The Australian Bureau of Statistics has surveyed Australian venture capital investments in innovative and fast growing companies.
Back in 2015, Australia’s former chief scientist Professor Ian Chubb highlighted in a major report that boosting high-impact entrepreneurship was a key to Australia’s transition to an innovation-led economy.
Much of this hinges on early-stage companies with a high-risk profile. For these raising debt capital is usually not an option. Instead their success often depends on getting access to capital from investors that are prepared to take the risk.
A major avenue for such investment are Australian managed funds that use money from resident and non-resident investors to acquire private equity stakes in small-to-medium-sized enterprises. It’s meant to be short-to-medium term investment mainly targeting returns from capital gains.
A recent survey by the Australian Bureau of Statistics provides a snapshot of Australia’s Venture Capital and Later Stage Private Equity (VC&LSPE) vehicles, covering high-risk investments in both earlier stage companies and more mature firms up to the buy-out or sale stage.
According the agency’s report, the total capital VC&LSPE fund managers were able to draw from increased strongly between 2014-15 and 2017-18, by 35 per cent from $19.9 billion to $26.9 billion. This was largely driven by overseas investors, who almost doubled their commitments over the period, while that of Australian resident sources increased by only 6%.
However, as capital provided by overseas investors peaked in 2018-19, total investments in VC&LSPE fell slightly in that year (by 1 per cent).
According to the ABS data, the investment deals finalised in 2018-19 totalled $1.45 billion, of which $1.15 billion represented new investment, while $307 million followed on from previous deals.
This is more than $1.1 billion less than in the previous year, when investments totalled $2.6 billion.
The combined value of the equity Australian funds hold in companies rose by 11 per cent to $12.2 billion, while as a proportion of gross domestic product it has remained steady at 0.6 per cent.