A number of tech bosses and startup founders have paid out Australia’s venture capital sector, with Freelancer CEO Matt Barrie calling the sector “stillborn” and Covata chairman Trent Telford comparing it to junior bankers.
There have a lack of sizeable funds ready to invest, a lack of experience among some investors and fund managers – and, possibly worst of all, a problem with returns.
“The accurate statement would be that venture in Australia, historically, has failed to deliver,” AirTree Ventures boss, Daniel Petre told Business Insider.
“That’s mathematically true,” he said, adding “The total return for venture in Australia in terms of tech has been like zero or less than zero.”
AirTree has raised $60 million this year, and has already looked over some 30 businesses. They haven’t committed to any investments yet but are focussing on revenue-generating startups, with a keen eye on market-disrupting ideas in the finance and real estate sectors.
Petre said the biggest issue with Australian VC’s was lack of experience. In the US many funds have an “entrepreneur in residence” who understands both tech and startups.
“I would argue there hasn’t been enough experienced investors building funds, people like us who have run businesses,” he said.
“There hasn’t been a lot of that repetition. People are raising money without that experience of how to build technology businesses and funds.”
But the quality of funds that are active in Australia’s tech sector is improving.
Pointing to Square Peg Capital, Blackbird Ventures, One Ventures and Accel Partners, Petre said, “There’s more money coming in.”
“There is a newer breed of more experienced, seasoned, fund guys who aren’t just the investment banking types.”
However, there is still a gaping funding hole in the middle.
“There’s been more money at the seed level then at the growth stage,” Petre said, adding his new fund which has just raised $60 million is focussing on revenue-generating startups.
Startups with good ideas won’t have issues raising in Australia but “if you’re trying to raise $50 million that’s a little harder,” he said. “There’s not a lot of people funding that.”