My view is that the Australian VC industry must forget the top-down approach or any attitude of “we will raise the money and the start-ups will come to us”.
Australia must rebuild its innovation and start-up culture, and venture capital industry, from the bottom up.
We must first concentrate on creating a sustainable ecosystem supporting entrepreneurs, start-ups and seed or early stage investors. For now, later stage VC investment will need to be sourced globally.
The really positive news is that great progress has been made over the last couple of years in the early stage scene.
Accelerators, incubators, university programs and angel groups have multiplied in number and activity.
The immediate challenge is to make these early stage participants sustainable.
I believe that the solution to the sustainability of angel groups, accelerators, incubators and university programs is also the template for the VC version 2.0 business model.
That solution is the rollout of co-investment funds, partnerships between investment managers, providing funds management operational and compliance services, plus capital raising capability and angel groups, accelerators, incubators and university programs providing crowd-sourced deal flow, deal screening and entrepreneur mentorship.
These partnerships can transform seed/early stage VC in Australia.
With a healthy and sustainable early stage ecosystem and some successful exits, even if they are smaller scale trade sales or M&A activity, the foundation will have been built for the possible emergence of a later stage VC industry in Australia or the support of global VC.
Jeremy Colless is managing partner of Artesian Capital Management, which invests in early stage ventures in Australia and China.
Andrew Sadauskas is a former journalist at SmartCompany and a former editor of TechCompany.
