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I recently got back from a fascinating conference in Sydney which brought back about a hundred of us expat Australians to talk about the Australian diaspora and how we could continue to help Australia from overseas. Peter Costello, the Australian Treasurer, said in his address that there are about 750,000 Australians working overseas. For a country that only has a population of around 20,000,000 that is pretty remarkable. Unlike most other diasporas, this hasn’t been driven by turmoil or disaster at home, but rather by opportunity abroad, and as a result the Aussie expats have tended to do pretty well.

Aside from the self congratulation, mutual admiration and networking (which is always fun!), I also really enjoyed the discussion on how to drive more innovation from Australian companies. A number of Australian tech companies and tech companies with Australian founders have seen some degree of success, including Hitwise, Looksmart and Massive among the better known ones. Other Aussie tech companies that have come to the US more recently and are getting some press or conference coverage include Bluepulse, Minti, Veetro and In The Chair.. And Eurekster has its roots in nearby New Zealand. So I took the opportunity during my trip back home to meet with a number of the local Venture Capital firms to get a flavor of the market.

The VC Industry in Australia is still young, with most firms currently raising their second, or at most third fund. The early part of this decade was as tough for the Aussie market as it was for firms of the ’99 ands ’00 vintage in the US, and since this was the first or second fund for many of the Aussie firms, they are just now getting their portfolios into shape to be ready to raise new funds. The consensus of opinion seemed to be that the Israeli model of Venture was the way to go.

If you look at most Sand Hill Venture firms that have an office outside the US, they will be in one of four geographies; China, Europe, India and Israel. One of these does not look like the others… Israel, like Australia, has too small a domestic market to be able to nurture a venture backable company. From the beginning, Israeli startups have to look to a global market. That often means eventually moving customer facing components (sales/marketing/business development, and often the executive team) of the company closer to the markets, usually the US. Development can often stay at home, where often costs are lower.

There is a long history of Israeli companies making this progression, and the partners at Lightspeed have been investing in Israeli companies making just this transition for many years. Many Israeli Venture firms end up leading the first round of investment in Israeli companies, then look to a US based Venture firm to lead a later round and help those companies move their market facing operations to the US and fill out their management teams. One of the reasons that this is common may be that the Jewish diaspora has led to many partners at US VC firms with ties to Israel. When faced with a very long flight to look at a potential investment, and VC’s general preference to invest within the same area code, having some personal connection to the geography can help bridge the gap.

Which brings me back to the Aussie diaspora. As an Aussie, I would LOVE to be able to fund promising Australian startups and help them make the jump to the US. As far as I’m aware there are only two other Aussie partners at VC firms in the US (although I haven’t done an exhaustive search and stand to be corrected in comments), and hopefully as the Aussies diaspora matures and more Aussies expats find them in positions where they can help Aussie startups make the jump, we will see more Australian founded companies make it big on the world stage. This would be good for Australia, good for the founders, good for Aussie VCs and good for US VCs with ties to Australia.

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Allan Leinwand did an interesting guest column on GigaOm yesterday about VC’s providing some founder liquidity at early rounds. This picks up on a Venturebeat story from Friday about a related topic, “FF” class stock that is deliberately designed to allow for partial founder liquidity. As Allan points out, this is also being driven by many consumer internet companies simply requiring less money to build – a trend that has been widely discussed.

We’re seeing more of this trend here at Lightspeed, especially with consumer internet companies since they take so little money to start. This has not been the case as much in other sectors. We’ve recently closed on one financing where founder liquidity was a portion of our investment (company had been in business 4 years) and are in the process of closing a second (company has been in buinsess 1 year). In both cases, our goals were (i) to increase our ownership, and (ii) to better align our incentives with the founders, who were then able to focus on building a big company (vs looking for a quick liquidity event). The founders wanted to diversify their risk since their net worths were largely tied up in the fortunes of their company which was private (and illiquid) and still risky. Plus, its expensive to buy a house in San Francisco! Everyone felt like it was a good result.

The challenge, as always, is in finding the right balance. Founder liquidity makes the most sense when the founders have already built something with real value through sweat equity and some seed money (ie its not a powerpoint presentation or a site still in closed beta). With consumer internet the biggest risks are often around consumer adoption as there are so many “good ideas” that “should work”. If a team has taken some of that risk out with real traction, it makes it much easier to contemplate the founders taking some money off the table.

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Lightspeed Venture Partners launched its blog this month.

What’s that?

Too many VC’s blogging already? Another example of VCs acting like sheep?

From our perspective the answers are clearly, no and no.

Ok. How about maybe and maybe?

The truth is we debated the idea internally and ultimately decided we need to do a better job of two things:

1. Sharing our personal ideas, beliefs and lessons with the community of entrepreneurs we are in the business of serving.

2. Engaging on a consistent basis with entrepreneurs and opening up direct channels of communication.

So here we go.

Stay tuned for regular posts from the various members of Lightspeed. We’ll be doing all the fun blogging things bloggers do such as commenting on news, sharing ideas about sectors we find particularly interesting, and looking to engage with you about ideas you have and how we can help.

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I joined Lightspeed on February 28, 2006. Since then a few people have asked me how I got a job in Venture. As with most of my career, it was mostly serendipity. However, as a number of others have recently …

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The Cleantech Venture Network this week unveiled its Q3 cleantech VC investment results. Total equity capital invested in North America reached $934M, representing a 11% increase from the $843M from Q2 and capturing 14.3% of the $6.5B invested in VC …

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HOPKINTON, Mass. – November 1, 2006 – EMC Corporation, the world leader in information management and storage, today announced the signing of a definitive agreement to acquire privately-held Avamar Technologies, Inc., a fast-growing provider of enterprise-class data protection …

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Mountain View, CA, October 30, 2006 — Rhythm NewMedia, a pioneer in mobile advertising, announced that it has closed $18 million in Series B financing. Carlyle Venture Partners, the US venture and growth arm of The Carlyle Group, a …

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SHANGHAI, China, and SAN FRANCISCO, Calif., Oct. 9, 2006—Advanced Micro-Fabrication Equipment Inc. (AMEC), an emerging Asia-based developer of innovative semiconductor processing technology and equipment, today completed its Series B financing, which raised $35 million. The financing will fund commercialization of …

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SAN FRANCISCO–(BUSINESS WIRE)–Sept. 21, 2006–Riverbed Technology, Inc. (Nasdaq:RVBD) today announced an initial public offering of 8.7 million shares of its common stock at a price of $9.75 per share. Riverbed has also granted the underwriters a …

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