Diverting even a tiny fraction of the Super pool into the early stage arena would transform our community - and more broadly the success of innovation in Australia.
On a company level with a start-up, the single biggest mitigator of risk (technical or commercial) is...cash - underfunded start-ups are far more likely to fail (a fairly obvious point). They don't have the money or time to do things properly or hire the right people...there's no margin for error, and they have to get it right first time...or die trying. For Super Funds, one of the key issues is how to deploy cash into this area - essentially on a macro/industrial scale. The only current "vehicle" is through venture capital funds. For numerous reasons, this pathway has proved underwhelming, even with significant government support. As noted above, Super Funds are not charities, and are not in the business of throwing their money away. On a related note, the Pty Ltd structure is a poor vehicle as well - particularly for angel investment. Regardless of the various rules (20/12 etc.), if you need $2m in investment, going through an angel round essentially equates to 20 people each putting $100k in. Anyone who has been through this knows how painful the process is - shareholders agreements, subscription agreements, preferences, down round protection, etc, etc.The process is far from transparent and smooth, and it can often take up to 12 months to close a big round... Overall the process needs to be far more efficient. For individual investors, there's generally a pain point at about $20,000 - under that, they're happy to take a bet and cut a cheque. Over that requires freeing up funds, consulting their partners, involving their accountants, etc. So 100 investors putting in $20k or 400 investors putting in $5k is at one level far more efficient and likely to happen - this can't happen as a private capital raise in a Pty Ltd structure. My personal view is that the only way this can happen is to embrace the mechanisms of the public markets. Essentially, this is what crowd funding is all about - but the mechanisms of proper markets already exist - they're just way to expensive to use at this current time. If the costs of listing on a public market (eg. NSX) could be dropped to $25-50k (proforma prospectus, conversion to an unlisted public company, etc), allied to the nascent crowd funding platforms, and others such as ASSOB, potentially we would have a pathway for small investors (not just high net worth angels) to put meaningful amounts of cash into technology companies. Completing the circle - it is far easier for Super Funds, and particularly SMSF's to invest in public companies - even micro caps. And if there enough micro caps, there is a ready made sector or basket of companies for a Super Fund to invest into. Just my thoughts, Matthew. On Tuesday, 23 October 2012 06:03:09 UTC+11, Paul Wallbank wrote: > > I think there's a little bit of misunderstanding in this thread about the > idea; this isn't about mum and dad self managed superfunds sticking 100% of > their money into a Color look-a-like being run by some bloke in white shoes > on the Gold Coast but why the major funds won't allocate a slice of their > investments – say a few percent – to new ventures rather than just the > current "safe" option of buying the index and knocking off for lunch. > > Geoff's point about the SMSF spivs is spot on, it chills my blood to see > the number of snake oil salesmen right now flogging dodgy property schemes > to these folk under the cover of tax favoured super contributions. I get > the feeling the authorities are allowing this to happen so they have the > justification to shut down all SMSFs and force us to stick our money with > AMP or the CBA who in turn will park it in an underperforming but fee rich > ASX index or REIT. > > One of the problems Australia faces is that over the last 30 years the > business funding landscape has become a monoculture dominated by the big > four banks which is a major weakness for the Aussie economy and all of us > trying to run businesses here, whether we're talking tech startups or > doughnut franchises. It is possible that sensible super investments run > with the objective of providing real returns could be a valuable addition > to the economy. > > Paul Wallbank > > Decoding the New Economy > •Writer •Broadcaster •Speaker > > Suite 236, 4 Young Street, Neutral Bay, NSW 2089 > pa...@paulwallbank.com <javascript:> > www.paulwallbank.com > 0415 967 017 > > <http://www.paulwallbank.com> <http://www.pcrescue.com.au> > > > On Tue, Oct 23, 2012 at 3:39 AM, Geoff McQueen | AffinityLive < > geoff....