AbstractThis paper is a report on the short history of Oztech Industries Pty. Ltd., a small private company incorporated to undertake a specific research and development project based upon the concept of electronic multiplexing. The incorporation was initially undertaken by the inventor and his associates to formalise the arrangements made between them and to provide a corporate identity for presentation to prospective customers.
Oztech's plan was to develop an automotive multiplexing platform which would be technically competent and cost effective with the aim of having it adopted by at least one Australian motor vehicle manufacturer. The research and development of the platform were the key issues and it was recognised from the very outset that Oztech would never become a manufacturer. The financial return for the success of the research and development undertaken would come from licence fees or royalties.
To fund the research and development venture capital was raised from friends and relatives of the original shareholders but this was insufficient to complete the project. Having been advised to approach a single large investor rather than a myriad of small investors they approached The Paspaley Pearls Group of Companies (PPCo) for financial support. After lengthy negotiations Paspaley agreed to enter into a funding arrangement with Oztech and approximately $1,000,000 was advanced for research and development work.
Encouragement for this research and development of an automotive multiplexing system was received from General Motors Holden Australia Ltd (GMHAL) which indicated it would be interested in adopting the technology if it met its stated criteria. The funds provided by Paspaley allowed the work to continue to a point where all the GMHAL criteria had been met. However they did not proceed to adopt the technology.
Oztech attempted to interest other parties in the automotive and other multiplexing applications but had no success. The company has ceased operating and is now virtually insolvent.
This work which is based upon qualitative argument, assessment and review and the field method of inquiry of direct or participative observation considers a number of issues arising from the Oztech project.
The first is a review of the motives of those who invested capital in the project and a comparison of these motives with the motives suggested by conventional financial investment theory. It is demonstrated that there were a number of motives involved in this particular investment decision which are not recognised by conventional theory.
The second issue considered is why the Oztech project failed. A critical review of the Oztech project is made in an attempt to explain why the project was not commercially successful. This includes an analysis of how the project was managed, what occurred that was outside the control or influence of Oztech and how it effected the outcome and whether any thing could have been done to increase the chance of success.
The final question is could or should Paspaley have foreseen the projects eventual failure and refused its financial support. The process adopted by Paspaley is compared with a model of the process prepared from research work done in the field of venture capital investment.
This work provides a qualitative review of an actual arrangement between a venture capital investor and an entrepreneur and attempts to highlight the reasons for failure. This account details the issues which arose in this particular circumstance and which could be considered during the evaluation and operating stages.
|Date of Award||Mar 1997|