Australian technology companies’ success in the US

Starfish Ventures portfolio companies make the Inc. 500:5000 fastest growing companies in America list (2011)

Every year, Inc. magazine awards the distinction of being named the gold standard of entrepreneurial success, only to the very best private firms in America. The ranking is based on revenue growth in the 4-year period from 2007-2010

In 2011, Innovative Retail and Health mobile communications provider, 5^th Finger International is ranked #168. The PDF Software developer, Nitro PDF, is ranked # 699 (coming in at #57 in the Software Category  and  #27 for San Francisco based firms)

5^th Finger International’s 2010 revenue was 2.6million which is a 1,752% growth over 3 years. (reference: http://www.inc.com/inc5000/list/2011)
In 2007, NITRO earned $1.6m, increasing to $9m in 2010.

About Nitro PDF

started in Australia in 1997 as ARTS PDF selling a range of Adobe Acrobat plugins. However over the years, Nitro came to the conclusion that they could deliver a better solution to Acrobat itself and at a more economical price point. In 2005, Nitro Professional was launched as the first true alternative to Adobe’s offering. On the back of their success, Nitro opened a US office in 2007 and has continued to grow ever since.

Starfish Ventures investment director and Nitro PDF director Anthony Glenning says “It is wonderful to see Australian start-up achieve such growth and recognition on an international stage. Australian firms have a market size disadvantage from the beginning, so to crack the market in the US and be recognised as one of the fastest growing US companies is a great credit to Nitro.”

About 5th Finger

5^th Finger is one of Australia’s most recognised mobile marketing companies. Over the first half of the last decade the 5^th Finger team grew a dominant business in the Australian mobile landscape, leading to the acquisition of the company by Ninemsn in 2006. In 2007 part of the team branched out and took the 5^th Finger story to the USA, establishing a standalone business with the core technology and brand that had demonstrated such success in the Australian market.  The company opened an office in San Francisco and is now a leading provider of mobile marketing technology and services to major brands, retailers and healthcare providers across North America.

Malcolm Thornton, Investment Director at Starfish and director of 5^th Finger believes that “The commendable growth of these Australian firms as highlighted by Inc. 500:5000 is important example of the importance of VC investments in Australia. With the investment capital and support services Starfish could provide, the 5^th Finger team were fully equipped to bring their market experience, standout technology and entrepreneurial enthusiasm to this major global market.”

For more information on Inc. 500|5000 - http://www.inc.com/inc5000/welcome

For more information on 5th Finger International - http://www.5thfinger.com/

For more information on Nitro PDF -http://www.nitropdf.com/

10th Anniversary Celebrations

It has been a festive month at Starfish, celebrating the 10th year anniversary for Starfish Ventures.

Here are some happy snaps from the occasion

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Happy 10th Birthday Starfish!!!

Smart Question – “How can I convince an investor that I’ve got a long-term proposition?”

Read the Smart answer by Starfish Ventures at StartupSmart

Investment Director Ivor Frischknecht will present at The Clean Technology Revolution, China and Australia Conference

Ivor Frischnecht will present at

~The Clean Technology Revolution, China and Australia~

Workshop, 8 September 2011

The workshop will focus on two themes:

• Adopting a low carbon pattern of development in China and Australia
  Debate the necessity, and scope, of deeper structural reforms to each nation’s economy in tackling rising energy use and carbon emissions as well as realising the opportunities of green growth
• Australia, China and the Clean Technology Revolution
  Examine the development of ‘low carbon’ clean technologies in China and the implications for Australia with an emphasis on identifying potential partnerships and complementary relations in the energy and clean-technology sectors.

http://www.vu.edu.au/events/implementing-effective-climate-policies-international-conference-and-workshop

Ivor will look at the topic of  ”Facing Commercialization of Clean Technology”







Starfish Celebrates 10 Years!

Starfish Ventures is celebrating its 10^th Anniversary.

We sit down with the co-founder John Dyson, to get some insights on what was and what is still to come

Q. How has the venture capital industry changed in the last 10 years?

The World has changed!

It has been a remarkable ten years –
we have seen the tail end of the burst of the internet bubble, the Global Financial Crisis, the boom of social media and most recently the volatility in the international markets.
We have seen first-hand the venture capital industry throughout the world going through a period of restructuring and consolidation – we would expect that there will continue to be a period of constriction in the industries – as there has been a flight of capital to quality and well respected VC managers – with large number of venture capital managers being unable to raise additional capital.

Two days are never the same – it has been a wild journey – a journey that we are still on – and who knows where it might end!

But despite these changes the spirit and the enthusiasm of entrepreneurs continue to shine through in their quest to establish new companies that can compete on the international markets.

