Appendix
Any Funding for High Technology
Entrepreneurs in Australia?
MASTER THESIS
by
Tom Roetgering
Faculty Economics & Business Administration
MSc Business Administration
Content of the Appendix
Appendix 0
Sub questions with the comments/quotes from
the respondents
Appendix 1
Appendix 1.1. Interview questions for the Investors
Appendix 1.2. Interview questions for the Entrepreneurs
Appendix 1.3. Interview questions for the Experts
Appendix 0 Sub questions with the comments/quotes from the respondents Results of the interviews
This appendix discusses the results of the interviews, the results are discussed in this appendix because there were in total 20 respondents. This appendix will help to give a clear view how the answers on the questions are be answered. Each sub question will be answered with the quotes from the respondents. This research focussed on discussions with three different kinds of participants: the entrepreneurs, the venture capitalists (investors) and the experts. Each sub question will be answered (where possible) by each participant. In total there were 20 participants 11 in Perth and 9 in Brisbane, these interviews discuss the answers of the deals between the entrepreneurs and the venture capitalists in the area’s; Western Australia and Queensland. The cities, Perth and Brisbane, are chosen because Zernike Australia is mainly active in these areas.
Each paragraph discusses the results/answers from the participants (Investors, Entrepreneurs and Experts) on the sub questions. All the quotes that are used in this appendix can be found in appendix 2, the so called data collection. For this research there was the opportunity to use multiple sources of evidence, this is called triangulation. According to Yin (1985) the rational for using multiple sources of data is the triangulation of evidence. Triangulation increases the reliability of the data and the process of gathering it. In the context of data collection,
triangulation serves to corroborate the data gathered from other sources.
Denzin(1984) identified four types of triangulation: Data source triangulation, when the researcher looks for the data to remain the same in different contexts; Investigator triangulation, when several investigators examine the same phenomenon; Theory
triangulation, when investigators with different view points interpret the same results; and Methodological triangulation, when one approach is followed by another, to increase confidence in the interpretation. In this chapter the research will use the data source triangulation; the participants have different point of views.
Every participant has his own sub paragraph within every sub question. The comments/quotes from the participants are used to answer every sub question. Every participant is looking from a different point of view about the deal making process between investors and entrepreneurs. So that's the main reason that the different participants are put into different paragraphs. In table 5 you will find the sub questions linked to the interview questions and the theory. The interview questions are in a different order, because for every different participant the
questions were different. Answers are also given outside the questionaire, most of the time at the end of the interviews.
Overview:
Interview questions for the Investors are in appendix 1.1. Interview questions for the Entrepreneurs are in appendix 1.2. Interview questions for the Experts are in appendix 1.3.
Subquestions Theory Interview questions Investor (appendix 1.1) Interview questions Entrepreneur (appendix 1.2) Interview questions Expert (appendix 1.3) 1. Which factors lead to a
deal? Proimos et al.(2005) 8-9-10-13-14-19- 21-22-23-25-27-28-29-30
8-9-10-11-16
-17-18-24 3-11-14-15-18-21-22-23-26-27-28-29 2. What is the role of Zernike
Australia in the deal making process?
Proimos et al.
(2005) 13-19-20-29 12-13-16-17 10-14-20-27 3. Who are the venture
capitalists in high technology companies in the start-up and growth phase in Australia and what kind of activities do they have?
Proimos et al.
(2005) 1-3-4-5-13-16-24 12-21-22-23 10-14-19 4. What do the venture
capitalists and the entrepreneurs of high technology companies in the start-up and the growth phase in Australia want?
Proimos et al. (2005)
13-23-26-27-28-30-31 12-13-14-19-22-24 11-23-24-25-26-29
5. How do entrepreneurs of high technology companies and venture capitalists fulfill their needs at this moment? And why?
Proimos et al.
(2005) 13-14-15-17-18-27 10-11-13-15 9-10-11-12-14-15-16-17-20 Table 5 Survey of the subjects with the theory and the interviewquestions
These questions give an overall description and information of the: Investor: 1-2-3-4-5-6-7-8-9-11-12
Entrepreneur: 1-2-3-4-5-6-7-Expert: 1-2-3-4-5-6-7-8-9-13-18 § 1 Which factors lead to a deal? Introduction
To answer every sub question it’s good to have a closer look at the literature and to find out what information is available about this subject and sub question. Every environment and climate is different as well as the investment climate in Australia. To get a better
understanding of this specific climate in this research the participants who where interviewed give a clear understanding how the climate looks like and which factors lead to a deal. This sub question is important because it’s important to know which factors lead to a deal. The most common definition of a deal according to the Oxford Reference Online is: “to do business, an agreement or an arrangement, especially in business”. For this research the definition of deal what was used is in §0.1. There are different factors that lead to a deal. For every participant different factors are important that lead to a deal. So that is the reason that in this research the interview questions will answer the sub question of every different point of view. In the actual thesis a conclusion/answer will be given on the sub question: Which factors lead to a deal?
The investor climate in Australia according to the Zernike
responses from 20 participants who are familiar with the investment market in and around Perth (Western Australia) and Brisbane (Queensland).
§1.1 Investor
In this paragraph the answer from the investors about the dealmaking process will be presented to you. Investors are the group in the dealmaking process who make the decision about investing. They have the power to make a decision, but what factors lead to a deal? To understand the investors in this research, this research also looks at how investors are looking at the process of dealmaking and how they make a decision. The investors who are
interviewed are also known as venture capitalists. Incorporated in the research four investors were interviewed and they gave their opinion and experience about the investing climate in Australia. The goal of this paragraph is to give an answer on this subquestion.
To answer the first sub question this research looked through the eyes of an investor. The following interview questions are used: 8-9-10-13-14-19-21-22-23-25-27-28-29-30 (interview questions are in appendix 1.1 and Table 5: contains the sub questions and the theory).
During the interviews there were certain subjects that appeared frequently in the interviews, table 6 gives an overview of how many times the subjects appeared in the interviews. These words are tagged and searched in the interviews, also how the answers have been interpretted to find an answer to the sub question. This research took a look at the subjects who were very strong. In this occasion when it came up two times or more in the interview, the research gave attention to it and worked it out.
Subject Deal = different
Patent Source Management Trackrecord Int 3 Q14 . Q29 Q13 Q13 Int 8 Q22 Q26 Q29 Q22 Q30 Int 16 . Q26 Q19 Q21 . Int 20 . . . Q23 Q23 Table 6 Subjects appear in interviews
Deal is different
Question 22 in the interview also gives a insight on which factors lead to a deal; the question is which investment criteria are always used? According to le Page (interview 8) “They are all different, there policy is making money. We invest in high risk companies and expect a high return. They look for 5 to 10 times return on their money in 2 to 5 years. That’s their policy.” In question 14 with Lopez (interview 3): “Every deal is different, deals aren’t the same. It depends on the investor and the entrepreneur, how much are they demanding/supplying for a certain percentage of the company.”
Source
Can the source of a deal be a sign of quality and potential for an investment? This question is put into the interview to get a view as to if the source is a factor that leads to a deal.
