Why don't Australian businesses get funded?

[PeterR]

OK, I might be wrong, but is there a lack of funding for Australian businesses?

I heard some Aussie web startup Bugherd got 500k funding (that's what, roughly the price of a small house in Sydney?), and they are the cream of the crop. Color (the best funded US startup) got $41 million, and I don't think their product was as well advanced.

To me, it's no wonder Australia has lot of innovations (i.e. penicillin, powered flight, pacemakers, some ultrasound stuff, IVF, cochlear implants, the wine cask), but not a lot of innovative companies - Australian inventors won't have the resources to turn an idea into a business.

I'm not sure why. Maybe it's just a pre-globalization thing - there's was no point making stuff in Australia, because overseas competitors would win in their markets, then crush you with economies of scale.

It's not a personal whinge - I'm not looking for funding, but it kind of bothers me anyway.

[JamesMillar]

Peter this is an interesting topic and you aren't alone in your thoughts - the Australian early stage funding market is pretty ordinary and much of this problem comes down to supply and demand for equity finance in this category. We simply have a much smaller pool of available funds for investments with this risk profile and as a result is that deals are pretty thin. I don't have the per capita adjusted numbers but I'd hazard a guess that the US market pumps a disproportionate percentage of funds into this space.

The worse part here is that the founders invariably have to accept less favourable deal conditions which effects their personal reward. Supply and demand I'm afraid.

[Khalid Adam]

Consider crowd funding. use the money as seed capital then approach the more conventional sources of funds like VCs, angels, banks, mezzanine, etc

13 Crowdfunding Websites to Fund Your Business

TOP 10 CROWDFUNDING WEBSITES FOR ENTREPRENEURS

Comparison of Crowdfunding Websites

http://www.pozible.com/

[JamesMillar]

Crowd funding in Australia isn't a viable solution unless you're in the creative space and / or unless your after small dollars (less than $10k). Pretty much the same in the US - the funding concept does not address the needs of either the investee or the investor. Really if you are embarking upon the startup journey and can't get together $50k to $100k of your own funds then you really need to rethink the model. If it’s an IT startup founded by a tech student that has no money and no costs then it may be viable to bootstrap to an early stage (or maybe a web only retail business).

There are some emerging micro business funding solutions in the US (and now here but only really in IT) but it’s still a vacant space and for a reason. It’s very high risk market and the small placements don't generally justify decent due diligence budgets.

[Khalid Adam]

Might be worthwhile to invest in:

Crowdfunding formula

It's by and investment banker and angel investor. See for yourself. In my experience, the issue is always about execution and not the tool itself.

$97 is worth the investment. You will learn alot as i have. My second degree was in international finance and the one thing they did not teach me was how to attract hungry investors. Had to learn this from my courses on business growth strategies.

Position yourself with a strong message and you will get support form anywhere and everywhere. If you don't know how to, get someone to do it for you.

It comes down to strategic marketing which most business owners have little to no experience in.

My point is that there is more money than ideas and talent even in this economoy. don't wait for the government to step up.

[adapt2change]

I think investors in Australia are much more conservative than in the US, meaning that even on a per-capita basis, there is far less money available for high-risk, high reward investment such as funding startups outside of established industries. Want to start a coffee shop, no worries. Just don't try and do anything that hasn't been done before.

What little high-risk money is available in this country is generally sunk into mineral exploration at the moment.

By contrast, wealthy individuals in the US have a well-established culture of investing some of their money in risky early-stage ventures. The very existence of Silicon Valley owes itself to this every bit as much as the ingenuity of the technology entrepreneurs themselves.

A colleague of mine once joked that startup funding in Australia is all about raising the funds for a flight to San Francisco. Sad, but one only has to look at the history of Australian inventions to see more than a grain of truth in it.

Cheers,

Michael

[PeterR]

Thanks, I've seen crowd-sourcing, and it's a nice idea, but I'd be afraid it looks like an attempt to skirt securities laws (but I'm not a lawyer). It seems to work best with designs - getting hardware (usually niche "toys" like iPhone covers) actually built, or movies shot. I can't see it funding much R&D.

I'm looking at this from a positive perspective, though. I think it could change, because we now have richer neighbors to trade with. China and India are emerging as better trade partners than the US, and we are pretty close (geographically). And business is much more international now - Australian companies don't have any massive disadvantages (except our high wages, high dollar, and their volatility).

As I see it, we aren't crippled by "the tyranny of distance" anymore, and our investment and startup landscape just hasn't caught on.

[JamesMillar]

I think that's particularly true of tech companies which is part of the reason IT startups are so hot at the moment. They offer massive upside because of their general global potential.

Take www.planhq.com as an example. Founded and developed in New Zealand, now owned and managed in / from Australia, hosted on servers based in the USA with a subscriber base that is spread all over the world (about 5% Australia, 50% USA, and 45% spread across Europe and rest of world).

[The Infotainer]

if you create a product- unless every single Australia is going to buy it- it is not worth investing in (you know what I mean)

on the other hand if you are planning to export something and make money for Australia, their are 1 million dollar grants from the government in fact there are over 400 grants for exporters

Australian government will help fund you if you make Australia richer

[FundingInfo]

I agree with many of you, there is a smaller amount of funding resources in Australia which has pushed many web/tech startups overseas. However, I have heard about a company in Brisbane - SalesMonkey (www.salesmonkey.com.au), who work with startups in the web/tech space helping to drive the sales and marketing side of the business. They also offer services to connect businesses with investors in Australia and overseas.

I found out about them from a friend at Kondoot who are using SalesMonkey to raise $12m in capital. Might be worth a look if you are looking to raise capital...

FundingInfo