Australia's venture capital industry: past performance, present structure and future prospects

No formal economic history of Australian venture capital has been written or attempted. Some patchy chronicles exist, but humanist and social-scientific quests for the meaning of events are entirely absent. Even the length strictures of a conference paper permit elaboration and structured interpretation of the major events, issues and themes which have influenced the development of both institutional and informal (angel) venture capital in Australia. The paper emphasizes the policy implications of the formal industry's trajectory over the last 18 years. It fills a gap in the national knowledge base and provides insights useful to scholars who take a global purview of the VC industry. The approach is fundamentally historical research using a variety of documentary and statistical data including material from the latest Global Entrepreneurship Monitor data set. Case research (Yin 1989), participatory action research (White 1989) and selected techniques of data analysis employed for hypothesis testing of quantitative data are also employed as subsidiary methodologies. The paper begins with definitions. It next present an economic analysis of both formal and informal (angel) venture capital in Australia It examines the similarities and distinctions between the operation of the formal venture capital industry in Australia and VC modus operandi in several other nations. It continues with an analysis of the three Federal government programs specifically targeted to the VC industry. The paper concludes with an analysis of how well entrepreneurship is enabled in the Australian economy and makes suggestions for improvement. Outcomes for management practice. A succinct, critical articulation of the evolution of the VC industry and the issues thus revealed have significant value for Australian entrepreneurs in structuring their approaches to the raising of risk capital and for Australian policy makers in their attempts to fabricate programs helpful in fostering a robust national industry. Outcomes for entrepreneurship theory. The historical investigation will be conducted with reference to the generic issues pertaining to all venture capital irrespective of national boundary (Bygrave and Timmons: 1994) and to the global context of venture capital beginning to be revealed by the Global Entrepreneurship Monitor Program (1999, 2000)