The state of early-stage funding in Australia

Stephen Withers
Tuesday, 29 March 2011 16:00

IT Industry - Development

Seeking funding for your new venture? Or maybe it's time to attract new investors to help your fledgling company grow. Four experienced players talk about the state of play for Australian Internet and other IT companies.

Although the GFC had a big impact on the investment industry in Australia making it harder for startups and other early-stage companies to raise capital, the environment is "pretty attractive at the moment," John Dyson, investment principal at Starfish Ventures told the Funding Connect 2011 event held in Melbourne today.

But Martin Hosking, managing director of RedBubble, stressed the need for a strong business model if a company is to attract investors. He pointed to the recently launched Color.com (a new-generation photo sharing facility), which he said needed rapid and massive uptake to become a success. Acquiring the color.com and colour.com domain names cost the company $500,000, he claimed.

Although Color.com raised $41 million from venture capital funds, "You can't do that in Australia," said Hosking, Instead, you need a clear business plan, a strong customer proposition, and the ability to scale the business and pick up investment as you grow: "a clear, steady path to growth" rather than requiring "a monumental step change" along the way.

A growing amount of investment money is becoming available in Australia, he said, and some investors are prepared to move a portion of their funds into more risky areas - ie. to become angel investors.

David Jones, founder and advisor at ThreatMetrix, believes the old model of identifying a market, creating a product and then building a team to make it a reality (as well as the more recent variant of putting together a proven team to identify a market opportunity and then create a product to address it) is no longer the route to funding.

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