Help starts at home
Help starts at home - Griffith Hack
| 25 May 2012 | ||||||||||
Financial and commercial support for startups in Australia abounds | ||||||||||
| So many voices bemoan the lack of funding available in Australia to those chasing their entrepreneurial dream. The voices have become so loud and the views so frequently expressed that they often go unquestioned. They frequently claim that going abroad, particularly to the supposedly greener pastures of the US and Silicon Valley, is the only option available to ambitious Australian entrepreneurs. But an extraordinary amount of support is available to startups in Australia. Sydney Angels is one group leading the charge. Sydney Angels’ members invest in innovative early-stage companies with high growth potential. Sydney Angels Committee Members – Vivian Stewart, Richard Dale, Mathias Kopp – all believe that Australia has a lot to offer startups, but this is sometimes overlooked because of the draw of larger markets overseas. Richard Dale comments that, “Entrepreneurs are drawn to the US because they believe there is easier access to funding. This perception is driven by the publicity given to US fund raising success stories and the sheer scale of the business ecosystem relative to Australia. | ||||||||||
Funding not definitively easier to come by in the US | ||||||||||
| Vivian Stewart successfully co-founded one of Australia’s first ISPs and is an ICT industry veteran. He commends startups who chase the larger markets of US, Europe and Asia. However, he says that moving overseas is not mandatory to secure early stage capital investment. Contrary to the perception that funding is easier to come by in the US, Stewart argues the opposite is true. “Because of the sheer scale of the entrepreneurial ecosystem in the US there is more funding available in real terms, but there is also an immense amount of competition to secure that funding. Australian companies who want to enter the US market can make themselves far more attractive to US investors by proving the business locally before making the jump.” Certainly, local success stories don’t receive the same amount of attention. Bubble Gum Interactive is an independent children’s entertainment studio based in Sydney. The venture received startup funding from Australian and regional angels and investment groups, government grant programs including Commercialisation Australia, Screen Australia and the NSW Interactive Media Fund. The company also received the first investment from the Sydney Angels Side Car Fund. The business is successfully establishing itself. This level of government funding is not unusual. Tim Staley, patent attorney and Principal at Griffith Hack, a supporter of Sydney Angels, has a number of startup IT clients who have benefited from generous government support and Sydney Angels funding. Paul Gray, Chief Marketing Officer and Community Director of Bubble Gum, notes that he and his team were all highly experienced in both the kids entertainment sector and in business, giving comfort to prospective investors. He speculates that for unproven talent, perhaps without adequate business credentials, securing funding may have been more difficult. His own perception is that the Australian business ecosystem is thriving, albeit on a smaller scale than what is on offer in Silicon Valley. In Gray’s experience, “From a very early stage there is support available, both strategic and financial.” | ||||||||||
Success bias masks the fact that raising funds overseas is high risk | ||||||||||
| According to Richard Dale, going overseas for startup funding is “the highest risk strategy available”. Dale has over 20 years experience in management consulting, new venture development, early-stage venture capital, and research and development engineering. He is pleased to hear success stories wherever they occur, but cautions “there are a staggering number of ventures pursued in the US which fail either to secure funding or to turn a profit. These never receive coverage so people’s perception of the opportunity and risk in the US is skewed.” Dale encourages startups to build locally and consider global options as they expand. | ||||||||||
Going abroad can be the right thing – at the right time and for the right reasons | ||||||||||
| Of course, in some circumstances, going abroad can be the right thing. As Mathias Kopp readily acknowledges, for those who can get it, the speed at which capital can be raised in the US is faster. And startup capital beyond $2 million is difficult to find in Australia. With a career spanning financial services, management consulting and business investment in Europe, Asia and Australia, Kopp believes that businesses generally need to be where their markets are. For this reason, companies with a global vision are likely to consider relocation overseas as they expand. However, Stewart argues that decisions made later in business life are often confused with priorities during the startup phase. It is inarguable there is greater venture capital available in the US than in Australia, but this tends to ignore the more generous government support system and growing private investor networks available to startups here. Grants of $50,000 to $2 million through Commercialisation Australia, various state based schemes and R&D tax incentives up to 45 cents in the dollar are all helping to build an early stage ecosystem that can support entrepreneurs locally. Dale goes further and contends that even growth stages can be undertaken from Australia, particularly for online businesses. He argues that seeking venture capital to fund growth overseas does not make relocation abroad inevitable. According to Stewart, “There is no reason why an Australian online company cannot receive local funding, then global funding and have global reach while maintaining substantial operations in Australia.” | ||||||||||
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