$1 billion raised in Australian venture capital over the last year, report finds

Australia’s venture capital sector has “come of age”, with a record $568 million raised in the 2016 financial year and an estimated $1 billion raised since last July, however national body for venture capital and private equity, AVCAL warned that more must be invested if Australia is to get up to speed with global tech leaders.

A report from AVCAL, The Venture Capital Effect, found that Australia’s VC investment as a percentage of GDP sits at 0.023 percent, compared to the OECD average of 0.049 percent for a ranking of 18th of 30; furthermore, just $15 is being invested per capita, compared to the $55 invested per capita in Israel.

Yasser El-Ansary, chief executive of AVCAL, said, “The reality is that Australia’s VC sector is still far too small for a country with bold ambitions to be an innovation leader. International experience shows we cannot have an innovative economy without a strong VC sector.”

Still, the growth of the sector should be cause for some celebration.

The last edition of the report, published in May 2013, found just $154 million had been raised by local VC funds in the 2013 financial year, compared to the $568 million in 2016. Just $144 million was deployed in 2013, compared to the $347 million invested into startups last financial year by a record-high 33 VC firms.

Alex Gruszka, head of data and insights at StartupAUS, said the figures are an indication of “real growth” in the local startup ecosystem.

“While we’re still a long way off the US, where even on a per capita basis VC totals are 7.3 times that of ours, we should celebrate our significant progress in the tech sector,” he said.

Further investment of Australia’s superannuation assets into VC was identified as a key potential driver of further growth, with the report pointing out that of the $2.2 trillion in Australian super, just $120 million was invested into VC funds last year.

“If we as a nation are to be truly ambitious, we must seek to emulate, and over time, eclipse our overseas counterparts through competitive innovation policy settings and harnessing the power of the superannuation system…there is clearly enormous potential for the super sector to catalyse the entire early stage ecosystem,” El-Ansary said.

Among the super funds investing in VC are Hostplus, which has invested over $350 million into Australian VCs, including $50 million with Square Peg Capital, $85 million with Artesian Venture Partners, and more into Blackbird Ventures. Blackbird has also received investment from First State Super.

Corporates were also identified as a key driver of further growth in the startup ecosystem, though the report found more was to be done here too.

However, it is likely the situation has changed given the growth of the startup landscape since: 2015 data on ASX50 companies analysed in the report found that just 38 percent of the listed companies were participating in the startup ecosystem in a targeted way, with the majority of activity concentrated in the telecom, banking, and insurance sectors.  

Image: Yasser El-Ansary. Source: BusinessInsider.