According to le Page (interview 8): “Yes, if it is coming from Zernike Australia it’s a better chance for them looking at it. Zernike has a pretty good name.” Also Lopez (interview 3) argues that: “Yes, if you got some good deals/experiences from a good source, you’ll comeback to that source again and make more deals.” Also Lane (interview 16) agrees this: “Referral from a trusted source has a much higher chance of being reviewed. And most of the deals, they actually finishing up doing from trusted sources.”
Management
financial. Each deal is different.” Lane (interview 16) said: “The look for total honestly of the management team (transparency), they look for chemistry with the management team (they want to interact with the team in the company).” Lawrence (interview 20) said about management: “This is very important. They evaluate the people before they invest in the company. But the also have a couple of entrepreneurs that are going to run the company and to penetrate the technology into the market.”
Track record
According to le Page (interview 8); “High earnings upside (potentials), high demand, patent, extending people (track record), margins, government driving it (subsidies), ease of access to markets.” And according to Lopez (interview 3) “The past success of entrepreneurs.” The past success of an entrepreneur is different words for track record. So most investors are looking for entrepreneurs who have experience and already run a company with proven success. So the investors (interview 3 and 8) are looking for entrepreneurs (management) who had success in the past. A trackrecord is very important for venture capitalists to make a decision for investing in an entrepreneur or a company. When you are an entrepreneur and have had success in the past it’s easier to get money. Venture Capitalist le Page (interview 8) says: “A track record and relevant expertise (qualified), can they go from a startup and manage the commercial role. That’s the key for us.” The only problem is that entrepreneurs who had success in the past, after their success they can finance their company themselves. They don’t need the money and aren’t looking for investors. Investor Lawrence (interview 20) doesn’t speak about a track record, but he said: ”They have to be capable to deliver and penetrate the technology into the market.”
§1.2 Entrepreneur
In this paragraph the answers from the entrepreneurs about the dealmaking process will be presented to you. Entrepreneurs are the group in the dealmaking process who are asking for the money. They want to start-up their company or want to grow with their company and most of the time they need money to do this. But what factors lead to a deal? To understand the entrepreneurs, this research looks at how entrepreneurs are looking at the process of dealmaking. The entrepreneurs who are interviewed in this research have companies in different kind of sectors, and have different kinds of businesses. Incorporated in the research four entrepreneurs were interviewed in Perth and Brisbane. The aim of this paragraph is to give an answer to this subquestion from the side of the entrepreneurs.
To answer the first sub question this research looked through the eyes of an entrepreneur. The following interview questions are used: 8-9-10-11-16-17-18-22-24 (interview questions are in appendix 1.2 and Table 5: contains the sub questions and the theory).
During the interviews there were certain subjects which appear often in the different interviews, table 7 gives an overview of how many times the subjects appeared in the
interviews. These words are tagged and searched in the interviews, also how the answers have been interpretted to find an answer on the sub question. This research took a look at the subjects who were very strong. When it came up three times or more in the interview, the research gave attention to it and worked it out.
Subject Venture
proposal Strategy Money Deal Management Int 1 Q9 . Q10 . Q24 Int 2 Q9 Q16 Q22 Q18 Q24 Int 11 Q9 . Q22/16 . Q24/12 Int 14 Q9 Q16 Q9 Q17 Q24 Table 7 Subjects appear in interviews
Three entrepreneurs (interview 1, 2 and 14) wrote a venture proposal. Hope said: “There are lots of venture proposals, that don’t lead to a deal.” The entrepreneurs wrote the proposal according the literature rules. Burnett (interview 14) “I didn’t follow the exact rules. But they knew what the investors wanted, because he had raised money previously from venture capitalists.” Rothwell (interview 11) didn’t wrote a venture proposal, he said ”I was building boats since 1972 and gathered a lot of experience in the boat industry. They didn’t asked for money, venture capitalists came to them. Austal was very successful with high-speed vessels in China, and venture capital companies came to them because they wanted to invest”. Money
According to Hope (interview 2) “A deal is when you’ll get the money, we only needed money for a deal. We don’t need services or advice from the investors. Because investors don’t know anything about their business.” Opposite of the comment of Hope, there is the comment of Rothwell (interview 11) “It’s the people, not the money. Their skills, experience and contacts are the most important. Their professional skills (of the VC’s) were welcome in the board and also were good for Austal (They didn’t offer only money, they also offered knowledge, experience in business, contacts (and were well connected) etc). Some companies were rejected because the people (the individuals), who was getting on the board were not liked”. Burnett (interview 14) said: “He knew what the investors wanted, because he had raised money previously from venture capitalists”. Respondent Groot (interview 1) “I wanted to be 100% owner of a company, it lead to a deal because I knew one of the managers of the company. Because of the inside information, I could see what the future would bring him.” Also Groot (interview 1) said; “I invested myself in this company and led it. I financed it myself because of success in the past.” “I bought 100% of the shares of the company. I financed it with my own money.” In the paragraph of the investor, it was already mentioned that when an entrepreneur (like Groot) had success in the past, most of the time they don’t need help to finance their company; they finance the company themselves.
Management
Hope (interview 2) answered on the question: Is your managment being measured or
reviewed? “Yes they did. They got a good solid management with all kind of degrees.” Groot (interview 1) said: “ Because he bought the division Ericsson Business Phone Center, he get to know one of the managers of Ericsson, and because he know the manager he knew what the condition of the company was.” Rothwell (interview 11) said: “It was always reviewed by himself because he is the biggest shareholder. The investors didn’t review the management of Austal. For Austal this was completely different because they had a business. They had a market in Asia which was starting to grow and expand, so they had a reference on the management quality and the entrepreneurial spirit”. Rothwell is also an informal investor and he said: “They (Rothwell and the company who invested in Austal in the beginning) select the companies on the quality of management and the quality of opportunity.” Burnett (interview 14) told that: “Incoming investors are always looking at the founder and considering if they can work with him. If they can be the CEO that is great but usually the founder isn’t the right person to be the CEO. The investor sometimes introduces the CEO.”
§1.3 Expert
Brisbane; 1 commercialisation expert, 1 incubator expert, 3 university commercialisation experts and one respondents of the government.
To answer the first sub question this research looked through the eyes of an expert. The following interview questions are used: 3-11-14-15-18-21-22-23-26-27-28-29 to answer this sub question. (interview questions are in appendix 1.3 and Table 5: contains the sub
questions and the theory).
During the interviews there were certain subjects which appear often in the different interviews, table 8 gives an overview of how many times the subjects appeared in the
interviews. These words are tagged and searched in the interviews, also how the answers have been interpretted to find an answer on the sub question. This research took a look at the subjects who were very strong. In this occasion when it came up five times or more in the interview, the research gave attention to it and worked it out.
