Start-up dismisses Australian investment

Australia-based podcasting business The Podcast Network is packing up its local presence and relocating to the United States.

The company's founder, Cameron Reilly, says Australian investors undervalue his business, which is currently seeking Venture Capital. He will relocate to the United States on October 22 to seek investment from US funds.

"I've been talking to investors for the last 12 months in Australia," he told Builder AU. "There's been a high degree of interest, but the challenge that we had was the valuations that we get given by Australian investors is a at significant discount."

The Podcast Network, which Reilly launched in February 2005, hosts 73 podcasts on topics from sport to technology. Reilly sells advertisements that run in the podcasts and splits the revenue with the program hosts. He estimates the network has 250,000-300,000 listeners.

The Podcast Network has a global reach, with 90 percent of its listeners located outside of Australia. "Businesses like us in a Web 2.0 climate have a global audience and the upside for our business isn't limited to this country," Reilly says. "The place where it falls down is where you're looking for international investors... Australia's just the other side of the planet for these guys."

However, Victor Bivell, editor of Australian Venture Capital Journal, says raising investment anywhere is a challenge. "Some of the people I speak to in the US say it's just as difficult over there, if not more difficult," he says. "Getting VC is hard no matter where you are, it's supposed to be hard... [but] if someone can get a better valuation elsewhere they should also go."

Raising foreign money from Australian shores is particularly difficult, Bivell concedes. "As a general principal... people like to see a local investor on board before they'll invest in someone far away," he says. "You need to win support in your home market... It's a little naive to expect someone on the other side of the planet to put money into something when they don't know [the business]."

Bivell says an American fund investing in a business located in Australia is similar to a property investor in Sydney buying a unit in Bahrain.

However, the lifting of some restrictions on Venture Capital funds announced in the May budget could see a boost in Australian VC coffers, says Terry Insley. He's putting together a VC fund to invest in Australian technology start-ups. "We've uncovered what we think are some excellent companies," he says.

Insley's proposed VC fund, ConsensusOne, is hoping to raise $120 million. "We're doing it because there's a void there, especially at the lower end of the market," Insley says. "We see numerous examples where companies have failed to get the funding they need to get to the next stage, and that's criminal," he says.

But Insley isn't prepared to criticise existing Australian funds over valuations. "We're the new kids on the block and we don't want to get a reputation for bagging other people," he says.