AirTree Ventures

Australian VC Landscape

By Daniel Petre

Wow! A lot can happen in 3 years.  If you left Planet Australia VC in 2013 you would have left behind a country with a few quality startups (Atlassian, Campaign Monitor to mention just 2), not much funding available for any stage of development, and, bar one or two stand out exceptions, a reasonably dead investment ecosystem.

Returning to look at the landscape in 2016 shows a world transformed.

Many (dare I say most) of our best and brightest want to start their career journey in a startup and they bring passion, energy, sharp intellect, resilience, daring and a desire to take over the world.

There exists a vibrant community of accelerators, incubators and angel groups across the country all focused on helping get startups off and going.

And there is a shitload of money now available. Just looking at the money available from formal Venture Capital funds (leaving to the side angel groups etc) in 2016, over $1b in new VC funds have been announced – compared to maybe $50m in the comparable set in 2012. The Government has also given tax incentives to individuals to invest in startup and funds (great idea) and also given visa options to those prepared to invest (really bad idea).

We are desperate for more software developers (not just STEM but SOFTWARE DEVELOPERS) as our burgeoning startup community looks to help software eat the world (nod to Marc Andreessen).

Just to put some more numbers down: at AirTree we have met over 2,300 founding teams in just over 2 years and I suspect we only had the chance to meet maybe 50-75% of all the startups springing up in Australia during that time. In 2007-2012 when Craig and I were running Netus, we met 550 companies and think we saw maybe 90% of the opportunity set (so the quick maths is 100 a year to 1150 a year…that would be > 10X!).

As many of our brightest entrepreneurs have realised, technology is continuing its unrelenting path to massively change every country, industry, company and job. Now is a GREAT time to be part of the startup ecosystem.

And yet there are also icebergs to avoid. The Australian tech IPO market has been a disaster. Companies that for the most part could not raise money from investors with domain experience went to the broad public and raised silly money at sillier valuations … and they mostly crashed. Guess what, this stuff is hard!

Also with the flood of money some truly bad ideas are getting funded and some great teams are probably being funded at levels that may well be unsustainable. Both of these trends will normalise and in the medium term the truly outstanding founders building great companies will do well and any venture firm that is lucky enough to work with these companies will equally enjoy the journey.

What next?

I expect when we revisit this post in 2020, everything will have changed.  We will surely have created at least 20X globally significant technology companies (i.e. more in 4 years than our combined history beforehand).  These companies will incorporate REAL machine learning algorithms, advanced robotics, VR/AR, blockchain technology and more.  Most of what we buy will be via some kind of sharing, marketplace or SaaS service..

There will be lots of great jobs created for those that understand how to help build globally competitive startups but LOTS of jobs will be lost where the job as just a binary application of a set of rules. We will need more nurses but less doctors, more chiropractors and less lawyers, more data scientists and less advertising executives.

We will have maybe 3-4 globally competitive venture firms (ok this part is self-serving!) that can be there to help grow more and more great Australian companies and help the best and brightest stay out of the boring monoculture that is our existing oligopolies (that’s you banking sector, retail sector, etc).

We are in the most interesting times … wouldn’t be dead for quids.

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