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14 Sep 2016

The role of equity in innovation

The below article is a transcript of Matthew Howard's guest presentation at our recent Smartequity launch event in Perth. Matthew Howard is the Director and Company Secretary of Strategic Elements, an Australian ASX-listed company that invests in Australian innovation.

 

When John phoned me last month and asked if I wanted to catch-up for breakfast and that it was his shout, I immediately accepted his invitation. So here I am today, evidence that there is no such thing as a free breakfast! Really, it is a pleasure to be here.

 

My name is Matthew Howard and I am a Director and Company Secretary of a small investment fund that invests into Australian innovation using the private capital from our shareholders. So essentially, it is Australian capital investing into Australian innovation. Principally, our fund invests into the Resources sector and the Technology sector.

 

I would like to talk briefly on the role of equity in innovation and some general thoughts and observations I have.

 

Firstly, if you consider the role of equity today, when you analyse it, equity probably sits behind cash in terms of being the preferred instrument within Australia. The Equity Capital Market is a large driver of the Australian Financial Market - from ‘mum and dad’ shareholders purchasing shares to small corporate transactions in the resources sector, or as a method of motivating employees in a small start-up. All of these scenarios, and many others involve the use of equity or derivatives of it.

 

Specifically within start-up entities, equity is a vital instrument, it is the oxygen of the company, which is used to control the Company, protect the ownership of the founders, reward and motivate key individuals and act as a vital pathway for the flow of capital.

 

Of interest to me is how equity can be a very effective method of rewarding and motivating founders and employees. The psychology of owning a portion of the company and building this is one of the drivers for most people in start-up entities. This motivation permeates through the business and drives a culture of innovation, pushing the barriers of what is present day.

 

Equity is critical to innovation and without it, innovation would be very different.

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