Lachlan Douglas, director of private equity placement agency Principle Advisory Services, says the problem with early-stage tech companies in Australia is not the technology, the availability of capital, or the lack of markets to exploit. It is the “paucity of entrepreneurship”. There aren’t many mangers with a track record of bringing these kind of companies to commercialisation, he says. “I don’t think creating a technology board on a second exchange addresses that challenge.” Mullins of Enterprise Pacific, however, says the initial 20 companies planning to launch on Aptex are hardly start-ups. “They are emerging,” he says. “They are one step past the traditional angel investor and at the commercial stage.”
Mullins estimates the initial companies will be capitalised at between $12 million and $70 million, making the total size of the exchange between $350 million and $650 million. Woodthorpe says at the $12 million end, companies are still well inside venture capital territory. At the $70 million end, they could be looking at listing on the ASX where there is more exposure. “For the companies in the middle, listing on Aptex might be feasible. But it makes for a small market raison d’etre.” Peter Mouatt, managing director of Adam Smith Asset Management, says “we want companies that we invest in to be listed on markets with deep and recurrent interest, so they have liquidity. If the Aptex can achieve that it would be great, but at the moment there are plenty of small companies on the ASX.” Richard Symon, chief executive of the NSX, argues there is less exposure when a small company lists on the ASX. “There is much more interest when a small company lists on our exchange,” he says. While he acknowledges there is less trading, Symon says the NSX is there for companies that want investors rather than punters, and less speculating actually reduces the volatility.
“We have a pipeline that is approaching that of the ASX. Singapore has three exchanges, and London has three. Australia is unique in having only one dominant player,” Symon says. At the time of interviewing, Symon was in London to discuss cross-promoting NSX listed companies on the Alternative Investments Market (AIM), which has recently outgrown the main market on the London Stock Exchange. “This is one of the ways we are planning to increase liquidity,” he says.
“Companies, brokers and investors are all saying Australia desperately needs something like this,” according to Enterprise’s Mullins. “It is about efficiency. There are a certain group of investors who focus on that area, and the board will make it easier for them. Companies will be able to access the right sort of stickier investor.” While increasing investment in Australian technology is an admirable aim, some fund managers argue that it is not practical. “Realistically, Australia is not about to become the knowledge base of the world,” says one small-cap manager, who invests primarily in US technology companies. “The Pacific Technology Corridor is not about to become the next Silicon Valley. Australian technology companies are too risky.”