Why VC investing is more than numbers

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March 10 2020
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Investors looking to take advantage of stronger returns in businesses that are starting out are being advised to look beyond the numbers and focus on the founder.

In conversation with nestegg, Tempus Partners founder and managing partner Alister Coleman explained why venture capital is all about investing in people.

“People build these companies so it’s all about the ability of the founder to have the vision of what they want to do and create a vision around a product and company,” Mr Coleman explained.

Not only does the founder need to have the vision to create a strong product and service, the person needs to be able to attract the right staff and customers in order to make the investment successful.

The venture capitalist also highlighted the individual traits needed to successfully grow a start-up company.

“The process is we will meet a founder when they have a product and don’t have revenue, or when they have a product and started generating revenue,” Mr Coleman said.

“What we look for are people who are really quite brilliant people and we feel have the capability to execute on the plan they have and the vision they have.

“Then you want to be investing in the underlying technology or the business model they are proposing; it needs to be viable.

“Ultimately, we are trying to find people who have come to their ideas and have the capability and also are unlocking a rapid advancement of technology that is viable.”

Further, Mr Coleman explained in a rapidly changing world, where technology is taking on a greater role in all aspects of life, the type of investor is changing.

Investors are not just younger Australians looking to cash in, with older private investment, government institutions and large institutions getting involved, he noted.

Using the example of the future fund, Mr Coleman explained: “The fund has gone from about 6 per cent of its total fund allocated to private equity and venture capital, to 17 per cent in three years.

“It’s because technology companies are actually creating value. They are low CAPX, very high gross margin companies.

“Every business is touched by technology now and the technology they are touching is built by someone.

“Private investors, super funds and institutional investors want to participate because they can’t put their money in cash, the bond market hasn’t performed and the equity markets can only take so much capital.

“So, an alternative amount of capital has flown to alternative investments, and in particular, private markets and venture capital.”

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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