A recent report prepared by EY for the Australian Private Equity and Venture Capital Association (AVCAL) found that the combined total of private equity and venture capital fundraising in 2016-17 was $3.35 billion.
The total included $1.32 billion raised for venture capital funds, up from $568 million in 2015-16 and representing a “record VC fundraising year”, according to AVCAL.
But Right Click Capital partner Benjamin Chong said the majority of the $1.32 billion in VC money appears to have come from the government rather than enlightened Australian investors.
The Coalition government announced the launch of its Biomedical Translation Fund in December 2016 in order to “turn biomedical discoveries into high growth potential companies which will benefit Australian patients”.
The fund, which is being run by OneVentures, Brandon Capital Partners and BioScience Managers, manages $250 million in government capital matched by an additional $250 million in private investment.
The CSIRO Innovation Fund was also set up in 2016-17 with $70 million from the government and $30 million from the CSIRO’s ongoing Wi-Fi royalities. The $100 million fund will be matched by a further $100 million from private investors.
“So if you add the [Biomedical Translation Fund’s] $500 million to the [CSIRO Innovation Fund’s] $200 million that’s $700 million,” said Mr Chong.
The South Australian government has also committed $50 million to its own innovation fund, he added.
“When you take that out the numbers are pretty similar to last year,” Mr Chong said.
“VC is a long-term game and it’s fantastic that there has been a government shot in the arm this year. But we shouldn’t get complacent.”
In particular, he homed in on the responsibility of the superannuation sector to support early stage innovation in Australia.
First State Super and Hostplus have been notable supporters of Australian VC in the past, Mr Chong said, but more needs to be done.
“Whilst the amount of money from superannuation funds [into venture capital] has gone up, when you zoom out I still think that superannuation funds are undercooked when it comes to their exposure to VC managers in Australia,” he said.
“If we want to lead this world on retirement incomes, we need to make sure that we have an exposure to the technology companies of tomorrow by backing the fledgling ones today.”
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