Venture Capital - Australia
Although the venture capital industry in Australia is still fairly new compared to the United States, the tradition of capitalism in the country has enabled it to grow rapidly in recent years. It has not faced the problems of countries like China that have had to overhaul their entire economic system to accommodate it.
Australia has always been a country with a very sound sense of economic development and investment opportunity. Angel investing has accounted for the majority of venture capital investment in the last century. The venture capital industry in Australia has grown rapidly since the turn of the century. Beginning in 2000, the Australian Government recognized the importance of this emerging industry and began to track it’s results in a Venture Capital and Later Stage Private Equity Statistical Report published by the Australian Bureau of Statistics annually.
A study of the most recent report issued early in 2008 shows that the vast majority of Australian venture capital investments are made in already establish companies seeking major expansion capital. Although venture capital investments are spread over all stages as in the United States, it appears that the venture capital funds are not putting the same emphasis on seed or start-up ventures. This is also indicated in the name of the report which lumps the very common Later Stage Private Equity (LSPE) in the totals while almost viewing it as a separate entity at the same time.
Australian venture capital and later stage private equity funds are generally either corporations or trusts. More than half of them are traded on the Australian Stock market. The funds are called vehicles and the report lists 280 separate vehicles being managed by 186 VC&LSPE managers. The managers are very highly skilled, experienced, and well compensated professionals. The management of multiple vehicles by come managers would indicate a shortage of qualified managers which is indicative of emerging venture capital industries.
There are 137 of the vehicles with investment assets listed from 0-9.9 million while 32 exceed 80 million. Finance and Property investments have moved a bit ahead of manufacturing and utilities as the leading category. Health and Services and Construction are two other areas showing growth while several investment areas have shown declines. An interesting note in the report showed that VC&LSPE managers reviewed 8,769 potential deals in 2007. A total of 1058 of them moved to the further review stage and only 229 were actually converted to new deals.
The overall impression of the venture capital industry in Australia is one of an emerging, but very conservative industry by American venture capital standards. The progressive nature of Australia and its rapid growth gives the impression that the real cutting edge technological start up ventures are still being financed by angel investors. The funds are still establishing themselves and gaining investor confidence by producing more predictable rates of returns. It might be expected that things will change down under as the experience level of the fund managers increases and the pressure of globalization begin to reach this isolated region.