Australia has so many incredible businesses with endless potential and a clear vision for the future. These are the business owners who have carved out a competitive advantage – often over many years. They can see down the road toward their new manufacturing facility, an expansion into a new geographic market or the pathway to take out a key competitor.
The problem is that these innovative businesses have had few options when it comes to securing the funding required to make those plans a reality.
Traditional banks are simply not designed to take a punt on step-change growth. Debt funding alone can only get an SME so far – it ups the stakes for business owners and too much of it can limit a business’ flexibility.
While private equity firms have the appetite for larger, riskier deals, their ambitions for a controlling stake don’t align with the goals of most SME owners. And many SMEs are simply too big or don’t have the growth profile to attract venture capital.
The Australian Business Growth Fund™ (ABGF) was setup to plug this critical funding gap: namely by providing patient growth capital tailored to the unique needs of SMEs. Founded as a public-private partnership between the Federal Government and six leading banks, the $540 million fund enables businesses to grow without taking on additional debt or giving up control of their business.
This model is a game-changer for high-growth SMEs, particularly in terms of accelerating the post-COVID recovery.
First, having the financial backing of the Australian Government as well as ANZ, the Commonwealth Bank, the National Australia Bank, Westpac, HSBC and Macquarie, the Fund has the dry powder required to make a material impact on a large and diverse group of SMEs. On a per deal basis, we will invest between $5–15m of growth capital in exchange for equity. Furthermore, as a for-purpose fund, our success will be judged not only by the returns we deliver to shareholders but also our indirect impact on the broader economy and the overall health of the SME sector.
Long story short: we’re in this for the long haul.
To that end, we’re also committed to ensuring business owners retain control over what they’ve built. Entrepreneurs and business owners pour their hearts and souls into their businesses, so we understand that the last thing a founder wants is to give up control when the best is yet to come.
That’s why we’ll only ever seek a minority stake in our investments.
There are a few stats that illustrate just how unique this approach is for our market. In 2019, in Australia alone, more than $2.24 billion was invested in venture capital deals, with another $15.8 billion in private equity buyouts and a staggering $56 billion in business loans.
How much money went toward minority stake growth capital to SMEs? Just $340 million.
Given that are more than 1.3 million SMEs, many of which are looking to move quickly post-COVID, we see a huge opportunity to put the pedal to the floor.