We were lucky at Starfish Ventures that we raised our 2^nd major fund in 2007 – as this has allowed us to continue to invest at a time when there has been in reduction in the availability of capital.

The cost of establishing an ITC is a fraction of what was 10 years ago – due to offerings such as SaaS, reduction in the cost of hardware, cloud computing etc – however this is offset by the increasing cost of commercialising life science opportunities.

Q. Where do you see the industry in another 10 years?

I am very optimistic about the industry and feel confident that in another 10 years we will have an industry that offers entrepreneurial capital across the life span of a company – from early stage via friends and family – seed stage through angels and angel networks – and then later stages supported by institutional capital via venture capital managers.

The industry in another 10 years will have an increasing number of success stories to point to – mainly in the IT&C, life science and cleantech industries. These success stories will act as a catalyst for more entrepreneurs to establish new companies, more academics to commercialise their research and more experience managers to leave well paying jobs or expatriates returning to Australia to work for these companies.

Australia will be seen as an attractive location for foreign investors to invest capital leveraging the benefits of starting companies in Australia and using Australia as a base to pursue global opportunities.

What is your vision for Venture Capital in Australia?

An industry that supports the continued development of the technology sector in Australia by providing capital and hands on management for Australian based technology companies – and through this process assist in building a pipeline of globally successful technology companies.

An industry that is sustainable and generates attractive returns for its investors and is supported by local and overseas institutional investors.

Q. How does the venture capital industry in Australia compare to the rest of the world?

Our industry is young and in terms of maturity and development is some way behind the more mature industries of the US and Europe.

There is a natural partnership between the Australian and international markets.

Our approach to investing in Australia is to capitalise on the inherent advantages of starting a company in Australia and achieving initial market engagement – and use this engagement to expand into the global markets. It is at this stage that it is logical for Australian companies to raise international capital from a well regarded VC and tap into the managers connections and relationships which should assist the companies in gaining traction in the international markets.

Q. What are some of the highlights over the last 10 years?

Highlights – too many to remember.

No doubt working with our investees and the great support that we have received from our institutional investors are real highlights.

It is a great honour and a privilege to manage other people’s capital – and the confidence that our investors have shown in us has been fantastic.

It has been a long journey – for us and for many of companies we have yet to reach the finish line. It is not industry where you have success over night – it takes many years to build great companies. We remain motivated and committed to building great companies and deliver attractive returns for our investors.

Sometimes it feels like our companies need to take a couple of steps backwards before moving forward – there are many pot holes and challenges along the way. Wherever possible we try to pass on our expertise and experience to our entrepreneurs to give them the best chance of navigating through these challenges.

Q. What do you enjoy the most about what you do?

There is no doubt that the most exciting and stimulating aspect of our job is working with young enthusiastic and excited entrepreneurs and helping them make their dreams come true. Their enthusiasm is infectious and it is very easy to get wrapped up in their excitement.

Ask a Venture Capitalist

Here at Starfish we like to demystify the world of venture capital, and are happy to answer questions.

Thanks to a question from Startup Smart, this week Investment Director Anthony Glenning sheds some light on:

Proof of Concept: What is? Why do you need it? And how to attain it?

Anthony Glenning

 Each potential investor may have different questions in mind when they asked for a ‘proof of concept’ (POC), but I’ve asked for many POC’s and I can certainly tell you what I am thinking.

In a nutshell, having a POC is about risk mitigation. When an entrepreneur pitches an opportunity there are always a number of premises that underpin the rosy outcome. Premises are often in the areas of:

• technology (“once I develop cold fusion”),
• commercialization (“I just need to scale production to get the COGS down”),
• customer acquisition (“my existing users will tell 5 of their friends”)
• and/or business model (“I’ll use a SaaS model and charge by the month”).

Each premise generally constitutes a risk factor. The point of a POC is to reduce or eliminate the risk associated with the premise not actually being true.

And by risk, I mean risk as perceived by the investor. Everyone comes to the table with a different set of experiences and knowledge base. Someone with a good understanding of JavaScript and HTML5, may not be that concerned about the development of a 3D real-time visualization tool in the browser, but much more concerned about the market adoption of such a tool for house design by architects. However another person, may know of the burning need within architecture firms for collaboration around design, but have no idea whether such a thing is possible. They would each assess the risks around those premises differently.

When I ask for a POC, generally I am asking to see a demonstration of an aspect of the business to reduce my perceived risk around one or more premises. Most often a POC will centre on a technological risk. So for example, if your pitch was to start a business that would solve the world’s energy problems through a cold fusion reactor, then I might ask to see a POC around generating a small amount of energy from a cold fusion reaction, such that the energy input was less than the energy output. For me, I would be willing to accept the premises that (a) if you could show this, then there would be market demand for such a product, and (b) if it can be done on a small scale, then it can be done on a large scale.

