I’m pleased to be given the offer from Rob to comment on the cleantech venture capital industry here in Australia. I am a partner with Starfish Ventures, Australia’s largest venture capital firm, and one of two partners who focus primarily on cleantech investments. I run my own blog (www.aaronfyke.com), which I use to comment on the Australian startup community – with a particular focus on cleantech.
This post comes at a time when we are particularly pleased about our participation in the recent round of funding for Ausra, a concentrating solar thermal company which originated here in Australia. Ausra has been a fantastic success, and is indicative of the types of cleantech opportunities that exist here. In many ways, Australia is a great fit for cleantech companies. Australia has huge solar, geothermal, wind and wave resources, remote communities ideal for distributed power generation with high energy prices, and a long-ongoing drought which has focussed the population, and entrepreneurs, onto water efficiency and recycling. However, a particular facet of the industry which can be both a positive and a negative is Australia’s very large, entrenched, coal industry that has been booming due to growth in export markets. This is a positive because coal is a major source of carbon globally, and solutions being pursued here to mitigate coal pollution have huge potential applications. Tremendous resources are going into carbon capture and storage development. As well, solar thermal technologies (like Ausra’s) can be used to augment thermal power plant production, allowing the same amount of electricity to be produced, with reduced carbon emissions, at extremely competitive costs. The negative of the coal industry influence is that it has previously had a dampening effect on government policy.
In the past there have been political difficulties brought about through Australia’s dependence on the coal industry. During the Howard administration, government policy was not supportive of energy technologies which would compete with coal, nor government regulations which would limit carbon output or put a price on carbon. “I'm not going to agree to prescriptions that are going to cost the jobs of Australian coal miners,??? he said in March of 2007. Australia joined with the US in being the two developed countries not to ratify Kyoto. However, when Kevin Rudd took power as Prime Minister in December, 2007 his first official act in his first day of office was to ratify the Kyoto Protocol. Since then the government has been rapidly moving towards implementing an emissions trading scheme, and has implemented numerous grant programs to develop renewable energy technology.
Australia has historically been fantastic at developing IP and technology, but poor at commercializing it. Many universities and government research facilities are actively targeting the cleantech sector. Many standouts, such as the solar program at the University of New South Wales (UNSW), are recognized as being global leaders. However, in addition to IP, successful companies need access to an experienced team. The quality of entrepreneurs in the cleantech space has been improving for a number of years now (both here in Australia, and in the rest of the world), and the cleantech dealflow is moving away from hobbyists and backyard inventors towards more experience executives. The excitement and fervor in the entrepreneurial community is matching, in pockets, anything I had seen in the US. It is these kinds of teams that we at Starfish are actively pursuing and are very optimistic that the quality of dealflow will continue to improve given the factors cited above.
Given Australia’s smaller domestic market (21 million people) means that early stage companies are naturally geared here to think globally, as it is the only means to reach scale for a technology business. Australia provides an excellent test market for new technologies. A typical strategy used by Starfish Ventures is to invest in a local technology company, use the local market to get initial market traction, and then take the company global to access larger markets and further rounds of funding. Roughly a third of our current portfolio are US companies that originated in Australia. This is a necessary strategy in a country that has been plagued by the “tyranny of distance???. As the world shrinks, expect to see more Aussie-started, VC-backed companies in the future.
It's also worth noting that Ausra has been one of the "solar IPO markets" set up on InTrade, although trading has been pretty anemic so far. Maybe today's news will kick-start it a bit?