The CEA Startup Fund invests in high-growth, scalable businesses that are tackling global markets in the creative industries

The CEA Startup Fund has seen a large number of opportunities from a diverse range of companies around Australia since it launched in 2013. The fund has made 10 early stage investments and deployed over $1.2M in funding to creative tech startups. You can learn more about them here.

We thought it would be useful to share some general observations about the sorts of opportunities we’ve seen, what sort of applications are particularly interesting to CEA’s Startup Fund, and what some of the common issues seen in the applications that we haven’t taken forward.

What are “Creative Industries”?

The CEA Startup Fund invests in Australian startups that are in the creative industries – by which we mean design, fashion, animation, digital media, film and television, music and gaming. A great example is Fame & Partners, an online fashion business focused specifically on the formal dress market.

We also invest in startups that are enablers of one of the above the creative sectors via software, web or mobile solutions that are focused on the creative industries. A great example is Trademark Vision, a software company that provides online image matching tools to logo designers and trademark professionals.

CEA has a mandate to support the growth of creative businesses in Australia, and our Startup Fund was created to address the lack of risk capital available to these businesses.

Many of the companies we have considered for investment could be viewed as “tech startups” by other investors, and we are very open to co-investing with mainstream early-stage investors including angels and VC funds.

Although we’re not limited to investing in “creative-tech” companies, the sweet spot for us is companies that use the internet to give them access to global markets and to scale rapidly in the creative industries.

In Australia the term “creative industries” often conjures up images of people engaged in arts and crafts or the performing arts. Whilst CEA does support commercially focused creative small businesses through its business mentoring programs, the Startup Fund is specifically focused on high-growth, scalable businesses that are tackling global markets.

Clear value proposition

For any startup looking to attract an investor’s attention, it’s vital that the founders can articulate a clear and compelling value proposition. This means they can succinctly describe what the company does (ie. its product or service), who it does it for (ie. target customers) and why those customers should care (ie. what value the company creates for them, either by solving a problem or enabling them to do something new).

We’ve seen quite a few startups that struggle to get across the fundamentals of their business in a few sentences, and these companies tend to find it hard to make an impression – not just on investors, but also potential new employees, customers and commercial partners.

A sure sign that a startup is struggling to articulate its value proposition is a pitch deck or business plan that contains a lot of fuzzy, non-specific language, or words like “revolutionary”, “paradigm-shifting” and “game-changer”.

For these companies we generally suggest they try out their pitch on five different people who know nothing about their business, and then ask those people to describe the company’s value proposition back to them. Unless all five people can accurately describe the company’s value proposition then the company needs to work on its pitch.

There are a couple of resources we like. Lean Canvas by Ash Maurya is a great tool for developing a value proposition. It’s based on the Business Model Canvas, which is a great startup resource and optimised for Lean Startup. Forbes has a great guide to building and articulating your value proposition, written by Michael Skok.

Deep understanding of the problem

The opportunities that have been the most interesting to us are ones where the founders have a deep understanding of the problem they are tackling, usually because they have worked in the industry over an extended period and have spent years “marinating” in the problem. These founders typically have a much more acute sense of what customers need, know how to sell to them, have the credibility to open doors and get warm introductions to customers and investors as well as a solid understanding of the competitive landscape.

Conversely, we have seen companies where it’s clear the founders do not have deep sector knowledge. This puts them at a distinct disadvantage because they have only a limited understanding of the market dynamics, competitive landscape and customer needs, and often lack credibility so they end up having to make a lot of cold calls.

Two (or three) heads are better than one

It’s a well known fact that startups with a single founder tend to struggle. The range and volume of tasks is usually more than one person is capable of, and it is very easy for a single founder to get disheartened and lose enthusiasm when things get tough (as they inevitably do).

While aspects of the business can be outsourced, we much prefer to see companies that have the technical capability within the team to build their product without having to pay a third party to build it for them.

For many startups the ideal mix of skills on the team includes someone with strong sales skills, someone with strong creative, technical or product development skills and someone with deep domain knowledge. For a lot of startups, having someone with strong UX or UI skills is also valuable.


We’ve seen a surprising number of companies whose differentiation from competitors has been fairly superficial, sometimes based on a different pricing model, a niche market focus or a different user interface. The best opportunities are invariably the ones that are fundamentally different to competitors and often sound like crazy ideas on first glance. These companies are capable of disrupting entire an industry and not just capturing a slice of market share through incremental improvements.

For early stage startups the quality of the founding team is often one of the most important differentiators. As an investor, we are constantly asking “why you?”. There are almost always other smart people building businesses to tackle the same markets as you – so why are you going to be the one to pull it off?


Dave McClure from 500 Startups famously describes a startup as “a company that is confused about what its product is, who its customers are, and how to make money”. We agree with Dave, and would argue that most startups are little more than a walking set of hypotheses – a set of assumptions on which the viability of their business is based.

The primary objective for any startup has to be to test and validate their hypotheses. CEA’s Startup Fund is an early-stage investor and is comfortable with investing money to help startups test and validate their hypotheses. The important thing for us is that the startup has a clear idea of what its hypotheses are, and a plan for systematically testing and validating them.

For any startup there are four types of hypotheses that need to be tested and validated.

  1. Problem hypothesis: You think you know what unsolved problem(s) the customer has.
  2. Solution hypothesis: You think you can develop a compelling solution.
  3. Value hypothesis: You think you can deliver enough value to customers that large numbers of them will buy your product or service (often referred to as product-market fit).
  4. Growth hypothesis: You think you know how to grow the business.

Companies that can show they have validated their major hypotheses, or have a clear path to validation, are well placed to raise money from investors.

Revenues, preferably repeat revenues, are of course a great indicator of product-market fit, although smart investors are going to be much more interested in what the company has learned from engaging with customers than unvalidated hockey-stick projections.

The Startup Fund is definitely open to investing in companies that are pre-revenue. We prefer to invest in companies that are beyond the idea stage and have built a product, even if it is a minimum viable product.

For a great free online introduction to the lean startup principles, you can’t go past Steve Blank’s Lean LaunchPad course on Udacity.

Also, take a look at the Validation Board by Lean Startup Machine.

Light touch sales

We like businesses that can grow rapidly without having to have a lot of contact with customers, either in sales, delivery or support. If your business requires significant skilled labour then you are most likely going to have a hard time convincing investors that the business can scale.

Think big!

We want to invest in companies that are tackling large, global markets worth hundreds of millions of dollars. Companies that are focusing on domestic markets, small niches, or opportunities where they will be one of many competitors, are usually not attractive investment opportunities.


For more information on the CEA Startup Fund, and to submit an expression of interest online, go to

 by Colin Kinner, Startup Fund Investment Manager 

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