Huff and Puff Post

Some bloke called Daniel Petre has had a whine about the whiners – see http://huff.to/1T27evT

There’s nothing more enthralling than a half-baked logical argument that is designed to prop up one’s own un-prop-able position.

In this article the whiner firstly has a whine about the other whiners that are whining that there isn’t enough innovation in Australia.

He seems to have missed the point that the point of the whining about innovation is to in order to receive handouts from the government to help fix the problem of the lack of innovation.

Which is especially ironic since the government itself has whined about the lack of innovation and made innovation a policy priority, but is in fact simply generating a marketing campaign to create the impression that something is being done about the so-called problem.

Back to the primary whiner in this blog entry. He says:

“Back in 2012-2013 there was very little money available for venture capital in Australia. It was due to the general failure of Australian venture funds during the 1990s and 2000s. Hundreds of millions of dollars had been blown up by fund managers who, for the most part, didn’t really know what they were doing.”

Ah yes, very true. But why, matey, do you think they didn’t know what they were doing?

It was because everyone that knew what they were doing had decided that venture capital couldn’t be successful in Australia and chose not to manage funds.

And venture capital can’t be successful in Australia because there isn’t a corporate sector in this country that buys successful start-ups. Without this thermodynamic driving force there is simply no need for start-ups here and the asset class can never be profitable.

Until we get our ASX Top 20 to become exporters of technology solutions rather than importers of technology solutions, nothing will change.

In the meantime, if you have a good start-up idea and you know what you are doing, then you may as well head off to Silicon Valley. But you know that already…

It’s just so much easier to move a few people on a plane in a one-step process than it is moving capital and VC mentoring across the oceans over many years, the company’s products and services back across the oceans, and then also the company itself back across the oceans when it needs to exit.

The bloke also said “Governments, or more specifically government funding, is critical in areas such as research but also in terms of investing where others fear to tread or where we need to establish research infrastructure such as the Quantum Computing investment, Synchrotron or the Square Kilometre Array”

For fuck’s sake, are these people morons? This is the IT century. The last thing we need to do is piss money up against the wall on big twentieth century science projects. Which, I might add, Australia is crap at. We have never once in the history of all our science projects, created and maintained a new corporate sector that has resulted from our government funded science.

Unrelated, my protagonist suggests “we (VC’s) tend to take minority positions in companies (normally between 5 percent and 25 percent) and are part of a broader ecosystem of participants in a company’s success. This means that if we (the fund with, say, 15 percent) make a good return for our investors, then the guys that own the 85 percent also do well.”

Geezus… each round is of VC is between 20-30% of equity shared between 1-3 VC funds. After three or four rounds they collectively should have well over 65% of the equity. It would seem to me that this new lot of VC’s know less than the last era, the ones they are dissing.

On university training – “This is surely not a surprise. The US, UK, Canada and Australia (to name a few) have a STEM skills shortage.”

No we don’t. We have a “T” shortage and more than enough “SEM’s”, thanks very much. STEM is an unholy grouping artificially cobbled together by some self-serving science professors worried about future funding.

In summary, after reading this article, I would suggest that quality of this generation of Australian VC’s has slipped from the last (pre-GFC) era, if this bloke is anything to go by.

Whereas the last lot managed a -7% return on capital over a 35 year period I am guessing this lot will do much better than that.

I am going to predict -65%.