US private equity open wallets to Australian tech startups: BDO

More foreign investment incoming as American economy recovers

The Australian startup scene has seen a surge in foreign private equity fund investment in the last six months, according to technology consulting firm, BDO.

At the same time, IPO activity has experienced a major recovery in Australia, BDO corporate finance partner, Sebastian Stevens, told Computerworld Australia.

BDO helps startups raise initial capital, develop business plan structure and financial forecasting, as well as prepare companies to find the next round of funding from private equity or the IPO market.

American private equity has driven the recent spike in foreign investment, said Stevens. “The US investment into Australia has been pretty quiet for the last three or four years, and in the six or nine months, it’s really started to rebound,” Stevens said. The likely reason is the recovery of the American economy, he said: “Now that they’re rebounding, they’re starting to look at more international investments.”

Foreign investment is important due to Australian investors frequently being more risk-averse, he said. “There’s good ideas, there’s good development in Australia, but probably not a very good capital market for [startups] to raise money.”

One danger of foreign investment is that Australian startups could be pulled to other countries, he cautioned. However, he said Australia still makes a great incubator for early-stage startups.

“I don’t think it’s a bad thing. It’s happened for a long, long period of time and it’s still seemed not to slow down Australian innovation. It would be better if we had a developed private equity market here, but I think it will happen over time.”

Meanwhile, the IPO market has opened up in Australia, said Stevens.

“The IPO markets have been virtually dormant in Australia for the last four or five years, and at the moment we’ve seen probably a three- or four-fold increase in opportunities there.”

He predicted both trends will continue through 2014 and possibly 2015, he said.

A BDO report on global activity in the technology sector released this week, TechTalk (PDF), highlighted increased global fears of a second tech bubble. The fears led to a widespread sell-off of tech stocks around the world, according to the report.

However, Stevens said that trend has not yet affected Australia and he is sceptical that there’s reason to worry.

“It’s a far more sophisticated technology market in the world these days,” he said. “I just can’t see a bubble on the horizon.”

Adam Bender covers telco and enterprise tech issues for Computerworld and is the author of dystopian sci-fi novels We, The Watched and Divided We Fall. Follow him on Twitter: @WatchAdam

Follow Computerworld Australia on Twitter: @ComputerworldAU, or take part in the Computerworld conversation on LinkedIn: Computerworld Australia

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