Subject Deal = different Value of company (Optimistic) entrepreneur
Management Risk Sector Patent Control Int 4 Q26 Q21 . Q28 . . . Q26 Int 5 . . Q21 . . . Q23 . Int 6 Q26 Q22 Q21 Q28 . . Q23 . Int 7 Q21 Q21 . Q21 . . Q23 Q21 Int 9 Q26 Q21 . . Q21 Q24 Q23 Q21 Int 10 Q24 . . Q21 . . Q23 Q25 Int 12 . . Q11 Q28 Q10 . Q23 Q21 Int 13 Q11 Q28 . Q28 Q29 Q29 Q23 . Int 15 . . Q27 . Q# Q14 Q23 . Int 17 Q18 . Q14 . Q11 . Q23 Int 18 . . . Q3 Q15 Q10 . . Int 19 . . . Q11 . . Q23 . Table 8 Subjects appear in interviews
Explanation for table 8:
Q (number) is the question number where the answer is be given in the interview
Q# this answer is the given outside the questions, most of the times at the end of the interview . is checked in the interview, but not mention
Every deal is different
According to most experts (interview 4, 6, 7, 9, 10) “every deal is different.” “Relationships are the most important for investors and entrepreneurs to make deals, you still get the websites etc. but personal relationships are the most important.” Said Collins (interview 6), according to respondent Lister (interview 10) “Entrepreneurs and investors find each other by word of mouth and industry bodies (networking groups)” “Networking, personal contact groups, introduced by financial advisors (accountants), lawyers, also a lot of repeated business, serial entrepreneurs.” In Brisbane Birkill (interview 13) gave also a reason for that all the deals different are: “Difficult question, all the deals are different. They come together in a variety of different ways; no deal is the same as another. Maybe this is because we are such a small market”. Smith (interview 17) also located in Brisbane said: “It depends, every deal is different.”
Value of the company
company left and want A$ 5,000,000 for 10 % of the company.” Birkill (interview 13) located in Brisbane also said: “A realistic valuation of the company”.
Entrepreneur
According to Collins (interview 6):”The entrepreneur has an unrealistic view of his company, not objective. Bashem (interview 5) is arguing that: “It really comes down of the skills of the inventor (entrepreneur). In most instances, it doesn’t work. This is because of the ego of the inventor and the inventor gives a too optimistic view.” Kapeleris (interview 12) said: ”Most of these companies don’t get anywhere because the entrepreneur isn’t able to explain it properly, or they haven’t been briefed on how to pitch”. Finney (interview 15) is agreeing that: “It’s not just about the technology, if the entrepreneur is very difficult they don’t invest”. Smith (interview 17) said in the interview: ”Entrepreneurs will either approach the university, or the university will approach entrepreneurs who are starting a company with the invention from the university.”
Management
Birch (interview 4) said ” You need a balanced management team in your organisation, and skilled people for finance, sales and production. Management teams need most of the time experiences.” Also Collins (interview 6) said: “It’s about the people.” According to lecturer Burnett (interview 10); “It’s not the idea. It’s all about the team, you need an a-team. Some investors take your idea and get rid of the team and put a better team on it. The technology or product is great, but you’re not the right people to run it.” Also Kapeleris (interview 12) said a venture attract investors if it have a strong patent, investible business model and strong management team. Birkill (interview 13) also anwersed on the question, what characteristics would attract investors to a venture? She said: “Good management”. The government, Gilbert (interview 18) said: “They work with early stage and startup businesses if they have good management team and technology. According to the government they have to put far more effort in management than in technologies.” Davis (interview 19) said: ”Very important having good early stage venture management, people who know how to take a company through their early milestones and have at the same time an eye on raising the next time of funding.”
Risk
Kapeleris (interview 12) said that: “The investors are very conservative when it comes to investing, although there are some pre seed investments happening, and there are pre seed funds out there. The general view is that those investors are not investing in high-risk ventures. There are deals taking place, and most investors are going too more established businesses that are looking for growth rather than the early stage risk”. Also Lister (interview 9) said: “The technology is great, but the risk is too high.”
Finney (interview 15) gave a broad and clear answer on how increasing the number of deals regarding risk, he said: “Universities go to a certain stage of development, and then you have the area that needs investment funding, and then you have organized capital funding. From the supply side: the area/gap requires the government to intervene in order to fund these ideas, because venture capitalists won’t fund it. They reject most ideas because they are too premature and too high risk. Universities won’t fund it, because they only do basic research, therefore a gap exists in the middle. The government has just started a fund called the proven concept fund. From the demand side: the government needs to give money to venture capitalists who invest in early stage companies. This has started to address the gap! The government is working on it, and is setting up a national innovation system. Everyone who is interested in the innovation system can set a submission for the national innovation system. There are a lot of good ideas from universities, but these ideas are too risky and too
government has stopped the grants, so the investors want a low risk deal.” Gilbert (interview 18) from the government in Brisbane said that: “Angels will put most of the high risk money in, for that early commercialisation or growth, not the venture capitalists.”
Sector
Lister (interview 9) said: “Yes, I think most investors understand certain sectors. They know people in this sector and feel comfortable investing in this sector”. Also according to Finney (interview 15): “VC are specialised in a sector and by BA you don’t know, so they can be approached, and if they are interested you can talk to them”. Birkill (interview 13) came with the following comment about the sector: ”There are some investors who are only interested in a certain theme or sector (last time the clean and green companies are very popular)”. Gilbert (interview 18) said: “You have to be in a certain sector to get grants, for example clean technology you’ll get a lot of grants, this can increase the deal”.
Patent
According to Collins (interview 6) “It’s an important issue for investors, it could be decisive. When you are dealing in Intellectual Property, it is essential! A patent, it’s one of the criteria to invest in it.” On the other side Levin (interview 7) said: “A patent helps to make a decision for a deal. But it is not deal making.” Also Lister (interview 9) argue that; “Patenting is very important if the technology and the market requires it, not important if it doesn't.” And Burnett (interview 10);” Invest in the people, invest in your product that’s sometimes more important then the patents. Of course a patent is something attractive, they have something that other people don’t have.” In Brisbane Kapeleris (interview 12) said: “Yes, it provides a temporary monopoly to attract investors”. Birkill (interview 13) said: “It depends on the sector, but it’s important in the biotechnology. In the information technology it isn’t important, because you can’t patent a piece of software (and have a copyright). For an investor it is a tick in the box for investing”. Also Finney (interview 15) from QUT Bluebox said: “Depends on the sector, at biotechnology it is absolutely critical; no patent, no deal. In the information technology it’s not critical because the life cycle is so short”. Smith
(interview 16) from the Griffith University said: ”In some industry you need a patent, depends on the industry, but most of the investors like a patent. Patent strategy is becoming much more important that it used to be.” The last expert Davis (interview 19) said: “Most of the early stage investors will tell you that there needs to be a strong protect able intellectual property position. That doesn’t need to be necessarily a patent, but most of the deals have a patent. Copyright is also used by software.”
Control
Birch (interview 4) said about control; “Some investors want to have control, some investor’s only want to invest (financial institutions).” Levin (interview 7) argues that; “ The investors want to have more control.” Lister (interview 9) said that; “Unrealistic expectations of the entrepreneur, they want the money but don’t want to give up the ownership or control.” Also Burnett (interview 10) said; “They don’t want to give it up and the company is their baby and they don’t want to give this to an investor. But they don’t have a choice; if they don’t have the money they don’t succeed with their company.” Control doesn’t always mean give up
§2 What is the role of Zernike Australia in the deal making process? Introduction
This second paragraph gives the results/answers from the participants (Investors,
Entrepreneurs and Experts) on this sub question. This paragraph is seen from three points of view.
