Navigating the Australian VC Landscape: Insights from Industry Experts

May 14, 2024
| minute read
Navigating the Australian VC Landscape: Insights from Industry Experts

In a recent discussion hosted by Duco van Breemen, CEO of Haymarket HQ, three seasoned investors—Terry Hilsberg, Bree Kirkham, and Jayden Basha—delved into the nuances of the Australian venture capital ecosystem and how it relates to international founders seeking to raise funds in Australia.

Introducing the Experts

  • Bree Kirkham: Chief Commercial Officer of F5 Collective, specialising in investing in female-founded startups globally and with the broader mission of generational change for women.
  • Jayden Basha: Investment Principal at Investible, an early-stage VC investing in technology companies globally.
  • Terry Hilsberg: Investor with experience spanning various global markets, today focused upon making investments in early-stage web3 startups via Fork Ventures.

Overview of the Australian VC Ecosystem

  • Emerging Market: The Australian VC ecosystem has witnessed significant growth in the past decade, with an influx of new funds and increasing fund sizes.
  • Comparative Analysis: While Australia's VC investment as a percentage of GDP remains low (<0.5%), it is steadily evolving. However, it lags behind regions like Singapore and the US.
  • Specialisation: As the VC market matures, the ecosystem is witnessing a trend towards specialisation, with funds focusing on niche sectors like crypto, defence, and female-founded startups.
  • Tax-driven Investment: Many Australian investors are tax-driven, which influences their investment decisions and exit strategies.
  • Limited Experience: Despite rapid growth, a significant portion of investment managers in Australia have less than five years of experience.

Strategies for Foreign Companies Entering the Australian Market

  • Leveraging Current Investors: Engage with your existing investors who have networks in Australia to identify suitable local partners.
  • Understanding Fund Structures: Be aware of fund structures like the Early Stage Venture Capital Limited Partnerships (ESVCLP), which in order to maintain their tax subsidy eligibility, have limitations on foreign investments (up to 20% of the fund), and explore alternative funding options such as family offices and corporate venture capital providers. 
  • Focus on Relevance: Tailor your approach to investors who align with your business model, values, and growth trajectory.
  • Value of Local Presence: Establishing a local presence in Australia can be advantageous, especially if your target market includes Australian customers.
  • Gateway to Other Markets: Use Australia as a testing ground before expanding into larger markets like the US, leveraging its similarities to Western markets.

Crafting a Compelling Value Proposition

  • Identifying Investor Motivations: Understand the various investment hypotheses that appeal to Australian investors, such as investing in local subsidiaries of successful international businesses or supporting global day-one teams.
  • Customer Focus: Highlight how your product or service addresses the needs of Australian customers, making it relevant to local investors.
  • Testing Ground: Position Australia as a strategic testing ground for your product or business model before expanding into larger markets.
  • Navigating Nuances: Acknowledge the differences between regions and educate investors on market nuances (especially when it comes to Asia) to tailor your value proposition effectively.
  • Five Types of Value Propositions that attract Australian investors to international companies:
    • Investing in Local Subsidiaries: Investors may seek opportunities to invest in successful international businesses entering the Australian market.
    • Supporting Global Day-One Teams: Companies with global day-one teams, spanning multiple countries and regions, can attract investor interest, particularly in specialised domains like Web3 or gaming.
    • Global Vehicle with Local Presence: Investors may seek to invest in global ventures while obtaining local distribution rights or involvement in the Australian market.
    • Backing Australian Expats: Companies founded by Australian expatriates living abroad may attract investment, leveraging connections and expertise from both local and international markets.
    • Tapping into Hot Markets: Investors may be drawn to companies operating in trending or high-growth sectors, offering significant return potential, such as cryptocurrency or emerging technologies.

Useful resources

  • Airtree Ventures has created an open-sourced Australian VC list. See here.

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