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Investment  11, Dec 2013

VentureCrowd: Get equity in a business in exchange for investment

Developed by Artesian, a venture capital firm, VentureCrowd lets startups pitch and seek crowdfunding in exchange for equity in the business

Australia based venture capital firm, Artesian, has launched VentureCrowd, the country’s online equity based crowdfunding (EBCF) platform. VentureCrowd will facilitate investments by a new generation of investors interested in accessing, investing in and supporting Australia’s innovative, early stage, high growth-potential startups.

The Autralian site differentiates itself from crowdfunding platforms such as Kickstarter and Indiegogo, by offering business ownership and the potential equity upside of the startup.

According to Managing Partner Jeremy Colless, VentureCrowd will not only help Australian entrepreneurs secure backing for their ideas, but it will allow a wider range of investors to share in the success of high growth startups.

“VentureCrowd will democratise the early stage finance sector in Australia in a way that has never been done before,” Colless said.

A critical aspect of the VentureCrowd funding model is to partner with a broad range of key participants in the Australian early stage ecosystem including accelerators, incubators, universities, digital agencies and corporate venturing programs.

“As individual investors do not have the capacity to assess even a fraction of the startup opportunities that exist in their own region, let alone nationally, they will benefit from VentureCrowd’s partners’ filtered flow of startup opportunities that are subsequently selected to participate in mentor driven accelerator and incubator programs,” Colless said.

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VentureCrowd hopes to encourage investors to build a diversified portfolio of startups to increase their chances of achieving strong investment returns and mitigate the inherent risks involved in investing in individual startups.

“More than 50 per cent of startups fail, and the distribution of outcomes is asymmetrical. Approximately 90% of the returns in a diversified portfolio come from 10% of the startups. This is the reason that a filtered deal flow and a diversified portfolio are critical strategies for early stage venture investors,” Colless said.

Investors registered on VentureCrowd will be given the opportunity to invest in companies that have been pre-screened through Artesian’s partner channels, as well as startups that register directly on the site. Artesian partners include Blue Chilli, StartMate, Blackbird Ventures, the University of Melbourne, SydVentures, Tank Stream Labs, Vivant, TechBeach, Fishburners, iAccelerate, the University of Wollongong, the Slingshot Accelerator, AngelCube and Future Capital.

The potential for growth of the Australian technology sector has been a recent topic of conversation in Australia. In a recent PwC report, ‘The Startup Economy – How to support tech startups and accelerate Australian innovation’, PwC estimated that the Australian technology sector has the potential to contribute $109 billion, or 4% of GDP, to the Australian economy and 540,000 jobs by 2033.

“An increase in early stage funding has the potential to contribute to the revenue generation and job growth potential of the Australian technology sector. Australia will see more large and successful technology companies such as Atlassian, Bigcommerce, OzForex and Freelancer emerge from the startup scene if early stage venture capital investment is broadly available and incubators, accelerators, university programs and angel groups and associated mentors continue to improve the quality and quantity of startups across the country”, said Artesian’s Jeremy Colless.

“Australia currently punches well below its weight in terms of risk capital as a percentage of GDP assigned to the startup space in comparison to world leading centres such as Israel and the US. Australians have traditionally focused a large percentage of high risk capital into junior miners and explorers. With the mining sector currently facing challenging conditions, I think it’s likely a proportion of this risk capital will be re-allocated to technology investment, especially if there are further high exposure exits and IPOs in the technology space’” said Colless.

Artesian recently received unconditional approval from Innovation Australia for the first Australian Venture Capital Fund of Funds. The fund invests across a number of Early Stage Venture Capital Limited Partnerships (or ESVCLPs) and over a 5-year period will look to gain exposure to up to over 1,000 startups, thereby increasing its portfolio diversification beyond anything previously attempted in Australia.

Speaking about the launch of the VentureCrowd platform Steven Maarbani, a director of the Venture Capital team at PwC, said “The last 12 months have been a very healthy period of maturity and growth for the Australian emerging technology scene, with more new startups being created, more new incubation & support programs, increased angel investment and more new micro-venture capital funds being launched than at any other time in recent history. What we are likely to see over the medium term is the maturity of the early stage finance industry to meet the funding requirements of high-growth startups. Equity based crowdfunding is an important part of that development.”

“The VentureCrowd platform will democratise the previously elite opportunity of being a venture capital investor and has the potential to allow easier access to funding for companies, thereby creating a better market for turning great ideas into thriving companies.”

Also read: Get your startup heard by investors on a flight

e27 Editorial Staff

e27 Editorial Staff

Keeping a pulse on Asia's emerging technology and business sectors, e27 brings users the latest news, analysis and events that impact Asia's tech industry.

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