In this paragraph there aren’t a lot of different factors that are been spoken about the role of Zernike Australia in the dealmaking process. That’s the reason that this paragraph doesn’t contain tables, because an overview isn’t necessary.
This sub question is important because it’s important to know what the role of Zernike is in the deal making process at this moment. Zernike Australia identify not many deals are made between venture capitalists and entrepreneurs and they want to increase this. They want to increase this because they want to take part in the deal making process.
This is also looked at from different participants because Zernike would like to understand how investors, entrepreneurs and experts are looking at Zernike Australia. So that is the reason that in this research the interview questions will answer the sub question of every different point of view. At the end of this paragraph a conclusion/answer will be given on the sub question: What is the role of Zernike Australia in the deal making process?
§2.1 Investor
In this paragraph the results of the investor about the role of Zernike Australia in the deal making process will be presented to you.
To answer the second sub question this research looked from the eyes of an investor. The following interview questions are used: 13-19-20-29 (interview questions are in appendix 1.1 and Table 5: contains the sub questions and the theory).
The investors have the power to make an investment decision. But they have to know which companies are looking for investment. To understand what the role is from Zernike Australia through the eyes of the investors, this research asked the investors what is the role of Zernike Australia in the deal making process according them. The investors that are interviewed are also known as venture capitalists. Incorporated in the research two investors were interviewed and they gave their opinion about the role of Zernike Australia in the dealmaking process. Some answers have been interpretted to find an answer on the sub question. This research takes a look at the subjects who were very strong. The goal of this paragraph is to give an answer on this subquestion.
During the interview with the two investors they spoke about the role of Zernike Australia in the dealmaking process. Respondent Lopez (interview 3) didn’t gave information about the role of Zernike in the dealmaking process. The questions weren’t that concentrated that it gave answers to this sub question. After the interview with le Page (interview 8), he said “Zernike is well connected in Europe, good access to funds this is important for a high technology companies.” He also said:” Zernike is a good organization to deal with. RM Capital sees a lot of things and they don’t have the expertise to do these deals, but Zernike has. That’s what they trying to do. So that’s a reason that they work out a partnership with Zernike, that will help in the future.” Le Page also mentioned: “Also advertising (press releases, lunches, diners for entrepreneurs and investors) will increase it, letting the market know that Zernike has the facility. And this will increase the number of deals.”
60.000 people. This is a large database with personal and institutional investors who are interested certain type of deals/sector.” In the interviews with Lane and Lawrence (interview 16 and 20) there isn’t spoken about Zernike.
§2.2 Entrepreneur
In this paragraph the results of the entrepreneurs about the role of Zernike Australia in the dealmaking process will be presented to you. The entrepreneurs that are interviewed in this research have companies in different kind of sectors, and have different kind of businesses. Incorporated in the research four entrepreneurs were interviewed in Perth and Brisbane. The goal of this paragraph is to give an answer to this subquestion from the side of the
entrepreneurs.
To answer the first sub question we looked from the eyes of an entrepreneur. The following interview questions are used: 12-13-16-17 (interview questions are in appendix 1.2 and Table 5: contains the sub questions and the theory).
The entrepreneurs are the persons who are going to run the company. They are looking for investment. To understand what the role is from Zernike Australia through the eyes of the entrepreneurs, this research asked the entrepreneurs what is the role of Zernike Australia in the deal making process according them.
Groot (interview 1) “Zernike didn’t played a role in this deal. At that time I didn’t knew the company.” When Groot emigrated to Australia he bought the company, during the interview he said: “The market is not transparent and as a starter in Perth it is not easy, he bought this company because a lawyer told him the company was for sale. He went to the owner and asked him to sell the company, after 3 months of negotiation they took over the company.” The other entrepreneur Hope (interview 2) “They were a company in EIR (Entrepreneurs In Residence) and Zernike was involved in EIR and invested in Unleashed technology”. “The accountant helps the company finding investors, and he found an investor, but didn’t bring enough money”. Entrepreneur Rothwell (interview 11) didn’t spoke about Zernike Australia, when I was on the phone with him he told me that he didn’t knew the company. Burnett (interview 14) from Mesaplexx said “Arnold said that the fund wasn’t that large, but Lex de Lange told him something different, that it’s much larger. He isn’t reliant on Zernike, but when Zernike is interested, he will be eager to talk. When Zernike has a fund what contains about A$10 to 20 mln for early stage business development, this will lead to a massive impact.”
§2.3 Expert
In this paragraph the results of the experts about the role of Zernike Australia in the
dealmaking process will be presented to you. The experts that are interviewed in this research are the group who are standing along the sideline of the playingfield of the dealmaking process between investors and entrepreneurs. The experts give mostly advice and are involved in the deal. To understand how the experts are looking at the role of Zernike Australia, this research looks at how experts are looking at Zernike Australia. The experts that are
interviewed in this research are working in different kinds of businesses. Incorporated in the research 6 experts were interviewed in Perth; 3 accountants, 2 laywers both specialised in Intellectual Property and 1 lecturer of Murdoch University who specialises in
Entrepreneurship.
To answer the first sub question we looked from the eyes of an expert. The following
The experts are the persons who are the advisors for the entrepreneurs and the investors, and bring them together. To understand what the role is from Zernike Australia through the eyes of the experts, this research asked the experts what is the role of Zernike Australia in the deal making process according them.
According to Collins (interview 6) “He has been involved with Zernike for already many years. He thinks that when Zernike can provide capital (equity or debt finance) to assist and acting as an intermediary, that will give them much more power and much more influence on the marketplace instead of being as a not influence as intermediary. Also helping companies to distribute it worldwide is very important.” Levin (interview 7) said: ”At the moment Zernike doesn’t show good deals. EIR has a negative perception in the market, negative view. Zernike is EIR, so there reputation of good deal making isn’t good in Australia. At the end of the interview Levin said to solve this: “When Zernike has a good reputation on the market, it has a good diligence. Choose the good companies and put their own money in, that’s will make a different. Then the ability to go to others, to put money in, is much easier. To have their own money, they have more power to attract other investors. After a couple of good deals, you’ll get a network of investors. When you did some successful deals you can start a fund, and Zernike will get the trust of the investors. So that gives them more power to work with this capital.” In Brisbane the respondent Kapeleris (interview 12) said the following about Zernike, they are strong in managing technology parks and strong in Queensland and Western Australia. AIC are trying to put a proposal in Brisbane where they can add software infrastructure services to really confirm the commercialisation, but did not work out for Zernike. This is probably the case in the Netherlands but he doesn’t see it here”. Finney (interview 15) said that: “He doesn’t know the role of Zernike”. Gilbert (interview 18) asked: “What is the company doing and what is the value for the government?” Davis (interview 19) said: “For him it was interesting that Zernike wanted you to do this. Why? What is the link? He doesn’t know really what Zernike is doing.”
