Lack of start-up funding threatens local innovation

Lack of start-up funding threatens local innovation

One of South Australia's largest technology investment firms, Playford Capital, yesterday warned a national drought of start-up funding was threatening local innovation.

Playford Capital CEO Amanda Heyworth called for "business angels" to dig deep to ensure Australia remains an attractive place to work.

"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.

"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 aeroplanes to go elsewhere because they won't have worthwhile jobs here. Investment is important for us, as a small sophisticated country in a global economy, to create high-quality jobs and give us a chance to control our own destiny."

Playford Capital is co-host for the VC Connect conference being held in Adelaide this week.

The event will introduce venture capitalists, who control more than $300 million in funds, to local start-ups seeking to grow.

Since the late 1990s, Playford has invested about $1million in technology companies at early stages of development.

Heyworth said Playford Capital remained one of the few professional investors 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 venture 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 percent 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," Heyworth said.

"In Australia, we need to actively encourage angel investment because it fertilizes the seed of innovation that we need to harvest in the future."

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