On 22 June AVCAL Queensland hosted a lively Panel session on Early Stage Venture Capital.
Notwithstanding Kohlberg Kravis Roberts & Co recent purchase of Brambles Industries Ltd.'s Cleanaway waste management unit in Australia for A$1.83 billion (US$1.3 billion), a record for an Australian private equity deal, the size of most early stage deals in Australia are really the equivalent of seed funding overseas according to the panellists, Andy Jane (CM Capital), John Dyson (Starfish Ventures) and Ruth Drinkwater (teQstart).
Some definitions from the panellists first: early stage is "5 years away from revenue generation", "a start up, not necessarily with a commercial structure".
Early stage funds allows companies to become "VC investable" not by getting involved operationally but by helping to locate staff with management skills who have experience in commercialisation, mentoring or doing whatever else is necessary.
How many early stage funds are there in Australia? 10 to 12 but with only 6 to 8 actively investing at any one time. How many are there in Queensland? CM Capital, Pioneer Development Fund, Uniseed, Starfish, teqstart.
Many questions were discussed but left unanswered: how do you resolve the mismatch between the returns funds expect and the valuation given by entrepreneurs on their fledgling business? Why are Australian companies selling their technology overseas? Why are the funds so small? Where are the experienced investors?