This fintech founder thinks local VCs are undermining Australian startups

In an article published elsewhere last week, the country’s largest VCs were scornful of the local sector’s prospects in 2024.

No one is arguing the landscape has become tougher; costs are higher, consumers have tightened their belts, market valuations are subdued. The sector is well aware we have much to prove and big hurdles to jump.

Still, the message felt like a dig at the quality of local startups, when it’s the VCs who should be turning the mirror on themselves.

Last year I touched on some of the difficulties our sector faces in raising capital for Startup Daily.

VCs are making it even harder. Despite raising substantial amounts of capital, they have deployed very little into local startups. Instead they are propping up some of the larger companies.

Fast investment cycles

The large Australian VCs also have a very narrow view of what they look at as investable. Whilst they say they invest in startups and early stage companies, this is rarely the case.

They are also skewed to investing in B2B SaaS businesses and seldom take a moment to seek opportunities beyond.

Further, they confess to cycling their investments in 3-5 years. Often this looks like pumping dollars into artificial growth and hoping something sticks.

In my mind, it is the startups who should be wary of these VCs, not the other way round. It’s vital to understand where you fit into their cycle and portfolio of investments.

Will you truly receive the support promised or will you fall victim to the VCs own plans? As the article showed, they will quickly cut ties and let you fail.

Instead of shrouding the market in pessimism, what we should be seeing from VCs is a willingness to back, guide and collaborate with startups. Right now that job falls on the shoulders of trusted private investors and board members.

As an industry and country, we also need to question why we have become so dependent on VC funding as a measure of success. We are all working our backsides off and spending time trying to get their attention, but the truth is, business goes on without them. And that’s nothing to be scoffed at – running lean is not a sign of failure or trouble, it is a sign of responsible planning and measured growth.

Now is the time to get behind startups. Our country has so many great entrepreneurs and promising businesses. We need governments and VCs working alongside us to drive things forward.

When inflation resides, as it inevitably will, we risk being left with underperforming enterprises, a backwards tech sector, an underskilled digital workforce, and a cohort of companies with great potential that were never given a chance from the very people whose job it is to do just that.

• Ben Zyl is CEO and cofounder of fintech, Waave