Respondents in Perth: Birch, Bashem, Lister and Burnett (interview 4, 5, 9 & 10) didn’t say anything about the role of Zernike in the deal making process. Respondents in Brisbane: Birkill and Smith (interview 13, 17) didn’t say anything about the role of Zernike in the deal making process.
§3 Who are the venture capitalists in high technology companies in the start-up and growth phase in Australia and what kind of activities do they have?
Introduction
This third paragraph in the appendix will give an answer on the third subquestion. This answer is important because every investor and every investment climate is different. This subquestion is also looked from different participants because Zernike would like to understand how investors, entrepreneurs and experts are looking at the venture capitalists. So that is the reason that in this research the interview questions will answer the sub question of every different point of view.
high a risk profile, venture capital firms may complement the spectrum of financing instruments available to the private business sector” (Scholtens, 1999).
Venture Capitalists
Venture capitalists (VCs) concentrate their activities on entrepreneurs in businesses with a high growth potential in the hope of achieving a high rate of return on invested funds. Venture capital plays a catalytic role in the entrepreneurial process, offering fundamental value creation that triggers and sustains economic growth and revival (Wijbenga, 2004). Entrepreneurs typically start firms with an innovative idea with the anticipation that the venture will become a long-term success. Often the new venture obtains some business angel financing to aid its development. If the venture achieves some early success, resource gaps often emerge and need to be filled if the venture is going to achieve its potential. As the venture progresses through the initial startup phase, venture capital investments are often sought. In addition to providing risk capital to high potential ventures in exchange for partial ownership of the firm, VCs are typically active investors who seek to add value through their interaction with and advice for the managers of the entrepreneurial venture as well as through their monitoring and reorganisation of the companies in which they participate. Given the substantial equity stake that VCs typically take in a firm, the relationship between VCs and the entrepreneurs that they fund has been compared to that of large block stockholders in leveraged-buyout firms (Arthurs and Busenitz, 2003).
According to Wijbenga (2004) when VC invests in a firm, they normally claim some seats in the board of directors. The board of directors of firms backed by VCs can be characterised by concentrated outside ownership, and in many cases by investors with special expertise and useful networking connections. Active board involvement forces managers to check their assumptions and to do their homework properly before advancing strategic proposals. In addition, the outside board directors can contribute to the process of creative strategy-making because they can offer a variety of experiences, as well as quality of judgement. Furthermore outside board members can add objectivity to the decision-making process, which can help to challenge narrow thinking, escalating commitment and weak analysis. Boards, and thus VCs, have the following three different types of activities that they bring into a firm:
1. Networking activities: the board helps to link the firm to its external environment, and to secure critical resources. This board role also means that members of the board perform interlocking activities on behalf of the firm in order to develop and maintain long-term relationships. In the VC portfolio company’s context, this function might imply the role of interface with other group members, providing contacts in the industry and with professionals, and obtaining alternative equity capital.
2. Monitoring activities: the board monitors and governs the firm’s management on behalf of shareholders or stakeholders. In situations in which management does not bear a major share of wealth effects of its decisions, the board is the common apex. The board screens and authorises investment proposals, approves decisions, and appoints, disciplines or removes ineffective individual managers or management teams. In the Venture capitalist portfolio company’s context, this function might comprise monitoring financial performance and monitoring operational performance, and the evaluation of the portfolio company’s strategy and product market
opportunities in order to develop the firm’s strategy to changing circumstances. 3. Strategy-making activities: the board participates in strategic decision making, and
§3.1 Investor
This paragraph shows who the venture capitalists in high technology companies are in the start-up and growth phase in Australia and what their activites are.
To answer the third sub question this research looks from the eyes of an investor. The following interview questions are used: 1-3-4-5-13-16-24 (interview questions are in appendix 1.1 and Table 5: contains the sub questions and the theory).
The investors are asked these questions, because they have to describe the investment market and the activities that they have. They are looking from their own point of view and position and the position of their collegues or opponents.
According to Lopez (interview 3): ”For investors it is a buyers market, there aren’t many investors. Western Australia only has one Venture Capitalist, this is Stone Ridge in WA. There aren’t many big investors, and when they are big, they don’t want to invest in relatively small companies. These big investors prefer the mining industry. The investors who want to invest in start-up and growth phase companies are looking for strong teams and companies with good business models. A company needs to have a merit, a value/quality/attributes.” Also le Page (interview 8) said; “There are stockbrokers like us, who put money in such projects. But it is small amounts. The main reason for not investing is the long process, expensive, high interest rate; the entrepreneurs have to give a lot away from the company to get a small amount of money. There aren’t a lot of success stories of high technology companies coming out of Australia.” Both investors said that the entrepreneurs aren’t getting money easily from investors and if entrepreneurs get money they have to give a lot of shares of their company.
Lopez (interview 3) said about his activities: “He gives advice to high technology and life sciences companies about raising money in the growth and past the growth phase. He reconsiders the strategy of the company and often changes this strategy.” One of the main activities from le Page (interview 8) is: “They structure a deal give corporate advice and raise capital. They also invest themselves.” Lane (interview 16) didn’t speak about who the venture capitalists were. He described there activities: “They actively keep contact with universities, incubators, VC connect etc. They also can give companies advice, because they specialised in technology.” Investor Lawrence (interview 20) from NBC Capital in Brisbane said: “It’s easy for venture capitalists to access people with technology and idea. After they found it, they got a serious of stages for their investments of diligence. They evaluate and rate in the first stage, if the scores well it will go across to the next stage of desktop diligence; meeting the people, get a feeling with the product and their business.”
§3.2 Entrepreneur
This paragraph discusses the statements of the entrepreneurs about who are the venture capitalists in high technology companies in the start-up and growth phase in Australia and their activities.
To answer the third sub question this research looked from the eyes of an entrepreneur. The following interview questions are used: 12-21-22-23 (interview questions are in appendix 1.2 and Table 5: contains the sub questions and the theory).
venture capitalists. The entrepreneurs that are interviewed in this research have companies in different kind of sectors, and have different kind of businesses. Incorporated in the research four entrepreneurs were interviewed in Australia. The goal of this paragraph is to give an answer to this subquestion from the view of the entrepreneurs.
According to Hope (interview 2) “There is nobody who wants to invest in start-up in high technology in Australia. There were investors who didn’t have money. Or for big VC, the company was to small to invest in.” Groot (interview 1) he didn’t need investors, “I bought 100% of the shares of the company. I financed it with my own money.” So Groot isn’t representative of the entrepreneurs because he has two functions, he is investor and entrepreneur. Rothwell (interview 11) said: “The VC approached them, for Austal, their skills, experience and contacts were the most important. Their professional skills (of the VC’s) were welcome in the board and also were good for Austal”. Burnett (interview 14) from Mesaplexx in Brisbane said, “He looked at a book with all the venture capitalists’ in it and see what their specialties were and give them a call and meet with them.”
§3.3 Expert
This paragraph contains the results of the experts discussions on who are the venture
capitalists in high technology companies in the start-up and growth phase in Australia are and what are their activities.
To answer the third sub question this research looked from the eyes of an expert. The
following interview questions are used: 10-14-19 (interview questions are in appendix 1.3 and Table 5: contains the sub questions and the theory).
