Jet lag is not so bad. I just “woke up” to an incredible sunrise over Melbourne in Australia – although I had actually been up for hours. Being ahead 16 hours makes it really tricky to keep track of what is going on back in Boston.
I am spending this week in Asia meeting investors and entrepreneurs. I grew up in Hong Kong and will end up there late tonight for a series of meetings around a major investor conference. But the trip to date has focused on Australia – and I remain very impressed by what is going on down here.
I spoke last year at the annual Australian VC conference to provide the “US VC perspective.” I was quite impressed with the enthusiasm of the VC community in Australia and it does not seem to have dulled at all – even in light of the economic crisis. The newspapers today reported that the Australian government has just made an $80 million commitment to four local VC firms – and the entire Australian VC industry has been estimated to be $300 million annually! Quite a commitment.
Yesterday’s meetings were mostly with some of the largest LP’s in Australia – called the Superannuation Funds which are large pools of capital representing public employees’ pension assets. These pools are very sophisticatedly managed and have historically been significant fans of the VC asset class (in fact one of them is indirectly a meaningful investor in Flybridge).
I am very excited about the investment opportunities we are seeing at Flybridge and made that very clear to the institutional investors I was meeting. In no time in my memory can I recall nearly every major industry sector going through such profound and fundamental waves of innovation – and it is those waves which provide the investment opportunities VC’s seek. Additionally, because of the rapid constriction of the VC industry (VC’s will probably raise close to $12 billion in 2010, down from $28 billion in 2008), the competitive dynamics have not been this favorable since arguably the mid-1990’s. Many of these LP’s “got that.”
But somewhat troubling, there were some LP’s that were considering modifying their asset allocation models away from VC. Those fund managers expressing this perspective did not seem to personally believe that was the right thing to be doing now but they were subject to the whims of their governance boards – often staffed by political appointees – who some undoubtedly “did not get it.” Financing innovation will lead to compelling returns. LP’s in Australia are really challenged to diligence the US VC industry – if for no other reason than the 16 hour flight just to get to the west coast.
And obviously the popular press has been very critical of VC performance (notwithstanding it still is superior to public equities). This is a real concern – perception often times creates the reality.