Cara Frederick on the state of innovation in Australia | So Good News
According to Cara Frederick, one of the most successful venture capitalists currently working in the Australian market, the technology boom has taken the heat out of the market, but I don’t think it’s close to ending investment in the sector.
Frederick, who led the public-private transition for tech unicorn Tritium, a global leader in EV charging infrastructure, says the energy transition is still the most exciting space of any subsector in venture capitalism right now.
Cara Frederick will be speaking at Tomorrowland 22 – register here
Right now, he says, we’re experiencing a decline in technology-driven risk appetite globally, which isn’t as good as it used to be. The controversy subsided. But that’s not necessarily all bad news, says Frederick. Think of it as a market correction.
“It’s a much more rational place,” he says.
That’s despite, or perhaps the new landscape now: interest rates at 40-year highs, the NASDEC down 35 percent this year — the biggest drop since the dot boom — and estimates for next year will fall as we experience them. the biggest pullback in tech valuations in a decade.
There’s more investment now than we’ve ever seen, says Frederick.
“Ten years ago you would have one-tenth the amount of capital available than you do now. Now you have an annual capital of $10 billion, up from $2 billion a few years ago.
“Quantum is still huge in terms of dry powder.”
In Budget 2022, Australia introduced several initiatives to boost innovation and commercialisation, including a $1.3 billion Medical Research Futures Fund (MRFF), a 10-year investment plan of $18.6 million over four years.
The goal is to “build globally relevant and emerging technology standards” and $3.9 million over two years to “support women to pursue career opportunities in Australia’s growing technology workforce”.
This is very good news.
That’s thanks to a boom in Australian innovation over the past five years, which has seen its overall dollar value quintuple over that period, partly due to an artificial increase in demand caused by the pandemic’s supply-and-demand effects. risk.
The bad news is that the gender gap still exists, and female founders are still at a huge disadvantage in funding. This is a problem that Frederick likes to handle.
“We believe we are the only team to consistently track gender diversity data (from 2020) and compare (with US data),” she says.
So how can startups navigate these waters?
How to stimulate innovation
But despite the government’s 2022 budget investment in innovation, “there’s a lot of talk in politics, but not action.”
If we compare the state of innovation in Australia with what’s happening in the US (Cara’s home country), we can look for a road map to catch up with our transpacific cousins.
The US has recently passed a series of bills to boost innovation.
There is this Inflation Reduction Act of 2022 it will invest about US$300 billion (US$467 billion) in deficit reduction and US$369 billion (US$574 billion) in energy security and climate change programs over the next 10 years.
And then there is CHIPS and the Science Act it will invest US$280 billion (US$435 billion) in STEM (science, technology, engineering and mathematics), particularly clean energy.
Frederick believes Australia should follow suit.
“The US has recently passed three major bills that will total $1 trillion across the value chain. We need to see the Australian government do something like this.”
While supply chain tightening has affected the value chain over the past 12 months, particularly with semiconductors, the situation is improving, but still affected by China’s lockdown policies.
According to Frederick, the two imperatives for Australia are decarbonisation and deglobalisation:
“Australia needs to get on board to bring the supply chain to shore. This is the biggest mistake in the supply chain.”
How do venture capitalists evaluate startups for funding?
At Tomorrowland, Frederic reveals some of the key metrics he and his peers use to evaluate investment potential.
In addition, some tips for attracting investors:
- Founders. Business is all about people. Are you a subject matter expert? Are you iterative? Can you change market feedback to improve your business model? This is the power of dynamism, without which you cannot move quickly and create a competitive advantage.
- Product market fit. Companies need to think about this from day one and make sure your product meets strong market demand. Do you believe that there will be a strong, and most importantly, global demand for what you do? How can you give yourself the time you deserve to meet this demand?
- Sickle. Your company should have a protectable IP that will make it harder for the next company to beat you. It must be able to compete and maintain profitability in the future. In order to maintain its market share, it needs to differentiate itself from its competitors.