Tuesday, November 15, 2011

Australian IT and US Venture Capital Investment

Picked up an Venture Capital investment article in the Australian Age earlier this month regarding investment in Australia by US VC's and how the dollars are increasing. The only Silicon Valley VC I'm aware of that has offices here and Australia is Southern Cross run by John Scull, Larry Marshall & Tristen Langley.  There are Australian VC's but there aren't very many and the competition is much stiffer in the US - if you take out the tyranny of distance.

One of the tenants of the article is that Start-ups don't need to move to the US to succeed. My feeling on that one is mixed.  I think that initially an Australian startup can gain traction and sales in Australia (in fact I often advise they get sales in Australia before looking for US capital) but in order to really grow big they will need to have office(s) in the US in order to access the market just like they always have.  One of the drivers not mentioned in the article is that US Venture capitalists like to have their investments close at hand.  They want this so they can keep an eye on them and their business network has the greatest potential to help the fledgling company as much as possible.

The other interesting note was the authors idea that many US start ups were overvalued and therefore Australian start ups were more attractive. I don't know if that is actually the case but in my experience the big hitters Sequoia Capital, DFJ, Kleiner Perkins Caufield & Beyers, Khosla Ventures, LightSpeed Ventures etc., have always been willing to look at Australian companies as long as they have a disruptive idea and they are properly prepared and introduced.  My hit list of items necessary for an Australian VC to raise US capital includes:
  • Disruptive technology or service with lots of room to grow (Most VC's want home runs - more than singles)
  • Good core management team
  • Passionate Leadership - investors believe management can do it
  • Great Elevator pitch - You're able to quickly get to the "I get it" stage when describing what your product or service does - to the buyer as well as investor
  • Have sales already in place with customers that are happy to sing your praises
  • Pitch Deck - 10 slides - Short, Sweet, no fluff - the Pitch deck should be the starting point to great conversation not explain everything
  • Know that no VC will sign any non-disclosure agreements to hear your pitch
 The Age

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