Reading time: 4 minutes

A little more than a year ago, our freshly anointed Prime Minister, Malcolm Turnbull, announced he was ushering in the ‘ideas boom’. The startup community lauded the government’s innovation agenda as transformational. So was 2016 a big year for Australian startups? What changed, what can improve and where are we, as a tech startup community, headed in 2017?

As a founder of Australia’s fastest growing legal services business which focuses particularly on assisting startup clients, I’ve seen three key themes emerge:

1) the scaling of Australia’s VC Ecosystem
2) the partial commoditisation of the capital raising process, and
3) regulatory acknowledgement of the startup sector.

Scaling of the VC Ecosystem

Throughout 2016, we’ve seen VC firms raise significant funds including AirTree Ventures who raised $250 million – Australia’s largest fund yet. It’s fair to say that the Australian VC ecosystem is now big enough that startups with a strong founding team focused on a big market can raise capital in Australia. This was certainly not the case even two years ago.

It’s also worth noting that alternative forms of venture funding have emerged over the course of 2016 in Australia. Venture debt is a form of finance that bridges the gap between traditional bank lending and venture capital. Recently, US venture debt shop, Partners for Growth, set up an Australian office. I firmly believe there’s a huge opportunity for alternative debt finance in Australia. The fact our ecosystem is attracting such cutting edge US investors is really promising.

Partial Commoditisation of Capital Raising Process

LegalVision works on more Seed and Series A capital raising rounds than any other law firm in Australia, so we get how deals are negotiated and settled. Throughout 2016, we saw more and more investors and startups choose to use AVCAL’s open source seed financing documents. Using these documents as a starting point has significantly reduced the cost (in lawyers fees!) of closing a Seed or Series A round.

It’s also worth mentioning that we see more and more startups use SAFE (simple agreement for future equity) investment instruments rather than convertible notes when raising early rounds or bridge rounds. SAFEs are similar to convertible notes in that they allow a startup to delay setting a valuation, but are subject to less regulation, don’t create a threat of insolvency and generally ensure a cleaner cap table. It’s great to see the Australian ecosystem using innovative financing structures where appropriate.

Regulatory Acknowledgement

It’s fair to say that regulators don’t bother regulating insignificant industries. Over the course of 2016, we saw some regulatory activity in the startup sector but how it will affect the ecosystem remains unclear. Regulators, however, have acknowledged that tech startups are important enough to regulate.

A good example is the ACCC’s recent guidance on the sharing economy. Australia’s consumer watchdog decided to wade in and guide sharing economy businesses (i.e. online marketplaces) on their legal obligations as businesses. Essentially, the ACCC has indicated that sharing platforms must comply with the Australian Consumer Law, just like any other business. Although the guidance itself is uncontroversial, the interesting point is that the ACCC bothered investigating the issues and issuing some guidance. Startups have gone mainstream.

***

2016 was big for tech startups and set the scene for what we can expect this year. The ecosystem is maturing, and that can only be a good thing. In the medium term, for startups to become a significant contributor to the Australian economy we’re going to need to see some successful exits – the big funds raised by the likes of Blackbird in 2015 and AirTree in 2016 will need to generate a return for their investors. We need another Atlassian, and more founders in a position to give back to the startup ecosystem. Let’s hope we continue the great work in 2017!

Think we’ve missed something? What do you think will shape Australia’s startup scene in 2017? Let us know your thoughts on LegalVision’s Twitter page.

Webinars

How Franchisors Can Avoid Misleading and Deceptive Conduct

Wednesday 18 May | 11:00 - 11:45am

Online
Ensure your franchise is not accused of misleading and deceptive conduct. Register for our free webinar today.
Register Now

New Kid on the Blockchain: Understanding the Proposed Laws for Crypto, NFT and Blockchain Projects

Wednesday 25 May | 10:00 - 10:45am

Online
If you operate in the crypto space, ensure you understand the Federal Government’s proposed licensing and regulation changes. Register today for our free webinar.
Register Now

How to Expand Your Business Into a Franchise

Thursday 26 May | 11:00 - 11:45am

Online
Drive rapid growth in your business by turning it into a franchise. To learn how, join our free webinar. Register today.
Register Now

Day in Court: What Happens When Your Business Goes to Court

Thursday 2 June | 11:00 - 11:45am

Online
If your business is going to court, then you need to understand the process. Our free webinar will explain.
Register Now

How to Manage a Construction Dispute

Thursday 9 June | 11:00 - 11:45am

Online
Protect your construction firm from disputes. To understand how, join our free webinar.
Register Now

Startup Financing: Venture Debt 101

Thursday 23 June | 11:00 - 11:45am

Online
Learn how venture debt can help take your startup to the next level. Register for our free webinar today.
Register Now

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Need Legal Help? Submit an Enquiry

If you would like to get in touch with our team and learn more about how our membership can help your business, fill out the form below.

Our Awards

  • 2020 Innovation Award 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Award 2020 Employer of Choice Winner – Australasian Lawyer
  • 2020 Financial Times Award 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year Award 2021 Law Firm of the Year - Australasian Law Awards
  • 2019 Most Innovative Firm - Australasian Lawyer