GLOOM in Europe and North America should encourage Australian companies to look to Asia for growth opportunities, according to a leading venture capital fund manager.
Starfish Ventures partner John Dyson said that even though Asian economies were also slowing, they were useful as part of a diversification strategy for Australian companies keen to tap into new markets.
"One of the things I take away from the global financial crisis is that givens that used to be accepted in the past I think need to be revisited," he said. "If the US does go through a period of prolonged slowdown, I think we need to look at alternative strategies for companies in terms of what markets to expand into."
Mr Dyson made the remarks on the sidelines of the Melbourne International Venture Capital Conference, where he spoke on a panel discussing investment opportunities in China, India, Japan and South Korea.
Starfish Ventures, which has $400 million invested in about 30 companies, specialises in Australian enterprises with a strong focus on technology.
Mr Dyson said many developing Asian economies were receptive to new technology because they did not have ageing legacy systems that hindered the embracing of new technology.
He cited the example of an Australian company in Starfish's portfolio that was contemplating entering the market for electronic payment systems in Indonesia, where there was minimal infrastructure outside the capital, Jakarta, and tourist magnet Bali.
"Basically, they are adopting technology today which hopefully will be world leading-edge rather than being stuck with technology that was developed 20 or 30 years ago," he said.
Speaking alongside Mr Dyson on the panel was Kee Wong, managing director of consultancy group e-Centric Innovations, who argued it was wrong to treat Asia as a homogenous market.
"There is no 'Asia' — only countries in Asia," he said.
Mr Dyson said the tightening of equity markets meant venture capitalists were forced to hold on to investments longer before exiting, usually either in an initial public offering, acquisition or through a sale to new private owners.
"The whole exit market has been postponed, clearly the IPO window is closed, and trying to get strategic buyers interested in this type of market is difficult, and those that are interested are clearly looking for good deals," he said. "That means for us, a number of our potential exits have been postponed."
The inability to sell off assets is likely to limit the ability of venture capitalists and private equity funds to take on new assets, because they run the risk of straining their balance sheets. But Mr Dyson said his fund had withstood much of that pressure, raising $185 million last year, which allowed it to continue to make investments.
A survey of 400 venture capital funds in December found that nine out of 10 venture capitalists expected a decrease in investments in 2009, but 53 per cent expected to invest in the same number of companies as last year. The result suggests the average size of each venture capital investment is likely to decrease.