VC Funding is not the Best Sourcing of Funding for All the Startups Out There

By Anne-Marie Birkill, Partner & Executive Director, OneVentures
Sunday, September 6, 2015
 By Anne-Marie Birkill, Partner & Executive Director, OneVentures
OneVentures is an Australian venture capital fund with $150M funds under management that provides human and investment capital to high growth companies with a particular focus on transformative technologies with global potential.

One of the most exciting things about being an Australian technology investor is being in a position to participate in the creation of vibrant 'new economy' businesses that will help move our economy away from its historical dependence on industries that exploit finite resources (mining, agriculture and tourism - or as I am fond of saying 'rocks, crops and crocs') towards those with infinite resources (the knowledge industries). Australia has a rich history of invention, innovation and entrepreneurship (for example the black-box flight recorder, plastic bank notes, the hills hoist, the cochlear implant, the world's first effective influenza treatment, the human papilloma virus vaccine, extended wear soft contact lenses), however the contribution of these businesses to our economy has been historically modest and needs to increase to ensure we meet the productivity challenges associated with our ageing population.

OneVentures invests in technology companies from many sectors, but we are particularly interested in companies in the healthcare, education, mobile, media, cloud computing and data, security and privacy, machine learning, software, sensors and robotics, and food security sectors. We screen around 20 companies every week and those that capture our attention have unique solutions to large and growing problems in the market, sound plans to move beyond Australia into the global market, business and pricing models that make sense, management teams that can demonstrate the capacity to execute, and a clear understanding and commitment to delivering a return to shareholders. It is a hackneyed comment to say "we invest in people" but in practice this is so true: assuming the market, technology and business model boxes are checked the difference between good and great companies is ultimately the management team.

One of the things it is important for entrepreneurs to understand is that venture capital is not the best source of funding for all start-up companies: we are looking for companies that can deliver significant multiples on our investment in a relatively short timeframe (5-7 years) i.e. high growth companies that are driving hard towards a liquidity event. Many of the companies we see have the potential to become sound businesses, but they won't deliver the sort of returns a venture capital fund is seeking. If I could give a single piece of advice to entrepreneurs seeking capital it would be to educate themselves about the different forms of funding that are available and choose the 'best fit' for their style of company before approaching investors. There are so many sources of information available - Meet Ups, incubators, accelerators, websites for example - that entrepreneurs can draw on to ensure their businesses are aligned to the investment criteria of their target investment source. Taking this a step further to have a good understanding of 'typical' deal terms, and in particular which terms are and are not negotiable, is also a valuable investment of time for entrepreneurs and will pay off in the event they are among the one in a hundred that gets to the stage of negotiating a term sheet.

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