Digging for start-up gold

Mark Carnegie is an investor who has been a high profile player at the top end of town for more than 25 years.

In October last year, Carnegie made headlines when he suggested that the wealthy should pay 15% more tax, to a mixed reaction from the business community.

Carnegie followed this up with a staunch defence of SMEs at the Tax Forum in Canberra, where he argued that governments wouldn’t regulate entrepreneurs as heavily if they understood the challenges faced by smaller enterprises. 

Since selling his investment firm Carnegie, Wylie & Company to Lazard in 2007, Carnegie has been focusing on his portfolio at M.H. Carnegie & Company, which has taken a refreshing interest in start-ups while other investors have shied away.

Last year Carnegie ploughed a “significant amount” into the Sydney Angels Sidecar Fund – aimed at early-stage businesses – and followed this up by investing $3 million in domain name trading start-up Winged Media.

So how can ambitious start-ups catch the eye of Carnegie and his investor ilk? We spoke to the VC to get his top tips.

Mark, how do you assess the Australian start-up market at the moment?

I think we’ll see the market improve this year. We’ve seen several Australians complete successful exits recently and start-ups here have been funded by Americans.

The US has turned some its attention to Australia and you can see why. There are some really good businesses here.

What kind of businesses have you been looking for in this market?

I like whole asset classes that aren’t correlated to the stock market, which is what Winged Media is. There are several emerging assets, such as technology, that have got the ability to make a good return.

Don’t get me wrong – I’m as greedy as the next VC. I’m not doing this from the goodness of my heart. But I’m happy to invest in emerging businesses because there’s an opportunity to make money and support the innovation we have here in Australia.

There are 10 to 20 angel networks in Australia now that do really well in finding start-ups to invest in. I think there’s increasing sophistication in the Australian market and there are a lot of smart people involved in start-ups.

Our own expertise is in the healthcare, eCommerce and media areas. There’s been a bit of a funding drought, but there are now some tech opportunities that will get backing.

You’ve spoken out about the burden of red tape on small businesses. Do you think that, generally, Australia is a good place to start-up and run a business?

Australia has got a reasonably good environment to run a business – but only if you can afford the account and lawyer fees to help you understand it.

I wouldn’t say that the government really needs to do too much more for businesses, but they do need to look at the compliance burden that entrepreneurs face.

The burden is really too much. There are talented, driven people who want to start a business and they should be able to focus on that, not all of the bureaucracy around it.

What tips would you give to a start-up that is pitching for investment?

The important thing to ask yourself is: “Am I trying to fund a business, or am I trying to fund a dream?”

You need to understand whether you have a dream or a viable business. Asking an investor to put their money into your dream is very different from a business proposition.

A characteristic of a small market like Australia is that entrepreneurs here feel they have to do it all themselves. They think everyone can do everything.

In the US, people do all sorts of things and entrepreneurs can call upon them. It’s important that start-ups here do the same – have trusted advisors and mentors and then you really can do it all.

The focus for me is always quality people. It’s about the people as much as the business. We absolutely hope to invest in Australian start-ups in the near future.