Experts are the group in the process who stand along the playingfield of investors who are investing in entrepreneurs. The experts interviewed in this research are the group who stand along the sideline of the playingfield of the dealmaking process between investors and entrepreneurs. The experts know both parties well and also know exactly who the investors are and what kind of activities they have. Experts also link entrepreneurs and investors, so they know what the investors want and what they are looking for. The experts interviewed in this research are working in different kinds of businesses.
Birch (interview 4) argue: “There is also a directory list with investors. Private equity funds have a reputation in Western Australian, there are loads of investors in Western Australia. So there are unlimited investors. This outcome is different from the other interviews, because most of the respondents (interview 5, 7) said; “There are only a small amount of investors interested in high technology companies.”
According to Bashem (interview 5) “The VC market is still small in Australia and
unsophisticated, but it’s getting better and easier to get the money. At the moment the credit crisis in the USA, money in Australia is getting more expensive and people are scared, but this will be realtively short.” Levin (interview 7) also mentioned that; “Because of the volatile global market. It’s very hard to find investors for technology based companies because in Western Australia there is the mining boom and the property boom. So investors weren’t interested in putting money in things other than mining or property.” This is also mentioned by Lister (interview 9): “It’s very very strong in mining, oil and gas technology and it’s not strong elsewhere.” Burnett (interview 10) gives the same reason: “Western Australia receives an income from resources; it’s all about a mining boom. A lot is foreign investment; people are really focusing on mining and not so much focus on high technology and small
businesses.”
and most investors are going too more established businesses that are looking for growth rather than the early stage risk”. Finney (interview 15) said: “There are 2 angel networks in Queensland (one at the Gold Coast and one in Brisbane), they are semi-organized, and you know who the venture capitalists are. But you don’t know who the business angels are; these two networks are where you go to pitch your ideas. They don’t put a lot of effort into that because the venture capitalists are a better way to go”. Birkill (interview 13) support this experience: “The venture capitalists are finding it hard to raise capital from the banks and funds, therefore there is only a handful of venture capitalists at the moment”. And when you look at the BA’s; “The business angels are too scared to invest because they have taken such a hit on the stock exchange”. Smith (interview 17) said: “The market at the moment is very poor, inventions from the universities are at a risk level to high for the VC’s. The investors want a low risk deal.” Gilbert (interview 18) of the government said: “In Australia there are less VC’s, there are a lot opportunity in Australia. VC’s are mostly looking for established business. In September they have the opportunity to bring international VC’s to Australia, the government connects 7 VC’s internationally to companies in Australia. They will bring 15 biotech companies in front of these international and national VC’s.” Davis (interview 19) said: “The Australian venture capital market is heavily biased to management buyouts (especially in the mezzanine and late stage), most VC is at the end of the phase.”
§4 What do the venture capitalists and the entrepreneurs of high technology companies in the start-up and the growth phase in Australia want?
To answer sub question four, there has to be a clear understanding of what the needs are from entrepreneurs and from venture capitalist. So in this paragraph it have to be clear. What do the entrepreneurs want? And what do the venture capitalist want? It needed to have a clear view of what they both need, this research asked entrepreneurs, investors and experts what entrepreneurs and investors want.
Before we can answer the research question, we have to know what the entrepreneurs want from the investors and what the investors want from the entrepreneurs. To understand this and answer this sub question, this research will divide the sub question in two parts. This sub question actually contains two questions:
4a: What do Venture Capitalists in Australia want?
4b: What do the entrepreneurs of high technology companies in the start-up and the growth phase in Australia want?
To answer the sub question in this paragraph, first there will be a look at: “What do Venture Capitalists in Australia want?” This will be answered by first to take a look at the literature. Sub question 4a: What do the venture capitalists in Australia want?
To answer this sub question it needs to highlight the side of the capital suppliers, also known as the investors. In sub question 4a, this will be answered with literature and at the end with a case study using interviews.
In addition to providing risk capital to high potential ventures in exchange for partial ownership of the firm, venture capitalists (VC’s) are typically active investors who seek to add value through their interaction with and advice for the managers of the entrepreneurial venture as well as through their monitoring and reorganisation of the companies in which they participate. Given the substantial equity stake that VC’s typically take in a firm, the
To understand what capital suppliers want, Proimos and Wright (2004) investigated a VC’s investment decision-making process. First if VC’s on average make successful investments, then an enhanced understanding of their investment criteria would improve understanding of what factors lead to investment criteria would improve understanding of what factors lead to investment success generally. Secondly, VC’s would gain from knowing which criteria could be used to distinguish between successful and unsuccessful ventures.
They also argue that VC’s, unlike the average investor, possess an enhanced ability to reduce information asymmetry and its subsequent issues (moral hazard and adverse selection) by applying vigilant screening and monitoring of ventures, both ex-ante and post investment. Clearly, this information gap is not a source of risk for VC’s, and so it is not the focus of this study.
Berger and Udell (1998) identify three distinct steps within a VC’s investment cycle that VC’s use to reduce adverse selection. Those steps are: selecting, contracting and monitoring. Alternatively, these steps are referred to as pre-investment activities, deal structuring and post-investment activities. The selecting step involves deal sourcing, screening and evaluation, during which unprofitable and poor ventures are eliminated or ‘screened out’. Contracting between the entrepreneur(s) and the VC, which occurs after the investment has been selected, is designed to provide incentives for the venture operator(s) to behave optimally. Monitoring occurs after selecting and contracting, and allows the VC to collect information on the venture during its operation, particularly information that pertains to its performance.
This study specifically examines whether Australian VCs, like their international
counterparts, employ Berger and Udell’s three steps of investment, and if so, how they reduce the risks of information asymmetry during the first step, the selecting or pre-investment step, which involves deal sourcing, screening and evaluation. The later contracting and monitoring steps are also examined for the use of risk reduction measures. According to Proimos and Wright (2004) the venture capital investment selection in Australia is limited. The Australian venture capital market is at the early stage of its development, and consequently provides the opportunity to investigate VCs’ behavior in an emerging market.
Sub question 4b: What do the entrepreneurs with a high technology company in the start-up and growth phase in Australia want?
To answer this sub question it needs to highlight the side of the entrepreneur with a high technology company in the start-up and growth phase. In sub question 4b, this will be answered with literature and at the end with a case study using interviews.
Entrepreneurs typically start firms with an innovative idea with the anticipation that the venture will become a long-term success. Often the new venture obtains some business angel financing to aid its development. As the venture progresses through the initial
start-up phase, venture capital investments are often sought (Arthurs and Busenitz, 2003). In other words, entrepreneurs seeking venture financing, it would benefit if they knew the VC’s investment criteria. Knowledge of the ‘desirable’ investment criteria would assist
§3.4.1 Investor
This paragraph shows what venture capitalist and the entrepreneurs of high technology companies want.
To answer the fourth sub question we looked from the eyes of an investor. The following interview questions are used: 13-23-26-27-28-30-31 (interview questions are in appendix 1.1 and Table 5: contains the sub questions and the theory).
