The public venture capital challenge: the Australian case

The appropriate role of the public sector in stimulating venture capital activity remains highly controversial. Whereas dynamic new venture markets have been catalysed by public interventions in some countries (e.g. Israel and India), there are also many examples worldwide of failed public sector efforts to promote venture capital activity. This paper describes the experience of the Australian government between 2004 and 2006 as an example of one attempt to avoid the pitfalls of the past, and design a thoughtful set of policies to encourage venture capital activity. The paper begins with a review of the general case for a public role in promoting venture activity and the possible pitfalls that may result, and then looks specifically at Australia, describing the market as it existed in 2004, and then discussing the key policies that were discussed and adopted.