Denham Sadler
September 5, 2019

Venture funding is in rude health

Policy

Venture funding is in rude health

Ian Gardiner: Venture capital deals have grown in size and volume

The Australian venture capital industry is reaching new stages of maturity and would continue to grow with or without government support, according to Innovation Bay co-founder Ian Gardiner.

Venture capital investment had grown, with deals increasing in size and volume, according to a landmark new survey.

Australian startup-focused organisation Innovation Bay conducted a survey 35 local VC funds in an effort to set a benchmark for where the industry is and how it is developing.

“There’s really very limited data, and that comes back to it being such a new industry here and people are focused on building their business and deploying investments,” Innovation Bay founder Ian Gardiner told InnovationAus.com.

“No-one has taken the time to do an aggregated survey of where the industry is at, so we thought it was the right thing to do to go out and try to get a snapshot of what trends we’re seeing. It will act as a benchmark.”

The survey found that nearly half of respondents had made at least six investments in the last year, and 37 per cent had made more than 10. That shows that there were about 250 VC investments made by Australian investors in the last 12 months.

The size of these deals has also increased, with 64 per cent of respondents saying they had grown in size. More than half of those firms surveyed said their average deal size was between $1 million and $5 million, while nearly 20 per cent were investing between $5 million and $50 million.

The most popular sectors for venture capital funding were deep technology, FinTech, MedTech, AgTech and consumer technology, while 58 per cent of respondents said that at least one startup in their portfolio had provided them with an exit in the past year.

Innovation Bay is also running the Venture Downunder conference in Christchurch, New Zealand this week, bringing together 60 venture capitalists from major firms including AirTree Ventures, Artesian, Blackbird, Google Ventures, Main Sequence Ventures and Right Click Capital.

With the VC industry still emerging in Australia, there usually isn’t an opportunity for it to come together in this way, Mr Gardiner said.

“At the moment we’re the only people that bring the community together. It’s still a brand new industry. If you go back five years there was only a handful of VCs. Fast forward to now and there are probably 50 VCs. It’s night and day in those terms,” he said.

“It’s growing so fast that you don’t really get the time to network and collaborate with others in the industry, so we felt we had the right people to bring that group together.”

The conference is being held in New Zealand partly to get the Aussie investors out of the office, but also thanks to generous support from the New Zealand government.

“New Zealand Trade and Enterprise has been a fantastic partner for us to work with. If you were going to redesign the Australian government agencies to do a better or different job, the right way to do it would be like New Zealand,” Mr Gardiner said.

“There’s no difference between state and federal agencies here, it’s just New Zealand Trade and Enterprise. But in Australia you’ve got state governments and it’s all a bit competitive, and the federal government, and it ends up being too messy.

But the Australian VC industry should be able to thrive with or without government support, he said.

“I don’t want to say that government is the problem – it’s too easy to wave your arms and think government is going to solve the problem. Capital is sophisticated, and people that manage the capital is sophisticated, with or without government support,” Mr Gardiner said.

“If we have a better founder community and startup creation then everyone is going to benefit, especially the VC sector because they’re the ones getting to invest in those startups. We’re building a whole industry here, and that’s like building a home. It’s not just one thing.

“Having better founders will lead to a better ecosystem, and the capital will follow the talent. That’s what we’re seeing now.”

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