Frequently Asked Questions
Momentum lend money to companies?
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.
do I meet Momentum staff face-to-face to explain my business?
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.
Momentum sign Confidentiality Agreements?
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.
Momentum invest in start-up businesses?
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.
Momentum Invest in service businesses?
will only invest in service businesses that are based on proprietary technology
owned by the company and that are readily scaleable.
Momentum help me address shortcomings in my business?
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.
is the maximum amount that Momentum would invest?
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.
is the minimum amount that Momentum would invest?
is unlikely to commit to an investment of less than A$500,000.
if my business needs more money than Momentum is prepared to commit?
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.
if my business turns out to need less capital than I requested and was
committed to by Momentum?
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
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.
Momentum take control of my business?
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.
will need to be on the company's Board of Directors?
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
should I seek venture capital instead of moving directly to an ASX or
other stock exchange listing?
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
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