Tech sector suffers in mining boom

16/01/2008 - 22:00


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While Western Australia’s mining stocks and their investors enjoy a bull run, emerging technology companies with new ideas are finding it harder to attract investor attention.

While Western Australia’s mining stocks and their investors enjoy a bull run, emerging technology companies with new ideas are finding it harder to attract investor attention.
At the same time, it appears the purse strings of state and federal governments are tightening, to the extent that funding is being cut to one of WA’s most successful research and development institutes.
“In WA, there’s not much money that’s looking for the Sensears of the world, it’s looking for the next uranium project, and that’s one of the disadvantages that we have here,” Titan Bioventures managing director Harry Karelis told the luncheon forum.
“Try setting up a mining company in Cambridge.
It’s the same reason you don’t launch a bio-tech company in WA,” he added with a hint of dark humour.
Mr Karelis said technology companies based in centres like Silicon Valley in the US and Cambridge in the UK were very close to ready funding sources, making the lure to head overseas extremely strong for Perth-based companies.
Live Technologies director Roland Butcher found the task of securing funding for the company in WA very difficult as prospective investors wanted to be convinced as to why they should put their money in.
“I’ve been pretty amazed at how onerous the task is, to apply money to a new idea.
We were finding that we were being congratulated a lot, and patted on the back, with nothing being applied,” he said.
Mr Butcher believed that people without his tenacity would have given up in the local market.
But according to GEM Consulting and PriceWaterhouseCoopers director Brian Beresford, new companies have the misfortune of trying to raise funds in a market that has a long memory.
“Given the nature of the funding environment in WA and the lack of a sophisticated VC [venture capital] market, it’s been a problem for a while that you’ve got a lot of companies going public a lot earlier than they should be, and the failures are there for public scrutiny,” Mr Beresford said.
In contrast, he said many start-ups in other markets were backed by venture capital and therefore their failure was out of the public eye.
Mr Karelis said while there was plenty of risk capital in WA, it was chasing the quick, high returns in resources.
Two years ago, he helped establish Gateway Capital, principally to tap into the risk money in WA by providing packaged biomedicaltype early opportunities for these investors.
“I think we have to be realistic.
Maybe WA, and Australia even, is just an incubator and these things get handed over to different investors, owners or managers,” Mr Karelis said.
Instead of most people losing money, having a bad experience and never returning, Mr Karelis said WA should “pump out these embryos and let someone else mature them”.
Advanced Nanotechnology chairman David Griffiths said WA had a very sophisticated VC market, but in resources, and this was because the market had naturally recognised where its opportunities lay.
Mr Griffiths was concerned, therefore, of the risk to government of championing the innovation sector too much.
“My fear of government is that it will hang on to the living dead because the system is institutionalised.
Three years and millions of dollars later and they haven’t got there.
Capitalism works out how to let them go,” he said.
However, leaving the sector to completely fend for itself is not in the interests of the state either, according to Sensear managing director Justin Miller.
His hearing technology company is a spin-out of the Western Australian Telecommunications Research Institute, a joint venture between Curtin University and the University of Western Australia, which he said was about to lose its government funding.
“WATRI has probably had more success with commercialisation than most in WA and its set to lose its state and federal funding.
It’s crazy,” Mr Miller said.
“Without an ICT pillar, something like Sensear can potentially disappear.” The institute has a history of attracting significant government and industry R&D funding, worldclass research, and commercialising the research by establishing startup companies.
Mr Karelis said government money was great if it was available, but if a company had to rely on it, then it didn’t really have a strong proposition.
“Money flows where the opportunity is, but the opportunity has got be communicated and it’s got to be connected with the money,” he explained,” he told the forum.
While funding was important, Mr Miller said the most pertinent issue affecting the innovation sector in WA was the skills gap.
“If you look hard, the funds are there and will come.
I think the biggest issue you’ve got in WA is the skills gap and people that have got the capability to take a good idea to market,” he said.


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