Notes from The Valley: Local start-ups need Australian investors to show faith

Published 02 April 2013 09:55, Updated 10 April 2013 07:42

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Notes from The Valley: Local start-ups need Australian investors to show faith

Phil Morle, of web venture capital company Pollenizer, says Australian investors need to back successful local start-ups to stop profits heading off-shore. Photo: Tamara Voninski

Australia’s start-up industry is stepping out of the shadows and demanding the world’s attention.

While we might be considered an emerging market by global investors who see our start-ups as offering great value without the Silicon Valley price tag, this is not an insult to the quality we are producing. Rather it is testament to the fact we are being noticed and, more importantly, we are being admired.

A leak exists in Australia’s start-up ecosystem – we lack investors

Despite this and our stand-out successes, a leak exists in Australia’s start-up ecosystem – we lack investors. This deficiency is causing our best start-ups to seek funding overseas or not achieve their full potential.

One of our biggest success stories, Spreets, which was sold to Yahoo!7 for about $40 million, had large European investors behind it. And that means a large chunk of that $40 million left Australia.

Two of our other biggest start-ups have also taken overseas investment. Both Atlassian and 99Designs, world leaders in their markets, have received significant investment from Accel Partners Venture Capital. They both had strong teams and strong revenue to support growth, and when the time came to take investment, they had no choice but to seek top-tier interest from the technology capital of the world, Silicon Valley.

I don’t pretend to imagine Australia can match the depth of experience and breadth of networks of Accel. We can’t. Not yet. We never will if we don’t build towards it. Accel is the product of 60 years of investment, growth, success and reinvestment. But also 60 years of lost investment, floundering, failure and, despite that, reinvestment.

Successful investors get that way by being experienced, and they get experienced by making investments. This takes some courage to start, but with patience and learning you’ll get there.

The pool of good investors in Australia is growing but it needs to be much bigger, more adventurous and more supportive. Without this, we will never be able to compete with global investors.

If we keep investing, that value can be local too. I wait for the day when we have a local entrepreneur, a local incubator, a local investor and a local acquirer. Then we can just keep doing laps and laps and get bigger and bigger.

Make a long-term investment in local start-ups.

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