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Venture Capital Carries A Huge Amount Of The R&D Spending In Australia

Getty / Sergio Dionisio

Venture Capital-backed firms spend more on research and development than industry peers, and while they only make up 0.01% of GDP they are responsible for around 10% of business R&D spending in Australia.

That’s according to a new report released today by the Australian Private Equity & Venture Capital Association, which said the research proves the VC industry was vital for true innovation in Australia.

“Research is in the DNA of VC-backed companies and they continue to invest more as they grow. Ten of the largest VC-backed companies alone spent $1.4 billion in R&D between 2005 and 2011. Such companies are crucial to creating new and sustainable jobs as we grapple with the realities of the Asian century,” said AVCAL chief executive Dr Katherine Woodthorpe.

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In the Federal Budget unveiled earlier this month, $350 million was earmarked to help foster Australian R&D, funding which AVCAL is confident would remain if there is a new government in place after the September 14 election.

Woodthorpe told Business Insider AVCAL has met with the Federal Opposition, and while she declined to disclose the outcome of those talks, she said the VC industry, unlike some sectors of the business community, “really does enjoy bi-partisan support,” as its importance to the economy is something understood by all sides of Australian politics.

Source: AVCAL

“I think it is clear both side of government really understand Australia’s future needs more than a mine to sustain it. Investment in early stage companies and new economies is going to be something that is critical to our future.

“They [both sides of Australian politics] have been very supportive of the industry and what we are trying to achieve.

“Already, many of our current leading technology and life science companies have been created via VC backing, for example, Seek which is now the largest online job-listings business in the world, Cochlear and SIRTeX were all reliant on VC funding in their early years.

While successfully VC-backed companies could be life blood for the economy, picking up some of the slack as the mining boom draws to a close, Woodthorpe offered some advice for entrepreneurs who are looking for capital.

“There are far more ideas an opportunities than there is capital to go around.

“The other thing that would be a benefit is letting entrepreneurs know that this is the odds they are up against.

“They need to make sure they have done as much of their homework as possible, to make sure they get through the early stages of due diligence.

Venture Capitalists see hundreds of proposals, and an idea truly needs to be unique to entice and investment, Woodthorpe explained.

“They really do need to do some work, to make sure their product in unique and it fills a market.”

Now more than ever, it is also essential that any idea is not too localised. If it only works in Australia, chances are it won’t be as attractive to investors.

“Now of course that doesn’t mean the US, it could be China or India.

“The tyranny of distance for Australian entrepreneurs has changed, you used to have to get on a plane and go to the United States and you had to look like Americans. And now people can operate great business out of Australia that service the world.”

Now read: Federal Budget Has Millions To Support Australian Startups But Don’t Expect Any Of It Soon

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