Take the case of Universal PowerTrack, which locally developed an electrical distribution solution than does away with traditional power points. The solution combines a flexible electrical distribution system with a cable duct management system that makes it easier to connect up devices to electricity.
This solution, developed more than four years ago, has had great success overseas although without much in the way of support from government and local venture capital. "We have done installations in Turkey, UAE [United Arab Emirates], and Malaysia without any assistance from Australia," explains John Sinclair, managing director of Universal PowerTrack.
Sinclair has had great difficulty in raising funding but says his situation isn't all that unique. Generally, there is resistance to funding a local idea at all stages of the process, according to Sinclair. "If you are at an early stage such as drawings then there is nothing for you, you have to go it alone," says Sinclair. "If you are at [the] production stage, still it is difficult because the venture capitalists don't believe that the product can be sold or marketed."
Most product developers opt out at this point, but those that push on and manage to succeed are still in a difficult position. "I you achieve all this and you are rolling in money then they all want a piece of the action," says Sinclair, "but why give it to them?"
Universal PowerTrack's ability to gain funding has stemmed from its willingness to sell off portions of the business to overseas investors, an option which deprives Australia of the profits. Nevertheless, Sinclair doesn't see anything unusual about doing this. "There is nothing unique about how we raise funding... Our product is exceptional and international people see this whereas here they don't," says Sinclair.
One of the key problems that faces local inventors is the lack of support from the government as well as the difficulties with establishing solid partnerships. "If you are an inventor in Australia and you have no money then my advice is to forget it unless this government gets its act together," laments Sinclair. "The only way to raise funding [locally] is to take on a partner, 90 percent of the time this partnership will fail and you will find yourself in court... The stress of losing everything after so much work is unbelievable."
The only bright spot for Universal PowerTrack was the Yellow Pages Business Ideas Grant of AUD$50,000 awarded to the company back in 1997. But after that, there was very little support elsewhere. "After spending $1.4 million on development we were entitled to a $20,000 grant [from the Australian government]... It cost nearly $8,000 to do all the paperwork," says Sinclair, "It wasn't' worth the stress."
Sinclair's advice to both government and venture capitalists is to "wake up". Particularly in the area of being able to claim amounts against patent costs, Sinclair believes that the current government should help small businesses shoulder the burden of paying for these fees. "Patents are extremely expensive and small businesses have to pay for this otherwise they have nothing," says Sinclair.
As for venture capitalists Sinclair believes there needs to be more committment and drive on their part to stimulate local innovation. "Why is it that only one in five projects are successful," asks Sinclair of venture capitalists. "It seems to me that they [venture capitalists] invest in projects that they do no due diligence on and this is why their success rate is so poor."
