Thinking beyond the ideas boom: What Australia really needs is later stage capital and experience
10 March 2016
The Innovation Economy is not just about funding start-ups
Sydney-based venture capital firm OneVentures today called for a greater focus on funding later stage companies if Australia wants to reinvent itself as an innovation economy.
Later stage companies are defined as those that already have a proven product and defined market opportunity but require significant capital in the range $5 to 20 million to aggressively build scale or grow market share. These companies are well beyond proof of concept and are generally approaching profitability.
The term ‘valley of death’ commonly describes the period between an idea and the first major investment hurdle. There has been a big focus on funding this end of the market in Australia, which at present has a 90 percent failure rate.
Attracting later stage funding has emerged as the second ‘valley of death’. Later stage investment peaked at $90 million in 2007. Last year that figure had halved. The lack of access to funding at this stage forces companies to seek alternative options such as premature public listings or offshore financing opportunities.
OneVentures CEO and Managing Director Dr Michelle Deaker said: “It is terrific to see the recent focus on the start-up community and on innovation more broadly – these are the first steps in creating a vibrant innovation economy in Australia.
“What’s needed now is a broader focus on providing the capital and expertise to traverse the second valley of death if Australia is to build real businesses that make sustainable contributions to our economy. This is arguably most critical stage where ideas become products that are commercialised resulting in significant job creation and shareholder value.”
In 2015, OneVentures launched the $100 million OneVentures Innovation and Growth Fund II to provide Australian companies with high growth potential a source of later stage funding. OneVentures identifies companies with a proven business model and an offer that has global application. Often these companies will already have entered larger offshore markets at the time of OneVentures investment.
“We applaud the federal government’s recent announcement on the establishment of the Biotechnology Translation Fund, which seeks to address this second valley of death for medical, biotechnology and healthcare related companies. We would like to see the focus broadened to encompass all innovation.
“A lot of investment is funnelled towards trying to find the next “unicorn”. Success stories such as Uber and Facebook are exceptions that prove the rule. Venture capital investment should not be about the next billion dollar unicorn but instead focus instead on backing companies with both capital and expertise to build highly successful, sustainable businesses.
“Rather than trying to find a unicorn, we focus on hunting ‘dragons’ – companies that ideally return the whole of a Fund to investors,” Dr Deaker said
For more information contact:
Jessica Effeney, Honner
Tel: +61 2 8248 3745
Email: [email protected]
OneVentures is a Sydney based venture capital firm with $170M under management that invests in emerging Australian companies with differentiated products particularly in the information technology and life sciences sectors that address large and growing global markets. OneVentures is managed by a team of partners with a track record of hands-on business execution and operational management: a unique blend of highly successful entrepreneurs, technology business founders and corporate executives with a strong technical and scientific pedigree, extensive off-shore experience and networks combined with investment management expertise. This skill-set makes the team ideally suited to supporting and mentoring entrepreneurial management to help them drive growth and create value in their companies and subsequently, through leveraging collective experience, reduce portfolio company risk and enhance portfolio returns for OneVentures’ investors.
OneVentures Innovation Fund I and OneVentures Innovation and Growth Fund II are formed as Early Stage Venture Capital Limited Partnerships (ESVCLPs). ESVCLP returns are tax free on income and capital account for national and international investors. The OneVentures Innovation Fund I is a $40 million venture capital fund raised in 2010 and is supported by the Australian Government through the IIF (Innovation Investment Fund) program with this funding matched by institutional investors, individual high net worth investors and family offices. The IIF is an Australian Government venture capital initiative that provides investment capital and managerial expertise through licensed venture capital fund managers to investee companies. OneVentures Fund II is a $100M later stage venture growth fund focusing on technology rich companies. The Fund is particularly interested in companies developing products in the following sectors: healthcare, education, mobile, media, cloud computing and data, security and privacy, machine learning, software, sensors and robotics or food security.
OneVentures also manages 6 co-investment funds where its network of private investors invest alongside the Fund in companies where they have sector experience, networks and interest.
OneVentures has raised over $55M in co-investment for its portfolio companies (additionally to its committed funds), exited 2 investments with the potential of returning over $100M to investors from one of these exits alone. The company screens over 2,000 businesses for every 10 it invests in, selecting a handful of about two to three deals to back each year.
OneVentures team members have extensive international operational experience working offshore in companies across US, EU, Australasia and Israel. This means that the team can provide an international perspective, networks and support for their portfolio companies developing their businesses in new growth markets. That support could be anything from licensing of products into new geographies, establishing offshore subsidiaries, introductions into decision makers in corporations or raising substantial rounds of capital from local and international investors and ultimately be instrumental in the success of the company.
Read more about OneVentures at www.one-ventures.com