During his annual trip to the future ‘Silicon Valley’ of Australia, veteran venture capitalist Bill Tai shared insights on his investment decisions, noting that acquisition of his startup investments and IP ownership arrangements are minor concerns for him.
Mr Tai shared some of his investment considerations with InnovationAus.com on the sidelines of West Tech Fest, a Perth-based innovation festival he helped co-found.
An early investor in Blackbird Ventures, Canva, SafetyCulture, Zoom, and TweetDeck, he has been in the venture capital game since 1991 and has served countless executive and directorship roles.
He was also responsible for establishing Charles River Ventures’ Silicon Valley office and has been an adjunct Professor of innovation and economic development at Curtin University since January 2011.
But when asked to describe himself, Mr Tai left it at “an experienced tech entrepreneur and company backer that just loves what I do, empowering other entrepreneurs”.
When considering whether to invest in a startup or not, Mr Tai said “I don’t think about acquisitions really at all” other than as a “last ditch, nothing else works, ‘do I have a resource that is acquirable?’”.
“I think for me, at the raw seed level of a few people, I do sometimes think ‘if I hire great people and the first iterations of a product aren’t what we thought, as long as we didn’t’ raise too much capital, great people as a unit can always be acquired as a product team…they call it acqui-hiring,” Mr Tai said.
He then reiterated, “yes, that crosses my mind, but I’ve never funded something because I thought, I’m going to build this and get acquired”.
“For me it’s always ‘can this company become great as a standalone, and then sometimes along the way, companies will get sold, but that’s never my preference.”
Mr Tai’s comments come as the Australian Consumer and Competition Commission (ACCC) continues its call for stronger regulatory powers against big digital platforms’ continuing expansion of influence while the government consults on proposed reforms to its mergers and acquisition regime.
The ACCC has also warned of ‘killer acquisitions’, where larger firms acquire smaller competitors only to discontinue the development of its product or innovation.
However, the head of Australia’s peak tech lobby, the Tech Council of Australia, Kate Pounder as well as competition lawyers have both reportedly warned that increasing the barriers to acquisitions would make it more difficult for investors to realise their investments, pushing VC towards other jurisdictions.
Another factor that is often cited as a barrier to attracting VC investment is whether a startup or a university spin-out owns the intellectual property underpinning its product.
The sentiment among some businesses is that “no one wants to invest in a spin-out [or startup] that only has a licence to IP”, according to a report by federal government think tank Industry Innovation and Science Australia.
It called on the government to consider “more efficient research-industry IP and patenting arrangements”, such as in universities like Stanford in the United States of America.
“In these cases, there are very low or no licencing fees in preference for equity to entrepreneurial researchers and students spinning out IP in partnership with industry,” the report reads.
Mr Tai similarly praised Stanford, highlighting that it works with companies “to align interests and take stakes in companies” while also setting aside “investment pools where they’ll throw 25k in with a licence to the technology and get a bunch of shares”.
“Between all the companies that have come out of Stanford, whether it’s, Google…or Sun Microsystems or Cisco Systems…Stanford’s done pretty well.”
He is also “very glad that Curtin [University] has a professional program to” licence IP. However, he told InnovationAus.com that in his experience working with startups “IP doesn’t mean anything unless you are the winner”.
“If you’re a struggling startup and you want all the patents, all you can do is sue somebody else with more money until you die,” Mr Tai said.
“And if you didn’t have the IP and you won in the market, and some little company has the IP, you just outlast them or you wait until they’re on their last gasp of breath then you buy them for nothing”.
Ultimately, he highlighted that “you can only have IP licensing strategy if you got IP” like in Perth, “which is just mind blowing”.
Mr Tai also took the opportunity to reiterate his likening of Western Australia to what “California was like before Silicon Valley became a thing”.
“Great education, a great university system, very good infrastructure on which to develop, pretty open attitude, better weather, and beautiful beaches”, the latter which supports his other undying passion, kiteboarding.
Brandon How’s travel to West Tech Fest 2023 in Perth was subsidised by the event organisers, including Curtin University and the WA government.
