Tuesday, 18 October 2005 10:00

Funding drought threatens Aussie innovation

DroughtThe boss of South Australia's largest technology investor says a national drought of start-up funding is hampering Australian innovation and threatening to send our brightest young minds offshore.

In the week of a major venture capital conference in Adelaide, SA's largest technology investor has called for 'business angels' to dig deep to ensure that Australia remains a place that our kids want to work in.

Amanda Heyworth, the chief executive officer of Adelaide-based technology investor Playford Capital, said a national drought of start-up funding was threatening future Australian innovation. 'The long-term problem for Australia is that if you're not seeding new companies and innovation, you'll end up with a stagnant economy,' she said.

'That means your kids will get on airplanes to go elsewhere because they won't have worthwhile jobs here. Investment is important for us, as a small sophisticated county in a global economy, to create high quality jobs and give us a chance to control our own destiny.'

Playford Capital is the South Australian co-host for the VC Connect conference which this week will introduce venture capitalists, who control more than $300 million in investment funds, to small smart South Australian companies that are seeking investment to grow.

Since the late 1990s, Playford Capital has invested as much as $1 million in technology companies at various early stages of development. Since 2001, the seed investor has actively sought to co-invest alongside both 'business angels' and venture capitalists, a strategy that has successfully attracted co-investment five times more than Playford's initial investment.

'Business angels' is a term used to describe individuals who invest their own money in a private company. For a start-up, angel funding can be the whole story, or it can be used to grow the company to the point where it is mature enough to attract Venture Capital.

Heyworth said Playford Capital remained one of the few professional investors that was actively seeking investment opportunities in the start-up company phase. 'A lot of activity is occurring at the large end of the market,' she said. 'Not all centure capital goes to start-ups - most of it goes into existing companies, often to effect a change in ownership structures, which contributes little to innovation. Only about 15% of private equity investment is in early stage companies.'

Heyworth said the role played by angel investors was less visible, but equally important. 'Research shows that the US "angel" market is the same size as that country's $20 billion a year venture capital market,' she said. 'While US angels account for the same investment value as the formal venture capitalists, they are involved in 40 times more transactions.

'There's every reason to think the same situation applies in Australia. However, it's difficult to track since most "angels" are invisible: They don't' fill out survey forms and often don't want people to know what they're doing. In Australia, we need to actively encourage angel investment because it fertilises the seed of innovation that we need to harvest in the future.'


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Stan Beer


Stan Beer co-founded iTWire in 2005. With 30 plus years of experience working in IT and Australian technology media, Beer has published articles in most of the IT publications that have mattered, including the AFR, The Australian, SMH, The Age, as well as a multitude of trade publications.



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