But sometimes a POC might focus on the business model. For example, before Google it was not clear that if you offered advertising to the long tail of advertisers (those with an ad spend too small to justify a sales phone call, let alone a sales visit and therefore did not traditionally advertise), whether there was significant revenue there. There was! So now while people understand the long tail phenomena better, an investor might still ask for a POC that illustrates the value of the long tail for a given business in a particular sector. In this case the POC might be to run the business on a very small scale – say just within one suburb – and show the revenue potential justifies investing in growth.

To conclude, if a potential investor asks you to demonstrate a POC, then your first order of business is to ask what particular concerns that the investor has (if they haven’t already told you), and think of a POC or trial or pilot program that would mitigate that risk, including defining end points. For savvy investors, most will share the same concern, so a well constructed POC will be useful for all your fund-raising, and, you never know, you as the entrepreneur may learn something that improves your offering too!

Cleantech Investment Director Ivor Frischknecht will present at the 2011 Climate Change and Business Conference

Starfish Venture’s Ivor Frischknecht will be presenting on cleantech investment opportunities in Australia & New Zealand as part of the Climate Finance session of the 7th Australia – New Zealand Climate Change & Business Conference, to be held August 1-2 in Wellington NZ.

The two day business event offers a comprehensive program on domestic & international policy, NZ ETS learnings, transport, geosequestration potential, low carbon cities, product carbon footprinting, carbon communication best practice.  For further details go to www.climateandbusiness.com

EnerNOC buys Energy Response: a Starfish perspective

Ivor Frischnecht – Investment Director

Today Starfish announced the sale of renewable energy portfolio company Energy  Response to EnerNOC, the world’s biggest demand response (DR) company. It’s a very good result for both Starfish’s and Energy Response’s investors.

However, what I’m really excited about is the potential for DR, given how critical it is to the rollout of renewable energy. I’d like to share my excitement and explain why Starfish is likely to make more investments in this area.

What is DR? It is users of energy (demand) reducing their use of energy temporarily at a time of peak use or other grid emergency. Usually we’re talking electricity, but it could be gas, or water for that matter. I’ll stick with electricity for now.
Since DR can drop aggregate demand on a network by 10-20%, it can greatly delay the need for costly new infrastructure which is behind Australia’s double digit annual percentage increases in electricity rates. Even more important, it enables intermittent renewable energy, such as wind or solar to become a substantial portion of electricity generation without storage—usually prohibitively expensive—or gas-fired backup. No wonder renewable energy isn’t cost competitive with fossil fuels if one has to build a gas-fired power station alongside every solar farm! In contrast, DR allows demand on the grid to adjust in the event of a sudden lull in the wind or a cloud passing over a solar farm.

How does DR work? Today it is limited to industrial electricity loads being turned off or back-up generators being turned on. The grid doesn’t care which of these two occur; either way the load has dropped off the grid. This activity can last for seconds or hours. Mostly DR consists of loads being turned off: cool rooms, electric steel furnaces, large pumps, ore crushers and industrial heaters. However, commercial buildings and data centres (a rapidly increasing portion of society’s computing resource) have backup generators that are turned on regularly for maintenance anyway; they might as well be turned on when there is some value to the grid.
In the near future, once smart meters are more prevalent, households will also be able to participate in DR programs by temporarily reducing air-conditioning or heating for example. They will be compensated for this. All sorts of technologies and services are being developed to allow households and businesses to remain in control.
A lot of the intelligence in DR is in the aggregation process; a mini steel smelter may only be able to turn off for an hour before the metal starts solidifying, for example, and yet the grid company requires a four hour shut down; a large water pump may be on or off, in an unpredictable manner; and a military base cannot participate in a DR program during an emergency, but is happy to do so the other 98% of the time. EnerNOC, Energy Response and others like them are experts in delivering a guaranteed DR capacity to electricity networks by finding, managing and appropriately aggregating industrial and commercial loads.

Why isn’t there more DR? Two words: it’s coming; but electricity is a conservative industry and change doesn’t happen quickly. The rules governing electricity networks determine the extent to which DR is supplied. Most North American networks support DR and there has been a competitive market there for perhaps five years. Western Australia and NZ both have very active and valuable DR contributions to the grid which are growing rapidly. Australia’s National Electricity Market (NEM) does not have DR-friendly rules, and the agenda is largely set by generators (which have little incentive to support demand reduction), so political impetus will be required to allow DR to make a significant contribution. This is a requirement if we are to adopt renewable energy at any great scale on Australia’s principal electricity network.

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