The Victorian government is cutting funding for its sovereign venture fund, Breakthrough Victoria, by $90 million annually over the next four year, today’s state budget reveals.
The reduction in capital allocation for the $2 billion fund comes amid sustained criticism and a high profile media campaign by the likes of Adir Shiffman, chair of ASX-listed Catapult Sports, who wanted the fund abolished, in recent months.
The state’s coffers are not in a healthy way, with Victorian treasurer Tim Pallas unveiling his 2024-25 budget on Tuesday, posting a $15.2 billion deficit as net debt grows to $156 billion in 2025 and then to $188 billion in 2028.
He avoided implementing new taxes, but slowed down a range of projects from the $10 billion Melbourne Airport Rail to childcare centres, hospitals, mental health centres and school upgrades.
SVG founder John Hatnett and Treasurer Tim Pallas in 2022.
Breakthrough Victoria is among the savings, receiving $360 million less over four years in a move the treasurer said “reprofiles funding”. However, its investment profile has been extended by five years as a consequence. And the number of startups it backs in the year ahead will be halved to around 10.
“Breakthrough Victoria was set up to help the economy recover and grow jobs after the pandemic – but with those tasks well underway, we will extend the fund’s investment profile from 10 to 15 years, giving Breakthrough Victoria more time to review and be selective about quality investments, ” Pallas said in his budget speech.
Just five days ago the treasurer was crowing about the “fantastic opportunities for Victoria and Australia” from BV investing $37 million in US atmospheric World View opening an office and manufacturing facility in Melbourne.
Pallas said Breakthrough Victoria had deployed more than $330 million, including investments in 24 companies. The $2 billion fund was set up in the FY21 state budget in response to the pandemic to invest in research commercialisation to benefit the state’s economy.
But in recent months the fund was criticised as being too slow to invest, too costly and lacking transparency, as well as being accused of competing with other VC funds.
Recent investments include $43 million for five universities to help turn research into startups, alongside another $100 million in pre-seed funding for uni startups, $20 million for solar power startup Raygen, baby-saving medtech startup Navi, anti-plagiarism edtech Cadmus and a $10 million program to find a way to recycle solar panels.
Breakthrough Victoria was expected to back to invest in 19 ideas this financial year – well above the targeted 15, but that number is expected to drop to 10 in FY2025.
“The 2023-24 expected outcome is higher than the 2023-24 target due to a larger number of anticipated investments of smaller value,” the budget papers say.
“The lower 2024-25 target reflects the extension of the Fund’s investment profile from 10 to 15 years.”
LaunchVic wins
There was some good news for Victoria’s startup sector with LaunchVic allocated $40 million over four years.
Dr Kate Cornick
LaunchVic CEO Kate Cornick said she was “thrilled with this outcome” saying treasurer Pallas “has been incredibly supportive” of the organisation
The confidence the Government has shown in the startup ecosystem is testament to their vision for Victoria,” she said.
“Startups drive new industries, create high value jobs and support economic growth – all of which will lead to a more prosperous and resilient Victoria.”
Cornick said startup numbers had more than tripled in the eight years of LaunchVic’s operations to 3,400-plus companies and the value of the sector in the state has increased from $5.6 billion in 2016 to $103 billion in 2023, supporting the creation of 2,064 new jobs through LaunchVic’s programs and investments.
LaunchVic is predicted to support 142 companies this financial year – two more than its 142 target – the 142 as the goal in FY25.
While the NSW Labor government scrapped plans for a $10 million fund to back female founders, Victoria’s Alice Anderson fund will continue to support female founders with the budget emphasising that ongoing support via LaunchVic, even though the target number appears to plunge from 30 to five, with the end of financial year figure expected to sit at 33.
The budget papers say that’s because “the 2023-24 expected outcome is higher than the target due to an update to the reporting methodology for the measure” as the total number of investments held by the Fund rather than the number of investments made each financial year.
“The lower 2024-25 target reflects the changed funding profile for the Alice Anderson Fund, with LaunchVic managing through its operational funding,” the budget notes.
“The 2024-25 target is a multi-year target. LaunchVic will continue to provide equity investment to female founded startups.”
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