A NEW early stage $10 million Australian venture capital fund is going where few have before on our shores and seeking signal deep in the startup trenches.
Backed by support from prominent early stage American investors, the appropriately named Signal Ventures has launched in Melbourne.
Signal Ventures is the brainchild of two general partners, Melbourne's Atlanta Daniel and US investor Niel Robertson (pictured L-R), who met a little under a year ago.
Robertson recognises Australia's startup ecosystem to be 'on the verge of unprecedented growth' and thinks Signal Venture's $10 million fund will provide the necessary ammunition.
He's been integral in building Boulder, Colorado's startup scene and from that, knows geography doesn't mean destiny in the startup zone and Australia is well-positioned, with $100 million coming into our VC community last year alone.
Robertson and Daniel tell Business News Australia that all that our startup's need is a little bit more of a helping hand in the early stages of their journey, which is what Signal Ventures will deliver.
"After operating in the early stage segment my whole career, I have learnt how to sift through a very sparse data set and extract true 'signal', the points in businesses that have breakout potential where you put them together in a pattern and recognise this," says Robertson.
"With a large influx of mid and later stage capital, it became clear there was a need and opportunity for institutional early stage capital to help Australian companies take advantage of the exciting climate for growth on a global scale."
Daniel says the majority of Australia's venture capital funds are currently focused on serving Series A and Series B rounds, scaling a startup's product or service once there is already traction.
"We saw there was an opportunity because no one was sourcing that true seed stage capital at an institutional level in Australia," says Daniel.
"Seed stage investing typically requires a different skillset and is generally more high-risk investing."
Early investors in Signal Ventures include global startup accelerator Techstars, global fintech venture fund Ribbit Capital and US venture fund Foundry Group.
Signal Ventures will shine a light on a funding blackspot, participating in seed rounds of up to $500,000 and contributing between $150,000 and $250,000. It's hoping to unearth highly scalable business models in business to business, software as a service and mobile apps, among others.
It is taking a 'collaborative approach' to venture capital by opening itself to teaming up with other funds.
This is commonplace in the US according to the duo, while Australia is lagging behind in this respect and our community is more inclined to operate in silos.
However, Daniel quotes that 'all boats will rise with the tide' and Robertson similarly uses collaborations between Hollywood movie studios as analogy to what Signal Ventures is hoping to achieve in the Australian market.
"The way the US market got around managing high risk is becoming collaborative in its approach, like a movie studio. It's a cheques and balances system where each studio spreads the risk around when partnering on a film," says Robertson.
"Things either get accelerated when everything's up, or when things are taking longer than planning there's more people that can tip back into the kitty to give more runway.
"Australians are learning to be more comfortable with risk but it's something we are constantly asked about here."
Robertson and Daniel work at an accelerated pace. Case in point, while Robertson was CEO of his last company, he still managed to guide two other companies through exits to Cisco and Twitter.
He's done the groundwork in the US, and both partners have also worked deep in the figurative startup trenches themselves - at present, Daniel serves on more than three advisory boards in Australia.
They think Australia is ready to gear up, and our relatively slower take-up in seed investing may yet have served us well.
"A region like the US has so much more data - if you put something onto a term sheet, for example, there will be 75 different situations that can arise," says Robertson.
"There's always a lot of data to apply when coming up with the best solution in the US.
"People have been burnt and lost a lot of money through this and I think Australia could essentially be better positioned for it.
"Learning is expensive. Australia can absorb the existing information from the US and better leverage its immense amount of opportunity."
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