Busselton-based inventor Jim Plamondon has called on the state government to create a WA Innovation Fund to assist local start-ups overcome our lack of local venture capitalists.
Busselton-based inventor Jim Plamondon has called on the state government to create a WA Innovation Fund to assist local start-ups struggling to get attention from venture capitalists.
Mr Plamondon, who has invented a new musical instrument called the Thummer, said that state money should only be used to establish the fund not invest directly as had happened in WA Inc days.
"There are very few Venture Capital firms in WA, and the firms based over East prefer to invest over East," he said in a statement.
"WA needs a new pooled development fund that pools the high-risk capital of WA's sophisticated investors and invests it in those start-up companies that have the best chance of profiting from it.
"This fund could help keep these companies, their jobs, and their future profits here in WA, while providing tax savings to its investors."
Below is a full statement:
In the sea of wealth flowing from Western Australia's resources boom, WA's high-tech start-up firms are dying of thirst. Jim Plamondon, CEO of Thumtronics Ltd., has called on the WA State Government to slake this thirst by establishing a new WA Innovation Fund.
Grant Burgess, Partner for Entrepreneurial Growth Markets in Ernst & Young's Perth office, sees local firms with great ideas struggling to raise capital. "There are very few Venture Capital firms in WA, and the firms based over East prefer to invest over East. WA needs a new Pooled Development Fund that pools the high-risk capital of WA's sophisticated investors and invests it in those start-up companies that have the best chance of profiting from it. This Fund could help keep these companies, their jobs, and their future profits here in WA, while providing tax savings to its investors."
The WA Innovation Fund, or "WAIF," has been proposed by Jim Plamondon of Thumtronics Ltd. "I was keen to incorporate the painful lessons learned from WA Inc., such as not having the Government 'pick winners' or invest tax money directly into private companies. In my WAIF proposal, Government money would be used only to pay the costs of (a) researching and establishing WAIF, (b) educating potential investors about WAIF, and (c) capturing the experience of WAIF's participants to build WA's capacity for further commercialisation of innovation. The money invested in individual companies, and the operating expenses of the Fund, would come from private investors."
Why should the Government get involved? After all, WA has a history of producing innovative firms such as Orbital Engine, Solahart, ERG, Kinetic Systems, Austal, TMT, and PIVoD Technologies.
"A fund like this would have been a huge help when PIVoD was starting out," according to Phillip Jenkins, Founder of PIVoD. "We've been winning major awards since 2001, but we've had to go over East and even overseas to find investors. Just searching for such out-of-state investors is incredibly expensive and time-consuming, which places a big extra cost on WA-based innovators."
Jim's efforts won't benefit his own company, Thumtronics Ltd. "Thumtronics is currently offering investors the opportunity to invest directly in Thumtronics at 10 cents a share - see www.thummer.com for details - but Thumtronics' offer will be closed long before the proposed WAIF fund is up and running. The WAIF proposal won't help Thumtronics; but it can help solve a problem that all battling WA innovators face, due to our State's isolation. The WAIF fund can create a fair, level playing field for Western Australia's innovative companies and investors alike. "
WA Innovation Fund Proposal
Key Messages
- The WA Innovation Fund should be a key part of the Carpenter Government's strategy for science and innovation in WA.
- No State money would be invested in the WA Innovation Fund's beneficiary companies or underwrite its operations.
- The WA Innovation Fund would keep the future profits from WA's innovations at home in WA, and provide tax benefits to its investors.
- The WA Innovation Fund would build WA's capacity to commercialise its own innovations.
Key Elements
1) The State would NOT invest in companies through this Fund, nor pay the Fund's operating costs. The State would ONLY pay those costs associated with establishing the Fund and capturing its capacity-building benefits, e.g.:
a) Researching the steps necessary to establish a new PDF and to qualify for Federal matching funds under AusIndustry's Innovation Investment Fund, and other relevant Federal funding schemes;
b) Establishing the Fund as a legal entity;
c) Promoting the Fund (see Item 2 below); and
d) Capturing the capacity-building benefits resulting from the Fund's activities.
2) The State would promote the Fund by:
a) Privately encouraging cashed-up WA companies and individuals to invest in the WA Innovation Fund;
b) Publicly exhorting retail investors to "Invest in the Future of WA" (for which purpose the WA Innovation Fund is just one option; for others "see your financial advisor"); and
c) Educating the State's financial advisors about the WA Innovation Fund and its benefits to investors, to investee companies, and to WA's future.
3) The State would NOT "pick winners" by choosing the firms which would receive investment through the Fund. The Fund's investments would be selected by the "WA Innovation Advisory Board" (the "Innovation Board"). The duties of the Innovation Board would include (i) "advising the Minister for Innovation on matters of innovation and the commercialization thereof," and (ii) acting as the Board of Directors of the Fund.
a) The State would appoint leading members of WA's business community to the Innovation Board, with a bias towards those who have successfully commercialized innovative technologies. Innovation Board members would receive compensation in line with VC industry norms (i.e., biased towards options, not salaries).
b) Only "WA-based firms" would be eligible for funding through the Fund. The Innovation Board would define "WA-based firms."
c) Only those firms which had received a "qualifying" award or grant would be eligible for funding through the Fund. The Innovation Board would define the list of qualifying awards and grants, changing it from time to time as new credible awards emerge or formerly-credible awards lose credibility. It is expected that this list would include such awards as the WAITTA Awards, the AIIA's iAwards, the WA Inventor of the Year Awards, etc. Grants such as those available from AusIndustry's Commercial Ready scheme are also expected to be included in the qualifying list.
4) The Fund would have a low minimum investment, to make its potentially-high returns accessible to individuals who are self-managing their super (for example).
5) The State would fund the establishment and operation of "recognized" capacity-building programs (as recognized by the Innovation Board). These programs would be required to have the objective of (a) helping the beneficiary firms learn to successfully commercialize their innovations, (b) helping the beneficiary firms teach others to successfully commercialize innovations, or (c) both. Beneficiary companies would be required to devote some time to participation in these programs, in an amount to be determined by the Innovation Board.
6) The Fund would operate two separate sub-funds: the WAIF Seed Fund and the WAIF Growth Fund, targeting early- and later- stage companies respectively, due to the different requirements of seed-stage and growth-stage firms.
