Risky money

13 June 2017

In Australia, venture capital investments are at around 0.023% of GDP still less than half that of leading nations in the OECD. However, there has been a steep rise in venture capital over the past years, with Australian VC funds estimated to raise a record amount of around $1 billion in 2016–17, according to a new report from the Australian Private Equity and Venture Capital Association Limited (AVCAL).

In 2012-13 the industry was still reeling from the impacts of the global financial crisis. In the years to 2015-16 venture capital funds raised in Australia then increased from $157 million to $568 million, while the invested funds rose from $144 million to $347 million.

infographic: adapted from Venture Capital Effect report
The around $1 billion in venture capital raised in 2016-17 include:

The report Venture Capital Effect: A report on the Industry’s Economic Impact on the Australian Economy is the first of its kind, providing a comprehensive assessment of the state of venture capital in Australia.

Some of the world's largest companies - including Apple, Alphabet (Google) and Microsoft - were supported through venture capital, highlighting the potential benefits for transforming old industries, and creating new ones.

Venture capital is especially important for support early stage innovations, which typically have higher risk/return profiles. The funds takes equity in the companies they invest in and provide not only capital but also commercialisation skills.

Examples for current Australian developments that draw on venture capital includes ground-breaking research, such as the treatment of Parkinson’s Disease (Global Kinetics) and the delivery of needle-free vaccines (Vaxxas).

However, Australia’s venture capital sector is still far too small for a country with bold ambitions to be an innovation-leader, says AVCA's chief executive Yasser El-Ansary.

The report finds that there is tremendous scope for further increases in this kind of investment in Australia, but limited institutional investment is holding back growth in the innovation ecosystem.

It calls for greater investments from superannuation funds, which contributed only $120 million Australia's venture capital in 2015-16.

Key findings of the report include:

More information: http://minister.industry.gov.au