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Seasoned investor and former investment manager of crowdfunding platform VentureCrowd, Alex Knight, has raised $25 million to kickstart his new venture, the R&D finance firm Advanced, and has flagged plans to top this up with an additional round of up to $100 million in the next 12 months.
The initial round is already supporting the research and development (R&D) efforts of about 50 companies, but for Knight this is just the tip of the iceberg in his mission to enhance innovation in Australia.
The oversubscribed $25 million raise, supported by QIC private equity principal Phil Cummins, Novigi partner Alan Hegerty and Employment Hero director Adrian Bunter, mostly comprises debt funding with just $2.3 million in equity.
The Sunshine Coast-based Knight founded Advanced early last year, shortly after he left VentureCrowd. After years working with startups, Knight saw an opportunity to deliver “fast, flexible R&D finance” to Australian innovators via the Advanced model, which he describes as a fintech rather than a lender.
Advanced is up against a number of competitors in the space, many offshore-based companies that Knight says send their profits offshore.
“We love being part of the Australian startup ecosystem and backing local innovation to make waves well beyond our shores,” he says.
“With science and tech now Australia’s third-largest sector, and R&D investment lagging, we’re unlocking the capital founders need to move faster, drive innovation forward and build a brighter future.”
The finance provided by Advanced is secured against the borrower’s future R&D Tax Incentive refund.
Knight says that instead of having to wait until tax time, startups and innovators can access more capital sooner, which allows them to scale quicker without compromising their ownership.
“Our north star goal – our ‘big hairy audacious goal’ in startup terms – is to generate a cumulative billion dollars of economic impact in Australia in the next five years,” says Knight.
“We’ll do this by enabling startups and innovative companies to turn their R&D Tax Incentive into a growth engine – by accessing it early, investing it into more R&D and thereby growing their refund to power even more R&D.”
Advanced has already locked in more than 50 deals with companies in the biotech, manufacturing, software and deeptech sectors – among them Rainstick, Sicona Battery Technologies, GapDrone and HowToo.
Advanced’s lending rates vary from 15 to 17 per cent and are short-term in nature, typically between eight and 12 months.
Advanced currently has about $15 million in on-balance-sheet transactions, but Knight says the strong take-up of loans has prompted Advanced to consider a second funding round to raise between $50 million and $100 million in the next 12 months.
Knight has structured Advanced to focus on “fast flexible capital” that he says works hard for companies and generates cumulative benefits for the economy. While competitors can take weeks to approve an R&D loan, Advanced can provide funding within 48 hours.
“We know what it’s like to be hampered by available capital and have to hold off on critical projects that delay getting products to market, and compromise commercial success,” says Knight.
“That’s why we handle approvals within 48 hours and provide funding as soon as 24 hours after signing. We’re a fintech, not a traditional financier, and we’re proud to see the positive impact this has on the startups we work with.”
Knight, whose personal investments over the years have included Mr Yum, Vitable and Aussie Angels, points out the importance of R&D to the economy, quoting CSIRO research, which found that $1 of R&D investment creates an average of $3.50 in benefits across the economy.
“R&D in Australia has a high impact for every dollar invested and more funding for innovative companies means we can have much more successful businesses here,” he says.
“We are a business built by founders for founders, entrepreneurs and investors and we want to see more successful Australian innovation and we want to see that on the global stage.”
Advanced is broadening that impact by joining Pledge 1%, pursuing B Corp certification and contributing to local causes, among the most recent being Cyclone Alfred relief efforts.
“With every R&D tax advance that we make, we also advance a cause that’s bigger than our own,” says Knight.
“If the founders and innovators we’re funding are passionate about a particular social, environmental or cultural cause, we contribute to that with our own funds, and we’re always keen to hear about local causes we can support.”
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