A venture capitalist such as Efraim Landa invests finances and expertise in an emerging company in exchange for equity in the company. A venture capital firm will supply the needed funds to help keep the business afloat while it is becoming established and growing. When a VC firm invests in a company the main plan is that the company will be able to move from its inception to its IPO within a period of 7 to 10 years at which time the investing firm will make a substantial profit. A venture capital firm provides the necessary funding for companies that they feel have great potential of growing exponentially in a relatively short amount of time. Venture capitalists like Efraim Landa understand the challenges facing an entrepreneur and can provide the funding as well as the expertise to ensure that the business does well and performs as expected. VC funding is a high risk investment but it also has a very high potential of making a substantial return on that investment.
History of VC Market in Australia
There were a few VC organizations in the 60’s and 70’s; but because of the credit problems of the early 70’s and undercapitalization of the firms most of them either failed or stopped making new investments. This caused a shortage of venture capital firms in Australia. In ’84, the government initiated a program to help remedy the problem and created the Management and Investment Companies (MIC) Program. The premise was to allow venture capitalists to invest in high tech businesses and then count the total investment as a tax deduction. There were 11 MIC’s that took advantage of the program and there were other VC firms operating in Australia as well. The MIC program was instrumental in developing the venture capital market and helping establish it to its current base of over $350 million.
Present Conditions in the Australian VC Market
The venture capital market in Australia has slowed down drastically over the last few years. The VC firms have faced many challenges over the years including global decline. However, there are still some venture capital firms that continue to signal marked growth. One difficulty that the VC market is facing is that it is getting more difficult to sell assets on a global level. In Australia, the superannuation sector has been the largest investor in the venture capital market and they have been slowly withdrawing which is causing a slowing in the overall market. Over the last 3 or 4 years, there have been more VC transactions which on the surface seem positive until you consider that the investment figures based on actually dollar amounts have remained about the same. It appears that venture capital firms are investing more into their existing portfolios in an attempt to maintain before exits begin rather than investing in newer investments.
Future of VC Markets in Australia
The main concern to the future of venture capital in Australia will be available funds. While there has been some marked economic improvements over the long term including job creation and tax revenue the challenge is going to be a shortage of capital for investing. Over the previous ten years, VC has been raised from endowments, the government and the superannuation funds. The difficulty is in the fact that the superannuation funds have been reducing the allocations to venture capital, and at the same time, the government funds are also declining in their contribution to venture capital investments. The future of Australian venture capital funds will be marked with difficulties in raising capital. It is anticipated that allocations of available VC funds will make a shift to the healthcare, energy and environmental sectors in the coming years.