What stage do you invest?
We like to be the first VC to invest, and ideally the first equity investor (that is, excluding any grant money you might have previously received). Investing very early is the rule, not the exception.
Our Standard Investment Terms
Our standard investment is $240,000 for a 12% equity stake in your company. We deduct a $40,000 program fee (see here), so you receive $200,000 to fund your startup.
That equates to a $2 million pre-money valuation. We wire you the money as soon as you accept our offer.
Most importantly, we want you to have 12-18 months of runway when you join our accelerator.
What is runway?
Runway is the amount of time that your startup has (assuming your expenses and income are about what you are expecting) before you run out of money. At an early stage, this is usually something like:
(Dollars in your bank account + our investment $ + any income you expect in the next 12 months) / (monthly salary of your team members (fully loaded annual salary divided by 12) + any other monthly expenses).
As a quick example, if you have $25,000 in the bank and expect around $20,000 in revenue this year, and you have 4 team members each with $65,000p.a. salaries (fully loaded - do not forget tax and superannuation), with no other expenses (you're using the free AWS tier or credits etc):
(25,000 + 200,000 + 20,000) / (65,000*4/12) = 11.3 months of runway
What we expect your startup to have post-investment
We aim to ensure that the amount of money we invest (that is, the amount of dollars in your account already, plus our $200,000 investment, plus any other expected income (whether from customers or grants)) ends up supplying you with 12 months of runway.
You may need to hire 1-5 contractors/casuals or even full time team members post-investment, and this must be factored in as well.
We aren't looking for a cent-by-cent budget, but you should not have 6 months of runway post-investment (and more than 18 months usually means you aren't scaling up your team at the right pace!). Your startup (and budget) will change a lot over that time, but tracking runway is an important metric to make sure that you don't run out of money.
For some businesses (hardware, biotech etc) you may have very significant 'other expenses'. We use this simplified example as most software companies have 'people' as their greatest expense in the early days.
If your business has much higher capital requirements, we may need to work with co-investors to get you up to 12-18 months runway. We can speak to you about this after you complete your Quick Application.
What instrument do you use to invest?
We prefer an equity investment over convertible note or SAFE, so you know your dilution but we are flexible with this for certain startups.
We find that at an early stage, "priced rounds" (equity investments at a specific valuation) are much simpler for founders so that you can easily manage dilution (how much of your startup you "own" after the investment).
At an early stage, you don't want to spend your time dealing with investment mechanics and legal/finance issues like conversion events on debt-like instruments – you should focus on operating your startup. A priced round is the simplest and easiest option, which is why we prefer it.
Can you match existing investors?
Yes. We can match or co-invest alongside existing investors if you have them. However we are very happy being alone – you do not need to have other investors.
Unless you have different funding requirements (ie you are at a later stage or the business has higher expenses like biotech companies), we expect Galileo to write the largest/only cheque in your round and to represent > 80% of the funds raised though.
We generally wouldn't invest as part of a $3 million round for example – the math doesn't work out for our fund, as we focus on early stage companies.
Do you invest more (or less) than $200k?
Yes we can invest more (usually only in later-stage companies), but we would be unlikely to invest less, as we aim for a 12% equity ownership.
We prefer to stick with our standard investment for most companies. This reduces legal fees associated with negotiations and review for both us and you.
Can you be flexible on valuation?
Yes, in some cases. Our standard valuation of $2 million AUD pre-money (before any money is put into your company) is, we think, very generous for most early stage startups.
Where you have existing investors or can make a very strong case that this is incorrect (i.e. significant revenue with good customers) we're happy to discuss the terms.
Ultimately however, we expect to invest at least 80% of the time on our standard terms. For companies at the stage that we are targeting, we think the valuation and investment size is just right.
What about later-stage investment and companies?
We can invest up to a Series A style investment, but this is very much the exception and not the rule. Our focus is on early stage companies and writing the first cheque, and so our processes and systems are designed primarily for these types of investments.
Please get in touch if you would like us to form part of your later stage round.
We have access to a large follow-on fund and institutional investors too.