Reflections from Australia
I’ve just returned from the annual Australian Angel Association Institute annual conference, held this year in Newcastle…the 9th best place to visit in 2011 according to Lonely Planet…Wellington’s 4th (-: . This was an excellent conference this year with many great people attending from around the world. The key highlights were:
- The world class connections made;
- Reflecting on the quality of the govt support we receive in NZ;
- The opportunity to incubate in NZ, grow in Australia and then accelerate around the world; and
- The heinous Australian / New Zealand exchange rate
World class connections
- A US Angel investor attending the conference who has invested in a New Zealand company founded by someone who I used to work with at Deloitte 10 years ago.
- An Australian investor reading my profile and connecting one of our businesses to a potentially significant international opportunity.
- A Singapore investor connecting me with another Singapore investor with significant media interests in Indonesia. A market and industry directly relevant to one of our portfolio companies.
- A Chilean investor with a technology that may be complimentary to a technology developed by one of our portfolio companies.
This is what these conferences are about. The content is just a filler.
Quality of NZ Government support
Compared to the Australians we’ve got it pretty good. But other parts of the world are catching up or moving ahead. Credit needs to be given to the policy people and governments of the day that have laid the seeds of the entrepreneurial and investor sector that we have today. Hopefully we can sustain the momentum as things are a little fragile. Our system has the following key components:
- Support for the regional incubators, that are producing better and better businesses;
- The creation of the Angel networks, that invested approximately $50m last year;
- NZVIF, the crutch that venture firms continue to rely on, while the sector matures;
- The research grants that make it possible to undertake projects that otherwise wouldn’t be funded; and
- The market development grants that make it possible to travel and reach out to the world.
These have combined to create an increasingly vibrant eco system. However we cant be complacent, other parts of the world (Australia excluded) have many of these elements and in some cases more. Some interesting stuff:
- Singapore – responded to the Global Financial Crisis by increasing the limit on their seed co-investment fund, on a deal by deal basis, from $500k to $750k. Something, in my view, that would make a significant difference in New Zealand given the lack of venture capital and increasingly overstretched private capital.
- Tax – every country (including Australia and the US in this case) have removed capital gains tax on “seed investment” and in many cases allowed for the deduction of investments from income. Reasonable data exists that these schemes stimulate investment at little cost given the flow on economic benefits and subsequent PAYE, GST and Company tax paid by the investee companies.
Australia as a stepping stone
Australia offers government grant support for commercialisation activity. These grants go further than the research grants available in New Zealand. NZ grants grants stop when commercialistion begins. The Aussie grants are on the same matching dollar basis.
A number of officials suggested to me that we should look at moving parts of our New Zealand operations to Australia and commercialise operations from there. This doesn’t need to take away from New Zealand jobs but could be looked at as part of an overall growth strategy.
The Aust / NZ exchange rate
At $0.73c the Aust / NZ exchange rate is heinous! Australia is currently a very expensive destination to travel to and set up business. By comparison the US rate is effectively the same at the moment, but from what i’ve seen its cheaper to be setting up business in the US than Australia at the moment.