Startup money follows innovation, but we're not innovative: Ben-Meir

Australian startups might complain that there are few venture capital (VC) firms locally, but according to Commercialisation Australia CEO Doran Ben-Meir, the blame for that lays mostly with the lack of smart, local startups.

Speaking at the CeBIT conference in Sydney on Wednesday, Ben-Meir said that a lack of local venture capitalists to fund entrepreneurs isn't the real problem in Australia and that it's really about local startups' ideas and whether they can actually be made into profitable businesses.

"If the only thing you need to be successful with your business is money, you'll have the money. There's no shortage of money for those sort of businesses that only need money. I've never met a business that only needs money and doesn't have it. The reason you don't have it is because it's not the only thing you need."

Ben-Meir pointed the finger back at entrepreneurs when it came to a lack of venture capital, saying that it was because of a lack of local innovation in Australia, compared to Silicon Valley, that had resulted in a lack of VCs. He argued that rather than VCs creating good businesses, entrepreneurs needed to first create good businesses to attract VCs.

"The money follows. It doesn't lead. It's not about 'We need more venture capitalists so we can get more innovation.' You need innovation before you can expect to see venture capital."

"We all need to, in a sense, grow up and realise it's not about a lack of capital — it's on us. It's on us to build [the] business proposition and there will be money hungry for us."

The reaction from entrepreneurs themselves has been mixed. At a panel later in the day, BuyReply founder and CEO Brad Lindenberg said that he agreed that many startups had begun without enough consideration of whether it could be a profitable business.

"I think for people to say it's hard to find funding, I think they need to take a real good look at what they're trying to have funded. They need to make sure it's something that can demonstrate long-term success and it's a big idea that they're trying to solve," Lindenberg said.

But Local Measure founder and CEO Jonathan Barouch disagreed, saying that although Commercialisation Australia is helping bridge the gap in terms of connecting people and helping founders with their businesses, the total amount of available funding is decreasing year-on-year.

"I don't think the stats support some of [Ben-Meir's] comments," Barouch said.

"If you look at the VC industry over the last three years in Australia, the total funds raised have actually declined year-on-year for three years to a point now where it's $7.50 per capita in Australia, $75 per capita in the US, $170 in Israel."

Barouch said that the local ecosystem has a number of shortfalls it needs to address, and that unless it did so, startups won't generate enough momentum where technology is taken seriously in Australia.