Serial entrepreneur Domenic Carosa has claimed that Australian start-ups have an unrealistic view of their valuations after announcing investment in three new internet companies.
Carosa is the founder of Australian venture accelerator Future Capital Development Fund, which invests in young, fast-growing internet, mobile and technology companies.
FCDF invests anything from $250,000 to $1.5 million, usually taking a significant minority stake. It’s latest investments are TheFarmTrader, RentABin and GetMeInform.
TheFarmTrader is an agricultural and product tender site, enabling farmers to put their farm supplies to tender, and accept the best prices and offers from suppliers.
RentABin is a nationally-operating booking system for skip bin hire, designed to ensure efficient waste removal for homes and businesses.
GetMetInform delivers a cloud-based solution for health and fitness professionals, enabling them to schedule, manage and organise their clientele using mobile devices.
However, Carosa believes one of the biggest barriers to similar investment deals is the unrealistic value expectations of entrepreneurs.
“A lot of the Australian entrepreneurs look at the US, and the valuations of Facebook and other such internet companies, and think they should be worth as much,” he says.
“It’s a very different marketplace here in Australia… Valuations in Australia are a lot less than in the US, typically. I think that hinders a lot of deals being done in Australia.”
According to Carosa, all three of his new investments are run by passionate founders with strong potential to transform their respective markets.
“Each offers simple but compelling services that drive down costs while delivering convenience and value for their respective customers… [They] have the potential to transform old economy business models,” he says.
Similarly, FCDF chief executive Andrew Fiori-Dea says all three companies have “disruptive business models,” which are “taking old world business models and transforming them into new world opportunities”.
According to Fiori-Dea, the next step will involve working with the founders to extract value and maximise each company’s potential.
“We’re sitting down with the CEOs of each of those businesses and we’re working on building the right business plans, and the right budget to support those business plans,” he says.
Dwain Duxson, founder and chief executive of TheFarmTrader, has only been operating the business for 10 months but believes it will experience exceptional growth.
“We’re really focused on the tender side of things now, whereas before we were spread all over the shop,” he says.
According to Carosa, the fast-growing nature of internet companies means they have no choice but to raise capital.
“It’s much better to own a smaller piece of a bigger pie… The companies we come across are beginning to understand the difference between dumb money and smart money,” he says.
“Money is only one of many ingredients of success. Kerry Packer said you should surround yourself with people who are smarter than you.”
“A lot of entrepreneurs are starting to listen to that mantra – they’re looking for capital that can provide expertise as well.”