Specialist bank and asset manager Investec Australia has flagged Australia’s burgeoning entrepreneurial scene as an area of significant growth and opportunities for investors.
Speaking in Sydney on Tuesday, Investec Australia Emerging Companies co-head Hein Vogel pointed to “a few macro factors play” that were currently shaping the growth of entrepreneurs and the emerging companies space.
“We think we’re at the early days of what we hope will be a 10-year wave of entrepreneurs coming through building companies which will hopefully make Australia’s economy grow and be successful in the time to come,” Mr Vogel said.
“We all know if you’re just going to be doing what the big players are going to be doing […] if you’re just doing what you’re doing today as an economy, I think you’re going to be in big trouble along the track.”
He added that there was “a lot of talent” with “new skills” and “huge connectivity” exiting major companies in order to build their own business.
“We know there’s a lot of capital available in the market, both in the institutional level and high net worth level, and high net worths in particular are very supportive of backing some of those entrepreneurs.
“Bringing those two together, and with the support of government […] We’re in a great environment where you kind of see a start-up ecosystem starting to thrive.”
The emerging companies ecosystem was becoming more sophisticated as entrepreneurs grew and scaled their businesses, Mr Vogel said.
“We’re seeing a lot of flow in this space and a lot of money coming into this space in particular.
“So that’s a thematic that we’ve taken on as a team and we see [as] prevalent in the market at the moment, and we think it's going to continue for some time to come.”
Investing in emerging companies
Speaking alongside Mr Vogel, Investec Australia Emerging Companies co-head David Phillips said the work ethic of a founder is important when selecting small firms to invest in.
“Good, strong founders, male or female, first thing they do when they wake up in the morning, last thing they do when they go to bed: is their focus on their business?” Mr Phillips said. “It’s finding those people.”
Anyone could start a business, Mr Phillips added, so it was important to also conduct due diligence. “Are they actually going to be a good founder as well? That’s important,” he said.
Investors should then consider the product and whether it was solving a problem, presenting value to people, and how many competitors there were.
Mr Phillips also underscored the importance of whether or not Investec itself, as an investor, would be a good fit for the company at that point time.
“We call it the ‘why Investec’. Why are we the right capital for you right now? Why shouldn’t this be one of the really good VC firms in Australia, why shouldn’t this be a big family office, why shouldn’t this be a handful of high net worth investors who, to be frank, if they can add more value to your register than we will, well they should be on your register,” he said.
“But if we think we are the right party, and it might be our connectivity, it might be a space we know, it may be any variety of reasons, but if we find that … then that gets through our process.”