How it works
Let’s bring start-up investing into your comfort zone.
Here’s how we help: we mitigate risk in the first year of your investment so that you have a chance to see if the start-up’s idea has traction. We do this by helping you access the full Australian government ESIC tax offset, which covers 20% of your investment. We then pair this with structuring the start-up effectively and managing its finances to give you protection for the other 80% of your investment. So you can support a good idea with minimal risk. Read on to see how it works in detail.
Let’s step it out
You have a taxable income of $65K or more, so you pay at least $10K in tax each year.
You buy 50,000 shares in an ESIC for $50K, using the funding option that suits your finances. This investment entitles you to a $10K tax offset, reducing your tax bill by $10K.
Option 1
$500 Deposit
• You purchase your 50,000 shares with a $500 deposit.
• The remainder is funded through a loan.
• At tax time, you get the $10K tax offset and forward $8000 toward your shares.
Who gets what in the first year?
Start-up: $7500*
You: $1500
Seedchange: $1000
*start-up’s access to money is delayed until after tax offset received.
Option 2
$8000 Deposit
• You purchase your 50,000 shares with an $8000 deposit.
• The remainder is funded through a loan.
• At tax time, you get the $10K tax offset.
Who gets what in the first year?
Start-up: $7000*
You: $2000
Seedchange: $1000
*start-up gains immediate access to money
Option 3
15% Deposit
• You nominate how many shares, pre-agreed with us.
• Purchase your shares with a 15% cash deposit.
• The remainder is funded through a loan (max $1M).
• At tax time, you get the $10K tax offset.
Who gets what in the first year?
Start-up: $7000*
You: $2000
Seedchange: $1000
*start-up gains immediate access to money
Option 4
Full Payment
• You purchase your 50,000 shares with $50,000.
• At tax time, you get the $10K tax offset.
Who gets what in the first year?
Start-up: $7000*
You: $2000
Seedchange: $1000
*start-up gains immediate access to money.
Option 2 is most common, so we will use it as our example. You retain $2K of the tax benefit for yourself and put $8K into the hands of an eager start-up.
We manage the start-up’s finances, and give them $8K of your investment (minus a one-off fee of $1000 for our administration) to use in the first year. The remaining $42K of your investment is held on deposit and protected.
In the first year, the start-up uses the first $7K to prove to you that idea has traction.
What happens next?
At the end of Year 1 we’ll see where they end up. Either they’ve:
Failed
We help the start-up wind up efficiently. The start-up still has $42K of your investment on deposit, which clears your loan. You come out financially unscathed, still with a $2K tax benefit, and you’ve helped test an innovative idea. On to the next idea!
Showed promise
The start up continues with their work.
→ You’re content with having encouraged the first growth, you cash out your shares, knowing you got a $2K tax benefit and supported a new idea.
→ You want to stick with this start-up. You keep your investment (at your own risk now) and we release more money to the start-up to apply to research, development and expansion.
Succeeded
The start-up’s shares have increased in value. Either you:
→ Cash out now and realise a tax-free capital gain.
→ Partially sell out to clear your loan and keep the rest of your investment.
→ Keep all your shares (at your own risk now) and continue to pay off your loan.
The choice is yours.
In all cases your investment is risk-managed in the first year, and you’ve supported an ecosystem of ideas and innovation. Brilliant!