The Victorian government’s controversial $2 billion venture capital fund, Breakthrough Victoria, posted a $3 million loss in its third year of operation.
The funding body, which saw several directors depart in 2024, with CEO Grant Dooley also heading to the exit after just three years, copped a $360 million haircut in the Victorian budget earlier this year, posted the loss after its operating grant funding ceased and it cut costs to focus on investing.
But the loss is “lower than forecast and reasonably reflects the performance of an investment firm at this stage in its evolution, Breakthrough Victoria says in its 2024 Annual Report.
The organisation came under sustained criticism earlier this year for its operating costs and modest investments, after the 2023 Annual Report revealed total costs of $22 million with just $73.7 million invested in the financial year. It posted a $58.7 million profit that year.
Breakthrough Victoria had around 50 staff and an annual wages bill of nearly $10 million.
Adir Shiffman, chair of ASX-listed Catapult Group, and Seek cofounder Matt Rockman were among those calling for the fund to be shut down.
Shiffman argued the it was “poorly conceived, suspiciously political, huge, opaque, using the wrong KPIs, an overly broad and unclear mandate, poor governance, and reporting that is slower than expected and provides little clarity”.
There is “no need for $2 billion of government money competing against an ocean of private venture capital in Australia,” he said at the time.
Costs down, investment up
The 2024 report notes improved operational efficiency, with ratio of direct investment related expenses as a percentage of assets under management nearly halving to 3.1%, down from 6% in 2023.
Breakthrough Victoria says it looked at more than 500 investment opportunities in FT24, taking up 21, for a total investment of $191.5 million. They involved 15 new companies and six follow-on investments. All up the fund has now committed $350 million across 44 investments – 36 to companies (including the 6 follow-ons), one fund, six university platforms and the Jumar Bioincubator.
Most controversially, it spent $52 million getting two US companies to set up shop in Melbourne – California-based test equipment manufacturer Liquid Instruments scored $15 million and there was $37 million for near-space exploration platform World View.
A World View balloon prepares to launch in the US
World View manufactures and launches stratospheric balloons for sensing, weather monitoring, and communication that can stay airborne for up to 45 days. The company is also exploring space tourism in the stratosphere, which extends roughly between 10km and 50km above Earth.
Critics consider the idea a pipe dream.
BV also led a $13 million raise for augmented reality app Jigspace, tipping in $4.4 million.
It also made deep tech investments including fermented dairy alternative Eden Brew’s $25 million Series A alongside CSIRO-backed VC Main Sequence, as well as baby-saving medtech startup Navi.
Supporters argue that the sovereign venture fund is critical to commercialisation for science startups and addresses a funding void for medtech startups, preventing the technology from heading offshore.
The annual report said that Breakthrough Victoria’s net assets at June 30 this year were $536.1m, an increase of $172m, primarily due an increase in investments held of $159.3m and $175m received in capital funding from the state government.
The state budget extended the investment timeline from 10 to 15 years, to 2034-35 and so far the government has contributed $450m.
Breakthrough Victoria said the board had approved $16.9m of investments which are expected to be contracted and settled subsequent to the reporting period. Among them is Sydney 5G chipset startup Millibeam.
But not all has gone to plan with epilepsy medtech Seer Medical, which raised a $34m Series A in 2021 and then took on Breakthrough Victoria funding the following, year, withdrawing their product from the Australian and US markets alongside legal action with one of the cofounders.
Breakthrough Victoria said it “will continue to monitor the future direction of the company with any implications on the future valuation”.
Opposition dismayed
The Opposition industry and innovation spokesperson Bridget Vallence, said Victorians deserve to know greater detail about the fund’s investments, adding that World View’s own auditors doubted their survival.
“Labor is gambling $2 billion of Victorian taxpayers’ money on its secretive Breakthrough Victoria fund, and now it is in financial strife,” she said.
“The CEO quit, five board members quit, and now Breakthrough Victoria under Labor is in financial disarray. Treasurer Tim Pallas must come clean about the financial incompetence of Labor’s secretive investment fund.”
Treasurer Tim Pallas is Breakthrough Victoria’s sole shareholder and former Labor premier John Brumby is chair of the board.
Brumby said in his chairman’s address that it’s more than just a venture capital fund.
“Through our University Innovation Platform co-investment program, Breakthrough Victoria has partnered with Deakin University, La Trobe University, the University of Melbourne, Monash University, RMIT, and Swinburne University of Technology to drive the commercialisation of their research,” he said.
“Matched dollar-for-dollar by the universities themselves, these coinvestment programs will drive innovation activity and transform research commercialisation on Victorian campuses
Trending
Daily startup news and insights, delivered to your inbox.