VCs Say Australian Start-Up Funding Is Improving: Here's Why

Peter Zurek, Shutterstock

Australian technology start-ups have long looked across the pacific to Silicon Valley with envy.

Entrepreneurs bemoan a shortage of early stage capital and mentors, while policy makers and market researchers blame a risk-averse culture for holding Silicon Beach back.

But the situation is improving as the Australian technology industry matures, venture funds told the IBM SmartCamp conference in Sydney yesterday.

According to Commercialisation Australia CEO Doron Ben-Meir, there’s plenty of money going into local businesses but investors tend to back more traditional ventures like mining:

Risk is in the eye of the beholder. So the more you know about the business you’re investing in, the less risk you are going to perceive, versus someone who has thought less about the business.

So the problem we’ve had, particularly with hi-tech innovation in Australia, is there are relatively few people who have succeeded in building those types of businesses, who are then able to plough back.

Traditionally, historically, people who have made money in Australia are those who have done so with less technology-intensive businesses be it mining, media, retail or property development.

When that’s your background, for you to then look at a tech deal and feel that it’s a good bet is much less likely. You’re likely to seek opportunity where you understand the subject matter.

It’s a risk-averse mythology that goes around Australia, because we are actually very good risk-takers; we’ll bet on anything in Australia.

The growing list of Australian tech entrepreneurs that are putting their own money into new start-ups includes Spreet’s Dean McEvoy, UberGlobal’s Michael McGoogan and Atlassian co-founders Mike Cannon-Brookes and Scott Farquhar.

Southern Cross Venture Partners founding managing director Bill Bartee said it was still too early to identify any “serial entrepreneurs” but the local start-up ecosystem was moving in the right direction.

The cycle hasn’t been as long as it has in the US, so you don’t have that man or woman who has done three or four companies successfully.

What we do have is people who have done one company successfully and are on their second or third. For the first time, we are seeing some of the recent entrepreneurs who have made money plough some of that back into the ecosystem and this is a good thing.

Bartee added that Australian tax rules currently made working for a local start-up far less attractive than in the US, but both major parties were working to improve rules pertaining to employee share ownership plans (ESOP).

In July, shadow treasurer Joe Hockey promised to abolish the tax rules that he said had put a “massive handbrake on start-ups” should a Coalition government come into power tomorrow.

The Labor Government also has been consulting with the industry about potential changes to employee share scheme taxes but Treasury put the review on hold when it entered into caretaker mode in the lead up to the election.

Now read: Apple’s New Bid To Trademark ‘Startup’ In Australia Needs An Incredible Amount Of Evidence

Follow Business Insider Australia on Facebook and Twitter

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.