Venture Capital Vital To Our Nation’s Hi-Tech Survival
February 22nd, 2012 § Leave a Comment
Dr Katherine Woodthorpe
But what is not well understood is how management expertise and capital move ideas and concepts from laboratories, garages and backrooms into innovative, commercially viable products and services, adding to the economic well-being of Australia.
A major source of entrepreneurial expertise and funding comes from the venture capital (VC) and private equity (PE) industry.
Entrepreneurs and innovators seeking support and backing for their intellectual property have limited options to access capital and expertise. There are few advisors and consultants that cater to the early stage market. Early stage companies are high-risk investments often with little or no collateral. Consequently, the firms that are in the best position to invest and advise early stage companies are those that are run by former successful entrepreneurs, scientists, doctors and engineers themselves – a VC firm.
Fund managers running VC firms can bring with them a unique business mindset that seeks out and manages early-stage investment opportunities on behalf of investors (mainly superannuation funds, institutions and wealthy individuals). Their hands-on ability to work closely with the founders/management of innovative companies, on matters of strategic planning, recruitment, and access to international markets and technology, makes them a partner who brings more than just capital to the table.
There are around 200 seed, early and late stage companies backed by local VC managers.
In the 2011 financial year, 37% of the total VC dollars invested were in the information communication and technology sector (ICT). Life sciences received the majority of VC investments in FY2011; a statistic which has been steady over the last six years. The largest proportion of investments in ICT went into business related software, followed by communication and networking services. Other ICT sectors include semiconductors, consumer electronics and connectivity, networking and communication software.
Some well-known VC successes in the ICT sector include Seek, Looksmart, Hitwise and Wedgetail. Successes in life sciences include Cochlear, Resmed and Pharmaxis.
VC fund managers bring a “business focus” to new companies, helping them grow to the next stage of their life-cycle, before being sold to another investor or merging with a competitor to create a larger market share.
While I would like to say the amount and number of VC investments is growing, the reality is that the VC industry has been contracting in Australia and around the world, even in the US.
The VC sector has faced headwinds in recent years, with investors seeking increased liquidity and reluctant to back higher risk, longer term investments.
The Australian Government spends around $8 billion a year on research, much of it ‘blue sky’ adding to the knowledge base but also in the hope that something will come out of it to contribute to the nation’s productivity.
Despite this government expenditure, little focus is given to commercialise the investment. VC fund managers take on the financial risk to help innovators commercialise their concepts. To help them continue this vital role in the nation’s innovation system, there needs to be greater policy support to these “enablers”.
One area of support in recent years has been the Government’s Innovation Investment Fund (IIF) program, started in 1998 just before the tech crash. It co-invests with private sector investors in VC funds to assist early-stage companies to commercialise the outcomes of Australia’s strong research capability.
However the IIF has only one more tranche of funds left before it ends later this year. Worryingly, there is no appetite from the Government to extend it in any form despite a very positive independent review and the Government’s own praise for the programme, leaving the massive taxpayer funded expenditure into R&D without any adequate commercialisation mechanism.
Historically, Government intervention into a unique asset class such as VC has been crucial to its growth. Governments in the US and UK have backed their respective early stage sectors for decades and have especially increased their initiatives towards the innovation sector post-GFC.
Australia maintains a robust ecosystem that advocates innovation in technology: for example, the Government’s zeal to establish a national broadband network is testament to its goal to better the Australian IT infrastructure. Australia is one of the easiest places to start a new business and is one of the best places for laws relating to ICT. Furthermore, Australia’s proximity to emerging technology-based Asian powerhouses like China, India, Indonesia and the Philippines gives us access to an agile product testing environment.
Dr Katherine Woodthorpe is the Chief Executive at AVCAL.
AVCAL, the Australian Private Equity and Venture Capital Association Limited, was established in 1992 as a forum and voice for participants in the private equity and venture capital industry. Membership includes almost all the domestic and international PE and VC fund managers active in Australia. PE and VC are key sources of capital for companies of all sizes, to enable their growth and realise their potential. VC is one of the few sources of capital available to enable entrepreneurs to convert innovative ideas into sustainable enterprises. Australian PE has $23.6b under management while VC has $2.9b under management. To find out more information please visit Www.Avcal.Com.Au,Www.Twitter.Com/Avcal1 and Www.Linkedin.Com/In/Avcal.
Bugherd named BRW’s Top 10 Startups to Watch
February 9th, 2012 § Leave a Comment
BUGHERD
| Jessica Gardner
Notable achievement: Successfully raising three rounds of cash in its first year.
Alan Downie and Matt Milosavljevic have created software that aims to make communication between web developers and their clients, who are often not tech-savvy, simpler and more effective.
Their company, BugHerd, enrolled in the inaugural class at start-up incubator Startmate in early 2011. As part of Startmate’s standard terms, they received a $25,000 cash injection in return for 7.5 per cent of the company. However, Downie says Startmate is not about the money. “It was more about the mentors and the access to the network of people,” he says.
One of BugHerd’s key mentors at Startmate was Alan Jones, the founder of online strategy company Doing Words. Jones was the lead investor in an angel round that raised a further $240,000 for the company in return for 15 per cent.
