Jessica Gardner Reporter

Jessica covers Australia's technology start-up scene, writing on breaking news and trends in entrepreneurialism, media and marketing. She was previously named Australia's best New IT Journalist for 2011.

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Go for a boost with benefits

Published 11 April 2012 14:39, Updated 12 April 2012 14:56

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Sydney-based video game studio Bubble Gum Interactive is one step closer to its goal of having 250 million children playing in its web-based virtual world Little Space Heroes as a result of a $250,000 cash injection from the federal government’s Commercialisation Australia grant initiative.

The money went towards building a multi-currency billing platform.

For many start-ups, reaching stepping stones on the path of global ambition is heavily reliant on funding. Applying for and winning a government grant is a competitive process but for companies that are successful, it is a great way to raise funds without diluting equity.

Two recent recipients of Commercialisation Australia grants found some unexpected benefits for their businesses, too. Their different approaches to the process and experiences will assist other start-ups that are considering an application.

Bubble Gum Interactive (BGI) chief marketing officer and director of community Paul Gray explains that due to Little Space Heroes’ “freemium” model – where kids play for free but can upgrade to paid memberships for extra game functionality – the company must “make it as easy as possible [for players] to convert to being paid members”.

The company used the money it received from the government, as well as an equivalent investment of its own capital from angel investors, to develop its own billing platform to accept payment in 11 major currencies.

“It’s actually surprisingly difficult to do real global, multi-currency billing directly to consumers if you’re not willing to put up with clunky PayPal and Bpay ... or setting up different [systems] in different countries,” Gray says.

Little Space Heroes now has “IP-gated” billing, which basically detects what country the player lives in and shows the relevant currency when asking for payment.

The next step for BGI is launching its multilingual game player modes. By mid-year, the company hopes to have children playing in French, Portuguese and Spanish and later the company will attack the more difficult script- and character-based languages such as Japanese, Arabic and simplified Chinese.

“Almost all the growth is happening in the developing world,” Gray explains.

BGI has always had a goal of reaching 250 million players worldwide. Getting the Commercialisation Australia grant has sped up the process but Gray explains that what’s most useful about applying for a grant like this is it forces the business owner to clearly set out a path to reaching that goal, whether or not they get the money.

“It’s a really great process to work though because it helps you to stay focused on how you’re actually going to turn your vision into reality,” he says. “Yes, we want to be a multi-currency and multilingual business, well how are we going to do that?”

The Commercialisation Australia trophy sits on the BGI mantelpiece next to grants from Screen Australia and the NSW government as well. In its short history, the gaming studio has received more than $500,000 in government funding.

Gray says the Commercialisation Australia application process is the “most robust and challenging” but adds that the Screen Australia application was “20 to 30 pages long”. “It’s a very competitive and challenging process to get any of these grants,” he says.

There’s no black art to getting a grant, Gray says. The government agencies want to see what any investor would require.

“For all the grants, it’s about having a compelling product concept and knowing how you’re going to build that and most importantly making sure there’s a valid customer requirement or demand in the marketplace,” he says.

That said, however, while an investor wants a capital return, government agencies have other objectives. Gray says it’s important to understand the purpose of a grant program and how your company fits in with that.

“They’re not like private equity investors, they don’t want a return on investment but they want to see that what they’re supporting is going to be beneficial for the industry or the region that they’re trying to support,” he says.

The $155,000 grant that BGI got from the NSW government was part of a push to build a digital industry in the state. With this in mind, Gray and his colleagues have tried to contribute to the industry by mentoring young entrepreneurs and sharing BGI’s grant application resources with other business (you can download a copy of its pitch deck for indie games developers from the company website).

“It’s understanding what it is they’re seeking to get out of it, not only to help you to be successful, but also to help with what they want,” Gray explains.

Business owners will definitely need well-articulated business plans. “And you need to be prepared to do a lot of work and make sure they’ve got everything in intricate detail,” Gray says.

“I think going through the process of applying for a grant is great way of taking a step back and thinking strategically about your business anyway. Even if you don’t get the grant, the process of applying for it, certainly helps [business owners] hone their thinking. I know everyone is busy and it’s hard to take a step back but you do need to do that sometimes.”

BGI did all its grant applications internally. Gray says that now the company has had success, it’s unlikely it will use consultants in future either.

“Because we’re a start-up and we operate incredibly lean, we’ve really minimised any involvement with consultants in any context really, because they’re so expensive,” he says. He adds that because building the multi-currency platform required specialist teams in-house, it was faster and easier to use that same knowledge to apply for the grants.

The chief executive of Commercialisation Australia, Doron Ben-Meir, says there’s nothing asked in the grant applications that only consultants know the answer to.

“It’s a business opportunity to help other people with these processes and I’ve got no problem with that at all,” he says. “At the end of the day, though ... it is the entrepreneur, it is the person who wants to take this to market that is going to have to do the hard work in terms of understanding the opportunity and prosecuting it into the marketplace.

“The consultant can certainly help them with the paperwork and articulation in answers to some of our questions but the fundamental answers typically must come from the proponent who is the one immersed in that marketplace.”

Melbourne veterinary biotechnology start-up Nexvet was successful in receiving a $50,000 Commercialisation Australia Skills and Knowledge grant, with the help of management consultancy IMC. The company has developed a suite of monoclonal antibody drugs for animals. The class of drugs has been used in humans for about 20 years to fight cancer and for use in pain medication but no one has developed an animal version, Nexvet chief executive Mark Heffernan says.

The company has raised about $1 million in seed funding from wealthy individuals but most of this has been used to develop the drugs. To raise the next round of funding, Nexvet required external advisers to assess the forecasting, legal and accounting positions. The Skills and Knowledge grant gives money for such services.

Heffernan used a grant consultant as a second pair of non-scientific eyes. “They obviously can check over the application and make sure it contains the key points that make these applications successful,” he says. “And because we all come from a science background, they can tailor things or make them more succinct.”

Commercialisation Australia has a four-stage grant process, from Skills and Knowledge, up to Early Stage Commercialisation. Ben-Meir says it’s not uncommon for companies to work their way through the stages. Heffernan adds that he hopes that now “we have a relationship with Commercialisation Australia, that will enable us to apply for further funding”.

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