There has never been a more exciting time to invest in tech: Eight tips for investing in Aussie startups
Thursday, June 9, 2016/
There has never been a more exciting time to invest in Australian tech.
We’re seeing a fresh wave of innovations that show the rest of the world that Aussies know what it takes to not only be competitive but be world-leading in the tech innovation space.
It’s only natural most astute entrepreneurs – here and overseas – are clamoring to be a part of the Aussie tech wave.
But how do you tell which of Australia’s innovations will provide the returns you want and which won’t?
In my time investing in the industry I’ve picked up a few pointers that have proven themselves useful.
So here are my biggest tips for breaking into Australia’s tech sector and seeing measurable returns sooner.
Invest in businesses that already have revenue
Otherwise it’s guesswork if you’ll even see revenue and, if the business grows, it may still take 5-10 years.
Investors need to consider how long they are prepared to hold their investment for and be prepared for long-term returns rather than rapid investment returns.
Many valuations are too big
The current tech boom simply won’t last – it’s too big and unsustainable. To ensure you invest in something great and don’t just get swept up in the excitement, examine your opportunities to ensure the projections are not artificially inflated. T
he boom can make things look better than they are but, with a bit of research, you’ll be able to get right to the heart of your investment.
Look for longevity
In most cases, agencies have the real profit – they can begin making money in a month or so and will continue to do so throughout their lifetimes.
On the other hand, investing in an app means your value is measured in users rather than money, which can be hard to measure in the long term.
Be careful investing in apps
If investing in mobile app technology make sure you understand the product – if you don’t, you could be investing in something that looks fantastic but insubstantial.
The deeper your knowledge, the more you can identify the user’s motivations and promote the product.
I chose to invest in the influencer marketing app Tribe because of its heavy support from its celebrity founder, Jules Lund. His credible celebrity influence drives awareness and ensures profitability is not solely based on user experience.
Invest in a proven model
With such a large number of products in the market going through rounds of funding, speculative investment can be risky. Investing in a company that has a proven business model means that they’re already in the position to produce cash in the bank.
Avoid business clamoring for multiple rounds of funding
Burning through funds should be an alarm bell. Whether the product is not functioning correctly, the business under-budgeted development costs or they’re spending capital frivolously, too many rounds may indicate that the business is not set for success.
Invest where you can influence the decision-making
Depending on your reasons for investing it is always a good idea to invest in opportunities where you have input in the decision making process, that way you have greater control over your investment.
Invest in businesses that can be made global
In Australia’s small market, profit opportunities are limited. It’s essential that you invest in businesses that can be internationally scaled. Otherwise, you’re unlikely to see a sizable return on investment.
Like investing in any area, investing in tech is about thinking critically and not getting swept up in hype.
Applying this approach investors can see great rewards from the Australian space. Research is critical to success and with prudent research investor are able to invest with confidence and be a part of the inspiring innovations being produced in the Australian market.