For example, last year he did a search on LinkedIn for people in Greater Sydney with “start-up” in their profile. He returned with over 28,000 people. “This is definitely a small subset of the number of employees at tech companies in the region who don’t have the word ‘startup’ on their LinkedIn resume.” Rice says by comparison that at the time, BHP employed 20,697 people in Australia.
Australia has three ‘crucial ingredients’ for venture capital success: ‘Incredible quality of life, the fourth largest pension asset of any country in the world [more than $3 trillion]and more than 40 universities producing more doctorates than all but nine other countries in the world.
On April 14, Bloomberg reported a pullback in new fundraising “as public market pressure begins to weigh on the lofty valuations sought by fast-growing startups.” Venture capital deals raised $148 billion globally in the first quarter, down nearly 25% from the last three months of 2021, and in contrast to the rate of volcanic growth among teens, according to data provided. by analytics firm PitchBook.
Rising interest rates, soaring inflation and Russia’s invasion of Ukraine are behind the market’s recent impact on growth stocks. The tech-heavy Nasdaq index in New York fell more than 14% from last November’s record high. This crisis is much worse than the 5.4% in the S&P 500 index over the same period.
Prior to the recent crisis, private capital transactions exploded globally, reaching $700 billion last year, according to published US estimates. That compares favorably to the record total of US$655 billion for initial public offerings (IPOs) during the same period, Bloomberg reported.
According to Rice, the question “prices adjust and less money will be raised becomes exaggerated. All this money has already been raised. This money is sent back to employees and investors.”
On April 5, The Australian Financial Review reported that Australian start-ups broke the Q1 2022 record for the most capital raised in a quarter, “raising $3.6 billion in venture capital funding thanks to the huge amount of dry powder available in the sector”.
The value of the 169 deals announced in the first three months of the year exceeded the total amount raised in 2020 and also surpassed the record third quarter of 2021, when $3.4 billion was raised.
According to Square Peg Capital partner Paul Bassat, there has been a “radical shift” in the level of start-up activity.
“The numbers, compiled by Chris Gillings’ Cut Through Venture, revealed that fintech and enterprise software continued to be the most dominant segments, generating $1 billion and $941 million in deals, respectively,” said the Financial analysis reported.
Today’s outlook contrasts with the history of pot venture capital start-ups in Australia, which dates back half a century. The story has an inverted “crying wolf” flavor. Each promising period, including during the 1980s and 1990s, was then crushed by events such as the stock market crash of October 20, 1987 and the dotcom crash of the late 1990s.
Change of a life
Looking back, Australian venture capital pioneer Bill Ferris recalls: “We made our first deals on the internet [Look Smart] in the 90s.” But the funds dried up after the Nasdaq crashed. Since then, “it’s just been won more and more each year”.
“We often talk about the tyranny of distance [as an obstacle]. [But] The internet has done away with this tyranny of distance for so many people. It’s an advantage [of the current web-based start-up boom]. This has allowed Australia to catch up on many fronts. ”
You can live anywhere – Byron Bay, Aspen, Miami – as long as you have solar power and a Starlink connection.
— Zebediah Rice, co-founder and partner of King River Capital
Over the 10-year period from 2010 to 2020, Australian start-ups grew eightfold. “The growth rate is pretty darn impressive,” Ferris says, and points out that in Blackbird’s portfolio there are 10 unicorns.
“For the government, this growth is really important. This reflects the strongest area of employment growth, particularly for those under 30.
Private capital, as opposed to public capital, has become a fundamental pillar of Australian capital markets, says Ferris. “It’s something you couldn’t really say until 2010. It’s the most significant and important change in our financial markets in our lifetime.
“The really great thing about it is that it’s moving Australian culture – taking risks and supporting your own innovation. It’s very different [compared with] 10 years ago, and that gives me great faith. We now have a very qualified infrastructure,” says Ferris, with companies including Blackbird, Air Tree, Square Peg, One Ventures and Brandon Life Sciences.
“These venture capital funds have demonstrated to major pension funds how essential it is for them to participate in the venture capital industry. Previously, they always stayed outside because they considered it too risky.
Now super funds “can commit to a given fund of $200 million or more and provide the long-term capital you need in these entities. Liquidity is not as obvious as in the public market where you phone and buy or sell stocks”.
“Silicon Valley is everywhere”
“In the past, the wealth creation industry was concentrated in real estate [but] Investing in a dozen venture capital funds and supporting them allows risk to be spread.
According to Rice, Australia’s VC startup scene “has been even more exciting” so far this year. And the old American adage that “home is where you are” has never been more apt. “Everyone seems to have moved. New York has moved to Hawaii and Silicon Valley is to Aspen [Colorado] and Austin [Texas].”
“It drives home that Silicon Valley is everywhere and nowhere. It’s a quality of life issue for investors. We’re in a global nation. People are driven more by their technical inclinations than their national allegiances. You You can live anywhere – Byron Bay, Aspen, Miami – as long as you have solar power and a Starlink connection.
Rice says he recently spoke to a colleague in San Francisco, asked her about her business address, and was told, “We don’t really have an office anymore.”
He says ‘the world has fundamentally changed’ and Australia is still ‘the lucky country – a place with great beaches, good food and wine’, and can take advantage of its position.
“People all over the world are saying ‘if I can work anywhere why not there’.” This is underscored by the fact that, according to Rice, six or seven of the best start-ups in the “exploding” field of web3 and blockchain are in Australia, including Immutable and Synthetix.