Entrepreneurs
Lopez (interview 3) argues that “They expect that investors want to invest in their great idea and their company.” Le Page (interview 8) said; “Entrepreneurs want to fund their projects by investors, but it’s very difficult to get money.” Lane (interview 16):”Entrepreneurs want to find money, but this is very hard. A lot of proposals are rejected, venture capitalists only want the best ones out of it.” According to Lawrence (interview 20) said: “It’s easier for venture capitalists to access people with technology and idea, then for the person (individual) with the technology and idea to access to find money. Not everybody is fully informed, he thinks that 30 % of the market is informed. People don’t know where to go, if they need money to fund their company.”
Venture capitalists
Le Page (interview 8) said: “Their policy is making money, looking for high earnings, high quality of management and the price to get in a company. They look for the earning
potentials, exceptional management.” Lopez (interview 3) said: “The investors who want to invest in start-up and growth phase companies they are looking for strong teams and
companies with good business models.” Lane (interview 16) said: “They chose the best ones out of it. Every deal has to be a winner! They are looking for technology what is disruptive in the marketplace where it’s in. Technology that is hard to copy (barriers to entry). Technology has to be defensible, technology is global, they bring it to a global market and general they take the companies in to the US.” Lawrence (interview 20) of NBC Capital said: “They get paid by a percentage of success, so managers who are managing these funds like to do big deals because they get more money in that way. They have to do the same kind of work, so they prefer the big deals instead of the small ones.”
§4.2 Entrepreneur
To answer the fourth sub question we looked from the eyes of an entrepreneur. The following interview questions are used: 12-13-14-19-22-24 (interview questions are in appendix 1.2 and Table 5: contains the sub questions and the theory).
Entrepreneurs
Entrepreneur Hope (interview 2) said: “Money, they don’t need services or advice from the investors.” Groot (interview 1) didn’t need the money; “He was his own investor, he is entrepreneur and also investor.” Rothwell (interview 11) was the opposite of these two entrepreneurs, he said: “You often have people with a dream, for them it seems a really good dream but there isn’t more substance than that. For them is much more difficult to convince a venture capitalist to invest because they don’t have a track record but they have a dream”. But Rothwell said from his entrepreneur perspective: “It’s the people, not the money. Their (VC’s) skills, experience and contacts are the most important”. Also Burnett (interview 14) from Mesaplexx said, “Personal chemistry is very important, trust in the investors. The investors need to have deep enough pockets to keep on funding, and are they have to have a specific interest in your market.”
Venture capitalists
anything about venture capitalists. For Rothwell (interview 11) it was different “Austal was acting passive, the venture capitalists came to them. Austal was very successful with high-speed vessels in China, and venture capital companies came to them because they wanted to invest”. Burnett (interview 14) said, “Venture capitalists want to speak with the founders directly and don’t want to have an intermediary. In Australia there aren’t a lot of experienced intermediaries.”
§4.3 Expert
To answer the fourth sub question we looked from the eyes of an expert. The following interview questions are used: 11-23-24-25-26-29 (interview questions are in appendix 1.3 and Table 5: contains the sub questions and the theory).
Entrepreneurs
According to Birch (interview 4): “The entrepreneur needs money to bring his
idea/product/service on the market.” Collins (interview 6) also argues: ”Entrepreneurs have a business or idea to sell, this requires people/money to buy it.” Levin (interview 7) said: “Entrepreneur comes with a business and decides to raise capital.” According to Lister (interview 9): “They want the money but don’t want to give up the ownership or control, he calls this unrealistic expectations.” Also Burnett (interview 10) said: “Entrepreneurs don’t want to give it up and the company is their baby and they don’t want to give this to an investor. But they don’t have a choice; if they don’t have the money they don’t succeed with their company.” In Brisbane Kapeleris (interview 12) mentioned: “There are a few
entrepreneurs, who are looking for an investment. Entrepreneurs aren’t well established in terms of having their investing readiness in place; they don’t have a clear business model, don’t have clear market information, and don’t have a clear path from product to
commercialisation”. Birkill (interview 13) said: “A lot of entrepreneurs are desperately looking for funding, because there aren’t a lot of opportunities for them. For investors on the other hand, it’s really a buyers market”. Smith (interview 17) said: ”Entrepreneurs will either approach the university, or the university will approach entrepreneurs who are starting a company with the invention from the university. These entrepreneurs look at press releases and if they see technology they are interested in, they approach the university.”
Finney (interview 15) is working for the QUT (Queensland University of Technology) and as an university they are looking for entrepreneurs, because the inventor wants to stay at the university as they are risk averse and are not motivated by commercialisation. He said: “Good entrepreneurs are already in business doing their things, therefore it can be very difficult to attract entrepreneurs to this early stage sector. Most alternate entrepreneurs that are able to help them require payment, and in the early stages of development this isn’t possible as funds are often an issue”. Gilbert (interview 18) said: “Entrepreneurs can do 3 things: fund
themselves (FFF; Friends, Family or Fools), secondly they can look for grants. As third they can look for Business Angels rather than Venture Capitalists.” Davis (interview 19) said: “There are more entrepreneurs who want to pick up an idea from the university and then raise the money, but this doesn’t work very often.”
Venture capitalists
Birch (interview 4) said that: “The criteria of the investor is changing. Some investors want to have control, some investor’s only want to invest (financial institutions).” Collins (interview 6) said: “Investors have money, they are looking for opportunities.” Lister (interview 9) mentions that a “The technology is great, but the risk is too high. Entrepreneurs don’t do their homework in a corporate governance security type of scenario.” So investors want to have some more security when they do their investment. According to Burnett (interview 10) “Most of the investors want a lot, they want to be involved.” In Brisbane Kapeleris (interview 12) said: “Many investors want a strong patent, investible business model, strong
to get the risk out of the company”. Finney (interview 15) said: “Venture capitalists will say there are very few deals, but what they actually mean, what meets their criteria is; ideas that are very well advanced and low risk”. According to Birkill (interview 13): “The investors have a choice out of hundreds of deals, they don’t have to take a bad deal”. Smith (interview 17) said: “There are some high risk VC’s out there (like starfish), they have government funding to invest. These VC’s have the capability to bring in the management and get the company started.” Gilbert (interview 18) said: “VC’s are mostly looking for established business.” Davis (interview 19) said: “The VC is looking for a technology that is going to take or create a big market.”
§5 How do entrepreneurs of high technology companies and venture capitalists fulfill their needs at this moment? And why?
In this fifth paragraph of this appendix this research will give the results/answers from the respondents (Investors, Entrepreneurs and Experts). There is no literature available about how venture capitalists and entrepreneurs of high technology companies in Australia fulfill their needs at this moment. This sub question will be answered only with interviews. In the fourth paragraph the question is answered what the needs are from entrepreneurs in high technology and venture capitalist. This has to keep in mind to answer how entrepreneurs and venture capitalists fulfill their needs at this moment.
§5.1 Investor
This paragraph shows how entrepreneurs of high technology companies and venture capitalists fulfill their needs at this moment, and why.
To answer the fifth sub question this research looks from the eyes of an investor. The following interview questions are used: 13-14-15-17-18-27 (interview questions appendix 1.1).
