If you’re hoping for investment from venture capitalists or private equity firms our weekly data dump shows you should not get too optimistic – the sector invests in fewer than 1000 investments each year, the value of its investments fell in 2010/2011 and it prefers older businesses rather than startups.
If your bank has tightened its purse strings and gone cold on the idea of a loan, don’t put your house on a venture capitalist or private equity investor coming to the party – they’re getting pickier too.
That’s one of the key findings in the Australian Bureau of Statistics (ABS) new research, Venture Capital and Later Stage Private Equity, Australia, 2010-11, which found that “As at 30 June 2011, investors had $15.9b committed to investment vehicles, a fall of 8% on the revised $17.3b committed as at 30 June 2010.”
The value of investments also fell, down $200 million to $ 8.7 billion in 2009/2010 (which is also bad news because the dominant category of VC investors is pension funds).
These investors are also very hard to impress: the ABS says just two per cent of potential investments reviewed by venture capitalists and private equiteers ever see a cent. Indeed, the ABS reports that just 875 new investees won funding in 2010/2011.
Among those investees were only a handful of companies under a year old – start-ups – while even companies that are two to four years old struggled to attract investment last year. In past years companies of that age were prime territory for these investors, but in companies five years and older became the most-invested-in category last financial year (see chart below).
Forget VC, too, if you’re outside NSW or Victoria: 66 per cent of investment was made in those two States, with Queensland the only other state in double digits.
One piece of bright news from the data is that two industries regarded as struggling – Retail and Manufacturing – seem to be doing alright. That could be a consequence of their being bundled into big categories, as the ABS found “Retail, Services and Real estate activities attracted the largest share of investment, with $3,008m or 35% of total investment as at 30 June 2011. The Manufacturing and Transport activities with $2,472m (28%) also attracted a large share of the total investments as at 30 June 2011.