When the company enrolled in Startmate, Downie says “we were probably undervalued but we were really keen to get into the program”.
Although BugHerd was still “pre-revenue” in July 2011 when the angel investment round closed, he reckons the six months of development work and enquiries from potential customers that had begun to flow in were two factors that contributed to the rise in the value of the company.
Finally, in January 2012, BugHerd announced a $500,000 investment from Australian venture capital fund Starfish Ventures. Downie would not disclose the total equity now held by investors but confirmed he and Milosavljevic still had a majority share.
“[BugHerd] is a brilliantly executed product that’s dead simple to use,” Startmate co-founder Niki Scevak says. “The initial customers are really happy and that’s enabled [Downie and Milosavljevic] to raise funding. They want to build a large company for the long term. It has the right ingredients.”
Jessica Gardner
Press Release
February 1st, 2012 § Leave a Comment
Google Drawings pioneer Anthony Glenning joins DesignCrowd board
Australian crowdsourcing company DesignCrowd appoints Stanford University graduates to board and executive team shortly after launching in Australia
DesignCrowd (www.designcrowd.com.au) – an online ‘crowdsourcing’ marketplace that launched in Australia today – is pleased to announce the appointment of Anthony Glenning (who sold his business, Tonic Systems, to Google in 2007) from Starfish Ventures to the DesignCrowd board, and Christopher McNamara (a recent graduate of Stanford Business School) to the position of Chief Operating Officer. The appointment of Glenning and McNamara coincides with the launch of DesignCrowd’s Australian crowdsourcing service and follows shortly after its acquisition of US business rival (Brandstack) in December.
Both Glenning and McNamara attained post-graduate degrees at Stanford University. Glenning graduated from the Electrical Engineering Faculty in 1992 and McNamara completed his MBA from the Graduate School of Business in 2009. Prior to joining Starfish Ventures, Glenning lived and worked in Silicon Valley for 14 years. In 1999 Glenning founded Tonic Systems, a company that was ultimately acquired by Google in 2007. He spent the next two years in the Google Docs team before returning home in 2007 and joining Starfish Ventures in 2010.
“I’m really excited to be joining the board of DesignCrowd and about the opportunities ahead for the company. Crowdsourcing is a tremendous space and growing rapidly. DesignCrowd is applying this new paradigm to a huge market, connecting designers to companies from all over the world. Despite DesignCrowd’s fast growth, the potential opportunity has barely been tapped,” said Glenning.
McNamara who studied Bachelor of Commerce at the University of New South Wales and recently completed his MBA at the Stanford Graduate School of Business joins DesignCrowd as its new Chief Operating Officer. McNamara said, “It‟s a great time to be joining the business. We‟re really well placed to take advantage of the tremendous growth in demand for crowd-sourced services. Right now, I’m focused on building an international team which will help us reach more people than ever before.”
DesignCrowd founder Alec Lynch said, “As an Australian business trying to grow in the US, it’s fantastic to have Aussies with experience in Silicon Valley, returning home and joining our business. Australians talk a lot about a ‘brain-drain’ but this is a good example of a ‘brain boomerang’.”
The appointments of Anthony Glenning and Chris McNamara reflect DesignCrowd’s appetite for fast- growth coupled with an international outlook. Lynch said, “We’ve just opened a new office in Surry Hills that’s big enough for over 30 staff and we expect to hire our first US employees in the coming months.”
Contact Chris McNamara, +61-402-945-323 chris.mcnamara@designcrowd.com
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About DesignCrowd
Launched in January 2008, DesignCrowd Pty Ltd is a leading crowdsourcing company that operates a number of online crowdsourcing marketplaces including BrandCrowd.com, DesignCrowd.com, DesignCrowd.com.au andDesignCrowd.co.nz. The platforms enables buyers to post a design contest or a logo, website, print orgraphic design project on the DesignCrowd network and select their favourite design of hundreds received from designers around the world. DesignCrowd’s business includes users in 159 countries including over 50,000 designers. In 2011, DesignCrowd received a $3M of investment from Starfish Ventures.
About BrandCrowd
BrandCrowd (formerly Brandstack) was launched in April 2008 and is the world’s largest marketplace for ready-made brands and logo designs. BrandCrowd helps logo designers monetize their unused logo designs, brands and domains. BrandCrowd is owned by DesignCrowd.
About Starfish Ventures
Established in 2001, Starfish Ventures is an Australian owned venture capital fund manager seeking superior returns through active investment in innovative technology companies. Starfish Ventures has over $385 million in funds under management and has made investments in over 40 companies to date.
Starfish Ventures seeks investments in emerging Australian businesses across all technologies sectors including information and communications technology, biotechnology and life sciences, industrial technology, and cleantech. For more information go to www.starfishvc.com
DesignCrowd // BrandCrowd Contact
Chris McNamara, chris.mcnamara@designcrowd.com
Ph: +61-402-945-323
Starfish Ventures Contact
Katya Baxter, Katya@starfishvc.com
Communications Manager, Starfish Ventures
Ph: +61-3-9654-2121 or +61 438-123-356
