Start-up expert calls for $100 million fund for budding local VCs
Monday, April 16, 2012/
An Australian start-up expert has called on the Federal Government to set up a $100 million fund for budding venture capitalists.
In submissions to a Federal review of venture capital and entrepreneurial skills, industry players identified major hindrances to the Australian start-up scene.
Commercialisation fund Uniseed used its submission to highlight skills as one of the main barriers to entrepreneurs developing their products in Australia.
This is in addition to geographical isolation and a lack of access to sufficient capital.
In the submission, Uniseed chief executive Peter Devine said depth of skills and experience is a problem due to knowledge drain overseas.
He said an easing of the taxation treatment, of employee share and option schemes, may help attract overseas talent.
“The current tax regime for options or share ownership plans for employees in start-ups is having a negative impact on the prospects for start-ups to attract and retain skilled staff,” he said.
Meanwhile, Jim Henderson, chief operating officer of NewSouth Innovations, said the lack of a healthy pool of start-up CEO candidates is a “true hindrance”.
New South Innovations is the commercialisation arm of the University of NSW.
“Any efforts to grow the pool would be very welcome,” Henderson said.
According to serial entrepreneur Randal Leeb-du Toit, who co-founded Innovation Bay, the Government needs to establish an Australian Centre of Entrepreneurship and Venture Capital.
This would comprise an entrepreneurship conservatorium, a VC college and an entrepreneurship research and policy unit.
Leeb du-Toit also recommended the establishment of a $100 million fund for trainee VCs.
A VC college would provide a real-life, experiential training ground for successive generations of Australian venture capitalists, Leeb du-Toit said.
Students would work initially on a captive ACEVC fund that would have to be set up by government or in conjunction with industry partners.
“I’d say it needs to be a $100 million fund. Anything less than that [is] probably going to be too logistically hard – and it won’t be sustainable either,” Leeb du-Toit said.
Students would work as “trainee VCs” under close supervision from experienced Silicon Valley VCs.
A structured curriculum would include a tailored learning plan, mentoring, peer learning and industry placements.
Once students graduated, they would be in a position to set up their own fund and the ACEVC would act as a “fund of seed funds”.
“Ideally, by peppering a number of seed funds and doing it on a regular basis, you eventually get to a point where you have a pipeline of successful VC funds and they in turn can go on to raise further funding in their second, third and fourth funds,” Leeb-du Toit said.
He said an entrepreneurship conservatorium would provide a “unique and dynamic environment within which entrepreneurs can collectively and collaboratively learn”.
The conservatorium would draw from models such as European micro seed fund Seedcamp, and US-based start-up incubator Y Combinator.
Meanwhile, a research and policy unit would conduct research that contributed to a broader understanding of the drivers of innovation, and the best way to advance entrepreneurship.