Australia’s first online equity crowdfunding platform to channel investment into start-ups has been launched.
Developed by leading early stage venture capital firm Artesian, VentureCrowd aims to “democratise” investment in start-ups by allowing wholesale investors such as high net worth individuals the opportunity to invest in them.
VentureCrowd will allow investors to take a stake in start-ups with a minimum investment of $1000.
Artesian managing partner and co-founder of VentureCrowd, Jeremy Colless, says in a statement that the platform will help Australian entrepreneurs secure backing for their ideas and allow a wider range of investors to share in the success of high growth start-ups.
He says VentureCrowd will encourage investors to build up a diversified portfolio of start-ups they invest in as more than 50% of start-ups fail and about 90% of investment returns come from 10% of start-ups in the portfolio.
“An increase in early stage funding has the potential to contribute to the revenue generation and job growth potential of the Australian technology sector,” Colless says.
“Australia will see more large and successful technology companies such as Atlassian, Bigcommerce, OzForex and Freelancer emerge from the start-up scene if early stage venture capital investment is broadly available and incubators, accelerators, university programs and angel (investor) groups and associated mentors continue to improve the quality and quantity of start-ups across the country.”
Colless told StartupSmart that unless someone was part of a venture capital fund or an angel investor, it was difficult to invest in start-ups.
“We think this is a great first step to get exposure to the space,” he says.
“This will help attract and retain a new generation of savvy tech investors who have been prevented in the past by the clubby nature of venture capital or the high hurdles in the space.”
Colless says investors need to be aware that the typical investment time frames for start-ups are five to seven years and that while there’s not enough data on returns in Australia, in the US, figures from the Kauffman Institute show a diversified angel portfolio offers an internal rate of return of 27% per annum and a 2.5 times return on capital over about five years.
VentureCrowd will partner with key organisations in Australia’s start-up ecosystem such as Blue Chilli, StartMate, Blackbird Ventures, AngelCube and the University of Melbourne to screen start-ups available for investment.
“As individual investors do not have the capacity to assess even a fraction of the start-up opportunities that exist in their own region, let alone nationally, they will benefit from VentureCrowd’s partners’ filtered flow of start-up opportunities that are subsequently selected to participate in mentor-driven accelerator and incubator programs,” Colless says in the statement.
VentureCrowd’s website has launched for registrations from investors and start-ups, with equity crowdfunding due to start in early 2014.