11 March 2016
The Australian venture capital industry is reviving. That’s the consensus from the industry at the Annual AVCJ Private Equity and Venture Forum 2016, held in Sydney recently.
After a period of negativity the local venture market has seen a revival that mirrors the global appetite for investor exposure to this asset class, says Tim Burroughs, Managing Editor, Asian Venture Capital Journal.
“The success of a company like Atlassian has had a demonstration effect but it must be remembered this company had a 10-year history before listing, and was no overnight success,” he added.
Key observations on the venture capital sector included:
The conference speakers agreed the Australian government’s R and D tax credit system was a major plus for the sector.
Managers of private equity funds said there was increasing awareness by start-ups in Australia seeking capital and of the importance and benefits of ‘intellectual capital’. This included sourcing capital from seasoned VCs who add more than just cash to the start-up business. The knowledge, experience and guidance that comes with this form of capital can be invaluable.
This is something that does not come from crowd funding and IPOs and back door listings, it was noted.
The risk with the latter was that mum and dad investors do not always understand what they are investing in. They don’t fully understand the risks, and in searching for the next big thing they may simply be attracted to a single IPO.
Professional VCs have the benefits of portfolio theory, that is, they spread their investments over a range of start-ups and technology companies in the knowledge that not all will succeed.
A better avenue for individual investors would be to look larger superannuation funds that can offer exposure to the start-up market or a good listed fund that can also take a portfolio approach to start-ups and fledging companies in the technology and life sciences space.
Another theme vented at the conference was for start-ups not to rush to listing.
It was noted many list too early and listed markets, particularly in Australia are demanding. If companies miss targets the results in terms of market valuation can be penal. Better to seek patient, intelligent capital till a level of robustness has been reached.
There was also a call for more corporate venture capital in Australia with Telstra and the banks some of the few notable participants in this space.
Further good news for the local sector was a noticeable trend for an increase in US VCs focusing on Australia as an investment outlet, reflecting the recognition of the quality of activity in Australia, Australia’s excellent reputation for core science and the increasing competitiveness in the US.
A common refrain was Australian corporates like the idea of innovation but they need to get better at doing it.
The 2016 AVCJ Australia & New Zealand Forum, was held in Sydney hosting global and local leaders speaking on upcoming expectations in investment activity, the opportunities in local private markets, ways to diversify by investing in real assets, and how Australasia benchmarks on the global stage.
About Asian Venture Capital Journal:
Asian Venture Capital Journal (AVCJ) is a renowned magazine and online journal covering the private equity industry in Asia. It has been hosting events in the region for more than 20 years, including the Hong Kong Forum, the largest gathering of institutional investors in Asia. The firm has been at the forefront of the industry’s development by offering country-specific events across the Asia Pacific region over a number of years.
For more information, please visit www.avcjausnz.com
Simrita Virk, at Shed Media
Phone: 02 9247 8533