It's a great time to be in Australia at the moment
Posted by Ian Holsman
With PBL getting $4.5b for selling it’s stake of channel nine, internet startups might have a new partner knocking on their door.
Sure.. I’m guessing most of that money is earmarked for gambling things, which is where PBL is focused, but the announcement also made mention of ‘new’ media… which means internet startups, and internet small companies.
One of the largest whines I’ve heard from Australian startup people is the lack of money available to fund startups (and hence why they are all moving to the US).
I think this is bullshit personally.
Australia has a superannuation contribution scheme which forces people to put at least 9% of there salary into investment funds (like a 401k). People can either elect to run their super fund themselves (which makes sense if you have more than $300k in it), or join a professional fund manager.
These funds are BIG. I was speaking to one fund manager who gets $1b of new funds a year. They are always on the lookout on ways to invest that, and startups are a good way to get a return which has a different risk profile than other investments (diversification of risk is what fund managers are after)
So what is the problem then.. people want money, people have money.. sounds like a perfect pair. Well.. speaking to a local VC, it seems that there are a couple of reasons.
1. Funds (LP’s) are not asking for a high enough return from local VC’s. This presents a problem as a low/medium return means you should be looking for things with a low/medium risk. By asking for a medium return for your money, it ties the hands of VCs, as they can’t fund a high-risk project without re-negoating with their LP’s.
2. The sales funnel is small. A way of countering a high risk project is with other high risk projects in different areas (diversifying and lowering your overall risk) so it matches the risk requirements of your LP. Because there isn’t many new projects coming up, or the ones which get proposed are very similar and facing similar risks it means they can’t get funded
3. Lack of experience. There are serial entrepreneurs in the US. people who have gone through it several times.. they know how to write a business plan, and what happens if you get funded.. To be fair, there are a couple of successful entrepreneurs in the internet space here, but they are still running their original businesses.
4. Lack of networking. I don’t think there is a place for people with ideas to meet each other, and swap war stories/experiences.
So why is Packer/PBL’s money any better ?
Well.. PBL is one of the companies who has the money, experience, and networks available to help. It is the ‘smart’ money that people always talk about. Here’s hoping they can start the virtuous circle going in Australia.