advice and contacts for raising further rounds of venture funding from overseas investors.