@affinitylive.com <javascript:>> wrote: > >> It is worth noting that the current system and its exclusion of "risk >> capital" is a bit deceptive. I've been keeping an eye on my mum's >> superannuation over the last few years and there's been a LOT of spivs from >> companies like MFS who did some incredibly shady things in the GFC and >> wiped out 50% of funds invested which were designed to be the safest form >> of investment (akin to term deposits, with downside insurance protection, >> etc). As an example, one of the funds which was capital protected shared >> directorship with a company which was going under; the directors then lent >> the protected capital to the related company to cover their own personal >> losses, and the result is that lots of people like my mum involuntarily >> bailed out the high flying personal lifestyles of these crooks. >> >> These aren't isolated situations, and ASIC doesn't seem to have the balls >> or evidence to secure prosecutions in most of them. >> >> I'm not for one minute saying startups are safe investments, but when >> "safe investments" are able to so easily gut a superannuation account, I >> think we need to be a bit more front foot about what we do as enterpreneurs >> and a little less accepting the "wisdom" that property investments and >> managed funds where those with their snout in the trough get paid first and >> regardless of performance are actually "safe". >> >> Geoff >> >> On Mon, Oct 22, 2012 at 6:01 AM, Robert Shea <rober...@acm.org<javascript:> >> > wrote: >> >>> >>> Too much putting the cart before the horse with all of this. >>> >>> Start-ups are not about VC, that is a whole different animal that >>> borrows the start-up image to look exciting. The problem with this money >>> over product focus is that the skills required to build a solution witha >>> few friends in your dorm room are wildly different than the skills >>> >>> required to run a company with even a few million dollars, offices, >>> accountants, lawyers, marketing reps, project milestones, intellectual >>> property considerations, etc, etc, etc. >>> >>> I've worked with quite a number of start-ups (from both sides) and you >>> might get small amounts of cash thrown at you here and there, the >>> majority of it goes like this: >>> >>> VC: "Here is $5,000,000." >>> You: "Thank you, this will really go a long way toward-" >>> VC: "We get 30%, non-ratcheting." >>> You: "Um, ok... non-what-" >>> VC: "You'll take four years to full vest. Here are your milestones." >>> You: "Wait, so that means that-" >>> VC: "Bob is joining your team as VP, Operations." >>> You: "Excellent! I really liked Bob-" >>> VC: "His salary is $200,000, plus bonuses." >>> You: "He gets paid from the $5mil?" >>> VC: "Joe, Mike, and Mary are all joining, at $150,000p/a each to handle >>> Marketing, Development, and Finance." >>> You: "..." >>> VC: "You're moving to a new office and I need a demo, highlighting the >>> list of features Bob will give you later, for the X expo." >>> You: "Three days from now?" >>> >>> And so begins your new life. >>> >>> As a VC however, instead of one success out of a few hundred, you now >>> start getting one success out out a small handful, because you are >>> actually making those successes, your executives. That is the player >>> that is missing from the start-up landscape here; money and talent to >>> take interesting toys and turn them into viable companies. >>> >>> As for investing super in start-ups? Honestly, that is a terrible idea >>> that completely flies in the face of what start-up investment should do >>> and what superannuation should do. Approval of such a plan, would be a >>> disaster, rife with fraud, excessive risk, and would further disrupt and >>> dissuade the start-up market. >>> >>> Cheers, >>> >>> Rob >>> >>> >> >> >> -- >> *Geoff McQueen* >> CEO >> >> <http://www.affinitylive.com/?utm_source=signature&utm_medium=email&utm_campaign=Signature> >> Cell: +1 650.450.4384 >> Skype: geoffmcqueen >> GTalk: geoff....@gmail.com <javascript:> >> >> <http://www.affinitylive.com/tour?utm_source=signature&utm_medium=email&utm_campaign=Signature><http://www.affinitylive.com/product/demo?utm_source=signature&utm_medium=email&utm_campaign=Signature><https://signup.affinitylive.com/?utm_source=signature&utm_medium=email&utm_campaign=Signature> >> >> -- >> You received this message because you are subscribed to the Silicon Beach >> Australia mailing list. 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