Angel Investing & Venture Capital Venture Capital in Australia

I have a listed Venture Capital company as a client so get to see some interesting stuff. They have really exited the early startup space in Australia though. The problem they had in Australia (as opposed to their operations in USA and Europe) was that the narrow nature of the startups. Very few developed concepts that worked beyond our shores and in the tech space they need universal appeal or if country specific need to be targeted at a much bigger population than ours.

 

I don't think you need to take the model international for it to be successful.
It can definitely be done locally, we have got a lot of property investors and I'd say less than 5% of them are even on this forum.

 

Not enough population in Australia to serve the definition of being successful.

 

You've got to build a million dollar business before a billion dollar one right?

 

VC total capitalisation is actually down in raw figures from '86 in Australia if I remember correctly - talk about a sad state of affairs.

Australian's are very risk adverse and have access to high leverage, relatively low risk investments (property) which means the flow of capital will continue to move to that sector at the expense of business/VC.

 

Will that see someone like BHP or WOW setting up head office in a town with a population of 12?

VC is in limited supply in Australia. The Federal and State governments acknowledge this, and do have tax incentives (dollar matching) for some R&D and some conceptualised innovation, and 100% CGT free for 'Angel Investors' - but that still doesn't even scratch the surface for what is needed in Australia,

I guess Australians are just too conservative from the Ma n Pa, through to formed governments.

pinkboy

 

Aside from the risk averse nature of most Australians, the focus on property as an asset class to build wealth is deeply ingrained on our population and culture historically.

Not saying it doesn't work and, certainly I am,...................guilty as charged. I haven't been denied anything from property investing.

So having people look at alternative asset classes even beyond traditional shares is challenging. Add to it the unlisted nature of VC, or private equity or the even more risky angel finance space and the investor pool shrinks drastically. The Government has created ESVCLP to encourage funds to flow in this VC direction with various tax incentives/concessions:

Early stage venture capital incentives and concessions | Australian Taxation Office

The lack of talent (not ideas or entrepreneurs) also plays a role in fast tracking the development of the various startup businesses that have validity. Despite the fantastic lifestyle on offer here people do not want to leave the US to relocate. Money is too good over there (even though life here is cheaper than San Francisco and Silicon Valley) and the culture over there is mature. It seems like a chicken or the egg analogy where we can't get the culture unless we have the people and they won't come unless the culture is already in situ.

I read somewhere a few years back that the entire VC capital allocated by Australian investment firms to Australian startups here was circa 70 million dollars per annum. In the same article it was reported that the amount one person from the US invested in startups per annum was approximately 70 million...........but get this, it was in Australian start ups alone. So one person from the US alone invested just as much in Aussie start ups as the entire VC industry here did. This Aussie VC figure has probably grown from that point, however it is still a very immature space.

I am increasingly looking at angel funding and private equity type investments to create a portfolio of startups and early stage commercialised businesses to diversify away from property and the traditional stock market approach.

I only discovered this forum an hour ago, after being re-introduced to Invest Chat this morning. So many chats now @Simon Hampel . What's next in the forum family? Chit Chat?

 

Some interesting insights on the difference in the startup landscape between Australia and someone who moved to the by area of San Francisco.

It's a good article for those who are (or intend to be) founders and investors.

Where Australia sucks for startups and what needs to be done to make the ecosystem shine - StartupSmart