Sydney VC Artesian Venture Partners has launched a “crowdfunding” platform that allows investors to tip as little as $1,000 into vetted Australian start-ups.
VentureCrowd launched today with about 200 registered investors and 36 start-ups seeking funds. The launch comes after four years of work and partnership agreements with about 20 incubators and accelerators including Startmate and BlueChilli.
The platform will list what Artesian managing director Jeremy Colless described as “pre-screened” start-ups from the various partner programs.
Registered VentureCrowd investors may choose to buy equity in any start-up on the site, with a minimum investment of $1,000 per start-up. Colless said investors should aim for a diversified portfolio of more than 15 start-ups to mitigate risk.
Australian regulations require VentureCrowd investors to be “sophisticated investors”, defined as individuals who either earn at least $250,000 a year or have at least $2.5 million in net assets.
“Investing in start-ups is risky – 90% of returns come from 10% of companies,” Colless told Business Insider Australia.
“It’s almost impossible to pick just winners, so we encourage investors to build portfolios of 10 to 20 start-ups over a year or two.”
Citing data from the US, Colless said about half of all start-up businesses tend to fold without making any money, while 10% return 10 to 30 times the original investment and the remaining start-ups cruise along without making significant gains.
Many start-ups are overlooked by traditional venture capital funds, which rely on deep analysis to justify tipping $100,000 to $250,000 on a particularly attractive business.
In contrast, VentureCrowd expects to promote more liquidity by having a bigger pool of investors put money into custom “start-up index” funds comprising a mix of businesses.
“The cost of starting up a business now is so low that the traditional venture capital model is not scalable,” Colless said.
“The wholesale [sophisticated] investor market in Australia is large with 207,000 wealthy individuals in Australia sitting on $US625 billion ($684 billion) worth of assets.
“What VentureCrowd will do is provide new avenues of funding for startups, enable a new generation of investors to take an equity interest in early stage ventures that could potentially be the next OzForex, Freelancer, Atlassian or Bigcommerce.”
Earlier this week, Jerusalem-based funding platform OurCrowd announced that it had recruited an Australian team to recommend local start-ups to a similar community of investors, who are asked to put at least $10,000 into each deal.
OurCrowd founder Jon Medved said at the time that Australia would benefit from more funding sources, with the ABS reporting that the nation’s pool of available venture capital fell 4% to $5.95 billion in the year to June 2013.
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