Another factor that is significantly different is that very few of the recent investments have been protected by patents.
Spreets cofounder Dean McEvoy says that when he started his previous business, BookingAngel, he was told that he needed to protect it.
“The money I spent on a patent back then I should have just spent on development,” McEvoy says.
“In the early stages you should just try and build something that people want. And that’s what we’ve focused on at Spreets. Speed is what’s allowed us to be number one in the market and deliver the best daily deals.”
Spreets also benefitted from the strengthening of investor networks in Australia. Its initial venture round was the result of a pitch made at the regular Innovation Bay investors dinner in Sydney in early 2010, where it caught the attention of Facebook investor Klaus Hommel and business partner and Oliver Jung.
“I pitched Spreets to the cream of Australian angel investors, and they had an opportunity to invest, but they were too slow,” McEvoy says.
“And the guys that ended up investing were from Europe and they had made investments in Facebook and Skype and were experienced. And from the first phone call to the money in the bank was two weeks.
“Operating at speed like that is how they snap up all the good deals. Australian investors have to get a bigger appetite for risk if they are going to reap the rewards.”
Online video specialists Viocorp have also not secured a patent for its video streaming technology, despite the company having been in existence for nine years. Lack of protection did not dissuade former Fairfax Media chief executive David Kirk tipping $5 million into the company from his new investment vehicle Bailador Fund.
Viocorp cofounder Ian Gardiner says he had met Kirk through alumni connections at Oxford University.
“In March last year I phone him with a view to asking him join the board, and he was interested, but also interested in an investment too, which was the last thing we expected him to say,” Gardiner says.
Like McEvoy, Gardiner says the pace of change of the internet means it is more important today to execute quickly than it is to develop an idea that is amazingly protected.
“We’re like a very clever architect, but we are using other people’s glass and steel and concrete,” Gardiner says.
“We have two possible patents that we might apply for, but it has taken us nine years to get to that point. Of the fast-growth tech businesses that I'm seeing, you don’t hear them talk about patents that much.”
The deals
Atlassian: The early breakthrough success of the current round of tech funding. These wiki software makers received US$60 million in funding from tier-one US investor Accel Partners in July 2010. http://www.atlassian.com
Big Richard: Underwear and condom maker which received and investment from Sydney Angels in 2010.http://bigrichard.com.au
Drive My Car Rentals: A car sharing service launched in December 2008 that has received two rounds of funding through Sydney Angels, the most recent being an injection of $600,000 in mid-2010. http://www.drivemycarrentals.com.au
Conversant Media: Media company that has also been the recipient of an investment from Network Ten in its online sports community website The Roar. http://www.conversant-media.com
GraysOnline: Online auction house which in January received a reported $35 million from fund manager Caledonia Investments in exchange for 25% of its business. http://www.graysonline.com
GetPrice: Five-year-old comparison shopping site wholly acquired by News Digital Media in September 2010. http://www.getprice.com.au
HelpMeChoose: Online home loan comparison service that was bought by Mortgage Choice in October 2010. http://www.helpmechoose.com.au
Jump On It: This deal-of-the-day site received $5 million in November 2010 from the Amazon-backed social buying site Living Social. http://www.jumponit.com
Oasis Active: Ten Network lifted its stake in this free social dating website to 40% in January. http://www.oasisactive.com
Our Deal: Group buying site has been backed by both News Limited and Network Ten. http://ourdeal.com.au
OzForex: Accel Partners’ second investment into an Australian web company, this 12-year-old online exchange payments service received upwards of $70 million in November 2010 in an investment round that also included the US asset manager Carlyle Group. http://www.ozforex.com.au
Ozsale: This members-only online shopping club that launched in 2007 was the recipient of $14.5 million from New York-based investors Insight Venture Partners in August 2010. http://www.ozsale.com.au
Posse: Social promotion and music marketing site that raised an undisclosed sum from investors including the Sydney Angels group and EMI Music in the UK in September 2010. http://www.posse.com
Life Events Media: Owner of the request-for-service business Quotify, which was acquired by Sensis in February this year. http://www.quotify.com.au
RetailMeNot: Hitherto unknown Melbourne-based online coupon site that burst to prominence when it was acquired by US company WhaleShark Media for close to US$90 million in December 2010. A spin-off of Stateless Systems, which owns a range of popular websites. http://www.retailmenot.com
Roamz: Local marketing site that received an undisclosed amount from marketing services company Salmat in January 2011 to create a new joint venture. Roamz was founded by Jonathon Barouch, the entrepreneur behind the online florist Fast Flowers, which was sold to 1300 Flowers in 2010. It is yet to launch.http://roamz.com.au
Spreets: Deal-of-the-day site sold to Yahoo!7 in January 2011, having grown its monthly revenue from $0 to $4 million in just 12 months. Early backers include Facebook investor Klaus Hommel. Spreets is modelled on the US company Groupon, which raised $950 million earlier this year.http://spreets.com.au
VioCorp: Video streaming specialists who received $5 million in funding in the first investment made by former Fairfax Media CEO David Kirk’s Bailador Fund in December 2010. http://www.viocorp.com
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