Money talks

Accessing finance has long been a barrier to Indigenous business, but First Australians Capital founder Leah Armstrong says untapped opportunities exist for venture capitalists to back a growing number of entrepreneurs.

First Nations Capital (FNC) was born out of a belief that the missing piece in Australia’s economic development is delivering greater economic independence to Aboriginal and Torres Strait Islander communities. Its mission is to back the cultural and creative strength of First Australians and for them to drive their own economic futures.

“Indigenous communities and enterprises have been locked out of the economy, it’s a generational issue,” says FNC founder and managing director Leah Armstrong. “Access to the right capital and support structures are important to build sustainable businesses and break free from government welfare dependency.”

FNC supports startup and growth First Nations businesses, which are unable to secure finance from mainstream banking due to limited security or trading history. FNC acts as an intermediary between the capital markets and First Nations entrepreneurs. It also gets involved with startup and growth businesses well before any financing need is recognised.

Walking alongside business

“We provide full wraparound support to the business,” says Armstrong. “We help them define their business case, whether through business planning, or connecting them with legal, marketing or accounting support. Our business relationship managers walk alongside the businesses as they grow, which makes us different from incubators or short-term accelerators.”

As much of the activity in this space has previously been government-led, it was important to Armstrong for FNC to be First Nations-owned and run. The Newcastle-based Torres Strait Islander has worked extensively in the not- for-profit sector and “comes from a family of entrepreneurs”. She also sits on a number of boards and is co-chair of FNC alongside her long-term business collaborator, Jocelyn King.

FNC is funded by philanthropic donations and social impact investors. “We structured it as an NFP because we believed the first movers likely to be willing to be innovative with us would be philanthropy,” says Armstrong.

Bringing about change

Since FNC was formed five years ago, it has supported more than 600 First Nations businesses and secured over $60m in accumulated capital for Indigenous businesses. In addition, 220 jobs have been created. FNC’s ambitious 10-year strategic plan, published in November, includes ambitious goals. Within five years, it seeks to grow its Impact Enterprise Fund to $100m. Within a decade, the goal is $250m. The six-month strategic planning process involved the FNC board and executive team, and local staff, as well as consultation with Aboriginal and Torres Strait Island-owned businesses, funding partners and strategic relationship partners.

“Our 2031 goal is to stimulate the Indigenous business sector by catalysing radical change in investment markets,” says Armstrong.

The FNC board currently has six members (and three vacancies), the majority of whom are female and Aboriginal or Torres Strait Islander. One of its non-Indigenous board members is Clive Ringler, a vice president of Morgan Stanley.

“Our board has a diverse mix of skillsets,” says Armstrong. “Good governance is about having diversity on your boards and building a culture within that board that recognises and respects diverse views and experiences. It’s not just about the stewardship of a company. As a board member, I consider our impacts on communities and on country, which fits within an ESG approach.”

Overcoming outmoded ideas

Armstrong says the biggest challenge over the past five years has been convincing investors that there are opportunities to invest in First Nations business. “There are entrenched and systemic biases about what an Indigenous business is,” she says. “Many see it as limited only to cultural activities. We have invested in diverse industries such as dairy, technology and the creative industries. We also believe there is the opportunity to build Indigenous equity in different markets in the future, such as in renewable energy, native foods and environmental conservation.”

While acknowledging that attitudes are slowly changing, and that the corporate sector is now aware of the opportunities to purchase products and services from First Nations businesses in the supply chain, Armstrong notes that accessing capital remains the biggest barrier to progress. “There are real opportunities for the venture capital sector to be supporting and growing Indigenous businesses,” she says. “Impact investing in Indigenous business has multiplier effects. As well as market rates of return, there is broader social impact — First Nations entrepreneurs are motivated to give back to community and grow community outcomes, rather than in becoming finance-first rich.”

FNC success stories

Aboriginal Sustainable Homes

Established in 2019, Aboriginal Sustainable Homes (ASH) builds environmentally friendly accommodation. It uses innovative structural insulated panels instead of bricks and mortar, which cuts maintenance costs and maintains stable inside temperatures, reducing heating and cooling costs.

FNC provided flexible construction loan finance, and Armstrong says it’s a great example of a collaboration of investment by First Nations-led organisations to build social housing.

ASH has also provided traineeship opportunities for 17 First Nations employees, and contracted other Aboriginal businesses as part of building the homes. The company has received further orders following the completion of the initial housing project in Moree.

Sobah Beverages

FNC has been working with the non- alcoholic craft beer company Sobah Beverages for 18 months, and helped the company get its first working capital loan through partnership with Westpac. The company’s growth has been significant, FNC now providing additional investment to realise its vision of building a zero-alcohol brewery and brew cafe on Queensland’s Gold Coast. It has also undertaken a round of crowd equity funding. “We wanted to have a partnership with a financial institution so that we could offer opportunities for Indigenous businesses to take on a mainstream loan, but with a more flexible process,” says Armstrong of the partnership with Westpac.