Adrian Bunter is an executive director of Venture Advisory, a specialist telecommunications, media and technology financial advisory firm operating out of Australia and Asia. Adrian is also on the Executive Committee of angel investment group Sydney Angels.
David Gonski was definitely right when he told a conference this week that many Australian investors were too focused on seeking short-term returns at the expense of building longer term value and developing innovation.
But he is wrong to believe that there are no pools of funds, and no market of educated investors actively looking to put money and experience behind the next wave of Australian ventures.
As a committee member of Sydney Angels, I would argue that Australian investors are not all as short-sighted as Gonski would have us believe – and many are willing to back long-term investments in the early stage space.
While of course Silicon Valley and the US start-up ecosystem is much more highly developed and has greater access to capital, Australia is by no means a barren market for a start-up seeking investment and assistance with building a business.
It is fair to say that, due to the lower costs required with starting many technology businesses, early stage capital for these businesses often comes from angel investors, rather than venture capital funds.
Sydney Angels, for example, has contributed funding for over 25 early-stage start-ups over the past four and a bit years and are now supported by a $10 million Sidecar Fund that invests alongside members who fund early stage Australian-based ventures.
Admittedly, when we first started as a group, the broad understanding of angel investment in Australia was quite low. But in the past few years, there has been a rising awareness of start-ups here in Australia, and particularly amongst the investment community.
There have also been numerous developments in the space, ranging from improvements in government support via R&D tax incentives and support for tax structures that provide tax-free returns for those investors who invest via Early Stage Venture Capital Limited Partnerships, through to finance and access to expertise available from entities such as accelerators and incubators like BlueChilli, Startmate and Slingshot, angel groups across Australia and from corporates like Optus Innov8 and Telstra.
These large players are backed up by many private investors who are increasingly willing to financially back new ventures.
At Sydney Angels, we’ve seen a trend towards more sophisticated and experienced angel investors joining our ranks, bringing new expertise and insight.
We’ve always been very focused on educating the market – and working to share our knowledge and approach to angel investment. There are significant benefits to be gained by investors from collaborating with other investors by leveraging combined expertise and networks.
As any investor knows, there are a number of risks associated with early stage companies, and raising capital is just one of them. Actually, access to customers and management support can play a stronger role in determining the success or failure of new ventures.
It’s important to remember that backing from investors brings more to companies than just money.
It brings access to a group of people who, besides being passionate about helping companies develop and grow often have significant industry experience and contacts. Sydney Angels members are often successful business people and entrepreneurs who want to help build the next generation of businesses.
Gonski is also right about another thing: there is still plenty of work to do if we want to build a strong and viable early stage ecosystem here in Australia.
As Silicon Valley has shown, success breeds success.
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