The investors also known as venture capitalists were asked these questions, because they have to describe how entrepreneurs and venture capitalists fulfill their needs at this moment. Entrepreneurs
Lopez (interview 3) said: “Entrepreneurs in Australia are unsophisticated; they don’t know what the customer wants. And they also don’t know what the investor want, they expect that investors want to invest in their great idea and their company. But they don’t realize what investors are really looking for.” Because the entrepreneurs are unsophisticated it’s hard for them to get money for the start-up of growth for their company. Le Page (interview 8) also agree: “It’s very difficult to get money. A lot of entrepreneurs funding their own projects and just getting it from family members, friends and closer associated. There are stockbrokers like us, who put money in such projects. But it is small amounts.” Lane (interview 16) said that you have to change this question into: “How can entrepreneurs improve their chances to getting VC money? Because a lot of the entrepreneurs are coming very unprepared, they have great technology but they don’t have good business plans and have major gaps in the
management team. They didn’t think how they going to take that idea to the market and become a market leader.” According to Lawrence (interview 20) said: “At the moment, the entrepreneurs who don’t know anything about venture capital, they go to a broker or to an intermediary (advisor) and the intermediary will run a process and bring them in contact with a bunch of people.”
Venture capitalists
demand, patent, extending people (track record), margins, government driving it (subsidies), easy of access to markets.” Lopez (interview 3) said: “Most important factors that a company need: problem solving, have a big market, good team, clear title IP (intellectual property). Good business plan (revenue plan).” Lane (interview 16) said that they looking for:” It have to be in their sector, large markets (or growing markets), innovative technology, very high class management team.” Lawrence (interview 20) from NBC Capital said: “They get paid by a percentage of success, so managers who are managing these funds like to do big deals because they get more money in that way. They have to do the same kind of work, so they prefer the big deals instead of the small ones.”
§5.2 Entrepreneur
This paragraph discusses the statements of the entrepreneurs about who entrepreneurs of high technology companies and venture capitalists fulfill their needs at this moment, and why. To answer the fifth sub question this research looked from the eyes of an entrepreneur. The following interview questions are used: 10-11-13-15 (interview questions appendix 1.2). The entrepreneurs have to describe how entrepreneurs and venture capitalists fulfill their needs at this moment.
Entrepreneurs
Hope (interview 2) said: “In total they have raised 1 M Australian Dollar for 40 % of the company, in 3 terms they get 1 M. (500,000 + 300,000 + 200,000), they were looking for active investors, looking for VC on the internet, VC association, introduction by other people, network individuals (most by personal networks). The accountant helps the company with finding investors, and he found an investor, but didn’t bring enough money.” Rothwell (interview 11) said from an informal investor perspective: “They select the companies on the quality of management and the quality of opportunity. Entrepreneurs need a good pitch and a good product, for Austal it was easier they had a market in Asia, which was starting to grow and expand, so they had a reference on the management quality and the entrepreneurial spirit”. Burnett (interview 14) said, “They were looking for an investor who was interested in the telecom sector (only 5 funds specialise in telecom in Australia), located in the Brisbane area. They were only two companies and they were working together so it was very easy to do business with them.”
Venture capitalists
Groot (interview 1) said: “He was his own investor, he is entrepreneur and also investor. He bought this company because a lawyer told him the company was for sale.” Hope (interview 2) said: “Their company was to small to invest in.” Rothwell (interview 11) said: “The venture capitalist came to Austal for an investment. They always have money to invest in good opportunities”. Burnett (interview 14) said: “They get a lot of business plans and if they know the person it makes the decision a lot easier. So it’s good to meet investors before you need the money, you can always approach them afterwards.”
§5.3 Expert
To answer the fifth sub question we looked from the eyes of an expert. The following interview questions are used: 9-10-11-12-14-15-16-17-20
Incubators, commercialise offices, government like AIC (Australian Institute for Commercialisation).
Entrepreneurs
According to Birch (interview 4): “They first try to raise money themselves, but after a while they have to look for an investor who believes in his idea/product/service.” Lister (interview 9) said: “Firstly the investor will become the intermediary to find the next level of
investment.“ Burnett (interview 10) said: ”The investors and entrepreneurs meet most by networking, it all about who you know and not what you know.” Also the respondents Birch, Bashem, Collins, Levin and Lister (Interview 4, 5, 6, 7 & 9) said that entrepreneurs and investors find each other by personal networks, by introduction and by personal recommendation. In Brisbane Kapeleris (interview 12) doesn't talk about how the entrepreneurs get their funding at the moment but he said: “A lot of entrepreneurs do the technology developing phase and they fall in the valley of death. They haven’t done their market overview or commercial balance, if there is a market for their product”. Birkill (interview 13) said: “Entrepreneurs can also can look on the internet, visit network functions, pitching sessions to meet venture capitalists and investors”.
Finney (interview 15) said: “If there is a proven concept, a patent, or even a business plan, this can be funded in three different ways; they may approach the venture capitalists themselves, the government (Grants may sometimes be applied for), or they can go to a business angels network and do a pitch”. He also said that: “VC’s are specialised in a sector and by BA’s you don’t know, so they can be approached, and if they are interested you can talk to them”. Smith (interview 17) said: “A lot of entrepreneurs approach the universities to get the technology and they want to start a business from it. These entrepreneurs don’t have money themselves, which can make it difficult. However, there are some exceptions to this rule; the university really likes an entrepreneur with a track record and money to invest in the idea.” Gilbert (interview 18) of the government said: “The government is providing the companies a lot of information to find the right investor, they also give them a kind coaching (business model, pitch etc), what the investors want from the entrepreneurs. They take them to AIC, the Australian Institute for Commercialisation from Kapeleris (interview 12). To know what do you need to raise capital?” Gilbert (interview 18) also said: ”With the program Mentoring for Investment, what gives them the opportunity for these businesses to get it right before they exactly going out for the real money. They find more capital as a direct result of these meetings than through any of the other forums.” Davis (interview 19) said: “They have their accountants or their lawyers to access finance through these professionals, these people have in their network investors.”
Venture capitalists
According to the next respondents; venture capitalist don’t like to invest in entrepreneurs who are working in the high technology. Levin (interview 7) said: “It’s very hard to find investors for technology based companies because in Western Australia there is the mining boom and the property boom.” Lister (interview 9) said: ”It’s very strong in mining, oil and gas technology and it’s not strong elsewhere.” Burnett (interview 10) said: “People are really focusing on mining and not so much focus on high technology and small businesses.” In Brisbane Kapeleris (interview 12) said: “Investors have a good network and talk with a lot of people, but they don't have to support their gut feeling”. Birkill (interview 13) support this according her: “Venture capitalists have many deals flowing, they visit meetings, so VC meet entrepreneurs by introduction and by personal networks”.
Finney (interview 15) said: “Venture capitalists will say there are very few deals, but what they actually mean, what meets their criteria is; ideas that are very well advanced and low risk”. Smith (interview 17) said: “VC not very active now. The market at the moment is very poor, inventions from the universities are at a risk level to high for the VC’s.” The
